Holding

Section 22(1) of the 1985 Act bars coercive actions like those under Section 29 of the 1951 Act, and the 1985 Act's non‑obstante clause prevails, requiring BIFR/Appellate Authority consent before such action.

Summary

Maharashtra Tubes Ltd., a steel pipe manufacturer, ceased operations in 1986 and sought financial assistance from the Board for Industrial and Financial Reconstruction (BIFR) in 1988. The BIFR, after hearings, held that the company was not a "sick industrial company" under the Sick Industrial Companies (Special Provisions) Act, 1985 and dismissed the reference. The State Financial Corporation (respondent No.1) then initiated proceedings under Section 29 of the State Financial Corporations Act, 1951 to take over the factory premises. The company appealed the BIFR order under Section 25 of the 1985 Act and invoked Section 22(1) of that Act to bar the corporation’s action. The Bombay High Court held that Section 22(1) did not apply to the corporation’s statutory takeover. The Supreme Court allowed the appeal, holding that the term "proceedings" in Section 22(1) includes coercive actions like those under Section 29, and that the later 1985 Act’s non‑obstante clause prevails over the 1951 Act’s, requiring consent of the BIFR/Appellate Authority before any such action. The High Court judgment was set aside.

Issues considered

The bar under Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, does it apply to proceedings under Section 29 and Section 31 of the State Financial Corporations Act, 1951?
Whether the non‑obstante clause of the 1985 Act prevails over that of the 1951 Act in case of conflict.
Whether the expression "proceedings" in Section 22(1) is limited to legal proceedings or includes statutory coercive actions such as takeover of management and possession.

Legislation cited

Companies Act, 1956
Sick Industrial Companies (Special Provisions) Act, 1985s. 15(1), s. 16, s. 17, s. 18, s. 19, s. 2(2), s. 22(1), s. 25, s. 31, s. 3(1)(o), s. 32(1)
State Financial Corporations Act, 1951s. 29, s. 31, s. 32, s. 46B
Transfer of Property Act, 1882s. 69

Subjects

State Financial Corporations ActSick Industrial Companies (Special Provisions) Actnon-obstante clauseBIFRsection 22(1) barcoercive proceedingsindustrial sicknesstakeover of assetsappealstatutory conflict

Judgment

A MAHARASHTRA TUBES LTD.
v.
STATE INDUSTRIAL AND INVESTMENT CORPORATION OF
MAHARASHTRA LTD. AND ANR.

JANUARY 29, 1993
B
[L.M. SHARMA, CJ. AND A.M. AHMADI, J.]

State Finance Corporation Act, 1951~bject and scope of-Finance
Corporation--Constitution-Purpose of
c
Sick Industrial Companies (Special Provisions) Act, 1985-0bject and
scope of

State Finance Corporation Act, 1951-Section 46B and read with Sec-
D lions 22, of the Sick Industrial Companies (Special Provisions) Ac4 1985-
Both Special statutes-Distinction-Non-obstante clause of latter Act whether
prevails over the non-obstante clause of former Act.

Sick Industrial Companies (Special Provisions) Act, 1985-Section 2£-
0bject of-''Or the like'~ 'the like" "Proceedings"-Construction of
E
State Finance Corporation Act, 1951-Sections 29, 31.read with sections
22, 25 of the Sick Industrial Companies (Special Provisions) Ac4 1985-
Default in repayment of loan/advance-Question whether company a 'sick
industry' pending in appeal u/s 25 of 1985 Act-Taking recourse u/s 29/31 of
F 1951 Act for recovery of loan/advance-Legality of

In July, 1982, the appellant-Company, incorporated under the Com-
panies Act, 1956 commenced manufacture of steel pipes/tubes etc. of
various sizes and dimensions for export.

G By July, 1986, labour unrest, strikes, financial constraints, etc. neces-
sitated the cessation of manufacturing activities.

On 28th August, 1988 the Company by its letter informed the Board
for Industrial and Financial Reconstruction (BIFR) of its accumulated
H losses and sought financial assistance for revival of the unit.
340
MAHARASIITRA TUBES v. STATE INVESTMENT CORPN. 341

The Director (Finance) of the BIFR desired the company to report. A
the sickness in Form A and to take appropriate action under section 15(1)
, of the Sick Industrial Companies (Special Provisions) Act, 1985. The
Company submitted the proposal in Form A.

The BIFR held a preliminary hearing on 12th September, 1991, at
which the company confirmed the information given in Form A. The Bench B
of the BIFR sought further information to enable it to form an opinion
on the question whether or not the company was a sick industrial company
under section 3(l)(o) of the 1985 Act. The Bench directed the company to
submit the authenticated documents regarding the number of workers,
audited/finalised accounts for the years 1989-90 and 1990-91 with detailed c
explanation in regard to the delay in making the reference and other
discrepancies pointed out in the course of hearing. The Bench also directed
the bank and other financial institutions to submit the reports regarding
the conduct of the company and their role in providing necessary funds.

On 20th July, 1992, considering the facts on record and submissions D
made, the BIFR dismissing the reference held that the company could not
be held to be a sick industrial company under section 3(l)(o) of the 1985
Act.

The respondent No. 1 thereafter initiated proceedings under section E
29 of the State Financial Corporation Act, 1951 for taking possession or
the factory premises of the company.

On 20th August, 1992, the company liled an appeal under section 25
of the 1985 Act against the order of the BIFR Bench and requested the
respondent No. 1 not to proceed under section 29 of the 1951 Act, in view F
of the provision in section 22(1) of 1985 Act.

The respondent No. 1 sought the permission of the Appellate
Authority under the 1985 Act, to take possession of the assets of the
company.
G
The action of the respondent No. 1 was challenged in a writ before
the High Court.

The High Court dismissed the writ petition holding that the bar of
section 22(1) of the 1985 Act did not apply to proceedings initiated under H
342 SUPREME COURT REPORTS (1993} 1 S.C.R.
A section 29/31 of the 1951 Act.

The view of the High Court was assailed in this appeal by special leave.

The respondent No. 1 contended that the 1985 Act was a general
statute covering a larger number of industrial conctrns than the 1951 Act
B and therefore the latter would prevail over the former in the event of
confiict; that as the right conferred on the Financial Corporation by
section 29 of the 1951 Act was not a legal proceeding but merely an action
permitted by statute, section 22(1) of the 1985 Act would not apply because
it only bars legal proceedings for the winding up of any industrial company
c or for execution, distress or the like against any of its properties or for the
appointment of a Receiver in respect thereof.

