S. K. G. Sugar Ltd. v. State of Bihar — 1995 DIGILAW 325 (PAT)

JUDGMENT Radha Mohan Prasad, J. In the present writ application the petitioner has challenged the validity of the Certificate case No. 1 of 1991-92 initiated by the Certificate Officer, Siwan and pending in the court of District Certificate Officer, Patna numbered as Certificate Case No. 347 of 1992-93 and has prayed for issue of a writ of mandamus commanding the respondents not to proceed and take any steps for realization and recovery of the amount in question. 2. In short, the case of the petitioner is that it had three sugar factories at Siwan, Hathua and Lauria. On 21.10.85 the Bihar Sugar Undertakings (Acquisition) Ordinance, 1985 was promulgated vide Bihar Ordinance no. 38 of 1985. The said Ordinance was replaced by the Bihar Sugar Undertakings (Acquisition) Act, 1985 (hereinafter referred to as 'the Take over Act'). By virtue of the said Act the factories of the petitioner stood transferred and vested in the State of Bihar with effect from 21.10.85. It appears that as against the petitioner certain dues on account of sales tax for the years 1977-78 to 1981-82 were assessed which were to the tune of Rs. 6,26,212.32 P and on account of non-payment of the same on 5.5.91 a demand was sent by the Asst. Commissioner, Sales Tax in the form of requisition to the District Certificate Officer, Siwan for realisation of the same under the provisions of the Bihar & Orissa Public Demand Recovery Act. On the basis of the said requisition a proceeding under the said Act was initiated by the District Certificate Officer, Siwan and the same was registered as certificate case no. 1/1991-92. 3. An objection was filed on behalf of the petitioner in the court of District Certificate Officer, Siwan inter alia contending that the proceeding is not maintainable inasmuch as, the proceeding of assessment under the Bihar Finance Act stands abated under the provisions of Section 6 of the aforementioned Take Over Act. On 14.5.92 another application was filed on behalf of the petitioner praying therein to fix a date and time in the month of June, 1992 in the case so that they may place the facts and the points after receipt of the certified copies of the papers, for which they had requested several times. On 14.5.92 another application was filed on behalf of the petitioner praying therein to fix a date and time in the month of June, 1992 in the case so that they may place the facts and the points after receipt of the certified copies of the papers, for which they had requested several times. The District Certificate Officer, Siwan, without deciding the objection, under the orders of the Collector, vide his order dated 12.8.92 transferred the said case to the District Certificate Officer, Patna. The District Certificate Officer, Patna after registering the case bearing no. 347 of 92-93 issued notice on 17.9.92 under Section 7 of the Bihar & Orissa Public Demand Recovery Act to the petitioner fixing 17.10.92 for filing of objection. It is stated that the said notice for the first time was received by the petitioner in November, 93 whereafter the present writ application has been filed. 4. While admitting the writ application on 3.5.94 by the Division Bench, the Court stated that the question involved in the present case is as to whether in terms of the provisions of Bihar Sugar Undertaking (Acquisition) Act, 1985 the jurisdiction of Certificate Officer is ousted by necessary implication and in the meantime, further proceeding of the certificate case was stayed. 5. Mr. Giri, learned counsel for the petitioner submitted that the liability arising out of the certificate case is admitted, but in view of the provisions as contained in Section 7(2) of the Act all liabilities of the undertaking is to be limited to the amount of compensation determined by the prescribed authority under Section 7(1) of the Act. It has been submitted that Sec. 8 of the Act defines the prescribed authority, according to which the State Government shall appoint an officer not below the rank of a Commissioner. According to the learned counsel, under the said provision the Member, Board of Revenue has been appointed as the prescribed authority, who has to act according to the procedure as prescribed under the provisions of the Act itself and the provisions of the Public Demand Recovery Act for the realization of the alleged dues will have no application inasmuch as, the forum for adjudication of such dispute is available under the said Act itself and the jurisdiction of any other forum including under the provision of Public Demand Recovery Act is completely ousted. In support of this the learned counsel placed reliance on the order passed by a Division Bench of this Court in C.W.J.C. no. 1881 of 1991, a true copy whereof has been annexed as Annexure 5'. 