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PETITIONER: MAHARASHTRA TUBES LTD.

       Vs.

RESPONDENT: STATE INDUSTRIAL AND INVESTMENT CORPORATION OFMAHARASHTRA LT

DATE OF JUDGMENT29/01/1993

BENCH: AHMADI, A.M. (J) BENCH: AHMADI, A.M. (J) SHARMA, L.M. (CJ)

CITATION:  1993 SCR  (1) 340        1993 SCC  (2) 144  JT 1993 (1)   310        1993 SCALE  (1)223

ACT: State  Finance  Corporation Act, 1951-Object and  scope  of- Finance Corporation-Constitution-Purpose of. Sick  Industrial Companies (Special Provisions)  Act,  1985- Object and scope of. State  Finance  Corporation Act, 1951-Section 46B  and  read with Sections 22, of the Sick Industrial Companies  (Special Provisions) Act, 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    22-Object   of-"Or   the   like",   "the    like" "Proceedings"-Construction of. State  Finance  Corporation Act, 1951-Sections 29,  31  read with  sections  22,  25 of  the  Sick  Industrial  Companies (Special  Provisions)  Act,  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 1951 Act for recovery of loan/advance-Legality of.

HEADNOTE: In July, 1982, the appellant-Company, incorporated under the Companies   Act,   1956  commenced  manufacture   of   steel pipes/tubes etc. of various sizes and dimensions for export. By   July,   1986,   labour   unrest,   strikes,   financial constraints,    etc.   necessitated   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 losses and sought financial assistance  for revival of the unit. 341 The  Director (Finance) of the BIFR desired the  company  to report 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 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  (1)

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(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 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  made,  the BIFR dismissing the  reference  held that  the company could not be held to be a sick  industrial company under section 3(1)(o) of the 1985 Act. The respondent No. 1 thereafter initiated proceedings  under section 29 of the State Financial Corporation Act, 1951  for taking possession of the factory premises of the company. On  20th  August, 1992, the company flied  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 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. 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 342 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 concerns  than the 1951 Act and therefore the  latter  would prevail  over the former in the event of conflict;  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 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 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 to  industrial  concerns. [355D] 1.02.     The purpose of constituting State Level  Financial Corporations  was to augment industrialization by  extending financial  assistance to certain industrial  concerns.   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.  floated  by  such  concerns.   Such  loans  etc.   are repayable within a stated period. [354G] 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

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the  statute, the real objective of the law is to create  an instrumentality  through which financial assistance  can  be 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 was enacted, with a view to timely  detection  of sick or potentially sick 343 companies 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. The  emphasis  is to prevent sickness and in cases  of  sick undertakings to prepare schemes for their rehabilitation  by providing financial assistance by way of loans, advances  or guarantees   or   by  providing  reliefs,   concessions   or sacrifices  from  Central or  State  Governments,  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  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 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. [356C-D] 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 the 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 a different objective, the emphasis in the  case  of  the  former  being  on  giving  of  financial assistance  to entrepreneur for setting up industries  while in  the  case of latter it being to revive  or  rehabilitate industries  which  have  on account  of  economic  or  other related  reasons gone sick The latter Act also  contemplates giving of financial assistance for revival or rehabilitation 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.   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 344 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 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 and says that the said provision shall apply notwithstanding anything contained in Companies Act, 1956 or any other law. [360D] 3.03.     The  1985  Act being a subsequent  enactment,  the

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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 generalia specialibus non-derogant would apply. [360E] 3.04.     In  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 situation.  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] 4.01.     Section 22(1) provides that where an appeal  under section  25  relating to an industrial company  is  pending, 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 properties 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 await  the  outcome  of  the reference   made   to   the  BIFR  for   the   revival   and rehabilitation of the sick industrial company. [361F-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 BIFR finally disposes of the  reference made under section 15 of the enactment.   The legislature  has advisedly used an omnibus  expression  ’the like’ as it could not have 345 conceived  of  all possible coercive measures  that  may  be taken against a sick undertaking. [361H, 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. [362G] 4.04.     The  expression  ’proceedings’  in  section  22(1) 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 debtor’s  property. [365C] 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 (Fourth Edition), referred to. 5.01.     On a plain reading of section 29 of the 1951  Act, 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 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

