Research › Search › Judgment

Punjab High Court · body

2012 DIGILAW 1685 (PNJ)

L. N. K. Murthy v. General Manager, PSIDC Ltd.

2012-12-03

AJAY K.MITTAL, GURMEET SINGH SANDHAWALIA

body2012
JUDGMENT Mr. G.S. Sandhawalia, J.: - The challenge in the present writ petition filed under Articles 226/227 of the Constitution of India is for issuance of a writ in the nature of Mandamus commanding respondent no.2 the specified authority of respondent no.1 to delete the name of the petitioner from the list of persons from whom recovery of dues is to be recovered given in recovery certificate dated 24.6.2008 and for issuance of a further direction commanding the respondents not to recover any amount from the petitioner in terms of the said recovery certificate (Annexure P-1). 2. The pleaded case of the petitioner is that he is resident of Mumbai aged about 67 years of age and is moving this Court through his special power of attorney Ms. Maya Kapil. The petitioner was a Director of M/s Finorg Chemicals Ltd. for the period from 16.3.1992 to 11.10.1996. Respondent No.1- Punjab State Industrial Development Corporation Ltd.( hereinafter referred to as the PSIDC) had granted loan to the said company around 1988 and the repayment of Rs.48.25 lacs was guaranteed by the then promoters and guarantors, vide deed of guarantee dated 4.8.1988 executed by them, namely, Dr. H.P.S.Chawla, Sri Harbhajan Singh Chawla and Mr. Jaspal Singh Chawla. The loan was not paid by the company and its assets were sold in the year 2000 and since there was a debt repayable by M/s Finorg Chemicals Ltd., the PSIDC made an application for recovery of Rs.54.38 lacs + interest as on 1.8.2004 before the specified authority-respondent no.2. Accordingly, the recovery certificate (Annexure P-1) dated 24.6.2008 under Section 32G of the State Financial Corporations Act, 1951 (hereinafter referred to as “the 1951 Act”) was issued and the amount was declared to be recoverable from the guarantors as per guarantee deed dated 4.8.1988. The police and revenue officials of Maharashtra were enforcing the recovery certificate and the copy of the recovery certificate had been sent to the Deputy Commissioner-cum-Collector, Bombay. The petitioner came to now about the recovery matter only when the police approached him and he could only get a handwritten copy of the recovery certificate dated 24.6.2008 and representations dated 4.12.2008 and 22.12.2008 were sent for withdrawal for recovery demand since the liability could not be fastened upon him. The petitioner came to now about the recovery matter only when the police approached him and he could only get a handwritten copy of the recovery certificate dated 24.6.2008 and representations dated 4.12.2008 and 22.12.2008 were sent for withdrawal for recovery demand since the liability could not be fastened upon him. The petitioner was inducted in M/s Finorg Chemicals Ltd. on 16.3.1992 and resigned on 11.10.1996 and he could not be held responsible for the loan taken vide deed of guarantee dated 4.8.1988 as he was not executor, administrator or legal heir of guarantors. Neither any notice had been given to him before or after sale of assets in 2000 and nor any notice was served upon him when the liability was determined nor any notice was served upon him when the proceedings were conducted before the specified authority. Accordingly, the writ petition was filed for the above mentioned relief. 3. In the written statement filed on behalf of the PSIDC, the objection was taken that the petitioner had not challenged the order passed by the specified authority under Section 32G of the 1951 Act and a sum of Rs. 43.25 lacs had been disbursed in terms of the loan agreement dated 4.8.1988 and M/s Finorg Chemicals Ltd. defaulted in the repayment of the loan amount and, therefore, an application under Section 32G of the 1951 Act was filed. It was submitted that the legal notice was issued to the petitioner on the correct address before filing the application under Section 32G of the 1951 Act and even after filing the application, respondent no.2 issued a registered letter to the petitioner being Director of the company. Inspite of that none had appeared on behalf of the petitioner before respondent no.2 and public notice had also been issued and published on 21.4.2005 and 22.4.2005 respectively. The petitioner failed to appear before the specified authority and was proceeded against exparte on 11.5.2005 by respondent no.2. The plea taken by the promoters was factually incorrect and the petitioner never informed the respondents that he had resigned from the company and no document was given to the respondent regarding the resignation of the petitioner from the company. The petitioner is one of the Directors of the Company and when the petitioner joined the company in the year 1992 as Director, he was fully aware about the liabilities of the company towards respondent no.1. The petitioner is one of the Directors of the Company and when the petitioner joined the company in the year 1992 as Director, he was fully aware about the liabilities of the company towards respondent no.1. The resignation in Form No.32 placed on record by the petitioner was never given to the answering respondent and petitioner be put to strict proof thereof. The recovery certificate was issued on 24.6.2008 and the amount was to be recovered against the respondents whose names are mentioned in the recovery certificate. The said recovery certificate had been sent to the Deputy Commissioner-cum- Collector, Mumbai for recovering the amount and revenue officials were to recover the amount as per law. The petitioner being fully aware about the pendency of the application under Section 32G of the 1951 Act, was also aware about the issuance of the recovery certificate. The letter dated 22.12.2008 was duly received and replied by the respondent and the petitioner being Director of the company could not absolve himself by taking a plea that he had resigned from the company. The petitioner had failed to appear before the specified authority and never submitted any document. The resignation as a Director of the company did not absolve his liability towards the company. 