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High Court Of Delhi
STATE BANK OF INDIA - Appellant
Versus
JAIPUR UDHYOG LIMITED - Respondent
Suit 1103 of 1977
Decided On : 05/18/1984
RAJASTHAN RELIEF UNDERTAKINGS (SPECIAL PROVISIONS) ACT, 1961 - EXTRATERRITORIAL APPLICABILITY - CONSTRUCTION - SCOPE AND EFFECT - SUIT AGAINST RELIEF UNDERTAKING - STAY - JURISDICTION OF COURTS OUTSIDE RAJASTHAN.
Fact of the Case:
The State Bank of India filed a suit against Jaipur Udyog Limited and others for the recovery of Rs. 5,45,37,042.73p. Among the defendants were guarantors who were sued on the basis of their guarantee. Jaipur Udyog Limited was declared a "relief undertaking" under section 3 of the Rajasthan Relief Undertakings (Special Provisions) Act, 1961 (Rajasthan Act). The company claimed that the suit was liable to be stayed against them based on section 4 of the Rajasthan Act, which provides for a moratorium on suits and legal proceedings against relief undertakings during the period they remain as such.
Finding of the Court:
The court held that the Rajasthan Act has no extraterritorial applicability. The legislature did not intend for the Act to have any extra-territorial application, as evident from the statement of objects and reasons and the territorial scope specified in section 1(2) of the Act. The court emphasized the principle of territoriality in international law and constitutional law, stating that a state's jurisdiction is generally limited to its own territory and that its laws cannot operate in other states or territories.
Issues: 1. Whether the Rajasthan Act has any extraterritorial force. 2. Whether the suit is liable to be stayed against the Relief Undertaking. 3. Whether the suit can proceed against the guarantors assuming that it is liable to be stayed against the Relief Undertaking.
Ratio Decidendi: 1. The court interpreted the Rajasthan Act strictly and found that its provisions are limited to the territory of Rajasthan. The court relied on the principle of territoriality in international law and constitutional law, which limits a state's jurisdiction to its own territory. 2. The court held that the Rajasthan Act cannot be applied extraterritorially to stay suits against the Relief Undertaking in courts outside Rajasthan. The court reasoned that the Rajasthan legislature lacked the power to enact laws with extraterritorial effect and that other states or territories are not bound to recognize or enforce such laws. 3. The court concluded that the suit against the Relief Undertaking and the guarantors could proceed in the Delhi Courts, as the Rajasthan Act did not apply outside Rajasthan.
Final Decision: The court answered the referred questions as follows: 1. The suit by the State Bank of India against Jaipur Udyog Limited can continue. It is not liable to be stayed. 2. The suit against the guarantors will also continue. 3. In the opinion of the court, the principal debtor and the guarantors can both be sued in Delhi Courts. The suit will proceed. The plea of stay was rejected.
( 1 ) THE plaintiff, State Bank of India, has brought a suit for the recovery of Rs. 5,45,37,042. 73p against Jaipur Udyog Limited and others. Among other defendants there arc guarantors who have been sued on the basis of their guarantee, Jaipur Udyog Limited being the principal debtory Jaipur Udyog Ltd. is a company based in Rajasthan ( the Company ). Their registered office is at Sawai Madhopur in Rajasthan. This company has been declared by the State of Rajasthan as a "relief Undertaking" under section 3 of the Rajasthan Relief Undertakings (Special Provisions) Act, 1961. The Company will hereinafter be referred to as a "relief Undertaking". The Rajasthan Relief. Undertakings (Special Provisions) Act, 1961 will be hereinafter referred to as the Rajasthan Act. Section 4 of the Act inter alia provides :
(1) * * * (a) * * * (b) No suit or other legal proceeding shall be instituted or commenced, or, if pending, shall be proceeded with, against any industrial undertaking during the period in which it remains a relief undertaking. Explanation : "legal proceeding" means any proceeding under any law before any court, tribunal, officer, authority or arbitrator, started on a plaint, petition or appeal, application, reference, or otherwise. (2) The period, during which any suit or legal proceeding cannot be instituted or commenced because of the provisions of clause (b) of sub-section (1), shall be excluded in computing the period of limitation prescribed by the Indian Limitation Act, 1908 (Central Act 9 of 1908) or any other law for the time being in force, for such suit or proceeding. "
( 2 ) BASING themselves on this provision of the Rajasthan Act, the company and the guarantors claim that the suit is liable to be stayed against them. The real question is whether the Rajasthan Act and in particular section 3 of the Act has any extra-territorial force. The learned Judge (R. N. Aggarwal before whom this question arose noticed that, there was a conflict of judicial opinion on this point. The Allahabad High Court in M/s. Jaipur Udyog Ltd. vs. Star Paper Mills Ltd. , 1981 All L. J. 121 (1) has taken the view that the Act has no extra-territorial applicability. On the other hand, the Punjab and Haryana High Court in Jaipur Udyog Ltd. vs. The Punjab University and another, 1980 P. L. R. 597 (2) has held to the contrary. The learned judge thought that the question being of general importance ought to be decided by a larger bench. He has referred to us two questions :
(1) Whether the suit is liable to be stayed against the Relief Undertaking;
(2) Whether the suit can proceed against the guarantors assuming that it is liable to he. stayed against the Relief Undertaking.
( 3 ) THE issue to be decided is whether the Rajasthan Act has any applicability outside the territory of the State of Rajasthan. The answer to this question is contained in the Rajasthan Act itself. Section l (2) says that the Act "extends to the whole of the State of Rajasthan". This is an explicit declaration by the legislature which has passed the Act. The framers of the Act did not intend that it should have any extra territorial application.
( 4 ) IN the statement of objects and reasons it is said:
"where the State Government, in order to prevent, or to provide relief against, unemployment, starts, takes over, or acquires, or grants any financial assistance to, any industry, it is necessary to protect it for such time as such industry may take to come to its owen, from legal proceedings and also to extend the period of limitation in order to save the interests of the creditors. Similarly, it is also necessary to suspend temporarily certain laws which provide for the machinery of settling labour disputes and certain other conditions of service of labour. Some retrenchment in labour will also be required and unless the labour laws are suspended, reduction of labour in the industry will not be feasible. "
( 5 ) IN approaching the subject of jurisdiction, we reac
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