The Meaning Of The Expression "Legal Proceedings" And Its Judicial Interpretation

1. MEANING AND SCOPE OF "LEGAL PROCEEDINGS"

1. Black's Law Dictionary^[6] defines a "Legal Proceeding" as "any proceedings in court of justice, whether law or equity, interlocutory or final, by which property of debtor is seized and diverted from his general creditors." The definition goes on to state that "this term includes all proceedings authorized or sanctioned by law and brought or instituted in a court of justice or legal tribunal, for the acquiring of a right or the enforcement of a remedy."^[7]

2. As per P. Ramanatha Aiyar, Concise Law Dictionary^[8],

"Legal proceeding means, -

• any proceedings or inquiry in which evidence is or may be given.
• an arbitration; and
• any investigation or inquiry under the CrPC, 1973 (2 of 1974), or under any other law for the time being in force for the collection of evidence, conducted by a police officer or by any other person (not being a magistrate) authorised in this behalf by a magistrate or by any law for the time being in force. [Banker's Books Evidence Act (18 of 1891), S. 2(4)]

'LEGAL PROCEEDING' means any proceeding under any law before any Court, tribunal, officer, authority, arbitrator, stated on a plaint, petition of appeal, application, reference, or otherwise. [Rajasthan Relief Undertakings (Special Provision) Act (9 of 1961), S. 4 (1)(b) Expln.]

Legal proceeding means a proceeding regulated or prescribed by law in which a judicial decision may or must be given.

Legal proceeding mean any proceedings authorised by law for redressal of a legal grievance of for violation of a legal right."

3. One of the earliest decisions that dealt with the expression was delivered by the erstwhile Federal Court of India in The Governor-General in Council v. Shiromani Sugar Mills Ltd. (In Liquidation)^[9] (hereinafter referred to as "Shiromani Sugar Mills"). The issue before the Federal Court was whether the leave of the Company Court/Winding-up Court was necessary to be obtained by the Income- Tax officer under Section 171^[10] of the erstwhile Companies Act, 1913 for initiating recovery proceedings under Section 46 (2) of the Indian Income Tax Act 1922.^[11] As per Section 171, "no suit or other legal proceeding" could be proceeded with or commenced against the company except by the leave of the Court when a winding up order had been made or a provisional liquidator had been appointed.^[12] According to the Federal Court, the term " other legal proceedings" could not be confined to "original proceedings in a Court of first instance, analogous to a suit initiated by means of a petition similar to a plaint."^[13] The Court stated that Section 171 had to be construed with reference to other sections of the Act.^[14] The Court further opined that "no narrow construction" should be placed upon the words "or other legal proceedings" and the said words were held to cover distress and execution proceedings in ordinary courts.^[15] One of the questions before the Federal Court was whether recovery proceedings under Section 46 of the Indian Income Tax Act, 1922 were covered by the phrase "other legal proceeding."^[16] In the Court's opinion it saw no reason why "in British India no " legal proceeding" can be taken otherwise than in an ordinary Court of law, or why a proceeding taken elsewhere than in an ordinary Court of law, provided it be taken in a manner prescribed by law and in pursuance of law or legal enactment, cannot properly be described as a "legal proceeding." " The Court eventually held that proceedings under Section 46 (2) of the aforesaid Act were "other legal proceedings."

4. Shiromani Sugar Mills was subsequently relied on and followed in a series of decisions which are briefly enumerated below:

• In Binod Mills Co. Ltd. Ujjain ( M.P.) v. Suresh Chandra Mahaveer Prasad Mantri, Bombay^[17](hereinafter referred to as "Binod Mills"), the Supreme Court was dealing with the interpretation of Section 5 of the M.P. Sahayata Upkram (Vishesh Upbandh) Adhiniyam, 1978 as per which "no suit or other legal proceeding" could be instituted, commenced or proceeded against an industrial undertaking during the period in which it remained "a relief undertaking under any law, usage, custom, contract, instrument, decree, order, award, settlement" or as per any other provision.^[18] The question before the Supreme Court was whether execution proceedings/petitions would fall within "other legal proceedings" under Section 5 of the aforesaid Act and once the decree was passed by the Bombay High Court and transferred to an executing court in Madhya Pradesh (the District Judge Ujjain), could the plea of suspension of decree under Section 5 of the Act be entertained by the executing Court?^[19] The Supreme Court held that execution proceedings would fall within the purview of "other legal proceedings", as not doing so "would render Section 5 of the Act nugatory" and destroy the benefits conferred.^[20]