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with them if it were the owner of the properties. [362D-E] 5.02.     The action contemplated by section 29 of the  1951 Act is undoubtedly  a coercive measure directed at the  take over  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  concern  and  any  such  transfer 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 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 346 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 fully empowered to dispose it of  to  a third party and 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-D]     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, 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 corporations 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 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 it should take with respect  to  the sick industrial company. [365B]   Gram Panchayat & Anr. v. Shree Vallabh Glass Works Ltd.  & Ors., [1990] 2 SCC 400 = AIR 1990 SC 1017; Texteels Ltd.  v. Radhaben Ranchhodlal Charitable Trust, AIR 1988 Gujarat 213; Industrial   Finance   Corporation  of  India  &   Ors.   v. Maharashtra Steel Ltd. & Ors., AIR 1988  347 Allahabad 170 and The Andhra Cement Co. Ltd, Secunderabad v. A.P.  State  Electricity Board & Ors., AIR  1991  A.P.  269, referred to.

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JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 289 of 1993. From  the Judgment and Order dated 6.10.1992 of  the  Bombay High Court in Writ Petition No. 1999 of 1992. G.L.  Rawal,  Ms. Alpana Poddar and Kailash Vasdev  for  the Appellant. P.P. Rao, S.K. Dholkia, Dr. Sumant Bhardwaj, A.M. Khanwilkar and A.S. Bhasme for the Respondents. The Judgment of the Court was delivered by AHMADI, J. Special leave granted. 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   Corporations   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. The 1951 Act was enacted to provide for the establishment of State Financial Corporations.  Section 3 empowers the  State Government  to establish a State Financial 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,  direction  and management  of  the affairs and business  of  the  Financial Corporation  shall  Nest 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 348 Directors.   Section  25 enumerates the business  which  the Financial  Corporation  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  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 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  otherwise  fails  to               comply  with the terms of its  agreement  with               the   Financial  Corporation,  the   Financial               Corporation 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." Where   the  Financial  Corporation,  in  exercise  of   the

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aforesaid  rights, transfers 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:               "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 with the Financial  Corporation               or where the Financial Corporation requires an               industrial concern to make immediate repayment               of  any loan or advance under section  30  and               the  industrial  concern fails  to  make  such               repayment,  then,  without  prejudice  to  the               provisions  of section 29 of this Act  and  of               section 69 of the Transfer of Property                349               Act,   1882  any  Officer  of  the   Financial               Corporation, 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 :               (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               (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 machinery or 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 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 contained  in the said Act or in the Memorandum or  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  proceedings  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-

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350 poration as an arrear of loan revenue.  And Section 46B says that  the provisions of the said Act and any rule  or  order made  thereunder 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 consequences 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  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 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  with  respect  to  such  companies  and   the expeditious  enforcement of the measures so  determined  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- stitution.   The  dictionary of the Act is to  be  found  in Section  3. Section 3(e) defines an ’industrial company’  to mean   a   company  which  owns  one  or   more   industrial undertakings   and  Section  3(f)  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  industrial undertaking as defined in Section 3(j)  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 assigned  to them in the Industries (Development & Regulation) Act, 1951, we  must  look  to the definition of factory  in  that  law. ’Factory’  as  defined in Section 3(c) of  that  law,  inter alia, means any premises including the  351 precincts  thereof  in  any part of  which  a  manufacturing process  is being 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. Section  3(o) defines a sick industrial company 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 accumulated losses equal to or exceeding its entire net worth  and has also suffered 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  11

