9911796707
TMI Blog1994 (2) TMI 268X X X X Extracts X X X X X X X X Extracts X X X X ..... t, the Andhra Pradesh State Financial Corporation (hereinafter 'the Corporation'), for the. purpose of carrying on the business of manufacturing agricultural implements. A mortgage deed was executed by the respondent on December 27, 1966. On account of the defaults committed by the respondent, the Corporation filed an application being 211 of 1969 before the District Judge, Guntur, under Section 31 of the Act for realisation of the sum of Rs. 1,09,020.19 paise together with further interest at the rate of 8 1/2 per cent per annum. Vide order dated September 7, 1971, the learned District Judge allowed the petition, though restricting the future interest to 6 per cent per annum. The respondent filed civil miscellaneous appeal in the High Court of Andhra Pradesh and the execution of the order in O.P. No. 211 of 1969 was stayed by the court on March 1, 1973, subject to the condition of respondent depositing 1/4th of the amount due and furnishing security for the balance amount within two months thereafter. The respondent failed to comply with the order dated March 1, 1973 and neither deposited 1/4th of the amount due nor furnished the security. The Corporation had also file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his appeal on special leave being granted. Civil Appeal No. 3216 of 1988 3.The first respondent applied for and obtained loan of Rs. 2,94,000 for the purpose of carrying on its business of re-rolling mills at Vijayanagaram in the name and style of M/s GAR Re-Rolling Mills. The first respondent on loan being sanctioned executed a mortgage deed dated November 10, 1970 in favour of the Corporation. The first respondent committed defaults in the matter of repayment of both the principal amount as well as the interest and the Corporation issued an advertisement for the sale of the unit invoking the provisions of Section 29 of the Act in 1975. The tender of Shri Jaganmohan Gupta was accepted by the Corporation in response to the advertisement and he deposited the earnest money. While the matters rested thus, a suit, being O.S. No. 106 of 1976, was got filed by Respondent 1, through a third party, in the sub-court at Visakhapatnam and an order of attachment before judgment was obtained in respect of the properties of the first respondent which were already under mortgage with the Corporation. The Corporation entered its appearance before the sub-court and pleaded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 deposit the amount and the Corporation, therefore, was once again driven to advertise the unit for sale. The effort of first respondent to obtain stay of the sale pursuant to the fresh advertisement issued by the Corporation, failed on May 13, 1980 when C.M.P. No. 6566 of 1980 filed by it was dismissed by the High Court. Undeterred by various orders against it and the continued default in making repayment or depositing the amounts under directions of the court, it appears that the first respondent filed Writ Petition No. 4187 of 1980 questioning the fresh invitation of tenders by the Corporation by invoking the provisions of Section 29 of the Act and succeeded in obtaining an order of stay. The writ petition, however, was dismissed on December 14, 1981, by the High Court upholding the action taken by the Corporation under Section 29 of the Act and the stay order was vacated. After the vacation of the stay order, tender of one M/s Bhagchandka Brothe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; (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 of such costs, charges and expenses and, secondly, in discharge of the debt due to the Financial Corporation, and the residue of the money so received shall be paid to the person entitled thereto. (5) * & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m transferring or removing its machinery or plant or equipment from the premises of the industrial concern without the permission of the Board, where such removal is apprehended. (2) An application under sub-section (1) shall state the and extent of the liability of the industrial concern Financial Corporation, the ground on which it is made and such other particulars as may be prescribed." 7.Section 32 of the Act deals with the procedure and the powers of the District Judge while dealing with 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -section (6), the District Judge may (a) confirm the order of attachment and direct the sale of the attached property; (b) vary the order of attachment so as to release a portion of the property from attachment and direct the sale of the remainder of the attached property; (c) release the property from attachment; (d) confirm or dissolve the injunction; (da)direct the enforcement of the liability of the surety or reject the claim made in this behalf; or (e) transfer industrial concern to the management of the the Financial Corporation or reject the claim made in this behalf: Provided that when making an order under clause (c) or making an 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 con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be exercisable (a) in a presidency town, where there is a city civil court having jurisdiction, by a judge of that court and in the absence of such court, by the High Court; and (b) elsewhere, also by an additional district judge or by any judge of the principal court of civil jurisdiction. (12)For the removal of doubts it is hereby declared that any court competent to grant an ad interim injunction under this section shall also have the power to appoint a Receiver and to exercise all the other powers incidental thereto. " 8.A perusal of the aforesaid provisions of the Act shows that they deal with rights of and the procedure to be followed to enable the Corporation, in the event of breach of agreement or default in payment of loan or advance or an instalment thereof, by the loanee, to recover the same. 9.An analysis of Section 29 of the Act reveals that where any industrial concern which is under an obligation and a liability to the Corporation under an agreement makes a default in repayment of the loan or advance or any insta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the sale of the property pledged, mortgaged, hypothecated or assigned to the Corporation as security for the loan or advance; (b) for transferring the management of the industrial concern to the Corporation; and (c) for an ad interim injunction restraining the defaulting industrial concern from transferring or removing its machinery or plant or equipment or any other material from the premises of the concern without the permission of the Board. 