6. A counter affidavit has been filed on behalf of the respondents 1 and 2, in which it is contended that the provisions of Section 16 of the Act is not applicable to the present case, as according to the respondents, the said provision is applicable against the undertaking which is defined under Section 2(b) and not against the company. In this regard reliance has been placed on clause (1) of sub-sec. (4) of Sec. 4 of the Act, under which every liability of the scheduled undertaking in respect of any period prior to the appointed date is to be the liability of the respective company owning the scheduled undertaking and is enforceable against such company and not against State Government and the Corporation. Thus, according to the respondents, the liability in the present case being for the period prior to the appointed date is enforceable against the petitioner company and not against the State Government or Corporation. The respondents have also ventured to contend that in view of the aforementioned provision of the Act the judgment rendered in C.W.J.C. no. 1881 of 91 is not at all binding on any other Bench on the principle of sub-silentio. 7. It is also contended that priority has been given in respect of certain categories of debts out of the compensation money payable under Section 7(3) of the Act, but it does not mean that the amounts are not realisable from the company independently. According to the respondents, Section 7(3) is only one of the modes of realisation and the same is not exhaustive nor restricts right of the creditors to realise from the company itself. 8. The question which needs to be decided in the present case is as to whether Section 7(3) of the Act is exhaustive in regard to the claim arising out of the matter specified in the second schedule and as to whether the liability of the State Government under Section 7 is completely different from its claim as creditor, which according to the respondents is enforceable under Section 7(4) of the Act. Section 3 of the Act provides the appointed day of the vesting of the scheduled undertaking specified in the first schedule absolutely free from all encumbrances. Section 4 deals with certain consequences of the vesting. The relevant provisions of Section 4 as referred to by the parties is clauses (i) and (ii) of sub-section (4) which are as follows: (4) (i) Every liability of the scheduled undertaking in respect of any period prior to the appointed day shall be the liability of the respective company owning the scheduled undertaking and shall be enforceable against such Company and not against the State Government Corporation; (ii) For removal of doubts, it is hereby declared that, save as otherwise expressly provided in this Section or in any other section of this Act- (a) No liability of the scheduled undertaking in respect of any period prior to the appointed day, shall be enforceable against the State Government Corporation as the case may be; (b) No award, decree or order of any Court, Tribunal or other authority, in relation to the scheduled undertaking, passed after the appointed day in respect of any matter, claim or dispute which arose before the appointed day shall be enforceable against the State Government/Corporation; (c) No liability incurred before the appointed day by the scheduled undertaking for contravention of any provision of law for the time being in force shall be enforceable against the State Government Corporation as the case may be; (d) Every shareholder of the vested scheduled undertaking shall cease to have any claim to the assets for the sugar undertaking concerned from the date of vesting or acquisition except compensation to the extent of his share out of the compensation determined under this Act; (e) Notwithstanding any provision in any other law, all the transfer, disposition of properties movable or immovable either in part or in whole made after 29th October, 1978 of the scheduled undertaking shall be invalid and stand annulled. The Collector shall take possession of such properties with the properties of the undertaking. 9. Under Sec. 7 of the Act the State Government is required to pay compensation of acquisition of the scheduled undertaking, which is to be the amount determined as per the book value of the assets of the undertaking by the prescribed authority. The Collector shall take possession of such properties with the properties of the undertaking. 