1985 (2) TMI 302 - HC - Indian Laws

Summary

Issues Involved:
1. Constitutional validity of the State Financial Corporations Act, 1951.
2. Proof of execution of the mortgage deed.
3. Grant of instalments for repayment of the loan.
4. Taking over management by the Financial Corporation.
5. Discriminatory treatment under Article 14 of the Constitution.

Detailed Analysis:

1. Constitutional Validity of the State Financial Corporations Act, 1951:
The appellant challenged the constitutional validity of the State Financial Corporations Act, 1951 (State Act), arguing it was ultra vires the Constitution as it pertained to money lending, a subject under the State List. The District Judge had previously rejected this contention. The High Court upheld this decision, stating that the State Act was primarily for the development of medium and small-scale industries, and financial aid was a necessary provision. The Court emphasized that the Act's pith and substance were not solely about money lending but included incorporation, regulation, and winding up of financial corporations, which falls under the Parliament's jurisdiction (Entry 43 of List I of the Seventh Schedule of the Constitution). The Court referenced the Assam High Court's decision in Chargola Tea Company v. Assam Financial Corporation, supporting the legislative competence of the Parliament in enacting the State Act.

2. Proof of Execution of the Mortgage Deed:
The appellant contended that the mortgage deed was not validly executed and not proved in accordance with Section 68 of the Evidence Act, which requires calling an attesting witness if available. The Court found that the Company and its Director had admitted the execution of the mortgage deed, though they alleged coercion and undue influence. The Court held that the admission of execution obviated the need for proof by an attesting witness, as per the proviso to Section 68 of the Evidence Act.

3. Grant of Instalments for Repayment of the Loan:
The appellant argued that the District Judge erred in not granting instalments under the State Act, which allows for the application of the Code of Civil Procedure (CPC) provisions. The Court acknowledged that while the District Judge could have granted instalments, it was not necessary at this stage as the twenty-year repayment period was nearing its end. The Court noted that the period for full repayment of the loan was expiring soon, rendering the issue of instalments academic.

4. Taking Over Management by the Financial Corporation:
The appellant suggested that the management of the Company could have been handed over to the West Bengal Financial Corporation to liquidate the mortgage debt. The Court found no merit in this argument, noting that neither party had requested such an arrangement. The Court emphasized that the Company was not running efficiently and was heavily indebted, making it undesirable to force the Financial Corporation to take over its management.

5. Discriminatory Treatment under Article 14 of the Constitution:
The appellant contended that Sections 31 and 32 of the State Act placed the Financial Corporation in an advantageous position without justifiable grounds, violating Article 14 of the Constitution. The Court rejected this argument, referencing the Full Bench decision of the Orissa High Court in State Financial Corporation v. Satpathy Brother & Nanda Co. (P) Ltd. The Court held that the special procedures under Sections 31 and 32 ensured speedy disposal of disputes before a high judicial authority (District Judge) and provided for an appeal to the High Court. The Court concluded that these provisions were not discriminatory but rather ensured better and quicker justice.

Conclusion:
The appeal was dismissed, with the Court upholding the constitutional validity of the State Financial Corporations Act, 1951, and rejecting the appellant's arguments regarding the proof of the mortgage deed, grant of instalments, taking over management, and alleged discriminatory treatment under Article 14 of the Constitution. The Court emphasized the legislative competence of the Parliament and the non-discriminatory nature of the special procedures provided in the State Act.