11.An application made under Section 31 must disclose the nature and extent of the liability of the industrial concern as well as the ground on which the application is made. Section 32 is procedural in nature and provides for the procedure which is required to be followed when the District Judge takes cognizance of an application filed under Section 31 of the Act. 12.Section 31 in terms provides that action under the said provision may be taken "w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same time. The reach and scope of the two remedies is essentially different even if somewhat similar result flows by taking recourse to either of the two provisions in certain respects. 14.While dealing with the provisions of Sections 31 and 32 of the Act, this Court in Gujarat State Financial Corpn. v. Naatson Mfg. Co. (P) Ltd. I after noticing the scope of Section 31 of the Act observed: (SCC p. 198, para 9) "Section 31(1) prescribes a special procedure for enforcement of claims by the Financial Corporation. The Corporation is to make an application for the reliefs set out in Section 31(1). The reliefs that a Court can grant under Section 31(1) are the sale of the property mortgaged, etc. to a Financial Corporation as security for the loan or advance; transfer of the management of the industrial concern to the Financial Corporation or restraining the industrial concern from transferring or removing its machinery or- plant or equipment from the premises of the industrial concern without the permissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at all. Subsection (7) of Section 32 prescribes the relief which can be granted after investigation under sub-section (6) is made and gives a clue to the nature of the contest between the parties. Sub-section (8) of Section 32 prescribes the mode and method for executing the order of attachment or sale of property as provided in the Code of Civil Procedure. Indeed, when subsections (6), (7) and (8) of Section 32 are read together in the context of the provisions of Section 31(1) of the Act, in the ultimate analysis, the result may be that the property will be sold for repayment of the loan or advance taken by the industrial concern from the Corporation but even then it cannot be said that it is a substantive monetary relief claimed by the Corporation which can be valued in terms of money in proceedings under Section 31 of the Act. The substantive relief under Section 3 1 (1) is something in the nature of an application for attachment of property in execution of a decree before the judgment. 15.The Doctrine of Election clearly suggests that when two remedies are available for the same relief, the party to whom the said remedies are available has the option to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 31 of the Act from a court of competent jurisdiction, is denuded of its rights under Section 29 of the Act. To hold so would render the above-quoted expression redundant in Section 31 of the Act and the courts do not lean in favour of rendering words used by the Legislature in the statutory provisions redundant. The Corporation which has the right to make the choice may make the choice initially whether to proceed under Section 29 of the Act or Section 31 of the Act, but its rights under Section 29 of the Act are not extinguished, if it decides to take recourse to the provisions of Section 31 of the Act. It can abandon the proceedings under Section 31 of the Act at any stage, including the stage of execution, if it finds it more practical, and may initiate proceedings under Section 29 of the Act. 17.The relief available to the Corporation under Section 29 of the Act to realise its dues in the manner prescribed therein is wider in scope than the limited reliefs available to it under Section 31 of the Act and is not controlled by Section 31 of the Act. The Legislature clearly intended to preserve the rights of the Corporation under Section 29 of the Act, by expressly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of India to assist it in not repaying its debts. The aim of equity is to promote honesty and not to frustrate the legitimate rights of the Corporation which after advancing the loan takes steps to recover its dues from the defaulting party. Thus, the intention of the Legislature in using the expression "without prejudice to the provisions of Section 29 of the Act" clearly appears to be that recourse to the provisions of Section 29 of the Act is not prohibited, where an order or decree under Section 31 of the Act obtained by the Corporation has not been complied with or honoured by the defaulting concern or is otherwise insufficient to satisfy the dues of the Corporation and the Corporation withdraws and abandons to pursue further proceedings under Section 31 of the Act. Passing a money decree for recovery of the outstanding dues, not being within the jurisdiction of the court under Section 31 of the Act, the Corporation retains its right to recover its dues by invoking the provisions of Section 29 of the Act in the manner prescribed therein notwithstanding any order, final or interim, obtained by it under Section 31 of the Act by withdrawing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order under Section 31 of the Act and yet simultaneously take recourse to proceedings under Section 29 of the Act for the same relief The position may also be different if the claim of the Corporation is negatived, on facts, by the Court in the proceedings under Section 31 of the Act. In that event depending upon the facts of each case, it may be permissible to hold that fair play and justice demand that the Corporation is not allowed to take recourse provisions of Section 29 of the Act. Thus from the discussion it follows that the answer to the question posed inthe opening part of the judgment is in the affirmative. 20.In Civil Appeal No. 3689 of 1987, the Corporation took recourse to the provisions of Section 31 of the Act and obtained an order under Section 31(1) of the Act but its effort to enforce the liability either against the defaulting concern or the surety was frustrated by the defaulting party by shifting the concern without leaving scope for tracing it. This 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 wit ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
