1991 (2) TMI 412 - SC - Indian Laws

Summary

Issues Involved:
1. Jurisdiction of the High Court to entertain a petition under Sections 31 and 32 of the State Financial Corporations Act, 1951.
2. Whether a money decree can be passed against sureties under Sections 31 and 32 of the Act.

Summary:

1. Jurisdiction of the High Court:
The primary issue was whether the High Court had jurisdiction to entertain a petition under Sections 31 and 32 of the State Financial Corporations Act, 1951, or if it was confined to the Bombay City Civil Court. The appellant argued that the High Court had jurisdiction if the liability exceeded Rs. 50,000, based on the pecuniary jurisdiction defined in Section 3 of the Bombay City Civil Court Act. The respondents contended that jurisdiction referred only to territorial limits. The Supreme Court concluded that the extent of liability stated in the application under Section 31(2) determines jurisdiction. If the liability exceeds Rs. 50,000, the High Court has jurisdiction. Thus, the High Court was correct in entertaining the petition.

2. Money Decree Against Sureties:
The second issue was whether Sections 31 and 32 of the Act allowed for a money decree against sureties who provided only a personal guarantee. The respondents argued that these sections did not contemplate passing a money decree against sureties, only allowing for the enforcement of property given as security. The Supreme Court disagreed, interpreting the amendments made by Act 43 of 1985 as allowing the enforcement of liability against sureties, including those who provided only personal guarantees. The Court held that the procedure for enforcing the liability of a surety under Sections 31 and 32 includes issuing a notice, investigating the claim, and passing an order for enforcement, which can be executed as if it were a decree.

Separate Judgment by S.C. Agrawal, J.:
Justice Agrawal concurred on the issue of jurisdiction but disagreed on the second issue. He argued that the amendments did not intend to allow for a money decree against sureties who provided only personal guarantees. He emphasized that the amendments were meant to place sureties on the same footing as principal debtors, allowing for the attachment and sale of property but not for passing a money decree. Consequently, he would have dismissed the petition seeking a money decree against the sureties.

Conclusion:
The Supreme Court allowed the appeal, setting aside the judgments of the Division Bench and the Single Judge of the High Court. The High Court was directed to decide the application in accordance with the law and the observations made by the Supreme Court.