NAZEER AHMED v. BRANCH MANAGER, KARNATAKA STATE FINANCIAL CORPORATION
1999-11-05
G.C.BHARUKA, MOHAMED ANWAR
body1999
DigiLaw.ai
G. C. BHARUKA, J. ( 1 ) THIS is surety's appeal filed under sub-section (9) of Section 32 of the State Financial Corporations Act, 1951 (in short the 'act') against the judgment and decree dated 7. 9. 1999 passed in misc. Case No. 2/93, by which the learned district judge, bidar, has held that the respondent Karnataka state financial corporation (in short the 'corporation') is entitled to enforce the liability against the appellant to the extent of Rs. 1,72,077/- due as on 31. 3. 1992 with interest at the rate of 14. 5% per annum from 1. 4. 1992 till the date of realisation. ( 2 ) THE relevant facts in brief are that the brother of the appellant, namely, mohd. Zahir ahmed had taken loan of Rs. 1,64,000/- from the corporation for establishment of industry under the name and style M/s. indira lathe engineering works. According to the corporation, for availment of the said loan, apart from mortgaging the properties of loanee, they had also secured personal guarantee of the appellant. The said guarantee was given by executing the deed of guarantee dated 7. 5. 1987 (ex. P. 1) in favour of the corporation. It has come on record that at the time of executing the said deed of guarantee, the appellant was serving as chief officer of municipalities. The execution of the lease by the appellant was duly proved by p. w. 1 and 2. Apart from this, the appellant under his letters at ex. p. 4 and p. 5 had requested the corporation to discharge him as surety on the ground that he is having stained relationship with his brother. But the corporation did not accept the said plea. On the basis of these materials, the district judge has held that the appellant had offered his personal guarantee to the loan obtained by his brother mohd. Zahir ahmed by executing the deed of guarantee (ex. p,1 ). This finding recorded by the court below is based on the evidence and even on reappreciation of the evidence referred in the judgment, no second view is possible. Accordingly this finding is upheld.
Zahir ahmed by executing the deed of guarantee (ex. p,1 ). This finding recorded by the court below is based on the evidence and even on reappreciation of the evidence referred in the judgment, no second view is possible. Accordingly this finding is upheld. ( 3 ) IT is also a matter of record that in order to realise the loan amount, notices were given both to the principal borrower as also to the present appellant and on having failed to secure due payment, mortgaged property was first sold under Section 29 of the act. But even after adjustment of the sale proceeds towards loan amount, still Rs. 1,72,077/- was found to be due as on 20. 3. 1992. Accordingly, the present appellant was requested to discharge the said dues but he failed to discharge the same. ( 4 ) UNDER the aforesaid circumstances the corporation made an application to the district judge under Section 31 (1) (aa) of the act which reads thus.- 31. 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 tepayment of any loan or advance under Section 30 and the industrial concern fails to make such repayment then, without prejudice to the Provisions of Section 29 of this act and of Section 69 cf the Transfer Of Property Act, 1882 (4 of 1882), any officer of the financial corporation, generally or specially authorized by the board in this behalf, may 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) xxx xxx xxx xxx xxx (aa) for enforcing the liability of any surety; or (b) xxx xxx xxx xxx xxx ( 5 ) ON receiving the application under Section 31 (1) (aa), the court below has followed the procedure as contemplated under sub-sections (1-a), (4-a) and (7) (da) of Section 32 of the act which read thus.- 32.