• Shiromani Sugar Mills was also followed in a decision of the Bombay High Court in Amravati Growers Co-operative Spinning Mills Ltd. v. Sheshrao K. Ingale and others^[21] in which the court held that the expression "other legal proceedings" under Section 107 of the Maharashtra Cooperative Societies Act, 1960^[22] would include proceedings initiated under Section 28 of the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act, 1971.^[23]

• In a recent 2016 judgement delivered by the Supreme Court in Ludocivo Sagrado Goveia v. Cirila Rosa Maria Pinto and others,^[24] the Court relied on both Shiromani Sugar Mills and Binod Mills^[25] to hold that the expression "any legal proceeding" pending in any court found in the Repeal and Saving Clause in Section 126 (6) of the Multi-State Cooperative Societies Act, 2002^[26] would include pending execution proceedings that had been initiated under Section 85 (c) of the repealed Multi-State Cooperative Societies Act, 1984.^[27]

5. Shiromani Sugar Mills was however distinguished by the Supreme Court in S.V. Kandekar v. V.M. Deshpande and another^[28] (hereinafter referred to as "Kandekar"). In this case, the question that required consideration was whether it was necessary for Income Tax Officer to obtain leave of the liquidation court under Section 446 of the Companies Act, 1956^[29] in order to re-assess a company for escaped income in respect of past years.^[30] The Court distinguished Shiromani Sugar Mills on the ground that the proceedings initiated by the Income Tax Department were recovery proceedings after the company had been wound up, whereas in the present case before it, the Court was dealing with assessment proceedings.^[31] According to the Supreme Court, in Shiromani Sugar Mills, it was held that the expression "other legal proceedings" covered distress and execution proceedings but "the expression was not held to cover assessment proceedings" under the Income Tax Act, 1961^[32] and therefore according to the Supreme Court, Shiromani Sugar Mills would not apply.^[33] The Supreme Court eventually held that the Income Tax Officer does not "perform the functions of a Court as contemplated by Section 446 (2) of the Companies Act^[34] and since the Income Tax Act is "a complete code" assessment proceedings under Section 446 of the Companies Act could not be held to be "other legal proceedings" and therefore, the leave of the liquidating court was not required.^[35]

6. Dealing with the same provision of the previous Companies Act, 1956, the Bombay High Court in Ion Exchange Finance Ltd. and Bombay Leasing Co. Pvt. Ltd.^[36] had to decide whether the expression "suit or other legal proceedings in Section 446 (1) and "suit or proceedings" in Section 442 of the Companies Act would include criminal complaints filed under Section 138 of the Negotiable Instruments Act.^[37] It was contended by the Petitioners in the said case that the expression "legal proceedings" or "other legal proceedings" had to be read ejusdem generis with the expression "suit" which meant that the expression would apply only to civil proceedings and not criminal proceedings.^[38] The High Court was of the view that wherever Parliament choose to confer power on the Company Court to try criminal offences, it had done so,^[39] like it did in Section 457 (1) (a) of the Companies Act which used the expression "suit", "prosecution" or other legal proceedings".^[40] Therefore in this context when the word "prosecution" is used, the expression "other legal proceedings" or "legal proceedings" would include "criminal proceedings".^[41] However, when it came to Section 446, the Court held that the expression "legal proceedings" in the said section meant "only those proceedings which have a bearing on the assets of a Company in winding up or have some relation with the issue in winding up."^[42] It did not mean "each and every civil proceedings" having no bearing on winding up proceedings or "criminal offence where the Company was liable to be prosecuted for".^[43] The Court eventually held that it was "impossible to contend that the Company Court in winding up would have jurisdiction to stay the criminal prosecution or that permission of the Company Court is required to prosecute the Company for offences committed before a provisional Liquidator is appointed or an order of winding up is made."^[44]

7. The principle of ejusdem generis was also applied by the Hon'ble Supreme Court in Assistant Collector of Central Excise, Guntur v. Ramdev Tobacco Company^[45] (hereinafter referred to as "Ramdev Tobacco") while interpreting the expression "other legal proceedings" in Section 40 (2) of the Central Excises and Salt Act, as it stood prior to its amendment in 1973. As per Section 40 (2),

"No suit, prosecution or other legal proceeding shall be instituted for anything done or ordered to be done under the Act after the expiration of six months from the accrual of the cause of action or from the date of the act or order complained of."

The issue before the Supreme Court was whether the issuance of a show cause notice and the initiation of consequential adjudication proceedings could be described as "other legal proceedings" within the meaning of sub-section 40(2) of the said Act.^[46] By applying the principal of ejusdem generis, the Court held that "there can be no doubt that 'suit' or 'prosecution' are those judicial or legal proceedings which are lodged in a court of law and not before any executive authority," even if it were a statutory one.^[47] The Supreme Court then stated that "the wide expression 'other legal proceeding' must be read ejusdem generis with the preceding words 'suit' and 'prosecution' as they constitute a genus." The Court ultimately held that "penalty and adjudication proceedings" did not fall within the expression "other legal proceedings."^[48] Incidentally, Shiromani Sugar Mills has not been referred to in Ramdev Tobacco.

