JUDGMENT
Satya Brata Sinha, J.
1. The petitioner in this writ application has, inter alia, prayed for issuance of a writ of or in the nature of mandamus directing respondents Nos. 1 and 2 to restore the three bank guarantees upon payment-back by respondent No. 1 to respondent No. 2 of the sum received upon recovering the relevant debt entries in the account of the petitioner with defendant No. 2 forthwith.
2. The fact of the matter is not much in dispute. The petitioner obtained a purchase order from respondent No. 1, Steel Authority of India, on December 12, 1985, and for the purpose of execution of the said contract it received advances from the said respondent, upon furnishing three bank guarantees executed by respondent No. 2 in favour of respondent No. 1, the details whereof are as follows :
TABLE
Purpose
Bank guarantees No. and date
Amount (Rs.)
Initial period of validity
Extended period
1.
Against 10% of supply value towards approval of GA drawings
10/77, dated 1-7-1986
35,01,000
October 24, 1987
September 24, 1991
2.
Against 10 per cent. of contract value in respect of advance for mobilisation and/ or delivery of materials.
18/151, dated 29-10-1985
38,95,000
October 24, 1987
September 24, 1991
3.
Towards security deposit amounting to 5 per cent. of the total value.
18/15
19,47,000
October 24, 1987
February 24, 1992
3. Allegedly the petitioner was declared a sick industrial undertaking on or about February 9, 1988, purported to be in terms of the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter called and referred to for the sake of brevity as “the said Act”). On January 29, 1991, the Steel Authority of India Ltd. filed a suit against the State Bank of India for recoveries of the amount under the three bank guarantees. On February 27, the said bank informed the petitioner that a writ of summons would be served upon the bank in Money Suit No. 22 of 1991 filed by respondent No. 1 for payment of the amount under the said bank guarantees. The bank intimated the petitioner that if respondent No. 1 presses its claim, the said bank guarantees would be paid and the proceeds thereof would be recovered by debiting the cash credit account of the petitioner. During pendency of the said suit the said bank paid voluntarily the entire proceeds of the three guarantees on March 9, 1992, without any order from the court. The petitioner filed two applications in the suit, one for being added as a party and another for restraining the bank from paying the said amount to respondent No. 1.
4. An arbitration proceeding was initiated which was terminated by an order dated June 21, 1995, by referring all the disputes other than the bank guarantees in question to arbitration whereafter the instant writ application was filed. The contention of the petitioner is that in terms of Section 22(1) of the said Act, respondent No. 2 could not have paid the amount under the bank guarantees in favour of respondent No. 1. Mr. Biswarup Gupta, learned senior counsel appearing on behalf of the petitioner, submitted that in view of the said provisions an interdict came into being restricting the making of such payment in view of the objective of the Act as has been laid down by the apex court in Gram Panchayat v. Shree Vallabh Glass Works Ltd. [1991] 71 Comp Cas 169 (SC) and Maharashtra Tubes Ltd. v. State Industrial and Investment Corporation of Maharashtra Ltd. . Learned counsel also placed strong reliance upon the decision of a learned single judge of this court reported in Himalaya Rubber Products Ltd. v. Board for Industrial and Financial Reconstruction [1992] 1 Cal LT 279 ; [1993] 76 Comp Cas 281 and submitted that as upon payment of the guaranteed amount the bank had realised the same from the petitioner, it comes within the purview of the word “distress or the like” as defined in Section 22(1) of the said Act. Learned counsel submits that although the prohibition relating to the filing of a suit for recovery of money or enforcement of any security against any industrial company or any guarantee in respect of loan or advances granted to the industrial company was inserted in
Section 22(1) of the said Act, in terms of an amendment which came into force on February 1, 1994, the restriction to make such payments was inherent in the scope and object of the said provision as would be evident from the objects and reasons of the Amending Act of 1993, inasmuch as it would appear therefrom that such an amendment was merely clarificatory in nature. Mr. Gupta would contend relying on the decision of the Supreme Court in K. P. Varghese v. ITO and R. S. Nayak v. A R. Antulay, , that the court while interpreting the statute is entitled to consider the Minister’s speech, marginal notes and department’s clarification, etc., as also other materials which were before Parliament at the time when such enactment came into force.
