The State Financial Corporation is not liable under a decree for a defaulting borrower without compliance with notice requirements and jurisdictional procedures; attachment of its assets for past debts is barred.

JUDGMENT :

R. MAHADEVAN, J.

1. Leave granted.

2. The present appeal has been filed by the Odisha State Financial Corporation, a government corporation in the State of Odisha, against the final judgment and order dated 22.11.2022 passed by the High Court of Uttarakhand at Nainital¹ [Hereinafter referred to as “the High Court”] in Writ Petition (M/S) No. 2314 of 2022, whereby the High Court dismissed the writ petition filed by the appellant under Article 227 of the Constitution of India, challenging the civil proceedings and the orders passed by the Courts below regarding the computation of interest on the decretal amount and the consequential execution proceedings.

BRIEF FACTS

3. The appellant, which is a State Financial Corporation, along with Industrial Promotion & Investment Corporation of Odisha² [For short “IPICOL”] jointly financed an industrial unit, namely, M/s. Manorama Chemicals Works Ltd. (Respondent No. 2 herein) on 22.11.1984 for setting up a bleaching powder unit at Ganjam, Odisha. M/s. Vigyan Chemical Industries Limited Dehradun (Respondent No. 1 herein) supplied raw materials worth Rs. 66,454.65 to Respondent No. 2 on 29.07.1985. Since Respondent No. 2 defaulted in repaying the financial assistance received from the appellant and IPICOL, possession of the industry of Respondent No. 2 was taken over by the appellant on 18.08.1987 under Section 29 of the State Financial Corporation Act, 1951.³ [For short “S.F.C. Act 1951”]

3.1. Thereafter, Respondent No. 1 filed Recovery Suit No. 103 of 1988 against Respondent Nos. 2, 3 and 4 in the Court of Second Additional Civil Judge (Senior Division), Dehradun⁴ [For short “the trial Court”] claiming Rs. 90,400/- with interest as the outstanding amount. Respondent No. 1/Plaintiff also claimed pendente lite and future interest at the rate of 24% per annum till realization of the amount. The appellant was sought to be impleaded in the suit on 11.02.1993, which was allowed by the trial Court on 06.12.1994, and the appellant was added as Defendant No. 4. The appellant objected to its impleadment by filing a Miscellaneous Appeal and thereafter, a Writ Petition, both of which ended in dismissal. The trial Court was directed to adjudicate the suit expeditiously, within one year, with the appellant as a party.

3.2. Respondent No. 1/plaintiff also sought leave to amend and add certain paragraphs, contending that under Section 29(5) of the S.F.C. Act, 1951, the appellant/Defendant No. 4 is liable for the claimed amount, as it had taken possession of Respondent No. 2, and the said industrial concern was now to be sued through Defendant No. 4. The amendment application was allowed, and the appellant/Defendant No. 4 filed a written statement, stating that due to default in repayment of the loan, it had taken possession of industry of Respondent No. 2 on 18.08.1987 under Section 29 of the S.F.C. Act, 1951 for the purpose of realization of its dues and thereafter sold the unit to one Shri T.R.K. Rao.

3.3. During the pendency of the suit, the appellant opened a bank guarantee on 27.11.1998 for a sum of Rs. 6,36,243/- with Union Bank of India, Cuttack, undertaking to pay the said amount to the trial Court, on demand. Similarly, another bank guarantee was opened on 16.10.1999 for a sum of Rs. 3,50,000/- with Union Bank of India, Cuttack to be deposited with the trial Court on demand with respect to Suit No. 103/1988. The trial Court was accordingly informed by the Union Bank of India regarding the issuance of the bank guarantee for Rs. 3,50,000/- to the credit of the suit. The appellant also instructed its lawyer vide letter dated 22.10.1999, to submit the said bank guarantee to the trial Court.

3.4. The suit filed by Respondent No. 1/Plaintiff was partly decreed on 20.08.2001 for an amount of Rs. 84,170/- with pendente lite and future interest to be calculated at 24% per annum from 01.03.1988 to 23.09.1992 and at 2% compounded monthly from 23.09.1992 till payment. Challenging the same, the appellant