JUDGMENT
Jahagirdar J.
1. The first petitioner is a public limited company and will be hereinafter referred to as “the company” and has an industrial undertaking at Salwad in Palghar Taluka of thane Districr. The second petitioner is the director of the company. The petitioners were presented with a bill by the gram panchayat of Salwas (the second respondent),hereinafter referred to as “tha grampanchayat”,for a sum of Rs.9,47,539. This amount cosists of the property tax of Rs.8.77 lakhs and sum of Rs.53,700,being expences for conducting the appeal-an appeal presumably prefered by the company against the claim of rhe grampanchayat. The first respondent in the petition is the State of Maharashtra. While the third respondent is the sarpanch of the gram panchayat.
2. The petitioners contend that the recovery of the dues of the gram panchayat is stayed by the provisions of section 22 of the Sick Industrial companies (Special Provisions) Act,1985,hereinafter,referred to as “the Act”. If the company does not pay the bill,the grampanchayat is entitled to resort to the provisions of sub-section (7) and sub-section (8) of section 129 of the bombay Village Panchayats Act,1958. If resort be had to these provisions,it will amount to coercive procedure for recovering the amounts due. It will be,in other words,distress against the property of the company for recovering the amount due. According to the company,this is what is prohibited by the provisions of section 22 of the Act.
3. In order to appreciate the contention of the company,it is necessary to state certain facts which are not disputed. The company,as mentioned above,is a public limited company and it owns and industrial undertaking in the village of which the second respondent is the graqm panchayat. The industrial undertaking manufactures glass. The menufacters of the glass is an industry mentioned in the Firsr Schedual to the Industries (Development and Regulation) Act,1951. This indistrial undertaking is coverd by the provisions of the Act. In view of the precarious financial condition of the company,certain action has been taken under the provisions of the Act. The Board for Industrial and Financial Reconstruction constituted under the Act has appointed the Industrial Credit and Investment Corporation of India Ltd. as its operating agencies as defined in clause(i) of section 3 of the act, By another order,the Board for Industrial and Financial Reconstruction has declared that the company has become a sick industrial company within the meaning of section3(1)(0) of the Act. By a further order,the Board has directed that an inquiry be conducted under section 17 of the act.
4. In view of these developments,the petitioners contend that no proceedings for execution,distress or the like against any ofthe properties of the company’s undertaking shall lie or be proceeded with further,expect with the consent of the Board. Section 22 of the Act mentions,in so far as it is relevent for the purpose of this petition,that where in respect of an industrial company,an inquiry under section 16 is pending or any scheme referred to under section 17 is implementation relating to an industrial company,then,notwiths-standing anything cointained in the Companies Act or any othe law or instrument,no proceeding for excution destress or the like against any of the properties of the industrial company shall lie or be proceeded with further,except with the conset of the Board. If the gram panchayat sets in the motion the coecive machinery for the recovery of the amount due to it as an arrear of land revenue,the properties of the company will necessarily be attached and sold. This is obvisions of section 22 apply,than it will have to be held that this mode of recovery cannot be resorted to.
5. It has been contended on behalf of the respondents,as disclosed in the affidavit dated March 28,1988,sworn to by one Ashok Damodar Raout,sarpanch of the gram panchayat,that ,if section 22 of the Act puts a bar upon the powers of the gram panchayat to impose property taxes,which it can under the provisions of the Bombay Village Panchayats Act, 1958, then the Act is ultra vires the legislative competence of Parliament. The Bombay Village Panchayats Act, 1958, specifically empowers the gram panchayat to levy taxes, among other things, on buildings. The validity of the Bombay Village Panchayats Act is not in question. It is an Act enacted by a competent Legislature and has received the assent of the President of India. Any Act of Parliament which impinges upon the powers of the gram panchayat under a law which is valid will have to be read down so as to see that the powers of the gram panchayat to impose taxes on properties are not curtailed or restricted.
6. The Act has been passed by Parliament apparently in exercise of its legislative power with reference to item 52 in List I of the Seventh Schedule to the Constitution. This item reads as follows:
“Industries, the control of which by the Union is declared by Parliament by law to be expedient in the public interest.”