5. Mr. Bimal Chatterjee, learned counsel appearing on behalf of the respondents, on the other hand, submitted that Section 22(1) of the said Act has two limbs and the second limb having come into force after the amendment was made, the petitioner cannot derive any benefit thereunder. Learned counsel contends that the amendment is prospective in nature and not retrospective and in support of his aforementioned contention counsel relied upon Athlumney, In re : Ex parte Wilson [1898] 2 QBD 547, R. Rajagopal Reddy v. Padmini Chandrasekharan and Mithilesh Kumari v. Prem Behari Khare . Learned counsel submits that the Supreme Court in Gram Panchayat v. Shree Vallabh Glass Works Ltd. [1991] 71 Comp Cas 169 (SC) has divided Section 22(1) of the said Act in three categories and thus prior to the coming into force of the said Amending Act as the petitioners’ case did not fall within any of the said categories no relief can be granted in their favour. Learned counsel further joins issue with Mr. Gupta that the Amending Act is clarificatory in nature. Reliance in this connection has been placed on Punjab Traders v. State of Punjab, and Central Bank of India v. Their Workmen .
6. Section 22(1) of the said Act reads thus :
“Where 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 instru
ment 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 (and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans, or advance granted to the industrial company) shall lie or be proceeded with further, except with the consent of the Board, or as the case may be, the Appellate Authority.”
7. Sub-section (3) of Section 22, however, provides that where an enquiry under Section 16 is pending or any scheme referred to in Section 17 is under preparation or during the period of consideration of any scheme under Section 18 or where any such scheme is sanctioned thereunder, for due implementation of the scheme, the Board may by order declare with respect to the sick industrial company concerned that the operation of all or any of the contracts, to which such sick industrial company is a party shall remain suspended or that any of the rights, privileges, obligations and liabilities arising thereunder before the said date shall remain suspended or shall be enforceable with such adaptations and in such manner as may be specified by the Board.
8. Section 22 of the said Act, therefore, not only provides for suspension of legal proceedings but also provides for suspension of contracts. Once such order of suspension is passed, the period of limitation for the enforcement of any right, privilege, obligation or liability, the period during which the remedy for the enforcement thereof remains suspended under the said section is to be excluded.
9. There cannot be any doubt that the provision of the said Act is beneficent in nature. However, the question which arises for consideration in this application is as to whether the respondent bank was entitled to file a suit against respondent No. 1 for enforcement of the said bank guarantees. At the relevant time the provision of Section 12 of the Amending Act which prohibited filing of any suit for recovery of the money or for enforcement of any security against the industrial company or of any guarantee in respect of any loan or advance granted to the industrial banks did not come into force.
10. The necessary corollary to the question involved in this application would be whether enforcement of a bank guarantee would come within the purview of the word “proceedings”.
11. The right to enforce any bank guarantee arises out of a contract-qua contract. Under the contract respondent No. 1 was entitled to enforce the bank guarantee and the bank was liable to pay the guaranteed amount without any demur whatsoever. No court was entitled even to grant an injunction in such matter unless a prima facie case of fraud or any irretrievable injury was made out. Reference in this connection may be made to A. C. Roy v. Union of India, . A right to enforce a bank guarantee as indicated hereinbefore is a contractual right. For enforcement of such guarantee no proceeding was required to be initiated. Even a suit was not required to be filed for enforcement thereof inasmuch as the bank was under a contractual obligation to pay such amount to respondent No. 1 without any demur whatsoever as and when it was called upon to do so. In the instant case, although a suit had been filed by respondent No. 1 against respondent No. 2, the amount under the bank guarantees had been paid voluntarily and without any order of the court.
12. By reason of the provision of the Sick Industrial Companies (Special Provisions) Amendment Act, 1993, Sections 3, 8, 12, 16, 17, 18, 19, 19A, 21, 22, 23, 28, 31, 32 and 33 were amended and Section 23A and Section 23B were inserted. The Statement of Objects and Reasons for the said Act appears at [1992] 74 Comp Cas (St.) 112, clauses 3 and 4 whereof read thus :
“3. The main features of the amendments proposed in the Bill are–
(a) jurisdictional amendments which redefine the category of the companies coming within the purview of the Act, and the options which are available for revival, rehabilitation or winding up of sick industrial companies ;
(b) amendments to enhance the effectiveness of BIFR ;
(c) amendments which seek to remove certain ambiguities and to strengthen the internal coherence of the Act by redefining certain provisions which are clarificatory in nature.