Procedure of district judge in respect of applications under Section 31. (1) xxx xxx xxx xxx xxx (1-a) when the application is for the relief mentioned in clause (aa) of sub-section (1) of Section 31, the district judge shall issue a notice calling upon the surety to show cause on a date to be specified in the notice why his liability should not be enforced. (2) xxx xxx xxx xxx xxx (4-a) if no cause is shown on or before the date specified in the notice under sub-section (1-a), the district judge shall forthwith order the enforcement of the liability of the surety. (5) xxx xxx xxx xxx xxx (7) (da) direct the enforcement of the liability of the surety or reject the claim made in this behalf; or (e) xxx xxx xxx xxx xxx ( 6 ) IT is not in dispute that the impugned judgment passed by the learned district judge is strictly in accordance with the procedure as noticed above. Nonetheless, the validity of the impugned judgment has been questioned by the learned counsel for the appellant taking the pleas that (a) no order fixing any liability on the guarantor or surety can be passed since he has not mortgaged any property, (b) the corporation is not entitled to invoke Section 29 as also 31 of the Act, (c) under the Provisions of the Transfer Of Property Act, when certain properties are mortgaged as security to the loan, no money-claim is maintainable, (d) ihe appellant had not undertaken any liability as surety as provided under the Indian Contract Act (e) the petition under Section 31 of the act was not maintainable against the appellant, unless all the efforts for recovery of the outstanding dues against the borrower had been exhausted, and, (f) keeping in view the Provisions of the Karnataka money lenders act and the interest act the corporation is not entitled to charge compound interest.
( 7 ) IN our considered opinion, most of the- objections/contentions taken by the learned counsel for the appellant stands appropriately answered by Section 46b of the Act, which reads thus.- 46-b. Effect of act on other laws.- the Provisions of this act and of any rules or orders made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in the memorandum or articles of association of an industrial concern or in any other instrument having effect by virtue of any law other than this Act, but save as aforesaid, the Provisions of this act shall be in addition to, and not in derogation of, any other- law for the time being applicable to an industrial concern. ( 8 ) FURTHER, Section 31 of the act has made specific provision for enforcing the outstanding liability of the borrower against any of the sureties but it does not provide that before proceeding against the surety it should be shown to the satisfaction of the district judge that ail other remedies available against the principal borrower has been exhausted. ( 9 ) THE above views of ours are squarely covered by the judgment of the Supreme Court in the case of maharashtra s. f. c. Vs jaycee drugs and pharm. ( 10 ) FOR the aforesaid reasons, we find no informity in the impugned judgment passed by the leaned district judge. Accordingly, the appeal is dismissed. ( 11 ) BEFORE parting, we may refer to a wholly misplaced objection raised by the learned counsel for the appellant regarding our jurisdiction to hear and decide this appeal at the stage of admission itself. According to him, as per sub-rule (5; of Rule 1 under chapter iv of the High Court of Karnataka rules, 1959 (in short 'rules'), at the first instance, the appeal has to be placed for admission before the registrar, who is duty bound to admit the same and only thereafter the judges can hear the appeal and dispose of the same only on being posted before for hearing on appearance of other side after issuance of notice. According to him, though he has been raising this issue before various benches, but no heed has been paid to his objection and appeals are being illegally placed before the judges even at the stage of admissions.
According to him, though he has been raising this issue before various benches, but no heed has been paid to his objection and appeals are being illegally placed before the judges even at the stage of admissions. ( 12 ) IN this connection, we may refer to the opening sentence of Rule 1 of chapter iv of the rules 1959, which says that "in addition to the powers and authorities conferred by these and other rules, the registrar shall have and exercise the following powers subject to any general or special order made by the chief justice". No doubt, the said powers include the power to admit all civil appeals and to issue notices to respondents subject to the conditions laid down therein. ( 13 ) UNDER the above rules, one of the conditions is that the registrar inhis discretion may determine whether notices shall be issued or the appeal be posted before the appropriate bench for admission and if he decides on the latter alternative, the appeal should be posted accordingly. ( 14 ) ACCORDINGLY, we have made enquiry with the registrar (judicial) regarding exercise of the said powers and we have been told that since 1975 under the general orders passed by the Hon'ble chief justice, civil appeals are not being placed before the registrar for admissions and the same are being placed directly before the appropriate benches. ( 15 ) IN the said view of the matter, the objection regarding jurisdiction raised by the learned counsel for the appellant is hopelessly misconceived being devoid of merits and it is accordingly rejected. --- *** --- .