1994 (2) TMI 268 - SC - Indian Laws

Whether the Financial Corporation set up under Section 3 of the State Financial Corporation Act is entitled to take recourse to the remedy available to it under Section 29 of the Act even after having obtained an order or a decree after invoking the provisions of Section 31 of the Act but without executing that decree/order? Held that - Appeal allowed. Action of the defaulting concern could not lead to the consequence that the remedy of the Corporation under Section 29 to recover its outstanding dues together with interest was lost because undoubtedly the Corporation did not proceed further with the proceedings under Section 31 of the Act which it abandoned by withdrawing from those proceedings impliedly. Therefore when the Corporation in the facts and circumstances of the case took recourse to the provisions of Section 29 of the Act to recover its outstanding dues by abandoning the proceedings under Section 31 of the Act it could not be faulted with and the final order/decree made under Section 31 which had remained unsatisfied could not debar the Corporation to invoke the provisions of Section 29 of the Act by giving up further proceedings under Sections 31/32 of the Act.

Summary

Issues Involved:
1. Whether the Financial Corporation can invoke Section 29 of the State Financial Corporation Act after obtaining an order under Section 31 but without executing it.
2. The interpretation and interplay between Sections 29 and 31 of the State Financial Corporation Act.
3. The applicability of the Doctrine of Election in the context of Sections 29 and 31 of the Act.
4. The rights and remedies available to the Financial Corporation under Sections 29 and 31.

Issue-wise Detailed Analysis:

1. Invocation of Section 29 after Obtaining an Order under Section 31
The primary issue was whether the Financial Corporation could take recourse to Section 29 of the State Financial Corporation Act after obtaining an order or decree under Section 31 but without executing it. The Supreme Court held that the Corporation could indeed invoke Section 29 even after obtaining an order under Section 31, provided it abandons or withdraws from the proceedings under Section 31 at any stage. The Court emphasized that the Corporation could not simultaneously pursue both remedies but could switch from one to the other to recover its dues.

2. Interpretation and Interplay between Sections 29 and 31
The Court analyzed Sections 29 and 31 of the Act. Section 29 provides the Corporation with the right to take over management or possession of the defaulting industrial concern and to transfer or sell the hypothecated property without the court's assistance. Section 31, on the other hand, allows the Corporation to seek judicial intervention for the sale of pledged property, transfer of management, or interim injunctions. The Court noted that Section 31 explicitly states that its provisions are "without prejudice to the provisions of Section 29," indicating that the Legislature intended to preserve the Corporation's rights under both sections.

3. Applicability of the Doctrine of Election
The Doctrine of Election, which suggests that when two remedies are available for the same relief, the party must choose one, was discussed. The Court clarified that this doctrine does not apply when the scope and ambit of the two remedies are essentially different. The Corporation could initially proceed under Section 31 and then abandon it to take recourse to Section 29, as the remedies under these sections are distinct.

4. Rights and Remedies under Sections 29 and 31
The Court concluded that the rights and remedies under Section 29 are broader and more self-contained compared to those under Section 31. The Corporation could choose to act under Section 29 without the court's assistance or seek judicial intervention under Section 31. The Corporation's right to recover dues is not extinguished by choosing one remedy initially; it retains the right to switch to the other remedy if necessary.

Separate Judgments:
The Supreme Court delivered a consolidated judgment for both Civil Appeal No. 3689 of 1987 and Civil Appeal No. 3216 of 1988, addressing the common legal question and individual facts of each case.

Civil Appeal No. 3689 of 1987
The Corporation initially took recourse to Section 31 and obtained an order but could not enforce it due to the respondent's actions. The Court held that the Corporation's subsequent invocation of Section 29 was justified as it had abandoned the proceedings under Section 31.

Civil Appeal No. 3216 of 1988
The respondent adopted delaying tactics and did not repay the debt. The Court upheld the Corporation's action under Section 29, noting that it had not pursued the remedy under Section 31 further. The Division Bench's reliance on the Full Bench judgment was set aside.

Conclusion
Both appeals were allowed, and the judgments under appeal were set aside. The Supreme Court ruled in favor of the Financial Corporation, allowing it to switch between the remedies under Sections 29 and 31 as long as it did not pursue both simultaneously. The appeals were allowed with costs of Rs. 5000 in each case.