Allowing the appeal of the company, this Court,

HELD : 1.01. The primary object of the State Finance Corporations
D Act, 1951 is to extend financial assistance to industrial concerns with a
view to hasten the pace of industrialisation and with that in view the
Financial Corporations have been statutorily enjoined or charged with
duty to provide credit facilities tu industrial concerns. (3550)

1.02. The purpose of constituting State Level Financial Corporations
E
was to augment industrialization by extending financial assistance to
certain industrial concerns. The Corporation is authorised to grant loans
to Industrial concerns and/or !o guarantee loans raised by such concerns,
even to underwrite the issue of stocks, shares, debentures, etc. floated by
such concerns. Such loans etc. are repayable within a stated period. [354G)
F
1.03. Incidental power to take over is given and summary procedures
have been laid down by sections 29 and 31 for the realisation of its dues
from defaulting industrial concerns. The power conferred by section 29
and the remedy provided in section 31(1) is not the underlying object and
purpose of the statute, the real objective of the law is to create an in-
G
strnmentality through which financial assistance can he extended to
deserving entrepreneurs. This is the main purpose, scope and object of
this special law. [355G]

2.01. The Sick Industrial Companies (Special Provisions) Act, 1985
H was enacted, with a view to timely detection of sick or potentially sick
MAHARASH'IRA TUBES v. SfATE INVESTMENT CORPN. 343
companies owning industrial undertakings, the identification oftbe nature A
of sickness through experts In relevant fields with a view to devising
• suitable remedial measures thnugh appropriate schemes and their ex·
peditious implementation. The emphasis is to prevent sickness and in
cases of sick undertakings to prepare schemes for their rehabilitation by
providing financial assistapce by way of loans, advances or guarantees or
B
by providing reliefs, concessions or sacrifies from Central or State Gov.ern·
ments, Scheduled banks, etc. [355H, 356A-B)

2.02 The basic idea is to revive sick units, if necessary, by extending
further financial assistance after a thorough examination of the units by
experts and only when the units is found to be more capable of rehabilita- c
tion, that the option of winding up may be resorted to. It Is for that reason
that section 22(1) provides that during the pendency of (j) an inquiry
under section 16 or (ii) preparation or consideration of a scheme under
section 17 or (iii) an appeal under section 25, no proceedings for winding
up of the concerned industrial company or for execution, distress or the
like shall lie or be proceeded with in relation to the properties of that D
concern unless BIFR/Appellate Authority has consented thereto. The un·
derlying idea is that every such action should be frozen unless expressly
permitted by <he specified authority until the investigation for the revival
of the industrial undertaking is finally determined. [356C-D)
E
2.03. The main thrust of this special legislation is at revival or
rehabilitation of the sick industrial undertaking and it is only when it is
realised that the same is not feasible that tbe option of winding up of the
unit can be resorted to. [356E)

3.01. The 1951 Act and the 1985 Act are special statutes, each having F
a different objective, the emphasis in the case of the former being on giving
of financial assistance to entrepreneur for setting up industries while lo
the case of latter It being to revive or rehabilitate industries which have
on account or economic or other related reasons gone sick. The latter Act
also contemplates giving of financial assistance for revival or rehabilita·
G
lion of a sick industrial undertaking but that is by way of a remedy or as
a measure at revival of the sick unit. [356F-G]

3.02 Both the statutes have competing non-obstante provisions. Sec-
tion 468 of the 1951 Act provides that the provision of that statute and of
any rule or order made thereunder shall have effect notwithstanding H
344 SUPREME COURT REPORTS (1993) 1 S.C.R.
A anything inconsistent therewith contained in any other law for the time
being in force; whereas section 22(1) of the 1985 Act also provides that the j._
provisions of the said Act and of any rules or schemes made thereunder
shall have effect notwithstanding anything inconsistent therewith con·
tained in any other law. Section 22(1) also carries a non-obstante clause
B and says that the said provision shall apply notwithstanding anything
contained in Companies Act, 1956 or any other law. (3600)

3.03. The 1985 Act being a subsequent enactment, the non-obstante
clause therein would ordinarily prevail over the non-obstante clause found "r'
in section 468 of the 1951 Act unless it is found that the 1985 Act is a
c general statute and the 1951 Act is a special one. In that event the maxim
generalia specia/ibus non-derogant would apply. [360E]

3.04. lo the present case on a consideration of. the relevant
provisions of the two statutes it is clear that the 1951 Act deals with
pre-sickness situation while the 1985 Act deals with post-sickness situa·
D tion. It is, therefore, not possible to agree that the 1951 Act is a special
statute vis-a-vis the 1985 Act. Both are special statutes dealing with
different situations notwithstanding a slight overlap here and there, for
example, both of them provide for grant of financial assistance though in
different situations. [360F-G]
E
4.01. Section 22(1) provides that where an appeal under section 25
relating to an industrial company is pending, then, notwithstanding any·
thing contained in any other law, no proceedings for the winding up of the
industrial company or for execution, distress or the like against any of the
properties of the industrial company or for appointment of a Receiver in
F respect thereof shall lie or be proceeded with further, except with the
consent of the BIFR or, as the case may be, the Appellate Authority. The
purpose and object of this provision is clearly to await the outcome of the
reference made to the BIFR for the revival and rehabilitation of the sick
industrial company. [361F-G]
G 4.02. The words 'or the like' which follow the words 'execution' and
'distress' are clearly intended to convey that the properties of the sick
industrial company shall not be made the subject-matter of coercive action
of similar quality and characteristic till the IllFR finally disposes of the
reference made under section 15 of the enactment. The legislature has
H advisedly used an omnibus expression 'the like' as it could not have
MAHARASHTRA TUBES v. SfATE INVESTMENT CORPN. 345
conceived of all possible coercive measures that may be taken against a A
sick undertaking. (3610, 362A]

4.03. The word 'proceedings' in section 22(1) cannot be given a
narrow or restricted meaning to limit the same to legal proceedings. Such
a narrow meaning would run counter to the scheme of the law and
frustrate the very object and purpose of section 22(1) of the 1985 Act. B
[362G]
4.04. The expression 'proceedings' in section 22(1) cannot be con-
fined to legal proceedings understood in the narrow sense of proceedings
in a court oflaw or a legal tribunal for attachment and sale of the debtor's
property. (365C) c
The Bengal Immunity Company Ltd. v. The State of Bihar & Ors.,
(1955] 2 SCR 603 at 636 and Board of Muslim Wakfs, Rajasthan v. Radha
Kishan & Ors., (1979] 2 SCC 468, referred to.

Black's Law Dictionary (Fourlh Edition), referred to. D

5.01. On a plain reading of section 29 of the 1951 Act, i; is obvious
that it permits coercive action against the defaulting industrial concern of
the type which would be taken in execution or distress proceedings; the
only difference being that in the latter case the concerned party would have
to use the forum prescribed by law for the purpose of securing attachment
E
and sale of property of the defaulting industrial coneern whereas in the
case of a Financial Corporation that right is conferred on the creditor
corporation itself which is permitted to takeover the management and
possession of the properties and deal with them if it were the owner of the
properties. (3620-E] F
5.02. The action contemplated by section 29 of the 1951 Act is
undoubtedly a coercive measure directed at the take over of the manage·
ment and property of the industrial concern and confers a further right
on the Financial Corporation to transfer by way of lease or sale the
properties of the said concern and any such transfer effected by the G
Financial Corporation would vest in the transferee all rights in or to the
transferred property as if the transfer was made by the owner of the
property. So also under the said provision the Financial Corporation will
have the same rights and powers with respect to goods manufactured or
produced wholly or partly from goods forming part of the security held by H
346 SUPREME COURT REPORTS [1993) 1 S.C.R.
'A it as it had with respect to the original goods. [362B·C]

