1985 (4) TMI 255 - HC - Companies Law

Summary

Issues Involved:
1. Construction of the notification issued under section 4 of the Tamil Nadu Relief Undertakings (Special Provisions) Act, 1969.
2. Suspension of monetary liabilities due to the notification.
3. Compliance with conditions in the notification by the appellant company.
4. Validity and enforceability of conditions in the notification.
5. Interpretation of statutory powers and conditions imposed by the State Government.

Issue-wise Detailed Analysis:

1. Construction of the Notification:
The central issue in these appeals revolves around the interpretation of the notification issued by the State Government under section 4 of the Tamil Nadu Relief Undertakings (Special Provisions) Act, 1969. The notification declared the Tirupur Cotton Spinning and Weaving Mills Ltd. as a relief undertaking and suspended all contracts, assurances of property, agreements, settlements, awards, standing orders, or other instruments in force to which the relief undertaking was a party. The court had to determine whether the appellant company could benefit from this notification despite not complying with certain conditions specified in the notification.

2. Suspension of Monetary Liabilities:
The appellant company argued that the monetary liabilities on which the winding-up applications were based stood suspended due to the notifications issued under sections 3 and 4 of the Act. The notifications effectively froze the liabilities, thereby preventing the continuation of the winding-up proceedings.

3. Compliance with Conditions in the Notification:
The learned judge initially ruled that the appellant company was not entitled to the benefits of the notification because it had not complied with the conditions specified in the second proviso of the notification. Specifically, the company had not co-opted a Government nominee to its board of directors and had not entered into written agreements with creditors to discharge their dues in instalments. The appellant company contended that it intended to comply with these requirements and that the notification should not be construed to deprive it of protection.

4. Validity and Enforceability of Conditions in the Notification:
The court examined whether the failure to comply with the conditions in the second proviso of the notification could negate the protection granted by the notification. It was argued that the conditions laid down by the State Government should be enforceable and effective by their own force, and compliance should not depend on the volition of third parties (creditors). The court found that the condition requiring the relief undertaking to enter into agreements with creditors was inconsistent with the blanket suspension of liabilities provided by the notification.

5. Interpretation of Statutory Powers and Conditions Imposed by the State Government:
The court analyzed the statutory powers vested in the State Government under section 4 of the Act. It concluded that the power to suspend contracts and liabilities could not be simultaneously exercised with the power to modify and enforce liabilities in a modified form. The court held that the substantive part of the notification, which suspended all contracts and liabilities, must prevail over the conditions in the proviso that required the company to enter into agreements with creditors. The court also noted that making the protection dependent on third parties' agreement was impermissible and undermined the statutory power of the State Government.

Conclusion:
The court set aside the order of the learned judge and held that the appellant company was entitled to the protection of section 4 of the Act. Consequently, the proceedings in the three company petitions could not continue as long as the notifications under sections 3 and 4 of the Act were in force. The appeals were allowed with costs.