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TMI Blog1994 (2) TMI 268X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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. X X X X Extracts X X X X X X X X Extracts X X X X ..... tage, that the first respondent filed Writ Petition No. 235 of 1982 in the High Court of Andhra Pradesh, questioning the calling of tenders by invoking the provisions of Section 29 of the Act on various grounds. The High Court stayed the sale of the concern subject to the condition that Respondent I should deposit a sum of ₹ 35,000. When the writ petition came up for hearing, it was brought to the notice of the High Court that there was difference of opinion between two benches of the High Court with regard to the vires of Section 29 of the Act. The writ petition was accordingly referred to a Full Bench. The Full Bench did not go into the question of vires of Section 29 of the Act but held that it was not open to the Corporation to invoke the provisions of Section 29 of the Act, having first successfully invoked the jurisdiction of the District Judge under Section 31 of the Act and consequently the writ petition was allowed. The Corporation has assailed the judgment of the High Court, allowing the writ petition, through this appeal on special leave being granted. Civil Appeal No. 3216 of 1988 3.The first respondent applied for and obtained loan of ₹ 2,94,000 for the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n accepted in the proceedings under Section 29 of the Act but who had resiled from the same due to pending litigation. An injunction against the Corporation was also sought. However, no injunction was granted and the plaintiff in the suit was given time to make the deposit within the stipulated period but he failed to do so within the period granted for the purpose. The Corporation having remained unsuccessful in enjoying the benefit of the order of the District Judge dated November 16, 1978, because of the pendency of the proceedings in the civil courts, at the instance of the first respondent, once again took recourse to the provisions of Section 29 of the Act and advertised the unit for sale. The first respondent filed CMA No. 403 of 1979 in the High Court of Andhra Pradesh and obtained an order of stay of the sale by the Corporation. The order of the stay was later on made absolute by the High Court, subject to the first respondent depositing 1/4th of the amount due by December 29, 197.9 and a further 1/4th by February 29, 1980. The time, for deposit, was, however, extended at the request of the first respondent, but despite the extension of time, the first respondent did not d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advance or any instalment thereof or in meeting its obligations in relation to any guarantee given by the Corporation or otherwise fails to comply with the terms of its agreement with the Financial Corporation, the Financial Corporation shall have the right to take over the management or possession or both of the industrial concern, as well as the right to transfer by way of lease or sale and realise the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation. (2)Any transfer of property made by the Financial Corporation, in exercise of its under under sub-section (1), shall vest in the transferee all rights in or to the property transferred as if the transfer had been made by the owner of the property. (3) * * * (4)Where any action has been taken against an industrial concern under the provisions of sub-section (1), all costs, charges and expenses which in the opinion of the Financial Corporation have been properly incurred by it as incidental thereto shall be recoverable from the industrial concern and the money which is received by it shall, in the absence of any contract to the contrary, be held by it in trust to be applied firstly, in payment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applications made under Section 31 of the Act. Section 32 provides as follows: "32. Procedure of District Judge in respect of applications under Section 31.(1) When the application is for the reliefs mentioned in clauses (a) and (c) of sub-section (1) Section 3 1, the District Judge shall pass an ad interim order attaching the security, or so much of the property of the industrial concern as would on being sold realise in his estimate an amount equivalent in value of the outstanding liability of the industrial concern to the Financial Corporation, together with the costs of the proceedings taken under Section 3 1, with or without an ad interim injunction restraining the industrial concern from transferring or removing its machinery, plant or equipment. (1-A) When the application is for the relief mentioned in clause (aa) of sub-section (1) of Section 31, the District Judge shall issue a notice calling upon the surety to show cause on a date to be specified in the notice why his liability should not be enforced. (2)When the application is for the relief mentioned in clause (b) of sub-section (1) of Section 31, the District Judge shall grant an ad interim injunction restrainin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order rejecting the claim to enforce the liability of the surety under clause (da) or making an order rejecting the claim to transfer the management of the industrial concern to the Financial Corporation under clause (e), the District Judge may make such further orders as he thinks necessary to protect the interests of the Financial Corporation and may apportion the costs of the proceedings in such manner as he thinks fit: Provided further that unless the Financial Corporation intimates to the District Judge that it will not appeal against any order releasing any property from attachment or rejecting the claim to enforce the liability of the surety or rejecting the claim to transfer the industrial concern to the Financial Corporation, such order shall not be given effect to, until the expiry of the period fixed under subsection (9) within which an appeal may be preferred or, if an appeal is preferred, unless the High Court otherwise directs until the appeal is disposed of. (8)An order of attachment or sale of property under this section shall becarried into effect as far as practicable in the manner provided in the Codeof Civil Procedure, 1908 (5 of 1908), for the attachment or s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on or both of the defaulting industrial concern. It also has the right to transfer by way of lease or sale and realise the property pledged, mortgaged or hypothecated or assigned to the Corporation as security for the loan. Any transfer of property of the defaulter thereafter made by the Corporation shall vest in the transferee all rights in or to the property transferred by virtue of Section 29(2) of the Act. Vide Section 29(3) of the Act, the Corporation has the same rights with respect to the goods manufactured, or produced wholly or partly as it had in respect of the original goods forming part of the security. Section 29 of the Act, therefore, deals with not only the rights of the Corporation in cases of default by the industrial concern, but also provides for a remedy to take over the management of the defaulting industrial concern with or without possession as well as the right to transfer by way of lease or sale of the hypothecated property to realise its dues. Since Section 29 of the Act provides both the rights and the remedies as also the procedure for enforcement of the rights and is a complete code in itself, it is open to