5.03. In the first place action under section 29 of the 1951 Act is to
seize the property of the defaulting industrial concern and to appropriate
it for satisfying the debt. It gets diverted from the general body of creditors.
The Corporation is fq!ly empowered to dispose it of to a third party and
B pass a clear marketable title. All this can be done by the Corporation
without the need to go to a court or tribunal or any other recovery agency.
The Corporation is itself permitted to play that role. From the point of
view of quality and character the remedy is the same as in execution or
distress proceedings. [363C-DJ
c 5.04. If the Corporation is permitted to resort to the provision of
section 29 of the 1951 Act while proceedings under sections 15 to 19 of the
1985 Act are pending it will render the entire process nugatory. In such a
situation the law merely expects the corporation and for that matter any
other creditor to obtain the consent of the BIFR or, as the case may be,
D the Appellate Authority to proceed against the industrial concern. The law
has not left them without a remedy. [362F]

5.05. It must be realised that in the modern industrial environment
large industries are generally finalised by banks and statutory corpora·
E lions created specially for that purpose and if they are permitted to resort
to independent action in total disregard of the pending inquiry under
sections 15 to 19 of the 1985 Act the entire exercise under the said
provisions would be rendered nugatory by the time the BIFR is able to
evolve a scheme of revival or rehabilitation of the sick industrial concern
by the simple device of the Financial Corporation resorting to section 29
F of the 1951 Act. [364H, 365A]

5.06. Where an inquiry is pending under section 16/17 or an appeal
is pending under section 25 of the 1985 Act there should be cessation of
the coercive activities of the type mentioned in section 22(1) to permit the
BIFR to consider what remedial measures ii should take with respect to
G
the sick industrial company. [365B]

Gram Panchayat & Anr. v. Shree Va/labh Glass Worl<s Ltd. & Ors., A
[1990] 2 SCC 400 = AIR 1990 SC 1017; Tqteels Ltd. v. Radhaben
Ranchhodlal Charitable Trnst, AIR 1988 Gujarat 213; Industrial Finance
H Corporation of India & Ors. v. Maharashtra Steel Ltd. & Ors., AIR 1988
MAHARASIITRA 11.JBES v. STATE INVESTMENT CORPN. (AHMADI, J.] 347

~ Allahabad 170and TheAndhra Cement Co. Ltd., Secunderabad v.A.P. State A
Electricity Board & Ors., AIR 1991 A.P. 269, referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 289 of
1993.

From the Judgment and Order dated 6.10.1992 of the Bombay High B
Court in Writ Petition No. 1999 of 1992.

G.L. Rawal, Ms. Alpana Poddar and Kailash Vasdev for the Appel-
!ant.·

P.P. Rao, S.K. Dholkia, Dr. Suman! Bhardwaj, A.M. Khanwilkar and C
A.S. Bhasme for the Respondents.

The J udgrnent of the Court was delivered by

AHMADI, J. Special leave granted.
D
The short but interesting question which arises for determination in
this appeal is whether in a case where an industrial concern makes any
default in repayment of any loan or advance or any instalment thereof or
otherwise fails to meet its obligations under the terms of any agreement
with the Financial Corporation, such as the respondent herein, can the
latter take recourse to sections 29 and/or 31 of the State Financial Cor-
E
porations Act, 1951 (hereinafter called the '1951 Act') notwithstanding the
bar of Section 22 of the Sick Industrial Companies (Special Provisions)
Act, 1985 (hereinafter called the '1951 Act')? In order to answer the
aforesaid question it is necessary to bear in mind the provisions of the
aforesaid two statutes. · F
The 1951 Act was enacted to provide for the establishment of State
Financial Corporations. Section 3 empowers the State Government to
establish a State Fmancial Corporation as a body corporate with an
authorised capital of such sum as may be fixed by the State Government
in this behalf. Section 9 provides that the general superintendence, direc- G
tion and management of the affairs and business of the Financial Corpora-
tion shall \est in a Board of Directors which may exercise all the powers
and discharge all the functions which may be exercised and discharged by
the Financial Corporation. Under Section 15 one of the Directors may be
nominated by the State Government to be the Chairman of the Board of H
-(

348 SUPREME COURT REPORTS [1993] 1 S.C.R.
A Directors. Section 25 enumerates the business which the Financial Cor-
poration may transact. These include among others, guaranteeing, on such
terms and conditions as may be agreed upon, loans raised by Industrial
concerns which are repayable within twenty years and are floated in the
public market, loans raised by industrial concerns from scheduled banks
or State Cooperative banks or other financial institutions and granting
B
loans and advances to an industrial concern repayable within a period not
exceeding twenty years from the date on which they are granted. Section
29, insofar as relevant for our purpose, then provides as under :

"29(1) Where any industrial concern, which is under a
c liability to the Financial Corporation under an agreement,
makes any default in repayment of any loan or advance
or any instalment thereof or in meeting its obligations in
relation to any guarantee given by the Corporation or
othei-wise fails to comply with the terms of its agreement
with the Financial Corporation, the Financial Corporation
D
shall have the right to take over the management or
possession or both of the industrial concern, as well as the
right to transfer by way of lease or sale and realise the
property pledged, mortgaged, hypothecated or assigned
to the Financial Corporation."
E
Where the Financial Corporation, in exercise of the aforesaid rights, trans-
fers any property, sub-section (2) provides that the same shall vest in the
transferee all rights in or to the transferred property as if the transfer had
been made by the owner of the property. Section 31 next provides as under:
F
"Where an industrial concern, in breach of any agreement,
makes any default in repayment of any loan or advances
or any instalment thereof or in meeting its obligations in
relation to any guarantee given by the Corporation or
otherwise fails to comply with the terms of the agreement
G with the Financial Corporation or where. the Financial
Corporation requires an industrial concern to make im-
mediate repayment of any loan or advance under section
30 and the industrial concern fails to make such repay-
ment, then, without prejudice to the provisions of section
H 29 of this Act and of section 69 of the Transfer of Property
\

MAHARASHTRA TUBES v. STAIB INVESTMENT CORPN. (AHMADI, J.] 349

Act, 1882 any Officer of the Financial Corporation, A
~ generally or specially authorised by the Board in this
behalf, may apply to the District Judge within the limits
of whose jurisdiction the Industrial concern carries on the
whole or a substantial part of its business for one or more
of the following reliefs :
B
(a) for an order for the sale of the property pledged,
mortgaged, hypothecated or assigned to the Financial

"' Corporation as security for the loan or advance; or

(aa) for enforcing the liability of any surety; or c
(b) for transferring the management of the Industrial
concern to the Financial Corporation; or

(c) for an ad interim injunction restraining the industrial
concern from transferring or removing its machinary or D
plant or equipment from the premises of the industrial
concern without the permission of the Board, where such
removal is apprehended.'