9. Under Sec. 7 of the Act the State Government is required to pay compensation of acquisition of the scheduled undertaking, which is to be the amount determined as per the book value of the assets of the undertaking by the prescribed authority. Sub-section (2) of Sec. 7 provides that the liability of the scheduled undertaking in respect of the period prior to the appointed day shall be met, in accordance with the rights and interests or the conditions of the respective undertaking from the amount payable as compensation as determined under sub-section (1) and shall be limited to the amount of compensation so determined. Sub-sec. (3) of Sec. 7 provides that the claims arising out of the matter specified in the second schedule shall have priorities in accordance which the principles as laid down in clauses (a) to (d) which are as follows : (a) Category 1 shall have precedence over all categories and category II shall have precedence over category III and so on; (b) Claims specified in each of the categories except category IV shall rank equally and be paid in full but if the amount is insufficient to meet such claims in full, they shall abate in equal proportion and be paid accordingly; (c) The liabilities specified in category IV shall be discharged subject to the priorities specified in this section in accordance with the terms of the secured loan and the priority inter se of such loans; and (d) The question of discharge of any liability with regard to a matter specified in a lower category shall arise only if a surplus is left after meeting all the liabilities specified in the immediately higher category. 10. The various categories of the IInd schedule are as follows : Category I. Empolyees dues on account of unpaid salaries, wages provident fund, employees State Insurance contribution or premium of Life Insurance Corporation of India for the period from the 29th October, 1973 till the appointed day. Category II. Cane price dues of the farmers for sugar-cane supplied in the scheduled undertakings during the crushing seasons, 1982-83, 1983-84 and 1984-85. Category III. Category II. Cane price dues of the farmers for sugar-cane supplied in the scheduled undertakings during the crushing seasons, 1982-83, 1983-84 and 1984-85. Category III. Secured loans from Nationalised Banks and other financial institutions during the crushing seasons 1982-83, 1983-84 and 1984-85, State Government loans and revenue, taxes, cesses, rents or other dues to Central/State Government and local authorities or State Electricity Board for the pre-take-over period. Category IV. Trade and other creditors for the pre-take-over period. 11. It is not in dispute that the amount of compensation to be paid for acquisition of the scheduled undertaking under the Take Over Act has not been determined by the prescribed authority till date, nor any payment has been made to the petitioner in that regard. Besides the question raised by Mr. Giri, as mentioned above, it has also been submitted by him that the impugned demand without determining the compensation by the State Government is wholly arbitrary and mala fide, inasmuch as the action of the respondents cannot be said to be fair in realisation of the taxes from the petitioner without first paying the compensation payable to the petitioner by the State Government. According to the learned counsel, the whole scheme of the Take Over Act is that the compensation for acquisition of the undertaking is to be determined by the prescribed authority appointed by the State Government and only thereafter the liability of the scheduled undertaking in respect of the period prior to the appointed day is to be met in accordance with rights and interests or conditions of the respective undertaking from the amount payable as compensation and that too shall be limited to the amount of compensation so determined, whereas, in the instant case the respondents authority proceeded to realise the taxes from the petitioner without even determining the compensation amount payable by the State Government to them. 12. According to the learned Advocate General, the determination of compensation has got nothing to do with the discharge of the liability by the respective company of the scheduled undertaking in respect of any period prior to the appointed day and the same is enforceable against such company under clause (1) of sub-sec. (4) of Section 4. 12. According to the learned Advocate General, the determination of compensation has got nothing to do with the discharge of the liability by the respective company of the scheduled undertaking in respect of any period prior to the appointed day and the same is enforceable against such company under clause (1) of sub-sec. (4) of Section 4. The learned Advocate General has submitted that the State Government cannot be compelled to adopt the procedure under sub-section (3) of Section 7 of the Act inasmuch as, theory of election of the mode of realisation of the liability/dues for the period prior to the appointed day is available to the creditors which includes the State Government and thus, there is no' illegality in electing the mode of realisation of the dues/taxes under the provisions of the Bihar and Orissa Public Demand Recovery Act, inasmuch as the jurisdiction of the Certificate Officer cannot be said to be ousted for adjudication of the dues by the provisions or the Bihar Sugar (Undertaking) Act, 1985. The learned Advocate General placed reliance on the Supreme Court decision reported in AIR 1990 SC 151, para 47 (Tinsukhia Electric Supply Co. Ltd. v. State of Assam). He also placed reliance on the decision of the Apex Court reported in A.I.R. 1986 SC 868 and of this court reported in 1988 PLJR 50. 