the Corporation to act under Section 29 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 31 of the Act. The choice for availing the remedy under Section 29 or Section 31 of the Act is that of the Financial Corporation alone and the defaulting concern has no say whatsoever in the matter, as to which remedy should be taken recourse to by the Corporation against it for effecting the recovery. The expression "without prejudice to the provisions of Section 29 of this Ace' as appearing in Section 31 of the Act clearly demonstrates that the Legislature did not intend to confine the Corporation to take recourse to only a particular remedy against the defaulting industrial concern for recovery of the amount due to it. It left the choice to the Corporation to act in the first instance under Section 31 of the Act and save its rights and remedies under Section 29 of the Act to be availed at a later stage, with the sole object of enabling the Corporation to recover its dues. It is not, however, obligatory on the part of the Financial Corporation to invoke the special provisions of Section 31 of the Act, it can even without taking recourse to the provisions of the said section invoke the procedure prescribed under Section 29 of the Act for realisation of its dues. Where th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , none of which, if granted, results in a money decree, or decree for recovery of outstanding loan or advance. Section 31(1) of the Act, in the circumstances therein set out, permits the Corporation to seek one or more of the three reliefs therein stated." The Court then considering the conspectus of the provisions of Sections 31 and 32 of the Act, went on to say that on an application under Section 31 (I) being made it is obligatory upon the court to make an interim order attaching the security with or without interim injunction restraining the industrial concern from transferring or removing its plant, machinery or equipment without the permission of the Board of the Corporation. If the relief claimed in the application under Section 31 is transfer of the management of the industrial concern to the Corporation, the District Judge is also obliged to grant an ad interim injunction and at the same time issue a notice calling upon the defaulting industrial concern to show cause why the interim injunction should not be made absolute. The claim of the Corporation in an application under Section 31 is not the monetary claim of its dues to be investigated, though it may become nece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 32(7) and (8) of the Act. The Corporation, however, may withdraw or abandon the proceedings at that stage and take recourse to the provisions of Section 29 of the Act. A 'decree' under Section 31 of the Act not being a money decree or a decree for realisation of the dues of the Corporation, as held in Gujarat State Financial Corpn. v. Naatson Mfg. Co. P. Ltd. I recourse to it cannot debar the Corporation from taking recourse to the provisions of Section 29 of the Act by not persuing the decree or order under Section 31 of the Act, in which event the order made under Section 31 of the Act would serve in aid of the relief available under Section 29 of the Act. 16.The doctrine of election, as commonly understood, would, thus, not be attracted under the Act in view of the express phraseology used in Section 31 of the Act, viz., "without prejudice to the provisions of Section 29 of this Ace,. While the Corporation cannot simultaneously pursue the two remedies, it is under no disability to take recourse to the rights and remedy available to it under Section the Act even after an order under Section obtained but without executing it and withdrawing from those proceedings at any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even a moral right to object to the Corporation from taking recourse to the provisions of Section 29 of the Act only on the ground that it has obtained a proper relief under Section 31 of the Act which relief it does not wish to pursue any further. Indeed, if the order of the court issued under Section 31 of the Act has been fully complied and honoured with by the defaulting concern, no occasion would arise for the Corporation to invoke the provisions of Section 29 of the Act. However, to hold that since the Corporation has initially taken action under Section 31 of the Act and obtained an order/decree from the court, the Corporation is prohibited from invoking the provisions of Section 29 of the Act, notwithstanding the fact that the defaulting concern has not honoured the court's order or decree made under Section 31 of the Act, would amount to putting premium of the activities of the defaulting concern aimed at frustrating the order/decree of the court and depriving the Corporation of recovering its legitimate dues and thereby rendering the expression "without prejudice to ..." occurring in Section 31 otiose. Courts do not favour such a course. 18.There is no equity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advances etc. repayable in easy instalments. The Corporation has to recover the loans and advances, so as to be able to give financial assistance to other industries and unless it recovers its dues, the money will not remain in circulation for long. It is with this end in view that Parliament gave the Corporation the right to proceed under Section 31 of the Act, preserving at the same time its rights and remedy under Section 29 of the Act, so that the Corporations are not choked by the defaulting debtors by adopting frustrating or dilatory tactics in the proceedings in the court initiated under Section 31 of the Act. 19.The right vested in the Corporation under Section 29 of the Act is besides the right already possessed at common law to institute a suit or the right available to it under Section 31 of the Act. Since, the Corporation can withdraw from the court its proceedings under Section 31 of the Act at any stage, it would imply that it has the right to withdraw from further proceedings under Sections 31 and 32 of the Act even after obtaining an order in its favour and take recourse to the proceedings under Section 29 of the Act without pursuing the proceedings under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd cannot therefore be sustained and accepting the appeal, we set aside the impugned judgment. 21.In Civil Appeal No. 3216 of 1988, the facts as noticed in the earlier part of this judgment which are rather eloquent show that the respondents did not have any intention of repaying any part of the debt. Even in this Court their attitude was no different. They have been merely adopting delaying tactics and putting forward one or the other ploy to keep the Corporation divested of its legitimate dues. The learned Single Judge was perfectly justified to dismiss the writ petition, thereby upholding the action under Section 29 of the Act since the Corporation did not further pursue its remedy under Section 31 of the Act. The Division Bench fell in error in setting aside the judgment of the Single Judge by following the Full Bench judgment, (which has been set aside by us while allowing C.A. No.3689 of 1987) without considering the peculiar facts of the case and the attitude of the respondent - the defaulting party. Consequently, C.A. No. 3216 of 1988 is also allowed and the impugned judgment under appeal is set aside. 22.Thus both the appeals succeed and are allowed with costs of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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