Section 32 outlines the procedure which the District Judge must follow in
respect of an application made· under Section 31. Section 32A empowers E
the Financial Corporation to appoint Directors or Administrators of an
industrial concern, the management whereof is taken over by the Financial
Corporation. Section 32E lays down that where the management of an
industrial concern, being a company as defined in the Companies Act, 1956
is taken over by the Financial Corporation, then, notwithstanding anything F
contained in the said Act or in the Memorandum o~ Articles of Association
of such concern, it shall not be lawful for the shareholders of such concern
or any other person to nominate or appoint any person to be a Director
of the said concern nor shall any resolution passed at the meeting of the
shareholders of such concern be given effect to unless approved by the
Financial Corporation. It also precludes the filing of a winding up proceed- G
ings or for the appointment of a Receiver in respect of such concern in any
:..._ court unless consented to by the Financial Corporation. So also Section
32F places a restriction on the filing of suits for dissolution, etc., of an
industrial concern other than a company whose management is taken over.
Section 32G provides for recovery of amounts due to the Financial Cor- H
j

350 SUPREME COURT REPORTS (1993] 1 S.C.R.
A poration as an arrear of loan revenue. And Section 46B says that the
provisions of the said Act and any rule or order made tl\ereunder shall
have effect notwithstanding anything inconsistent therewith in any other
law for the time being in force. It further says that the provisions of the.
Act shall be in addition to, and not in derogation of, any such law
applicable to an industrial concern. It will thus be seen that the consequen-
B
ces of a take over of the industrial concern are quite drastic and virtually
denudes the management of such industrial concern of its power to ad-
minister the properties and assets of such concern.

While on the one hand the 1951 Act provide for grant of financial
c assistance to industrial concerns, on the other hand the ever increasing
problem of industrial sickness and its consequential fall-out on the nation's
economy and the problems faced by the Financial Corporations in the
matter of recovery of their dues and/or rehabilitation of a sick industrial
undertaking led to the appointment of a Committee known as the Tiwari
D Committee in 1981 which submitted its report in 1983 leading to the
enactment of the 1985 Act with a view to securing the timely detection of
sick and potentially sick companies owing industrial undertakings, the
speedy determination by a body of experts of the preventive, ameliorative,
remedial and other measures needed to be taken V<ith respect to such
companies and the expeditious enforcement of the measures so determined
E and for other matters connected therewith or incidental thereto. This Act
extends to the whole of India and Section 2 thereof carries a declaration
that it is enacted for giving effect to the policy of the State towards securing
the principles specified in Clauses (b) and (c) of Article 39 of the Con-
•titution. The dictionary of the Act is to be found in Section 3. Section 3(e)
F defines an 'industrial company' to mean a company which owns one or
more industrial undertakings and Section 3(!) defines an 'industrial
undertaking' to mean an undertaking pertaining to a scheduled industry
carried on in one or more factories by any company but does not include
an ancillary industrial undertaking as defined in clause (aa) of Section 3 of
the Industries (Development & Regulation) Act, 1951 and a small scale
G industrial undertaking as defined in Section 3G) of the same statute. Since
Section 3(2) provides that words and expressions used but not defined
under the said Act or the Companies Act, 1956, shall have the meaning
I
assigned to them in the Industries (Development & Regulation) Act, 1951, -~

we must look to the definition of factory in that law. 'Factory' as defined
H in Section 3( c) of that law, inter alia, means any premises including the
MAHARASHTRA TUBES 1•. STATE INVESTMEl\'T CORPN. [AHMADI. .l.J 351

precincts thereof in any part of which a manufacturing process is being . A
carried on or is ordinarily so carried on with the aid of power, provided
that fifty or more workers are working or were working thereon on any day
of the preceding twelve months. Again Section 3(n) defines a 'scheduled
industry' to mean any of the industries specified for the time being in the
First Schedule of that law. Srction 3( o) defines a sick industrial company B
to mean an industrial company (not being a company registered for not
less than seven years) which has at the end of any financial year accumu-
lated losses equal to or exceeding its entire net worth and. has also suffered
7 cash losses in such financial year and the financial year immediately
preceding such financial year. The expression 'cash loss' means loss as
computed without providing for depreciation. Chapter II provides for C
establishment of a Board and Appellate Authority for Industrial & Finan-
cial Reconstruction. Section 4(1) empowers the Central Government to
establish a Board to be known. as the 'Board for Industrial & Financial
Reconstruction' (B!FR) to exercise the jurisdiction and powers and dis-
charge the functions and duties conferred or imposed thereon by or under D
the provisions of the said Act. Section 5 envisages constitution of an
Appellate Authority to be called the 'Appellate Authority for Industrial &
Financial Reconstruction' for hearing appeals against the orders of the
BlFR. Section 12 posits that the jurisdiction, powers and authority of the
BIFR or the Appellate Authority may be exercised by benches to be
constituted by their respective Chairmen. Section 14 says that the proceed- E
ings before the BIFR or the Appellate Authority shall be deemed to be
judicial proceedings. Then comes Chapter Ill entitled 'References, In-
quiries and Schemes'. Section 15(1) provides that where an industrial
company has become a sick industrial company, the Board of Directors of
the Company, shall within sixty days from the date of 'finalisation' of the F
duly audited accounts of the company for the financial year as at the end
of which the company has become a sick industrial company, make a
reference to the BIFR for determination of the measures which shall be
adopted with respect to the company. If, however, the Board of Directors
of the Company had for sufficient reasons formed an opinion before the
finalisation of ·the duly audited accounts that the company had become a G
sick industrial company, they could make a reference within sixty days after
the formation of such opinion for determination of the measures to be
adopted with respect to the company. Upon receipt of such reference with
respect of such company or upon information received or upon its own
H
352 SUPREME COURT REPORTS [1993] l S.C.R.
A knowledge as to the financial condition of the company a duty is cast by
'
Section 16(1) on the BIFR to make such inquiry as it deems fit for
determining whether any industrial company has become a sick industrial
'
~·

company. Where the BIFR deems it fit to make such an inquiry or to cause
an inquiry to be made into any industrial company, sub-section (4) requires
it to appoint one or more persons to lie a special director or special
B
directors of the company for safeguarding the financial and other interests
of the company. Section 17 next provides that if after making an inquiry
under Section 16 of the BIFR is satisfied that a company has become a
sick industrial company, it shall, after considering all the relevant facts and
circumstances of the case, decide, whether it is practicable for the company
c to make its net worth positive within a reasonable time. If the BIFR decides
in the affirmative, it shall, by order in writing give such time to the company
as it may deem fit to make its net worth positive but if it decides in the
negative and considers it necessary or expedient in the public interest to
adopt all or any of the measures specified in Section 18, it may, by written
D order direct any operating agency to prepare a scheme providing for such
measures in relation to such company. Section 18 provides that where an
order is made under the aforesaid provisions in relation to any sick
industrial company, the operating agency shall prepare a scheme with
respect to such company providing for any one or more of the following
measures, namely :
E
(a) the reconstruction, revival or rehabilitation of the sick
A .'
industrial company; I·
r
(b) the proper management of the sick industrial company
r·
F
by change in, or take over of, management of the sick
industrial company; ;)
.......
(c) the amalgamation of the sick industrial company with
any other industrial company;

(d) the sale or lease of a part or whole of any industrial
I
li
~
G
undertaking of the sick industrial company;

