Eswari Industries, Shencottai v. Tamil Nadu Industrial Investment Corporation Ltd. , by its Branch Manager, Tirunelveli
1998-07-06
K.GOVINDARAJAN, M.S.LIBERHAN
body1998
DigiLaw.ai
Judgment : MANMOHAN SINGH LIBERHAN, C.J.: 1. The gravamen of the argument advanced by the learned counsel for the appellant is that by the impugned decree and judgment, the Additional District Judge, Tirunelveli, ordering the guarantors to pay a sum of Rs.2,16,000, while exercising the powers under Sec.31 of the State Financial Corporation Act (hereinafter referred to as ‘the Act’) have no jurisdiction to pass a money decree. The order dated 24.6.1996, passing the decree, cannot be sustained. For the para meteria reason, the order of the Hon’ble single Judge dated 3.11.1997, in which the order of the Additional District Judge referred to earlier affirmed, cannot be sustained. Reliance on the decision in G.S.F.C. v. Katson Manufacturing Company G.S.F.C. v. Katson Manufacturing Company G.S.F.C. v. Katson Manufacturing Company (1979)1 S. C. R. 372 and Everest Industrial Corporation v. G.S.F.C. Everest Industrial Corporation v. G.S.F.C. Everest Industrial Corporation v. G.S.F.C. (1987)3 S.C.C. 597 was placed. 2.
Reliance on the decision in G.S.F.C. v. Katson Manufacturing Company G.S.F.C. v. Katson Manufacturing Company G.S.F.C. v. Katson Manufacturing Company (1979)1 S. C. R. 372 and Everest Industrial Corporation v. G.S.F.C. Everest Industrial Corporation v. G.S.F.C. Everest Industrial Corporation v. G.S.F.C. (1987)3 S.C.C. 597 was placed. 2. It would be expedient at this stage to note down the provisions of Sec.31 of the Act as amended by the State Financial Corporation Act, 1951 which runs thus: “Special provisions for enforcement of claims by Financial Corporation:(1) where an industrial concern, in breach of any agreement, makes any default in repayment of any loan or advance or any instalment thereof (or in meeting its obligations in relation to any guarantee given by the Corporation) or otherwise fails to comply with the terms of its agreement with the Financial Corporation or where the Financial Corporation requires an industrial concern to make immediate repayment of any loan or advance under Sec.30 and the industrial concerns fails to make such repayment, (then, without prejudice to the provisions of Sec.29 of this Act and Sec.69 of the Transfer of Property Act, 1882 (4 of 1882) any officer of the Financial Corporation, generally or specially authorised by the Board in this behalf, apply to the District Judge within the limits of whose jurisdiction the industrial concern carries on the whole or a substantial part of its business for one or more of the following reliefs, namely: (a) for an order for the sale of the property pledged, mortgaged, hypothecated or assigned to the (Financial Corporation) as security for the loan or advance; or (aa) for enforcing the liability of any surety; or (b) for transferring the management of the industrial concern to the Financial Corporation; or (c) for an ad interim injunction restraining the industrial concern from transfering or removing its machinery or plant or equipment from the premises of the industrial concern without the permission of the Board, where such removal is apprehended. (2) An application under Sub-sec.(1) shall state the nature and extent of the liability of the industrial concern to the Financial Corporation, the ground on which it is made and such other particulars as may be prescribed.” 3. The undisputed facts are, that the respondents 2 to 4, i.e., appellants 2 to 5 herein are the guarantors for the loan advanced to the first appellant.
