Corporate Laws

Sick Textile Undertakings (Nationalisation) Act, 1974

— Ss. 20, 21, 23, 27 & 5(3) r/w Second Sch. — Taking over of management of sick textile company — Claim by creditors — Order of priorities for discharge of liabilities specified in Second Schedule — Priority claim as to <169>loans advanced by bank<170> — Credit facilities given by Bank to erstwhile owner continued to be availed by Authorised Controller for revival of sick mills on guarantees furnished by State of Gujarat and Gujarat State Financial Corporation (GSFC) — Liability in respect of — Held, furnishing of guarantees by State was dehors the provisions of the 1974 Act — Said guarantees could not have been furnished by State and GSFC — Hence, they having furnished guarantees on their own behalf, the same would be binding on them and, thus, enforceable against them — Continuance of the aforesaid credit facilities by Authorised Controller, did not amount to a fresh agreement/renewal of loan taken by owner — Jiwanlal Achariya, (1967) 1 SCR 190 distinguished in this regard — Thus, said claim did not fall within the purview of Category I of the Second Schedule — Bank could seek remedy under the Contract Act for recovery notwithstanding the application of Bombay Relief Undertakings (Special Provisions) Act, 1958, (2006) 7 SCC 542