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TMI Blog2005 (5) TMI 331X X X X Extracts X X X X X X X X Extracts X X X X ..... The company premises was also mortgaged with the Corporation and the entire machinery, goods (finished and unfinished) were hypothecated. 3. The Company could not pay the loan. The Corporation issued letter dated 23-11-2000 asking the Company to repay the dues failing which it threatened to take action under section 2 of the 1951 Act. The Company filed original Suit No. 638 of 2000 before the Civil Judge (Senior Division), Allahabad for injunction against the recovery along with application for temporary injunction. The temporary injunction was granted on 16-2-2001. The Corporation filed an FAFO No. 374 of 2001 before this Court against his order and obtained an interim order on 27-3-2001. The Corporation took possession of the factory premises of the Company on 2-3-2001 and advertised for auction of the factory premises on 9-3-2002. We are informed that the auction has been held and possession has been handed over to the purchaser. 4. The petitioners are guarantors of the loan. The Corporation sent a letter to the Collector Kanpur Nagar for recovering the amount as arrears of land revenue under the 1972 Act against the petitioners. The Tehsildar issued a citation dated 25-1-2002 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egislature to enact laws in respect of any matter enumerated in List II in the Seventh Schedule. Thus, u List I is in domain of Parliament; u List II is in domain of the State Legislature; u List III is in domain of Parliament as well as State Legislature. 8. Article 254 explains the position, in case there is inconsistency between the laws made by the Parliament and the State Legislature regarding entry in List III. Sub-Article 1 of article 254 [Article 254 (1)] gives supremacy to the Central law. However sub-article 2 of article 254 [Article 254 (2)] gives primacy to the State law provided the President gives his assent to that law. Even in such a case a subsequent Central Act will override the same. 9. Indications regarding supremacy of the Central law under List I and the State Act under List II are mentioned in article 246. This article not only talks about distribution of powers but also explains the supremacy of powers. Article 246(2) specifically states that 'it is subject to clause (1)'. Similarly article 246(3) states that it is 'subject to clauses (1) and (2)'. The use of these words shows that the power of the Parliament under article 246 (1) is supreme whereas the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has held that the 1972 Act has been made in pursuance of the Entry 43 of the List II of the Seventh Schedule. In the Venktaswami case it has been observed that the Tamil Nadu Recovery Act is referable to the Entry 30 of List II of the Seventh Schedule as well as to Entry 11-A of the List III of the Seventh Schedule. However, it is not necessary to decide the question-- 1. Under which entry the 1972 State Act has been enacted; or 2. Whether article 246 or 254 is applicable in this case. Even if it is taken that the 1972 Act was made in pursuance of Entry 11-A of List III of the Constitution and Article 254 is applicable, it does not make any difference. 12. Section 32G was inserted in the 1951 Act in the year 1985 by the Central Act No. 43 of 1982. It is subsequent to the 1972 Act. However this section is not contrary to anything contained in the 1972 Act. This section states that the procedure is 'without prejudice to any other mode of recovery'. This shows that section 32G does not bar any other mode of recovery. The 1972 Act also provides a mode of recovery; it is not contrary to section 32G of the 1951 Act; it has not become void as there is no repugnancy between the two. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions. However, in view of sub-section (4) of section 1 [Section 1 (4)] of this Act, it does not apply when the amount of debt is less than Rs. 10 lakhs. 17. Section 2(d), (e ), (h) defines the words 'Bank', 'Banking Company' and 'Financial Institution'. The Corporation is neither a bank nor a banking company. Under section 2 (h)( i) the financial institution has been defined to mean a public institution within the meaning of section 42A of the Company Act, 1956. The Corporation is also not a financial institution within the meaning of this section. Section 2 (h)( ii) of the 1993 Act includes such other institution as financial institution that the Central Government may by notification specify. The Central Government has specified the Corporation under section 2(h)( ii) of the 1993 Act by notification dated 28-3-1995. This means the Corporation is a financial institution within the meaning of the 1993 Act. The debt is more than Rs. 10 lakhs and the 1993 Act is applicable for recovery of this debt. 18. Section 34 of the 1993 Act is titled as 'Act to have overriding effect'. Sub-section (2) of section 34 [Section 34 (2)] saves the mode of recovery under the Acts mentioned in that s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The counsel for the respondents submitted that u Guarantee is governed by section 128 of the Contract Act. Liability of the guarantor is co-extensive with the principal borrower and the guarantor is jointly liable with the principal borrower. uThe proceeding against the guarantors can always be taken without recourse to the proceeding against the principal borrower. uThe Pawan Kumar Jain's case (supra) has neither taken into account section 128 of the Contract Act nor earlier larger Bench decision in State Bank of India v. Indexport Registered AIR 1992 SC 1740. uSub-section (2) of section 4 [Section 4 (2)] of the 1972 Act mandates that the recovery should be made first against certain kind of property mentioned in that sub-section. The observations of the Supreme Court should be confined to the property covered by section 4 (2) of the 1972 Act and to no other property. And it cannot be said that every kind of property of the principal borrower has to be sold first before proceeding against the guarantor--whether covered by section 4(2) of the 1972 Act or not. 22. There is force in the submission of the respondents. However, it is not necessary to express our opinion on this p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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