(e) such other preventive, ameliorative and remedial .,.. ~-
\II
measures as may be appropriate; i-
H A copy of the draft scheme prepared by the BIFR is required to be sent ~
fa
i ;
MAHARASITTRA TUBES v. STATE INVESTMENT CORPN. [AHMADI, l.] 353

to the sick industrial company as well as the operating agency. After the A
draft scheme is finalised, it has to be sanctioned by the BIFR and then be
brought into force with effect from such date as the BIFR may specify in
this behalf. Provision is also made for reviewing a sanctioned scheme and
making modifications therein if the exigencies of administration so require.
Where the scheme relates to preventive, ameliorative, remedial or other
B
measures with respect to any sick industrial company, t\.e scheme may
provide for finaacial assistance by way of loans, advances, guarantees,
reliefs, concessions or sacrifices from the Central Government, a State
Government, any scheduled bank or other bank, a public financial institu-
tion or State level institution or any institution or other authority to the sick
industrial company, vide Section 19(1) of the Act. Section 20, however,
provides that where the BIFR after making an inquiry under Section 16
is of opinion that it is just and equitable to wind up the sick industrial
company, it may forward its opinion in that behalf to the concerned High
Court whereupon the High Court shall, on the basis thereof, order winding
up of the sick industrial company. That brings us to Section 22, Sub-section
D
( 1) whereof needs to be reproduced :

"22(1) Wh ·n- in respect of an industrial company, an
inquiry under section 16 is pending or any scheme referred
to under section 17 is under preparation or consideration
or a sanctioned scheme is under implementation or where E
an appeal under seciion 25 relating to an industrial com-
pany is pending, then, notwithstanding anything contained
in the Companies Act, 1956 (1 of 1956) or any other law
or the memorandum and articles of, association of the
industrial company or any other instrument having effect
F
under the said Act or other law, no proceedings for the
winding up of the industrial company or for execution,
distress or the like against any of the properties of the
indtistriaf eompany or for the ·appoincment of a receiver
in respect. ·thereof shall lie or be proceeded wich further,
except with the consent of the Board or, as the case may G
be, the Appellate Authority."

We now come to Chapter IV entitled 'Proceedings in case of potentially
sick indusll;ial companies, misfeasance proceedings, appeals and miscella-
neous'. Section 25 provides for an appeal and reads as under: H
I
354 SUPREME COURT REPORTS (1993) ! S.C.R.
A "25(1) Any person aggrieved by an order of the Board
made under t~. Act may, within forty five days from the
.A
date on which a copy of the order is issued to him, prefer
an appeal to the Appellate Authority:

Provided that the Appellate Authority may entertain any
B appeal after the said period of forty-five days but not after
sixty days from the date aforesaid if it is satisfied that the
appellant was prevented by sufficient cause from filing the
appeal in time.

c (2) On receipt of an appeal under sub-section (1), the
Appellate Authority niay, after giving .an opportunity to
the appellant to br heard, if he so desires, and after
making such further inquiry as it deems fit, confirm,
modify or set aside the order appealed against."

D Section 26, however, states that no order passed or proposal made under
this Act shall be appealable except as provided therein and no civil court
shall have jurisdiction in respect of any matter which the Appellate
Authority or the BIFR is empowered by or under this Act to determine
and no injunction shall be granted by any court or other authority in respect
of any action taken or to be taken in pursuance of any power conferred by
E
or under this Act. Section 32 says that the provisions of this Act and of any A
Rules or Schemes made thereunder shall have effect notwithstanding any-
thing inconsistent therewith contained in any other law except the
provisions of the Foreign Exchange Regulation Act, 1973 and the Urban
Land (Ceiling & Regulation) Act, 1976 for the time being in force or in
F the Memorandum or Articles of Association of an industrial company or
in any other instrument having effect by virtue of any law other than this
Act. This, in brief, is the scheme of 1985 Act. ,.._

From the relevant provisions of the 1951 Act it is clear that the
purpose of constituting State level Financial Corporations was to augment
G industrialisation by extending financial assistance to certain industrial con-
cerns. The Corporation is authorised to grant loans to industrial concerns
and/or to guarantee loans raised by such concerns, even to underwrite the
issue of stocks, shares, debentures, etc., floi.ted by such concerns. Such
loans, etc., are repayable within a stated peric,d. The enactment has under-
H gone amendments from time to time 'with a view to enlarging the functions
MAHARASHTRA TUBES v. SfATE INVESTMENT CORPN. (AHMADI, J.) 355

and powers of the Financial Corporations. The said Act was amended in A
1956 (Act 56 of 1956) inter alia to extend its benefit to industrial concerns
engaged in small scale and cottage industries and to widen the powers of
management vested in the Corporation in regard to concerns taken over
by the Corporation. Experience gained over a period of time necessitated
a further amendment in 1962 (Act 6 of 1962) to provide for extending the
B
benefit of financial assistance to hotel and transport industries and to meet
the growing need of the industry occasioned by the rising tempo of in-
dustrialisation in the country. The amendments were introduced to enable
the Corporations to guarantee loans raised from Scheduled Banks, State
Co-operative Banks, etc., and to retain underv.ritten shares beyond seven
years and to convert loans/debentures into share capital. A further amend- c
ment was made in 1972 (Act 77 of 1972) as it was felt that technical
entrepreneurs and units situate in b~ckward areas should also be granted
soft term loans and such other benefits. At the same time certain con-
straints on the Corporations were removed to ensure their smooth working.
-4, It is clear from the foregoing discussion that the primary object of this D
statute is to extend fmancial assistance to industrial concerns with a view
to hasten the :iace of industrialisation and with that in view the Financial
Corporations have been statutorily enjoined or charged with the duty to ·
proyide credit facilities to industrial concerns. Undoubtedly Financial Cor-
porations have been empowered by section 29 to take over management of
defaulting industrial concerns for realisation of its dues. Similarly, section E
31(1) also prescribes a special remedy for enforcement of Corporation
claims through the judicial machinery by sale etc. of
pledged/mortgaged/hypothecated or assigned property of the defaulting
industrial concern. It is thus clear from the provisions of this law that its
primary objective is to provide an impetus to industrialisation by providing F
through a statutory corporation financial assistance to industrial concerns
and incidental power to take over is given and summary procedures have
been laid down by sections 29 and 31 for the realisation of its dues from
defaulting industrial concerns. The power conferred by section 29 and the
remedy provided in section 31(1) is not the underlying object and purpose
of the statute, the real o!Jjective of the law is to create an instrumentality G
through which financial assistance can be extended to deserving
entrepreneurs. This is the main purpose, scope and object of this special
law.