4. Counsel for the petitioner submitted that deed of guarantee dated 4.8.1988 was executed by the promoters of the company, namely, Dr. H.P.S.Chawla, Sri Harbhajan Singh Chawla and Mr. Jaspal Singh Chawla and the petitioner was not the signatory to the guarantee deed and therefore, no recovery could be effected from the petitioner on the basis of the said guarantee deed. The inclusion of the petitioner’s name in the recovery certificate was without any basis. 5. The contract of guarantee was an independent agreement on principal to principal basis between the creditor and the guarantor and could not be invoked against the petitioner. The provisions of Section 32G of the 1951 Act provides that where amount due to the Financial Corporation in respect of any accommodation granted by it to any industrial concern is outstanding then the Corporation may make an application for recovery of the said amount. The Hon’ble Apex Court in Delhi Financial Corporation and another Vs. Rajiv Anand and others (2004) 11 SCC 625 has held that the remedy under Section 32G of the 1951 Act is available even against surety. The Hon’ble Apex Court in Delhi Financial Corporation and another Vs. Rajiv Anand and others (2004) 11 SCC 625 has held that the remedy under Section 32G of the 1951 Act is available even against surety. However, because a person is a Director it does not make him surety. Reference may be made to the observations of the Apex Court in Karnataka State Financial Corporation Vs. N. Narasimahaiah and others (2008) 5 SCC 176 , which reads as under:- “A surety may be a Director of the Company. He also may not be. Even if he is a close relative of the Director or the Managing Director of the Company, the same is not relevant. A Director of the Company is not an industrial concern. He in his capacity as a surety would certainly not be. A juristic person is a separate legal entity. Its veil can be lifted or pierced only in certain situations. [See Salomon v. Salomon and Co. [1897 AC 22], Dal Chand and Others v. Commissioner of Income Tax, Punjab (1944) 12 ITR 458, Juggilal Kamlapat vs. Commissioner of Income Tax, U.P. (1969) 1 SCR 988 = 1969 (73) ITR 702 and Kapila Hingorani v. State of Bihar (2003) 6 SCC 1 ].” 6. Counsel for respondent-PSIDC on the other hand argued that since the petitioner was a Director of the company, therefore, notice was issued to him for the liability of the company and he had failed to appear before the specified authority inspite of publication and, thus, was proceeded against exparte. Reference was made to the order dated 11.5.2005. It was further urged that the order under Section 32G of the 1951 Act had not been challenged. 7. After hearing counsel for the parties, we are of the opinion that the writ petition is liable to be allowed. Admittedly, the guarantee deed dated 4.8.1988 was executed by the three promoters of the company mentioned above, and the petitioner was not involved in the activities of the company at that point of time and was not signatory to the said guarantee deed on the basis of which recovery is now sought to be effected from the petitioner. From a perusal of Form 32 issued by the Registrar of Companies, it is clear that the petitioner had joined the company on 16.3.1992 as Director and thereafter submitted his resignation on 11.10.1996. From a perusal of Form 32 issued by the Registrar of Companies, it is clear that the petitioner had joined the company on 16.3.1992 as Director and thereafter submitted his resignation on 11.10.1996. The Corporation has failed to show any material whereby the petitioner had given any personal guarantee which could be invoked by the Corporation by resorting to the summary procedure for recovery under Section 32G of the 1951 Act. Once the petitioner had only joined the company from 1992 to 1996 as Director, he could not be held liable in the absence of any contract. Further, the guarantee deed dated 4.8.1988 could only be enforced against the guarantors of the company. The Corporation has not alleged that the petitioner was associated with the company, prior to 1992, and that he had given any guarantee. 8. We are not impressed upon with the submission made by the counsel for the respondent-PSIDC that the petitioner never put in appearance in pursuance of the notice issued to him when the proceedings under Section 32G of the 1951 Act were initiated. Once the petitioner was never a party to the guarantee deed, the question of sending notice to him did not arise and the said proceedings against the petitioner were, thus, without any jurisdiction since he was neither promoter nor surety. The Hon’ble Apex Court in Mrs. Anita Malhotra Vs. Apparel Export Promotion Council and another (2012) 1 SCC 520 where action was sought to be taken against a Director, who had no association with the company at the time of the offence had held as under:- 14. Inasmuch as the certified copy of the annual return dated 30.09.1999 is a public document, more particularly, in view of the provisions of the Companies Act, 1956 read with Section 74(2) of the Indian Evidence Act, 1872, we hold that the appellant has validly resigned from the Directorship of the Company even in the year 1998 and she cannot be held responsible for the dishonour of the cheques issued in the year 2004. xxx xxx xxx 16. xxx xxx xxx 16. In the light of the above discussion and of the fact that the appellant has established that she had resigned from the Company as a Director in 1998, well before the relevant date, namely, in the year 2004, when the cheques were issued, the High Court, in the light of the acceptable materials such as certified copy of annual return dated 30.09.1999 and Form 32 ought to have exercised its jurisdiction under Section 482 and quashed the criminal proceedings. We are unable to accept the reasoning of the High Court and we are satisfied that the appellant has made out a case for quashing the criminal proceedings. Consequently, the criminal complaint No. 993/1 of 2005 on the file of ACMM, New Delhi, insofar as the appellant herein (A3) is quashed and the appeal is allowed.” 8. Accordingly, the present writ petition is allowed with costs and the name of the petitioner which is mentioned at Sr. No.8 in the recovery certificate dated 24.6.2008 is ordered to be deleted. The PSIDC shall pay costs of Rs.10,000/-, which it shall deposit with the Punjab State Legal Services Authority.