7. It is in exercise of this power that the Industries (Development and Reggulation) Act has been passed and the industry being carried on by the company is an industry mentioned in the First Schedule to that Act. One must proceed on the basis that the present Act has also been passed under this item. After going through all the relevant provisions of this Act and, in particular, reading section 22 in its entirety, one must notice that section 22 or, for that matter, any provision of the Act does not put any restriction on the power of the gram panchayat to imposes taxes on properties under section 127 of Bombay Village Panchayats Act. What is arrested under section 22 of the Act is the recovery by coercive procedure of any amount due by the company. The properties of the company shall not be proceeded against for satisfaction of any claim against the company. That is the provision in sub-section (1) of section 22 of the Act. It is, therefore, clear that the power of the gram panchayat to impose taxes on properties under section 127 of the Bombay Village Panchayats Act remains totally unimpaired. It is only prohibited by the provisions of section 22(1) of the Act from proceeding against the properties of the company while recovering the amounts due by way of property taxes.
8. There is no question of examining the validity of the Bombay Village Panchayats Act. It is a valid piece of legislation. The Bombay Village Panchayats Act has been passed by the then Bombay Legislature by exercising its powers in relation to item 5 of List IIof the Seventh Schedule to the Constitution of India. This item deals with the local Government, including authorities for the purpose of village administration. This should be sufficient for the purpose of holding that the Act passed by Parliament does not impinge upon the powers conferred upon the village panchayats by an Act of the Legislature whose validity is not questioned. However, we may briefly, refer to the provisions of article 246 of the Constitution in order to understand the respective places of the Acts of Parliament and the Acts of the State Legislature.
9. The provisions of article 246 of the Constitution are as follows:
“246. Subject matter of laws made by Parliament and by the Legislature of States.-(1) Notwithstanding anything in clauses (2) and (3), Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule (in this Constitution referred to as `the Union List’).
(2) Notwithstanding anything in clause (3), Parliament, and subject to clause (1), the Legislature of any State also, have power to make laws with respect to any of the matters enumerated in List III in the Seventh Schedule (in this Constitution referred to as `the concurrent List’).
(3) Subject to clauses (1) and (2), the Legislature of any State has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List II in the Seventh Schedule (in this Constitution referred to as `the State List’).
(4) Parliament has power to make laws with respect to any matter for any part of the territory of India not included in a State notwithstanding that such matter is a matter enumerated in the State List.”
10. From the language of article 246, it is clear that clause (1) is not controlled by anything that is provided in clauses (2) and (3) of article 246. On the other hand, what is provided in clause (2) of article 246 is subject to clause (1) of the said article. The overriding nature of the provision in clause (1) of article 246 is thus evident .
11. In Chaturbhai M.Patel v. Union of India, , the scheme of article 246 was examined. In that case, the provisions of the Central Excises and Salt were challenged on the ground that they interfered with trade and commerce within the province as defined in the Government of India Act, 1935. The Supreme Court pointed out that the Central Act was essentially connected with the levying and collection of excise duty and, in its true nature and character, the Act remained as one that fell under item 45 of List I of the Government of India Act, 1935. If it incidentally invaded the provincial field, it could not be said that the Act was invalid. It was held that the incidental trenching upon the provincial field, such as, for example, item 27 or item 29 of List II, would not affect its constitutionality because the extent of invasion of th4 provincial field may be a circumstance to determine the true pith and substance, but once that question is determined, the Act would fall on the side of the Central field and not on the provincial field. In paragraph 10 of its judgment, the Supreme Court specially pointed out that, in every case where the legislative competence of a Legislature in regard to a particular enactment is challenged with reference to the entries in the various lists, it is necessary to examine the pith and substance of the Act and if the matter comes substantially within an item in the Central List, it is not deemed to come within an entry in the Provincial List even though the clauses of subjects looked at singly overlap in many respects.