On the other hand the 1985 Act was enacted, as its preamble H
356 SUPREME COURT REPORTS [1993] 1 S.C.R.
A manifests, with a view to timely detection of sick or potentially sick com-
panies owning industrial undertakings, the identification of the nature of
sickness through experts in relevant fields with a view to devising suitable
remedial measures through appropriate schemes and their expeditious
implementation. Here the emphasis is to prevent sickness and in cases of
sick undertakings to prepare schemes for their rehabilitation by providing
B
financial assistance by way of loans, advances or guarantees or by providing
reliefs, concessions or sacrifices from Central or State Governments,
scheduled banks, etc. The basic idea is to revive sick units. If necessary, by
extending further financial assistance after a thorough examination of the
units by experts and only when the unit is found to be more capable of
c rehabilitation, that the option of winding. up may be resorted to. It is for
that reason that section 22(1) provides that during the pendency of (i) an
inquiry under section 16 or (ii) preparation or consideration of a scheme
under section 17 or (iii) an appeal under section 25, no proceedings for
winding up of the concerned industrial company or for execution, distress
D or the like shall lie or be proceeded with in relation to the properties of
that concern unless BIFR/Appellate Authority has consented thereto. The
underlying idea is that every such action should be frozen unless expressly
permitted by. the specified authority until the investigation for the revival
of the industrial undertaking is finally determined. It is thus crystal clear
that the main thrust of this special legislation is at revival or rehabilitation
E of.the sick industrial undertaking and it is only when it is realised that the
same is not feasible that the option of winding up of the unit can be
resorted to.

It will be seen from the above discussion that both the 1951 Act and
F the 1985 Act are special statutes, each having a different objective, the
emphasis in the case of the former being on giving of financial assistance
to entrepreneurs for setting up industries while in the case of the latter it
being to revive or rehabilitate industries. which have on account of econo-
mic or other related reasons gone .sick. No doubt the latter Act also
contemplates giving of fmancial assistance for revival or rehabilitation of a
G sick indusiiial undertaking but that·ii bfway of a remedy or as a measure
.at revival of the Sick unit.

Now that we have clarified the respective schemes and objects of the
lWo enactments we may notice a few background facts which have a bearing
on the question under consideration. The appellant-company was incor-
' >'
)

MAHARASIITRA TUBES v. STATE INVESTMENT CORPN. IAHMADI. l.J 357

porated under the Companies Act, 1956 on 15th April, 1980 or thereabouts A
~
and it commenced its activities of manufacturing steel pipes/tubes etc. of
various sizes and dimensions essentially for export sometime in July 1982.
Unfortunately within a couple of years of its commencing manu~acturing
activities it ran into difficulties on account of labour unrest, strikes, finan-
cial constraints, etc. which necessitated the cessation of manufacturing
B
activities by about July, 1986. The disputes with the workman lingered on
for a couple of years and were settled by about August 1988. Since the
,... company had run into serious financial problems on account of accumu-
lated losses and paucity of cash flow, it wrote a letter to the BIFR on 28th
August, 1988 enclosing therewith a provisional balance-sheet for the year
ended 30th ~une, 1988 showing the accumulated losses and sought financial c
assistance for revival of the unit. The Director (Finance) of the BIFR
replied by pointing out certain deficiencies in the statements of accounts
forwarded io it and desi.red 'the company to report the sickness in Form A
_.. and to take appropriate action under section 15(1) of the 1985 Act. The
·- company submitted the proposal in Form A showing accumulated.losses
D
as on 31st March, 1990 at Rs. 369 lakhs with a paid up capital as on that
date of Rs. 1.11 crores and free reserves at Rs. 29.20 lakhs. It was also
pointed out that the company suffered a cash loss of Rs. 50.40 lakhs in the
financial year ended 31st March, 1989 and a further cash loss of Rs. 149.79
lakhs in the financial year ended 31st March, 1990. The gross value of the
plant and machinery of the company as on 31st March, 1990 was estimated E
at Rs. 160 lakhs. On that date the company had 34 workers on its rolls. It
appears that after the receipt of Form A the BIFR held a preliminary
hearing on 12th September, 1991, at which Shri Rajesh Dalmia, Managing
Director of the company, confirmed the information given in Form A and
stated that during 1st July, 1987 to 30th June, 1988, the company employed F
more than 50 workers. Considering the facts on record and the oral
..... submissions made by the Managing Director of the company, the Bench of
' the BIFR sought information to unable it to form an opinion on the
question whether or not the company was a sick industrial company within
the meaning of section 3{1)(o) of the 1985 Act since the information in
regard to the total number of workers employed by the company at the G
relevant date was not clear and the company had also not submitted the
.:... audited accounts for the financial year· ended 31st March, 1991. Several
other discrepancies were also pointed out to the Managing Director of the
company and the Bench directed him to submit the authenticated docu-
H
•
358 SUPREME COURT REPORTS [1993) 1 S.C.R.
A ments regarding the number of workers, audited/finalised accounts for th~ t
A
years 1989-90 and 1990-91 with a detailed explanation in regard to the delay
in making the reference and other discrepancies pointed out in the course
of hearing. The bank and other financial institutions were also directed to
submit the report> regarding the conduct of the company and their role in
providing necessary funds. The Chief Manager of the Bank of Baroda
B
addressed a letter to the company on 4th October, 1991 reminding it to
furnish by return of post the information in regard to the number of
workers employed during the period from 1st July, 1987 to 30th August,
1987 duly authenticated by the Registrar/Commissioner of Labour, reasons
for not reporting to BIFR in time, inventory of fixed and current assets of
c the company along with a copy of "the audited balance-sheet as on 31st
March, 1991, reasons for not reporting the details of sister-concerns in
Form A and the position in regard to accumulated losses/cash losses for
the last three years. At the next hearing held on 20th July, 1992, Bench lIJ
of BIFR took note of the statement of the Managing Director that "he had
D no documentary evidence in support of his contention that the unit emplo-
yed more than 50 workers during one year preceding the date of reference"
and after noticing certain discrepancies in regard to sundry debtors, expen-
diture on security staff, removal of certain movables, etc., the Bench
concluded as under :

E "Considering the facts on record and submissions made at
today's hearing, the Bench observed that despite sufficient
opportunity given to the company, it had not submitted
the authenticated documents regarding the number of
workers employed during the year preceding the date of
F reference and Shri Dalmia also could not substantiate
during the hearing today his statement that company had
more than 50 workers at any one time during the year
preceding the date of reference to BIFR. The company
as such could not be held a sick industrial company under
section 3(1)(o) of the SIC (SP) Act, 1985. The reference
G is, therefore, non-maintainable and is dismissed. 11

After the above order was made the first respondent initiated proceedings
under section 29 of the 1951 Act for taking over possession of the factory
premises of the company. In the meantime on 20th August, 1992, the
H company filed an appeal under section 25 of the 1985 Act against the
MAHARASHTRA TUBES v. STATE INVESTMENT CORPN. [AHMADI. J.) 359
"" impugned order of the BIFR Bench dated 20th July, 1992, extracted A
.A hereinabove. On the same day the company also sent a letter to the first
respondent requesting it to stay his hands in view of the provisions of
section 22(1) of the 1985 Act. Thereupon, the first respondent wrote a
letter to the Appellate Authority for permission to take possession of the
assets of the company. The company challenged this action before the High
Court of Bombay by a Writ Petition which came to be dismissed on 6th
B