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provides   for  establishment  of  a  Board  and   Appellate Authority   for  Industrial  &   Financial   Reconstruction. Section 4(1) empowers the Central Government to establish  a Board  to be known as the ’Board for Industrial &  Financial Reconstruction’  (BIFR)  to exercise  the  jurisdiction  and powers  and discharge the functions and duties conferred  or imposed thereon by or under 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  BIFR.   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  proceedings  before the  BIFR  or  the  Appellate Authority shall be deemed to be judicial proceedings.   Then comes  Chapter  III  entitled  ’References,  Inquiries   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 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 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 352 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 be a special director or special 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  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 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:               (a)   the    reconstruction,    revival     or               rehabilitation of the sick industrial company;               (b)   the   proper  management  of  the   sick

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             industrial company 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  undertaking  of   the   sick               industrial company;               (e)   such other preventive, ameliorative  and               remedial measures as may be appropriate; A copy of the draft scheme prepared by the BIFR is  required to be sent  353 to  the  sick industrial company as well  as  the  operating agency.   After the 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  measures  with respect  to  any  sick industrial company,  the  scheme  may provide for financial 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 institution 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               "22(1)  Which  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  an  appeal   under               section  25 relating to an industrial  company               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               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 industrial company or for the  appointment               of a receiver in respect, thereof shall lie or               be  proceeded  with further, except  with  the               consent  of the Board or, as the case may  be,               the Appellate Authority." We  now come to Chapter IV entitled ’Proceedings in case  of potentially    sick   industrial   companies,    misfeasance proceedings,   appeals  and  miscellaneous’.    Section   25 provides for an appeal and reads as under: 354               "25(1) Any person aggrieved by an order of the               Board  made  under the Act may,  within  forty               five days from the date on which a copy of the               order  is issued to him, prefer an  appeal  to               the Appellate Authority:

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             Provided  that  the  Appellate  Authority  may               entertain any 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.               (2)   On  receipt  of  an  appeal  under  sub-               section  (1),  the  Appellate  Authority  may,               after  giving An opportunity to the  appellant               to  be  heard,  if he so  desires,  and  after               making  such further inquiry as it deems  fit,               confirm,   modify  or  set  aside  the   order               appealed against." 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 or under this Act.   Section  32 says  that  the provisions of this Act and of any  Rules  or Schemes  made thereunder shall have  effect  notwithstanding anything  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 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 industrialisation by  extending financial  assistance to certain industrial  concerns.   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.,  floated  by  such concerns.  Such  loans,  etc.,  are repayable within a stated period.  The enactment has  under- gone  amendments from time to time with a view to  enlarging the functions  355 and powers of the Financial Corporations.  The said Act  was amended  in 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 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 underwritten shares beyond seven years and  to convert  loans/debentures  into share  capital.   A  further amendment  was made in 1972 (Act 77 of 1972) as it was  felt that  technical entrepreneurs and units situate in  backward areas should also be granted soft term loans and such  other benefits.   At  the  same time certain  constraints  on  the Corporations  were removed to ensure their  smooth  working. It  is clear from the foregoing discussion that the  primary object of this statute is to extend financial assistance  to industrial  concerns  with  a view to  hasten  the  pace  of

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industrialisation  and  with  that  in  view  the  Financial Corporations have been statutorily enjoined or charged  with the  duty  to’  provide  credit  facilities  to   industrial concerns.   Undoubtedly  Financial  Corporations  have  been empowered   by  section  29  to  take  over  management   of defaulting industrial concerns for realisation of its  dues. Similarly,  section 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   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 objective of the law is to create  an instrumentality  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 356 manifests,  with  a  view to timely  detection  of  sick  or potentially  sick companies 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 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 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 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  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 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 economic or other related  reasons gone sick.  No doubt the latter Act also contemplates giving

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of  financial assistant for revival or rehabilitation  of  a sick  industrial undertaking but that is by way 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 two enactments we may notice a few background facts   which   have  a  bearing  on  the   question   under consideration.  The appellant-company was incor-  357 porated under the Companies Act, 1956 on 15th April, 1980 or thereabouts 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  manufacturing activities  it  ran into difficulties on account  of  labour unrest,   strikes,   financial   constraints,   etc.   which necessitated  the cessation of manufacturing  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 accumulated 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  June, 1988 showing the accumulated losses  and  sought financial assistance for revival of the unit.  The  Director (Finance)  of  the  BIFR replied  by  pointing  out  certain deficiencies  in the statements of accounts forwarded to  it and desired 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 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 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  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  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- 358 ments  regarding  the number of  workers,  audited/finalised accounts  for the 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 reports regarding the conduct of the  company  and their role in providing  necessary  funds. The  Chief Manager of the Bank of Baroda addressed a  letter