4. The Bill seeks to achieve the aforesaid objects.”
13. It is, therefore, evident that the said amendments have been classified in three categories. The amendment in Section 22(1) evidently comes within category B which had been carried for the purpose of enhancing the effectiveness of BIFR and not an amendment which seeks to remove
certain ambiguities and to strengthen the internal coherence of the Act by redefining certain provisions which are clarificatory in nature. Keeping in view the broad spectrum of the amendment carried out in Section 22(1) of the said Act, I am of the view that the amendment is of a substantive nature and not of clarificatory nature.
14. For the purpose of this case it was not necessary for this court to go into the question as to whether the court while enterpreting a statute is entitled to consider the marginal notes, speeches of Ministers or objects and reasons or other materials which were before Parliament as recourse thereto can be taken only in the event an interpretation of the statute is required to be invoked when the provision thereof is ambigious. In K. P. Varghese v. ITO , upon which strong reliance has been placed by Mr. Gupta, the apex court held that marginal notes or the speeches of the Ministers are relevant as they throws light on the objects and purpose of the enactment and for getting indication of the drift of the section or to show what the section is dealing with. It has, however, been held that marginal notes cannot control the interpretation of the words when the “section” is clear and ambigious. It has also been held that the speeches made by the members of the Legislature on the floor of the House when a Bill for introducing a statutory provision is being debated are inadmissible for the purpose of interpreting the statutory provision but can be referred to only for the purpose of explaining the same.
15. In R. S. Nayak v. A. R. Antulay, , the Supreme Court held (at page 702) :
“If the basic purpose underlying construction of a legislation is to ascertain the real intention of Parliament, why should the aids which Parliament availed of such as the report of a Special Committee preceding the enactment, the existing state of law, the environment necessitating enactment of legislation, and the object sought to be achieved, be denied to the court whose function is primarily to give effect to the real intention of Parliament in enacting the legislation. Such denial would deprive the court of a substantial and illuminating aid to construction.”
16. However, the apex court has held that objects and reasons of a statute are inadmissible.
17. In Central Bank of India v. Their Workmen [1959] 29 Comp Cas 367, the apex court, while construing the provision of Section 277HH of the Companies Act, as introduced by the Indian Companies (Amendment) Act, 1944, held (at page 380) :
“However, the section was not confined to a managing agent or manager only, though by a reference to the Statement of Objects and Reasons in relation to the amendment of 1944, it was suggested on behalf of the respondents that the section was so confined. The Statement of Objects and Reasons is not admissible, however, for construing the section, far less can it control the actual words used.”
18. In Doypack Systems Pvt. Ltd. v. Union of India , the apex court again reiterated the said statement of law in the following terms (at page 22 of 65 Comp Gas) :
“This court in Sanjeev Coke Manufacturing Co. v. Bharat Coking Coal Ltd., , held that no one may speak for Parliament and Parliament is never before the court. After the Parliament has said what it intends to say, only the court may say what the Parliament meant to say. None else. See also in this connection Dr. Mrs. Sushma Sharma v. State of Rajasthan, . The objects and purposes of the person who initiated the Bill are not admissible as aids to construction since it is impossible to contend that such purposes in the minds of some officials of the Government before the matter is discussed by the cabinet would at all be relevant. See in this connection State of West Bengal v. Union of India, , where this court reiterated that the Statement of Objects and Reasons, accompanying a Bill, when introduced in Parliament, cannot be used to determine the true meaning and effect of the substantive provisions of the statute. Such statement cannot be used to show that the Legislature did not intend to take over any particular property. See also Central Bank of India v. Their Workmen .”
19. However, in the instant case, I am of the considered view that the interdict to file a suit in terms of the amendment of 1993 of the Amending Act was not and could not have been clarificatory in nature as thereby the scope of Section 22 has been extended. A person is entitled to file a suit and/or enforce the bank guarantee in terms of Section 9 of the Code of Civil Procedure, or under a contract unless a statutory provision interdicts the same. A right to sue is a natural right apart from being a statutory right unless the same is curtailed by any statute expressly or by necessary implication. It may be recorded that when the petitioner filed applications for getting itself impleaded as a party and for obtaining an order of injunction, it did not raise the question that the suit is not maintainable in view of Section 22 of the Act.
20. The amendment now expressly provides that no suit shall lie or be further proceeded with. It is a disqualifying statute which has to be interpreted to be prospective and not retrospective in nature.
