LexSTATE BANK OF INDIA versus SAKSARIA SUGAR MILLS LTD. AND ORS.
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290 A STAl'E BANK OF INDIA v. SAXSARIA SUGAR KILLS LTD. AND ORS. FEBRUARY 14, 1986. B [E.S. VENKATARAMIAH AND M.P. THAKKAR, JJ.] The Sugar Undertakings (Taking over of Management) Act ~ 1978, s.7(l)(b) - Sugar Undertaking Notified - Only obliga- tions, rights, liabilities etc. arising out of contracts, assurances of properties or · agreements specified in the C Notification issu.!d remain suspended and unenforceable - Remedies against guarantor/surety - Not suspended. D E F G H Indian Contract Act, 1872, s. 128 - Liability of surety - Whether co-extensive with that of principal debtor. The Sugar Undertakings (Taking over of Management) Act, 1978, by Clause (b) of section 7(1) mipowers the Central Govenment to issue a notification declaring that the opera- .tion of all or any of the contracts, usnrances of property, agr._t•, aettlaenta, awards, standing orders or other instramenta, in force (to which a notified sugar undertaking or the person Olllling snch undertaking is a party or which 118}' be applicable to snch sugar undertaking or person) imediately · before the date of isaae of the notification shall rmain ••pended or tha1; all or any of the rights, privileges, •llligations and . liabilities accruing or arising thereunder \... llefore the aaid date shall remain suspended or shall. be anforcesble with snch adaptations and in such unner u 118}' be apecified in the notification. Sub-1iection (4) of section 7 of tba Act provides that any ready for the enforcement of any right, privilege, obligation or liability referred to in cl-~ (b) of sub-1iection (1) of section 7 and suspended or modified by a notification mada under that sub-1iection shall ill accordance with the terms of the notification, remain auspended or llOdified and all proceedings relating thereto pending before any Court, tribunal, officer or other authority ahall accordingly rnain atayed or ~ continued subject to~ •nch adaptations, so, howet'er, that on the notification ceuing to have effect (a) any right, privilege, obligation or STATE BANK v. SAKSARIA SUGAR MILLS 291 liability so remaining suspended or modified shall become -t revived and enforceable as if the notification had never been made; and (b) any proceeding so remaining stayed shall be proceeded with subject to the provisions of any law which may then be in force . from the stage which had been reached when A the proceedings became stayed. B The appellant, State Ban1t of India, had allowed cash credit facility to respondent No. 1, M/s. Saksaria Sugar Mills Ltd., on the security of goods produced at its Sugar Factory and the title deeds of its i1111110vable properties deposited with the appellant by way of equitable mortgage to secure the amount advanced under the ~aid cash credit facility• Respondents Nos, 2 to 5 had agreed to be the guarantors for the repayment of any amunt dae from respondent No. l under the said cash credit aceount. Since there was default in the repayment of the amount dae under the said caah credit account, the appellant instituted a suit against respondent Nos. l to 5 for recovery of a sum of Rs. 54,89,822,99, In the meanwhile, the Central Government took over the Sugar under- .. taking belongliig to Respondent No. l under the provisions of the Act and appointed a Custodian of the said undertaking. In the suit, respondent Nos. · l to 5 pleaded that the suit was liable to be stayed in view of the provisions of the Act• The Trial Court held that it had jurisdiction to try the suit. In revision, the High Court held that the trial of the suit in so far aa prayer for d~cree for Rs. 54,89,822.99 against respondent Nos. l to 5 waa .concerned, waa liable to be stayed by virtue of the provisions of the Act and that the ,.... trial of the suit with regard to all other matters may proceed. The High Court also dismissed an application filed by the appellant seeking clarification of the· aforesaid order. Hence these appeals by Special Leave. Allowing the appeals, lllW: l. The order paased by the High Court is set aaide and the trial court is directed to proceed with the suit. [299 F] c D E F G ,. . 2, The Sugar Undertakings (Taking over of Manageaent) Act 1978 does not provide that on a sugar undertaking being H A B c D E F G H 292 SUl'REME COURT REPORTS [1986] 1 s.c.a. notified, automatically all the COBtrmcta, uaurances of property or agree111nt• etc. entered into by
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