.,. October, 1992. The controversy before High Court was whether the bar of
section 22( 1) of the 1985 Act applied to proceedings initiated under section
29/31 of the 1951 Act. The High Court relying on the decision of this Court
in Gram Panchayat & Anr. v. Shree .Vallabh Glass Works Ltd. & Ors., (1990)
2 SCC 440 = AIR (1990) SC 1017 held as under: c
".......we are of the view that when 1st respondent seeks to
enforce its special rights under sub-section (1) of Section
...(_. 29 of the State Financial Corporations Act, 1951, such an
action would not attract the bar of sub-section (1) of D
Section 22 of the 1985 enactment. In our view, some
distinction has to be made between the rights of the 1st
respondent Corporation to proceed under sub-section (1)
of section 31 of the said Act which amounts to initiation
of proceedings. Preventing the financial institution like the
l 1st respondent Corporation from even resorting to its E
rights under section 29 of the 1951 Act would, in our view
render the said provisions totally nugatory. While ap-
preciating the public interest contemplated behind the
enactment of section 22(1) of the 1985 enactment, it must
be observed that it is not everybody who may have a F
special or a higher right of the kind provided under
~- sub-section (1) of section 29 of the 1951 Act. For example,
in this very case, we are told at the bar that the petitioner
owes crores of rupees to some banks and so far as such
creditors are concerned, different considerations may
come into play. As far as the States Financial Corporation, G
respondent No. 1 is concerned, we are in this case con-
cerned with its action under the letter, Exh.F, which falls
squarely under sub-section (1) of section 29 of the 1951
Act. The 1st respondent has not initiated any proceedings,
which could be done only under sub-section (1) of section H
360 SUPREME COURT REPORTS (1993) 1 S.C.R.
-
A 31 of the said Act.'

It is this view of the High Court which is assailed before us in this appeal.

Having reached the conclusion that both the 1951 Act and the 1985
Act are special statutes dealing with different situations the former provid-
B
ing for the grant of financial assistance to industrial concerns with a view
to boost up industrialization and the latter providing for revival and
rehabilitation of sick industrial undertakings, if necessary, by grant of
financial assistance, we cannot uphold the contention urged on behalf of
the respondent that the 1985 Act is a general statute covering a larger
c number of industrial concerns than the 1951 Act and, therefore, the latter
would prevail over the former in the event of conflict. Both the statutes
have competing non-obstante provisions. Section 46B of the 1951 Act
provides that the provision of that statute and of any rule or order made
thereunder shall have effect notwithstanding anything inconsistent there-
D with contained in any other law for the time being in force whereas section
32(1) of the 1985 Act also provides that the provisions of the said Act and
of any rules or schemes made thereunder shall have effect 11-0twithstanding
anything inconsistent therewith contained in any other law. Section 22tl)
also carries a non-obstante clause and says that the said provision shall
apply notwithstanding anything contained in Companies Act, 1956 or any
E other law. The 1985 Act being a subsequent enactment, the non-obstante
clause therein would ordinarily prevail over the non-obstante clause found
in section 46B of the 1951 Act unless it is found that the 1985 Act is a
general statute and the 1951 Act is a special one. In that event the maxim
gtneralia specialibus non derogant would apply. But in the present case on
F a consideration the relevant provisions of the two statutes we have come
to the conclusion that the 1951 Act deals with pre-sickness situation
whereas the 1985 Act deals with the post-sickness situation. It is, therefore,
not possible to .agree that the 1951 act is a special statute vis-a-vis the 1985
Act which is at general statute. Both are special statutes dealing with
different situations notwithstanding a slight overlap here and there, for
G example, both of them provide for grant of financial assistance though in
different situations. We must, therefore, hold that in cases of sick industrial
undertakings the provisions contained in the 1985 Act would ordinarily 1
prevail and govern.

H It was next contended that the right conferred on the Financial
MAHARASHTRA 1UBES v. SfATE INVESfMENf CORPN. [AHMADI. J.] 361
Corporation by Section 29 of the 1951 Act is not a 'legal proceeding' but
merely an action permitted by statute and, therefore, section 22(1) will have
no application as it only bars legal proceedings for the winding up of any
industrial company or for execution, distress or the like against any of its
properties or for the appointment of a Receiver in respect thereof. Now
section 22(1) uses the expression 'proceedings' and not 'legal proceedings'
B
which expression is albeii 'used in the marginal µote to the said provision.
Mr. Rao contended that section 22 must be read in the light of the marginal
note and when so read it becomes obvious that only legal proceedings of
the type mentioned in sub-section (1) .thereof are barred and not the
exercise of a right such as the one conferred _by section 29 of the 1951 Act.
In support of his contention that the marginal note can be used as an aid c
to interpretation he invited our attention to a 7-Judge Bench decision of
this Court in The Bengal Immunity Company Ltd. v. 77ze State of Bil:ar &
Ors., [1955] 2 SCR 603 at 636. In that case the marginal note to Article 286
of the Constitution was referred to and it was said that it furnished some
clue as to the meaning and purpose of the Article. But at the same time
D
the Court pointed out that unlike the marginal notes in the statutes of the
British Parliament, the various Articles of the Constitution were passed by
the Constituent Assembly with the marginal notes and, therefore, the Court
considered · it permissible to use the marginal note to understand the
meaning and purport of the Article. But so far as statutes are concerned
this Court in the case of Board of Muslim Wakfs, Rajasthan v. Radha E
Kishan & Ors., [1979) 2 SCC 468 held in no uncertain terms that the weight
of the authority was in favour of the view thac the marginal note appended
to a section cannot be used for construing the section (See paragraph 24
at p. 479). Section 22(1) shorn of the irrelevant part provides that where
an appeal under section 25 relating to an industrial company is pending, F
then, notwithstanding anything contained in any other law, no proceedings
for the winding up of the industrial company or for execution, distress or
the like against any of the propertie~ of the industrial company or for
appointment of a Receiver in respect thereof shall lie or be proceeded with
further, except with the consent of the BIFR or, as the case may be, the
Appellate Authority. The purpose and object of this provision is clearly to G
await the outcome of the reference made to the BIFR for the revival and
rehabilitation of the sick industrial company. The words 'or the like' which
follow the words 'execution' and 'distress' are clearly intended to convey
that _the properties of the sick industrial company shall not be made the
H
362 SUPREME COURT REPORTS [1993] 1 S.C.R.
A subject-matter of coercive action of similar quality and characteristic till
the BIFR fmally disposes of the reference made under section 15 of' the
said enactment. The legislature has advisedly used an omnibus expression
'the like' as it could not have conceived of all possible coercive measures
that may be taken against a sick undertaking. The action contemplated by
section 29 of the 1951 Act is undoubtedly a coercive measure directed at
B
the takeover of the management and property of the industrial concern and
confers a further right on the Financial Corporation to transfer by way of
lease or sale the properties of the said roncern and any such transfer ' 'll:
effected by the Financial Corporation would vest in.the transferee all rights
in or to the transferred property as if the transfer was made by the owner
c of the property. So also under the said provision the Financial Corporation
will have the same rights and powers with respect to goods manufactured
or produced wholly or partly from goods, forming part of the security held
by it as it had with respect to the original goods, It is, therefore, obvious·
on a plain reading of section 29 of the 1951 Act that it permits coercive
D action against the defaulting industrial concern of the type which would be
taken in execution or distress proceedings; the only difference being that
in the latter case the concerned party would have to use the forum
prescribed by law for the purpose of securing attachment and sale of
property of the defaulting industrial concern whereas in the case of a
Financial Corporation that right is conferred on the creditor corporation
itself which is permitted to takeover the management and possession of the
properties and deal with them as if it were the ciwner of the properties. If
the corporation is permitted to resort to' the provision of section 29 of the
1951 Act while proceedings under sections 15 to 19 of the 1985 Act are
pending it will render the entire process nugatory. In such a situation the
law merely expects the corporation and for that matter any other creditor
to obtain the consenl of the BIFR or, as the case may be, the Appellate
Authority to proceed against the industrial concern. The law has not left
them without a remedy. We are, therefore, of the opinion that the word
'proceedings' in section 22( 1) cannot be given a narrow or restricted
, meaning to limit the same to legal proceedings. Such a narrow meaning
J
would run counter to the scheme of the law and frustrate the very object
and purpose of section 22(1) of the 1985 Act.