12. In a later judgment, namely, Sudhir Chandra v. WTO , the Supreme Court examined the same question in a different context. It held that levy of tax on the capital value of non-agricultural lands and buildings was constitutional and was referable to entry 86 in List I of the Seventh Schedule. The Supreme Court also held that legislation under the said entry did not conflict with any legislation under entry 49 of List II. Assuming that there is a conflict which was not capable of reconciliation, it was held that the power of Parliament to legislate in respect of a matter which is exclusively entrusted to it must supersede pro tanto the exercise of power of the State Legislature.
13. The overriding nature of the provisions conatined in clause (1) of article 246 of the Constitution has been underlined again in Kerala State Electricity Board v. Indian Aluminium Co., . The following, to be found in paragraph 5 of the judgment, ought to be noticed (at page 1036):
“The State Legislature has exclusive power to legislate with respect to matters in List II. But this is subject to the provisions of clause (1) (leaving out for the moment the regerence to clause (2)). The power of Parliament to legislate with respect to matters included in List I is supreme notwithstanding anything contained in clause (3) (again leaving out of consideration the provisions of clause (2)). Now what is the meaning of the words `notwithstanding’ in clause (1) and `subject to’ in clause (3)? They mean that where an entry is in general terms in List II and part of that entry is in specific terms in List I, the entry in List I takes effect notwithstanding the entry in List II. This is also on the principle that the `special’ excludes the general’ and the general entry is List II is subject to the special entry in List I.”
14. It is not disputed, and indeed it cannot be disputed, that the present Act has been passed by Parliament in exercise of its legislative power contained in List I of the Seventh Schedule. If this is so, naturally the provisions in the Act cannot be controlled by any other Act that might have been passed by the State Legislature in exercise of its legislative power under List II of the Seventh Schedule of the Constitution. We have already held that the Act does not touch upon the powers of the gram panchayat to levy property tax. It only puts a restriction on the recovery proceedings that may be adopted for recovering the taxes which the gram panchayat may legally levy. Such a provision must be regarded as incidental to the main provision contained in the Act, namely, the provision to nurse and bring back to health sick industrial units. Even if it is held that such a provision interferes to some extent with the power of the gram panchayat as conferred by a valid piece of legislation enacted by the State, it must override the provisions of the State Act.
15. It has than been argued by Mr.Gangal that what has been prohibited under sub-section (1) of section 22 is only the monies that become due as a result of working out contracts and other transactions mentioned in sub-section (3) of section 22. According to him, it could not be the intention of Parliament to stop the recovery of taxes which are imposed pursuant to the sovereign powers of the State. In the instant case, those powers have been delegated to the gram panchayat. The recovery of taxes is not, according to him, prohibited or restricted under sub- section (1) of section 22.
16. We have read, with his assistance, the provisions contained in sub-section (3) of section 22 along with sub-section (1). In our opinion, what is mentioned in sub-section (3) or even its broad language does not control the provisions contained in sub- section (1) of section 22. Properly analysed, the provisions of section 22 show that, in sub-section (1), recovery of claims which have become crystallised as due is arrested, while under sub-section (3), crystallisation of claims under instruments or transactions referred to therein is stopped. Even when there are settlements or awards, the Board has been given power to suspend the same, so that amounts payable under them do not become due. The context of the provisions in the two sub-sections are different; the stages at which they come into operation are also different. We disagree with Mr. Gangal when he says that the language of sub-section (3) of section 22 must be referred to in order to understand the nature of recovery proceedings that are stopped or arrested under sub-section (1).
17. In the affidavit of the sarpanch, it has been mentioned that almost 80 per cent, of the income of the gram panchayat in the instant case comes from the amount paid by the company by way of taxes. As a result of the embargo placed upon the recovery of taxes due from the company by section 22(1) of the Act, all the activities of the gram panchayat will grind to a halt. If this is so, it is an unfortunate situation, but we cannot interpret the provisions of an Act with reference to hardship in a particular case. We may, however point out that it is open to the gram panchayat to obtain the consent of the Board to proceed with the recovery of the property taxes and other dues from the company. If such consent is obtained, then the embargo impose by section 22(1) of the Act is lifted.
18. In the result, the petition succeeds. Rules is made absolute in terms of prayer clauses (b)(i) and (b)(ii) of the petition. No order as to costs.