13. The learned counsel for the petitioner in reply submitted that in order to give full effect to the various provisions of the Act, they have to be read harmoniously. According to him, there is no doubt that every dues/debts prior to the appointed day is the liability of the respective company owning the scheduled undertaking and is enforceable against such company and not against the State Government Corporation, but by reading the provisions contained in Section 7(2), the liability is to be met in accordance with rights and interests or the conditions of the respective undertaking from the amount payable as compensation and further is to be limited to the amount of compensation so determined. 14. I find it difficult to accept the said submissions of the learned counsel for the petitioner. 14. I find it difficult to accept the said submissions of the learned counsel for the petitioner. It is true that under sub-section (3) of Section 7, the liability of the scheduled undertaking for the period prior to the appointed day is payable from the amount of compensation as determined, but I an unable to accept the submission that the said liability as against the creditors other than the State Government can also be limited to the amount of compensation only. Neither the learned counsel for the petitioner nor the learned Advocate General has been able to point out that the State Legislature has the legislative competence to limit such liability only to the amount of compensation determined under Section 7 of the Take Over Act. However, in view of the nature of the liability in the present case, I do not find it necessary to deal with the said question in detail, as the same can be adjudicated in an appropriate case. 15. However, one thing is clear that every liability of the undertaking in respect of any period prior to the appointed day is the liability of the respective company and enforceable against them and not against the State Government. But I am unable to appreciate the stand of the learned Advocate General that the liability of the State Government to pay compensation is completely different from its claim as a creditor as against the liability of the company for the period prior to the appointed day. Under Section 7(3) itself the claim arising out of the matter specified in the second schedule as against the liabilities of the respective company for any period prior to the appointed day have to be discharged according to the priorities given in the said provision. 16. The purpose of this provision is too obvious .to require and cannot be held to be intended for an unjust enrichment in the hands of Government. The purpose is to facilitate recovery of certain types of debts owing to public institutions etc. and is for the benefit of those creditor-institutions and the Government would be under legal obligation to pay the sums so deducted from the compensation payable to the petitioner creditors in the preferential order as envisaged under Section 7(3) of the Take Over Act. The purpose is to facilitate recovery of certain types of debts owing to public institutions etc. and is for the benefit of those creditor-institutions and the Government would be under legal obligation to pay the sums so deducted from the compensation payable to the petitioner creditors in the preferential order as envisaged under Section 7(3) of the Take Over Act. It is well settled that the provisions of the Statute must be read along, and in consonance with the general principles of law which import such obligations on the part of the Government and an implied corresponding discharge by the petitioners to the extent of such deductions in their liabilities. The Supreme Court in the case of Tinsukhia Electric Supply Co. Ltd. v. State of Assam (supra) went to the extent of holding that there is a resulting statutory trust in the hands of the Government to pay the sums so deducted, to the respective creditors as even in the absence of express provisions in this behalf in the statute, the general principles of law operate. In fact, the said decision relied upon by the learned Advocate General rather helps the petitioner. The submission of the learned Advocate General that the State Government can elect any other mode for discharge of the liability of the respective company in relation to any period prior to the appointed day in my opinion is wholly untenable inasmuch as that will run counter to the provisions contained in sub-section (3) of Section 7 of the Take Over Act. Sub-section (4) of Section 4 of the Take Over Act cannot be read in isolation. It is a rule now firmly established that the intention of the legislature must be found by reading the Statute as a whole. A reference in this regard may be made to the decisions of the Apex Court reported in A.I.R. 1985 SC 1034, A.I.R. 1987 SC 2034 at page 2042 and A.I.R. 1991 SC 1632 at page 1638. 