21. Athlumney, In re : Ex parte Wilson [1898] 2 QBD 547, held that the provisions of the Bankruptcy Act, 1890, which came into force on January 1, 1891, and provided in Section 23 that where a debt including interest “has been proved” on a debtor’s estate, such interest shall for the purpose of dividend be calculated at a rate not exceeding 5 per cent. per annum, was not retrospective in its operation and, therefore, did not apply to a debt, including interest above 5 per cent., proved under a scheme adopted by the court before the date of the passing of the Act. When the Legislature alters the rights of the parties by taking away or conferring any right of action, its enactments, unless in express terms they apply to pending actions, do not affect them. The only exception to that rule is when the amendment is in relation to procedural matters. The said decision has been relied upon by the Supreme Court in Sree Bank Ltd. (In Liquidation) v. Sarkar Dutt Roy and Co. .
22. In Mithilesh Kumari v. Prem Behari Khare , the Supreme Court held that the provisions of the Benami Transactions (Prohibition) Act, 1988, which imposed a prohibition upon a person to file a suit or raise a defence that the suit property has been held by the defendant/plaintiff as his benamidar being a disqualifying statute shall also apply to a pending suit.
23. A three-judge Bench of the apex court, however, overruled the said judgment in R. Rajagopal Reddy v. Padmini Chandrasekharan and held that the word “lie” in connection with the suit, claim or action having not been defined by the Act, going by the dictionary meaning it would mean that such suit, claim or action to get any property declared benami will not be admitted on behalf of such plaintiff or appellant against the defendant concerned, in whose name the property is held on and from the date on which the prohibition against entertaining of such suits came into force.
24. In Wijesuriya v. Amit [1965] 3 All ER 701 (PC) held (at page 704) :
“Their Lordships would not be disposed to place undue emphasis on minor difficulties of administration, and they recognise that retrospective legislation is likely, in its nature, to give rise to some anomalies and maladjustments. They are forced to the conclusion, however, in this case that it is not possible to apply the recovery or enforcement provisions of
the original Ordinance to the case of tax in respect of the past period without modifications and violence to the scheme of that Ordinance greater than it is legitimate, by a process of construction to make. In other words in order to enable tax to be collected it was not sufficient merely to date back the operation of the amendment; it was necessary expressly to adapt the existing scheme to the new conditions created by the amendment by specifying the date on which the past tax was to be due, who was to pay it, within what time and what place, and stating clearly what consequences to what person would follow if payment was not made.”
25. The provision of the said Amending Act cannot, therefore, be said to be retrospective so as to be held that no such suit was maintainable even prior to the coming into force thereof as it prohibits entertainment of a suit by using the word “lie”. However, after the coming into force of such Act no suit shall be further proceeded with.
26. Before the said Amendment Act came into force, Section 22(1) was interpreted by the Supreme Court in Gram Panchayat v. Shree Vallabh Glass Works Ltd. [1991] 71 Comp Cas 169 in the following terms (at page
172) :
“The nature of the proceedings which are automatically suspended are : (1) winding up of the industrial company ; (2) proceedings for execution, distress or the like against the properties of the sick industrial company ; and (3) proceedings for the appointment of receiver.”
27. In Himalaya Rubber Products Ltd. v. Board for Industrial and Financial Reconstruction [1992] 1 Cal LT 279 ; [1993] 76 Comp Cas 281, a learned single judge of this court was considering the question as to whether during the pendency of a proceeding under Section 22(1) of the Act, the sick industry can be deprived of declaration forms under the Sales Tax Act, 1956, and it is in that context pointed out that the characteristics of distress are (a) an action to recover monies due ; (b) taken summarily ; (c) by retention of the goods of the debtor, as also the meaning of the word “execution” as being the enforcement or giving effect to the judgment or orders of court of justice or by a public officer and held that the word “like” has to be read as envisaging the same procedure. The learned judge, however, clearly held that Section 22(1) envisages an action against the sick industry in respect of its properties. Having come to the said finding it was held that properties included both movable or immovable including a cash. The said decision, therefore, is not applicable to the facts and circumstances of the case.
28. In Maharashtra Tubes Ltd. v. State Industrial and Investment Corporation of Maharashtra Ltd. , the effect of Section 29 of the State Financial Corporations Act was being considered and in that context it was held that a proceeding envisaged in Section 22(1) need not be a legal proceeding but would include all such proceedings whereby a coercive step is taken. The State Financial Corporation while invoking its power under Section 29(1) was exercising a statutory power. The said Act being a special statute and also a later statute would prevail over the State Financial Corporations Act, 1951. The apex court held (at page 818) :
“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 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 undertaking. The action contemplated by Section 29 of the 1951 Act is undoubtedly a coercive measure directed at the taking 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 effective 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 take over the management and possession of the properties and deal with them as if it were the owner of the properties.”
