2006 Supreme(SC) 710

2006(7) Supreme 774
SUPREME COURT OF INDIA
(From Gujarat High Court)
S.B. Sinha and P.P. Naolekar, JJ.
National Textile Corporation (Gujarat)—Appellant
versus
State Bank of India & Ors.—Respondents
Civil Appeal No.2314 of 2000
With C.A. Nos. 2315 to 2321 of 2000
All Decided on 8-8-2006
Counsel for the Parties :
For the Appellant : L. Nageshwara Rao, Sr. Advocate, Mrs. B. Sunita Rao and Sushil Kumar Pathak, Advocates.
For the Respondents : Rajeev Dutta, R. Sundaravardan, T.L. Vishwanatha Iyer, Sr. Advocates, Ms. Sunita Sharma, Kiran Bhardwaj, D.S. Mahra, R.N. Keshwani, Ramlal Roy, M.T. George, Ms. Indu Malhotra and M/s. J.B. Dadachanji & Co., Advocates.

IMPORTANT POINT
In case of textile undertakings which were sick ones and which were takenover for the purpose of revival thereof, if in that process the Authorized Controller was required to raise loan either from a bank or from a financial institution other than a bank, the same would come within the purview of categories I liability being a post takeover management period.

Headnote:Sick Textile Undertakings (Nationalization) Act, 1974—Sections 2, 3, 17, 21, 22 and 27—Second Schedule—Industries (Development and Regulation) Act, 1951—Section 18(1)—Textile undertakings takenover in terms of 1951 Act—Priority claims—Company took some loans from the State Bank of India—During the period of takeover also, Bank continued to extend various credit facilities to the management—Writ Petitions filed making claims—Whether outstanding dues in different accounts for the pre-takeover as on 14-2-1969 were the liabilities of the Authorized Controller—(Yes)—Whether provisions of Bombay Relief Undertaking (Special Provision) Act, 1958 would be applicable in the instant case—Whether judgment of the High Court is sustainable—(No).

       Held : The basic fact of the matter is not in dispute. Although the managements of the textile mills were taken over in terms of the provisions of the 1951 Act, the Authorized Controller managed the affairs of the mills for or on behalf of the owners. The liabilities incurred or profits made during the said period were to be credited to the account of the owners. The owners in terms of the provisions of the Act were not entitled to receive the amount of compensation but also the interest provided for in the said Act as also the amount of compensation payable for taking over of the management of the mills under the 1956 Act.(Para 17)

       The claim of every claimant was required to be determined by the Commissioner of Payments strictly in terms of the provisions of the Act. For the purpose of enabling it to disburse his claim from the amount deposited with it by the Central Government, priorities were to be accorded to the specified category of claim in terms of the Second Schedule of the Act. (Para 18)

       The Commissioner of Payments as a statutory authority was to act within the four-corners of the Act.(Para 19)

       In terms of the provisions of the Act, the liability of the owner has not ceased to run. The entire claim of the bank, if not capable of being disbursed from the amount deposited by the Central Government, the same would abate. The claimants, therefore, are entitled to realize their remaining claims from the owners.(Para 20)

       For the purpose of attracting the provisions of the Second Schedule, the amount mentioned in Category I must be confined to loans advanced by the banks or other financial institutions, or any other loan or any credit availed of for the purpose of trade or manufacturing operations. A distinction, therefore, exists between a loan given to the Controller and availing of the credit facilities which were available to the owner of the textile mills so as to enable it to carry on the manufacture operation thereof after its take over. The textile undertakings were sick ones. The managements of such mills were taken over for the purpose of revival thereof. If in that process the Authorized Controller was required to raise loan either from a bank or from a financial institution other than a bank or from any other person or availed any other credit, indisputably, the same would come within the purview of Category-I liability being a post-takeover management period.(Para 23)

       The liability of the owner continues even during the take-over period. Indisputably, however, that would not mean that any act done by the statutory authority or the State would be binding on the owner. The Gujarat Financial Corporation or the State of Gujarat having furnished guarantee on their own behalf, the same indisputably would continue to remain binding on them. Such guarantees which were furnished by the Gujarat Financial Corporation or the State of Gujarat would, thus, be enforceable against them. We, however, may clarify that we, at present advised, have not gone into the question of effect of abatement of claims against the owner. (Para 34)

       The provisions of the said Act, however, do not bar adjustment of any account; but what was suspended was a declaration of relief undertaking and suspension of any remedy for the enforcement thereof. What was stayed was the proceedings pending before any court, tribunal, officer or authority, but the same had nothing to do with the adjustment of accounts in terms of the provisions of the Indian Contract Act, 1872. Section 59 of the Indian Contract Act provides for application of payment where debt to be discharged is indicated. Section 60 thereof provides for application of payment where debt to be discharged is not indicated. Section 61, however, provides that in absence of any party making appropriation, the payment shall be applied in discharge of the debts in order of time, whether they are or are not barred by the law in force for the time being as to the limitations of suits.(Para 36)