17. The claim arising out of the dues of taxes, which is in category III of the second schedule in my opinion, is realisable in terms of sub-section (3) of Section 7. It is well settled that if a statute requires action to be taken in a particular manner, then it has to be done in the same manner. 17. The claim arising out of the dues of taxes, which is in category III of the second schedule in my opinion, is realisable in terms of sub-section (3) of Section 7. It is well settled that if a statute requires action to be taken in a particular manner, then it has to be done in the same manner. This also stands supported in view of the settled principle that the jurisdiction vested in the general Act can be taken away by special procedure under special Act. A reference in this connection, may be made to the decision of the Apex Court in the case of State of Mizoram v. Biakchhawna, (1995) 1 SCC 156 . 18. Moreover, it would be absurd to hold that the State Government being a debtor in so far as in relation to payment of compensation of acquisition of the scheduled undertaking is concerned can realise its claim as creditor from the respective company without even discharging its liability towards the said company. Such action in my opinion will be wholly arbitrary, and mala fide exercise of the powers. 19. Other decision relied upon by the learned Advocate General also does not support his stand. The decision reported in 1988 PLJR 50 (M/s Gaya Cotton & Jute Mills v. Union of India) rather supports the view taken by me above. In the said case the learned Single Judge while considering the provisions contained in Sections 17 and 20 of the said Act held that the Act is a self-contained Code and any parson having claim as against the owner of a sick undertaking has to file a claim before Commissioner of Payment. It was further held that the Parliament has fixed as to which category of claim shall have priority over others and thus, the amounts received from Commissioner of Payment in lieu of nationalisation of the sick textile undertaking in question is to be disbursed in terms of priorities fixed by statute itself. 20. The words of sub-sections (2) and (3) of Section 7 of the Take Over Act are absolutely clear and unambiguous and clearly spell out the intention of the Legislature. The liability of the scheduled undertaking in respect of period prior to the appointed day is to be met in accordance with rights and interests or conditions of the respectives undertaking from the amount payable as compensation. The liability of the scheduled undertaking in respect of period prior to the appointed day is to be met in accordance with rights and interests or conditions of the respectives undertaking from the amount payable as compensation. Further the priorities in respect of the claims arising out of the matter specified in the second schedule have to be fixed in accordance with the principle laid in sub-section (3). The language of the provisions aforementioned being clear and unambiguous, no other construction is possible, nor any other meaning can be assigned. It is well settled rule of construction that a language of a provision or a Rule should not be construed in a manner, which would be in violation of the phraseology used thereto. In other words, if the provisions of the statute are themselves clear and unambiguous, then no more is necessary other than to expound the words used therein in their ordinary natural senses. In the case of Union of India v. Sankalchand Himatlal Seth and another, reported in A.I.R. 1977 SC 2328 it was held that where the statute's meaning is clear and explicit words cannot be interpolated. Further, in the case of Raja Satyendra Narain Singh vs. State of Bihar and others, reported in 1987 BLJR 477 at page 481 : 1987 PLJR (SC) 47 the Apex Court held that the basic principle of construction of every statute is to find out what is clearly stated and not to speculate upon latent imponderables. 21. In the facts and circumstances aforementioned, in my opinion, the Certificate Officer, in exercise of the jurisdiction of the Bihar and Orissa Public Demand Recovery Act cannot act unless something is left to be done under the provisions of the Take Over Act, inasmuch as in case the liability, if any, is unenforceable under the Take Over Act, only then the Certificate Officer can proceed in the matter under the provisions of the Bihar and Orissa Public Demand Recovery Act. 22. In the result, the writ application succeeds and the certificate case no. 22. In the result, the writ application succeeds and the certificate case no. 1 of 1991-92/ 347 of 1882-93 pending in the court of District Certificate Officer, Patna as against this petitioner is hereby quashed and further a writ in the nature of mandamus is issued to the Respondents commanding them not to proceed and take any steps for realisation of amount in question, except in accordance with Section 7 of the Take Over Act. However, in the facts and circumstances of the case, there shall be no order as to costs. Gurusharan Sharma; J.-I agree.