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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 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 III  of  BIFR  took note of the statement  of  the  Managing Director  that "he ha no documentary evidence in support  of his  contention that the unit employed more than 50  workers during  one year preceding the date of reference" and  after noticing certain discrepancies in regard to sundry  debtors, expenditure on security staff, removal of certain  movables, etc., the Bench concluded as under :               "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 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  is,               therefore, non-maintainable and is  dismissed.               " 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  company filed an appeal under section 25 of the 1985 Act against the 359 impugned  order  of the BIFR Bench dated  20th  July,  1992, extracted  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  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:               "...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  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

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             which  amounts to initiation  of  proceedings.               Preventing the financial institution like  the               1st respondent Corporation from even resorting               to its rights under section 29 of the 1951 Act               would, in our view render the said  provisions               totally  nugatory.   While  appreciating   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 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, respondent No. 1 is concerned, we               are  in  this case concerned 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 360 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 providing 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  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  therewith 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 notwithstanding anything inconsistent therewith contained in any  other law.  Section 22(1) also carries  a  non-obstante clause  and  says  that  the  said  provision  shall   apply notwithstanding anything contained in Companies Act, 1956 or any  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 generalia specialibus non derogant  would  apply. But  in  the present case on 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

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here and there, for 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 prevail and govern. It  was  next  contended that the  right  conferred  on  the Financial  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’ which  expression is  albeit used in the marginal note 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 to interpretation  he  invited  our attention  to a 7-Judge Bench decision of this Court in  The Bengal  Immunity Company Ltd. v. The State of Bihar &  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  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 Kishan & Ors., [1979] 2  SCC  468 held in no uncertain terms that the weight of the  authority was in favour of the view that 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,  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 properties 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 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 362 subject-matter  of  coercive action of similar  quality  and characteristic   tin  the  BIFR  finally  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

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undertaking.   The action contemplated by section 29 of  the 1951  Act is undoubtedly a coercive measure directed at  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  concern  and  any  such  transfer 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 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 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 owner 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 consent 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 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 Edition) which reads as under  363               " Any proceedings in court of justice ....  by               which   property  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." Even  this definition does not militate against the view  we are  inclined  to  take.  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 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 Corporation is playing the same  role.   From the point of view of quality and character the remedy is the same  as in execution of distress  proceedings.   Therefore, even  if  one goes by the said meaning and  understands  the

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term ’proceedings’ 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 the contentions urged on behalf of the  appellant Company.  We shall deal with them briefly.  In Texteels Ltd. v.  Radhaben Ranchhodlal Charitable Trust AIR  1988  Gujarat 213  the short point for decision was whether a  winding  up proceeding  already commenced against an industrial  company ought  to be dismissed or stayed during the pendency of  the reference under 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 should 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  administer  the  schemes   under section 18 or grant financial 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 defeated. In the other case of Industrial Finance Corporation of India v. Maharashtra Steel Ltd & ors., 364 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 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 that 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 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 The Andhra Cement Co. Ltd., Secunderabad  v.  A.P. State Electricity Board &  Ors.,  AIR 1991 A.P. 269.  That was case in which the company sought  a permanent  injunction  against  the  Electricity  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  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  militate  against the view which commends to us. Now  we come to the impugned decision.  The High  Court  was considerably  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 assist sick industrial undertakings which inter alia failed to meet their financial obligations.  It is, therefore, difficult to accept  the view of the High Court that where the  creditors

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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  permitted  to resort  to  independent action in total.  disregard  of  the pending inquiry under sections  365 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 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 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. 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. 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 the 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. 366