The undisputed facts are, that the respondents 2 to 4, i.e., appellants 2 to 5 herein are the guarantors for the loan advanced to the first appellant. The Corporations i.e., respondents, in exercise of the rights under Sec.31 of the Act, sold the property pledged by the debtor, the sale proceeds did not satisfy the amount due. The Corporation sought to recover the balance amount from the guarantors under Sec.31 of the Act. The lower court, before issuing warrant for attachment of properties, calculated the amount due under the impugned order. Learned counsel for the appellants fairly accepts that under Sec.31 of the Act, attachment of property of the guarantors can be issued in view of the specific amendment made in the Act to the effect that the State Financial Corporation can seek the relief for enforcing the liability of any surety. From the dichotomy of the section, it emerges that the Financial Corporation can invoke the jurisdiction of the court against an industrial concern, that is the principal debtor, as well as the guarantor, demanding repayment of the loan or advance or any instalment due thereof or to meet it. It is their obligation in relation to any guarantee given to the Corporation or otherwise, if principal fails to comply with the terms of agreement with the Financial Corporation or where the Financial Corporation requires an industrial concern to make immediate repayment of any loan or advance under Sec.30 and the industrial concern, on whose failure to make repayment, any officer of the Financial Corporation may apply to the District Judge within the limits of whose jurisdiction industrial concern carries on the business, for various reliefs. For the purpose of disposing of this appeal the only relevant relief which the principal creditor that is the Financial Corporation sought for is enforcing the liability of the surety. 4. In view of what is narrated above, that is, what the Corporation has done, i.e. before issuing the order of attachment as envisaged by processual law of Civil Procedure Code and it is required to specify the amount due for which the attachment is being made. The lower court has done nothing except quantifying the amount due from the guarantors as a consequence of which the warrant of attachment had to follow.
The lower court has done nothing except quantifying the amount due from the guarantors as a consequence of which the warrant of attachment had to follow. The impugned order assessing or calculating the amount due cannot be termed as decree in terms or jurisprudential laws known to the Code of Civil Procedure. It is a Special Act and special procedure has been provided for recovering the amount from the principal debtor as well as the guarantors in order to protect the financial institutions. It is a self-contained Act. Thus, we find no force in the submission of the learned counsel for the appellants that the lower court has no jurisdiction to pass the order or decree, as envisaged by the Code of Civil Procedure. There can be no gain saying that the whole procedure of making of the calculation till the sale of the property, for the amount due is a process of execution of a decree already passed under the Act. 5. The judgment cited by the learned counsel for the appellants in G.S.F.C. v. Katson Manufacturing Company G.S.F.C. v. Katson Manufacturing Company G.S.F.C. v. Katson Manufacturing Company (1979)1 S.C.R. 372 has interpreted the law before introduction of the amendment of section by which right to enforce the liability against a guarantor under the provisions of Sec.31 of the Act has been provided for. Not only this, the law in the context of the facts of the care on hand is whether an application under Sec.31 of the Act can be treated as a plaint for the purpose of Court-Fees Act or an application. All observations were made in the context of the question under consideration in that case, which is not even remotely under consideration in the case on hand. Neither the law laid down nor the facts are in any manner para materia with the facts in the case on hand. 6. We further find no ground to permit the appellants to raise the plea that calculating the amount due from the surety cannot be done which was never pleaded or put forth before the lower court and the first appellate court declining to accept that point at the appellate stage. 7. Lastly, faced with the situation, learned counsel for the appellants contended that the application does not contain any prayer as such for the attachment and sale of the property. The prayer is vague.
7. Lastly, faced with the situation, learned counsel for the appellants contended that the application does not contain any prayer as such for the attachment and sale of the property. The prayer is vague. We find no force in this submission of the learned counsel for the appellants for the simple reason that the facts have been stated as per the provisions of law and it is for the court to mould the relief to which the appellants are found entitled in the facts and circumstances of the case. However, the relief sought is reproduced hereunder verbatim: “The petitioner therefore, prays that this Hon’ble Court may be pleased to pass an order: (a) for enforcing the liability of the respondents 2 to 5 as guarantors towards the discharge of the loan with future interest; (b) for cost of this petition; and (c) for such other reliefs as this Hon’ble Court deem fit and proper in the circumstances of the case and thus render Justice.” 8. In our considered view and in view of the observations made above, the relief sought for is categorical and as such the said recovery of the amount due from the guarantor in view of Sec.31 of the Act which provides for attachment and sale of the property of the guarantor for the amount due to the Corporation by the principal debtor with interest and costs is correct and it is in fact being done in this case. We find no ground to interfere in this appeal. The appeal is dismissed. Consequently, the C.M.P. is also dismissed.