8. The aforesaid decision along with Binod Mills and Kandekar was referred to and relied upon by a later Bench of the Supreme Court in General Officer Commanding, Rashtriya Rifles v. Central Bureau of Investigation and another^[49] (hereinafter referred to as the "CBI case") in which the Court was dealing with the interpretation of Section 6 of the Armed Forces (Special Powers) Act, 1958^[50] and the pari materia^[51] provision in Section 7 of the Armed Forces (Jammu and Kashmir) Special Powers Act, 1990^[52] that prohibited institution of any "prosecution, suit or other legal proceeding" without previous sanction of the Central Government. After explaining the difference between "prosecution" and "civil suit",^[53] the Supreme Court examined the expression "legal proceeding." The relevant portion of the judgment reads thus,

"The phrase 'legal proceeding' connotes a term which means the proceedings in a court of justice to get a remedy which the law permits to the person aggrieved. It includes any formal steps or measures employed therein. It is not synonymous with the 'judicial proceedings'. Every judicial proceeding is a legal proceeding but not vice-versa, for the reason that there may be a 'legal proceeding' which may not be judicial at all, e.g. statutory remedies like assessment under Income Tax Act, Sales Tax Act, arbitration proceedings etc. So, the ambit of expression 'legal proceedings' is much wider than 'judicial proceedings'. The expression 'legal proceeding' is to be construed in its ordinary meaning but it is quite distinguishable from the departmental and administrative proceedings, e.g. proceedings for registration of trade marks etc. The terms used in Section 7 i.e. suit, prosecution and legal proceedings are not inter-changeable or convey the same meaning. The phrase 'legal proceedings' is to be understood in the context of the statutory provision applicable in a particular case, and considering the preceding words used therein."

The Court then referred to Ramdev Tobacco and another judgment delivered by it in Maharashtra Tubes Ltd. v. State Industrial & Investment Corpn. of Maharashtra Ltd.^[54] and further held that "Legal proceedings" do not include administrative proceedings, departmental proceedings or proceedings before a statutory authority.

9. This has been further reiterated in a judgment delivered by the Bombay High Court in 2019 in Prabhakar Ramchandra Desai and others v. State of Maharashtra and Another^[56] (hereinafter referred to as "Prabhakar Ramchandra Desai"). The issue before the High Court was whether Departmental Proceedings are "other legal proceedings" [see Section 3(p)^[57]] under Section 14A of the Scheduled Caste and Scheduled Tribe (Prevention of Atrocities) Act, 1980.^[58] The Court in this case held that department proceedings are not "other legal proceedings."^[59] The Court referred to Ramdev Tobacco and the CBI case and set out the following precedential aspects in relation to the expression which are as under:

"(1) If particular words of a certain genus precede a wide expression, that wide expression must be limited to things ejusdem generis; that is, it takes colour from the preceding words. It must receive a limited meaning.

(2) "Suit" or "prosecution" are those judicial or legal proceedings before a Court of law-but not before any executive authority, even if a statutory one.

(3) The phrase "legal proceedings" is to be understood in the context of the statutory provision applicable in a particular case, and by considering the preceding words if any.

(4) A departmental proceeding stands outside the scope of "legal proceedings."

(5) In the departmental proceedings, the "consequential adjudication proceedings by the appellate authority" would not fall within the expression "other legal proceedings".

(6) The "legal proceedings" are the proceedings in a court of justice to get a remedy which the law permits to the person aggrieved.

(7) And the legal proceedings quite differ from the departmental and administrative proceedings."

A reading of the judgments delivered by the Supreme Court and Bombay High Court show that the expression "legal proceedings" cannot be assigned a fixed meaning and it varies depending on the context and manner in which it is used in a provision. The principles of statutory interpretation have to be used in order to interpret the expression in the absence of a particular statute defining it. However, the Supreme Court and High Court judgments hold that "legal proceedings" are proceedings in a court of law and cannot be extended to departmental and administrative proceedings. The judgment of the Bombay High Court in Prabhakar Ramchandra Desai has helped simplify and consolidate the meaning, nature and scope of the expression. This would in turn certainly be of great assistance to both judges and advocates in dealing with this innocuous, yet complicated expression.

Views are personal.

(The author is a practicing Advocate at the Bombay High Court and the National Company Law Tribunal.)

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