29. Enforcement of a contract of bank guarantee, however, in my opinion, stands on a different footing. Section 22 as indicated hereinbefore not only provides for suspension of legal proceedings but also suspension of contracts. In a case which falls under Sub-section (1) of Section 22, the statutory injunction operates automatically whereas a case attracting the provision of Sub-section (3) would require a specific order to be passed by the BIFR. Enforcement of a contract, therefore, could not have been interpreted to mean taking recourse to a proceeding either legal or statutory.
30. In Turnkey International Ltd. v. Banque Nationals de Paris [1995] 2 Cal HN 149, a Division Bench of this court relying upon various Supreme Court decisions held :
“As from the conditions of the guarantee, as set out above, it clearly appears that the bank unconditionally guaranteed and undertook to pay the beneficiary on demand irrespective of any dispute between the parties under the underlying contract and without any demur, reservation, protest and without any reference to the contractor. On such condition, if the invocation is proper and in terms of the bank guarantee, the bank would straightaway arrange for payment of the amount covered by the bank guarantee. Further, considering the nature of the contracts of guarantee executed by the bank, the bank’s obligation is not fettered by any provisions in the contract originally executed between the party at whose instance the bank has furnished the guarantee was furnished. As has been firmly laid down by a series of decisions of various courts including the Supreme Court, the bank guarantees being contracts independent of any other contract, cannot be referable to any other contract that may have been entered into by the party at whose instance such guarantee was furnished by the bank and the party for whose benefit such guarantee had been furnished by the bank.”
31. Enforcement of a bank guarantee, therefore, can neither be said to be taking recourse to a proceeding for distress or execution. The words “or the like” must be read ejusdem generis. In any event the doctrine noscitur a sociis shall be applicable in this case. Moreover, after the coming into force of the 1993 Amending Act, the provision of Section 22 has two different limbs ; one, prohibiting a proceeding of distress or execution and another, entertaining or continuing a suit.
32. In the backdrop of the aforementioned findings, the contention of Mr. Gupta to the effect that the amendment was clarificatory in nature and a bar to the enforcement of a bank guarantee was inherent in the
provision of Section 22(1), as it stood before amendment, must be rejected. A clarificatory provision normally operates retrospectively. The terminologies used in the amendment as a result whereof a person having a right to realise a huge amount by way of bank guarantee is prohibited from doing so cannot be held to be clarificatory in nature. By reason thereof a person is deprived of his general as also a statutory right. A statute depriving such a right cannot be held to be clarificatory in nature nor can it be held to be a disqualifying statute.
33. In Punjab Traders v. State of Punjab, , the Supreme Court, inter alia, held that khandsari sugar within the meaning of sugar by way of amendment was clarificatory in nature as it was well understood in trade that khandsari sugar was also sugar and any reference to sugar in the absence of specific exclusion or qualification was capable of equal application to sugar of all kinds including khandsari. The apex court held (at page 2304) :
“Even if it is true that persons who dealt with statute understood its provisions in a restricted sense, such mistaken construction of the statute did not bind the court so as to prevent it from giving it its true construction.”
34. Moreover, in my view, the case has to be considered in the light of the provisions of Sub-section (1) and Sub-section (3) of Section 22 of the said Act as they stood prior to amendment. Sub-sections (1) and (2) operate in two different fields. If a case falls within the purview of Sub-section (3), Sub-section (1) must be held to have no application whatsoever in relation thereto. Only after Sub-section (1) of Section 22 was amended an embargo was put for realisation of loan, advance or enforcement of bank guarantee by way of a suit. It is relevant to note that even by reason of such amendment what is prohibited is filing of a suit or continuing the same in relation to a bank guarantee furnished as against the loan and advance and not all types of bank guarantees.
35. As in the instant case the bank guarantee was enforced prior to the filing of the suit and in any event the payment has been made not pursuant to any order of the court but voluntarily by the bank. In my opinion, Section 22(1), as it stood prior to its amendment, had no role to play in the matter.
36. For the reasons aforementioned there is no merit in this application which is dismissed but, in the facts and circumstances of this case, there will be no order as to costs.