IMPORTANT POINT
Limitation for filing recovery suit against indemnifier would start from the date the assets of mortgagee Company are sold.

Judgment :-

A.K. Sikri, J.

1. Leave granted.

2. Present appeal raises an interesting question of law pertaining to the starting point of limitation for filing the suit for recovery by the State Financial Corporations constituted under the State Financial Corporation Act. We make it clear at the outset itself that we are not treading a virgin path. There are two judgments of this Court touching upon this very issue. At the same time it is also necessary to point out that it has become imperative to clarify the legal position contained in two judgments and to reconcile the ratio thereof as well because of the reason that they are contradictory in nature. It necessitates wider discussion in order to avoid any confusion in the manner such cases are to be dealt with.

3. With the aforesaid preliminary introduction to the subject matter of the present appeal, we now proceed to take note of the facts which have led to the question of limitation that confronts us.

4. Respondent No. 1 viz. Himachal Pradesh State Industrial Development Corporation Limited (hereinafter to be referred as 'the Corporation') is a financial corporation under the State Development Corporation Act (hereinafter to be referred as the Act). It is a statutory body constituted for the purpose of carrying out the objectives of the Act. It is a company incorporated under the Companies Act, 1956, engaged in the business of providing financial aid to companies for setting up and commencing operations. Respondent No. 2 (hereinafter to be referred as the 'Company') is the industrial concern which defaulted in repayment of the loan disbursed by the Respondent No. 1. It is now under liquidation. Respondent No. 3 is the official liquidator, who was appointed by the High Court of Delhi for the purposes of winding up the Company. Respondent Nos. 4 & 5 were the Directors of the Company at the time of entering into the loan agreements with the Corporation.

5. The appellant who was also a director of the Company, was a Guarantor for the payment of loans taken by the Company vide loan agreements executed between Corporation and the Company. The following loan agreements were executed along with the corresponding amounts and guarantees : 

 6. The Company defaulted on the repayments of the loan amount disbursed to it by the Corporation. The Corporation issued a Recall Notice bearing No. PAC 84/ 90/ 6705 dated 21.5.1990 recalling an amount of Rs. 77,35,607/-(Rupees seventy seven lakhs thirty five thousand six hundred and seven only) plus further interest to be accrued from 10.9.1990.

7. The Company failed to make the repayment and accordingly the Corporation, proceeded under Section 29 of the State Financial Corporations Act, 1951 to take over the mortgaged/ hypothecated assets of the Company. The assets of the Company were taken over by the Corporation on 10.7.1992. The mortgaged/ hypothecated assets of the Company were sold by the Corporation on 31.3.1994 for a sum of Rs. 96,00,000/- (Rupees Ninety Six Lakhs only) by inviting offers by means of publishing advertisements in the leading newspapers.

8. Since the company was also indebted to HP Financial Corporation, amount realised from the sale of the company's assets was apportioned between these two secured creditors. After adjusting the sale proceeds against the outstanding debts of the Company, in proportion to the term loans advanced by the Corporation and Himachal Pradesh Financial Corporation; a sum of Rs. 68,96,564/- (Rupees Sixty Eight Lakhs Ninety Six Thousand Five Hundred and Sixty Four only) still remained outstanding against the Company.

9. The Corporation preferred a Civil Suit No. 85 of 1995 on 26.12