Mr. Rao, however, invited our attention to the definition of the
expression 'legal proceedings' as found in Black's Law Dictionary (Fourth
f Edition) which reads as under :
'
MAHARASIITRA TUBES v. STATE INVESTMENT CORPN. [AHMADI. J.] 363

' Any proceedings in court of justice....by which properly A
of debtor is seized and diverted from his general
creditors ......This term includes all proceedings authorised
or sanctioned by law, and brought or instituted in a court
of justice or legal tribunal, for the acquiring of a right or
the enforcement of a remedy."
B

,,. · take.
Even this defmition does not militate against the view we are inclined to
In the first place action under section 29 of the 1951 Act is to seize.
the property of the defaulting industrial concern and to appropriate it for
satisfying the debt. It gets diverted from the general body of creditors. The
Corporation is fully empowered to dispose it of to a third party and pass C
a clear marketable title. All this can. be done by the Corporation without
the need to go to a court or tribunal or any other recovery agency. The
Corporation is itself permitted to play that role. In substance the Corpora-
"'· tion is playing the same role. From the point of view of quality and
character the remedy is the same as in execution m distress proceedings. D
Therefore, even if one goes by the said meaning and understands the term
'p«'ceedings' in the light of the object and purpose of section 22(1) of the
1985 Act, no difficulty is experienced in taking the view that it must be
widely construed.

Reliance was placed on decisions of two High Courts in support of E
the contentions urged on behalf of the appellant Company. We shall deal
with them briefly. In Textee/s Ltd. v. Radhaben Ranchhodla! Charitable
Trnst AIR 1988 Gujarat 213 the short point for decision was whether a
winding up proceeding already commenced against an industrial company
ought to be dismissec\ or stayed during the pendency of the reference under F
section 15 of the 1985 Act. The High Court held that the word 'be
proceeded with further' in section 22 cannot be interpreted to mean that
the proceedings sholild be kept in abeyance but the various provisions of
the enactment must be construed to put an end to both the contemplated
and pending winding up proceedings. The High· Court held that if the
. winding up proceedings are kept pending it may be difficult to effectively G
administer the schemes under section 18 or grant fmancial assistance
under section 19 of the 1985 Act. The High Court held that the provision
must be broadly construed keeping in mind the scheme of the law so that
the ultimate objective is achieved and not .defeat'!ld. In the other case of
Industrial Finance C01p0ration of India v. Mahanishtra Steel Ltd. & Ors., H
364 SUPREME COURT REPORTS [1993) 1 S.C.R.
A AIR 1988 Allahabad 170 the view taken was that pending enquiry by the
BIFR the exercise of power under section 30 of the 1951 Act would not
be proper in view of section 22(1) of the 1985 Act. Section 30 empowers
the Financial Corporation to require an industrial concern by notice to
discharge its liabilities before the agreed date. Even though no legal
B proceedings are contemplated under that provision, the High Court did
not permit such an action during the pendency of proceedings under the
1985 Act. These two cases reinforce the view ti\_at the provision of section
22(1) of the 1985 Act should receive a broad construction. These cases,
therefore, support the view that the expression 'proceedings' in section
22(1) need not be limited to 'legal proceedings' understood in the narrow
c sense notwithstanding the use of that expression in the marginal note.

Mr. Rao, however, invited our attention to the decision of the
Andhra Pradesh High Court in Ihe Andhra Cement Co. Ltd., Secunderabad
v.A.P. State Electricity Board & Ors., AIR 1991A.P.269. That was case in
which the company sought a permanent injunction against the Electricity
D
Board to restrain it from refusing to supply electrical energy to the sick
undertaking. The High Court held 'non-supply of further goods under a
contract cannot, in our view, be equated with the kind of proceedings
contemplated by section 22(1)'. Since non-supply of goods in future cannot
amount to action proposed against the property of the Company, the High
E Court held that section 22( 1) was not attracted. It is, therefore, obvious
that the decision turned on the peculiar facts of that case and does not
miEtate against the view which commends to us.

Now we come to the impugned decision. The High Court was con-
F siderably influenced by the fact that the appellant-company owed crores of
rupees to banks and felt that so far as such creditors are concerned
different considerations may come into play but the High Court with
respect failed to appreciate that the 1985 Act was enacted primarily to
assi,st sick industrial undertakings which inter alia failed to meet their
financial obligations. It is, therefore, difficult to accept the view of the High
G"
Col!ft that where the creditors of a sick industrial concern happen to be
Banks or State Financial Corporations different considerations would come
into play. It must be realised that in the modern industrial environment
large industries are generally financed by banks and statutory corporations
created specially for that purpose and if they are perniltted to resort to
H independent action in total disregard of the pending inquiry under sections
MAHARASHTRA TUBES v. STATE INVESTMENT CORPN. [AHMADI, .I.] 365

15 to 19 of the 1985 Act the entire exercise under the said provisions would A
be rendered nugatory by the time the BIFR is able to evolve a scheme of
.A revival or 1ehabilitation of the sick industrial concern by the simple device
of the Financial Corporation resorting to section 29 of the 1951 Act. We
are, therefore, of the opinion that where an inquiry is pending under
section 16/17 or an appeal is pending under section 25 of the 1985 Act
there should be cessation of the coercive activities of the type mentioned B
in section 22(1) to permit the BIFR to consider what remedial measures it
should take with respect to the sick industrial company. The expression
'proceedings' in section 22(1) therefore, cannot be confined to legal
proceedings understood in the narrow sense of proceedings in a court of
law or a legal tribunal for attachment and sale of the debtors's property. c
Before we part we must state that it has not been our endeavor to
examine the correctness or otherwise of the decision of BIFR dated 20th
July, 1991 as an appeal under section 25 is pending against the same. The
BIFR will dispose of that appeal as early as possible on merits.
D
For the above reasons, we allow this appeal and set aside the
impugned judgment and order of the High Court. We, however, make it
clear that tbe respondent-corporation will be at liberty to seek the consent
of the Appellate Authority under section 25 of the 1985 Act for taking
action under section 29 of the 1951 Act. There will be no order as to costs
throughout.

V.P.R. Appeal allowed.