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Issues Involved:
1. Scope of powers under Section 29 of the State Financial Corporations Act, 1951. 2. Applicability of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, to proceedings against guarantors. Issue-wise Detailed Analysis: 1. Scope of Powers under Section 29 of the State Financial Corporations Act, 1951: Section 29 of the Act of 1951 empowers the Financial Corporation to take over the management or possession of the industrial concern in case of default in repayment of any loan or advance. This section also allows the Financial Corporation to transfer by way of lease or sale and realize the property pledged, mortgaged, hypothecated, or assigned to it. The expression "right to transfer by way of lease or sale and realize the property pledged, mortgaged, hypothecated or assigned" extends to the property mortgaged by the surety or guarantor, not just the industrial concern's property. This interpretation is supported by various judgments, including Thressiamma Varghese v. Kerala State Financial Corpn. and Ms. K.T. Sulochana Nair v. Managing Director, Orissa State Financial Corpn., which affirmed that the property mortgaged by guarantors can be proceeded against under Section 29. The court concluded that the Financial Corporation's power under Section 29 is comprehensive and includes the right to take possession and realize the property of third-party sureties or guarantors. 2. Applicability of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, to Proceedings Against Guarantors: Section 22 of SICA, as amended by Act 12 of 1994, provides that no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advances granted to the industrial company shall lie or be proceeded with, except with the consent of the Board or the appellate authority. However, the court clarified that the term "suit" in Section 22 relates only to civil suits in a court of law and does not encompass all legal proceedings. The proceedings under Section 29 of the Act of 1951 against guarantors are not barred by Section 22 of SICA because such proceedings are not considered suits. This distinction was upheld in Lloyd Insulations (India) Ltd. v. Cement Corpn. of India Ltd., where it was held that the word "suit" in Section 22(1) relates only to civil suits in the court of law. Therefore, even if proceedings against the industrial company are pending before the appellate authority under Section 25 of SICA, there is no bar in proceeding against guarantors under Section 29 of the Act of 1951. Conclusion: The court dismissed the writ petition, holding that the Financial Corporation can proceed against the property mortgaged by guarantors under Section 29 of the Act of 1951, and Section 22 of SICA does not bar such proceedings. The rule was discharged with no costs. The court also directed that the statement made by the learned counsel for the respondent on 7-3-2000 shall continue for a period of eight weeks.
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