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Karnataka High Court
Judges : B.PADMARAJ,S.ABDUL NAZEER
GULHATI - Appellant
Versus
KARNATAKA STATE FINANCIAL CORPORATION - Respondent
MFA 3353 Of 2001
Decided On : 03/01/2006
Advocates Appeared :
B.RUDRAGOWDA, K.G.RAGHAVAN, KESTHUR N.CHANDRA SHEKHAR
Cases Referred: MFA No. 597/2004; AIR 1967 SC 1105; (2003) 5 KLJ 164; AIR 1968 SC 1413; AIR 1977 Kar. 14; AIR 1977 204-C; AIR 1987 Kar. 2; AIR 1992 SC 1740; AIR 1979 SC 102 ; (1991)2 SCC 637 (At page 652); AIR 1987 SC 1950; AIR 1992 SC 1815-A; (1996) 5 SCC Page 357; AIR 1989 SC 2113; AIR 1997 Rajasthan 273.
Plaint - What is - If an application under Section 31, SFS Act is a plaint.
Cases Referred: MFA No. 597/2004; AIR 1967 SC 1105; (2003) 5 KLJ 164; AIR 1968 SC 1413; AIR 1977 Kar. 14; AIR 1977 204-C; AIR 1987 Kar. 2; AIR 1992 SC 1740; AIR 1979 SC 102 ; (1991)2 SCC 637 (At page 652); AIR 1987 SC 1950; AIR 1992 SC 1815-A; (1996) 5 SCC Page 357; AIR 1989 SC 2113; AIR 1997 Rajasthan 273.
State Financial Corporations Act, 1951- Sections 31 - Nature of application under - An application under this provision carries little information - Does not contain several details prescribed for a plaint under CPC - Hence such application cannot be treated as a plaint. [B. Padmaraj and S. Abdul Nazeer, JJ.]: The proceedings under the State Financial Corporation Act, are not in the nature of the suit and the application under Section 31, is also not a plaint, nevertheless in the very nature of the powers under Section 31, the District Judge, is required to inquire into the matter before granting relief. An application under Section 31 carries the little information provided for in Section 31(2) and does not contain the several details prescribed for a plaint under the CPC. The scope of enquiry under Sections 31 and 32 is very limited. In an enquiry of this nature, no claim for damages can be looked into or decided. Section 31 enables the Corporation alone to approach the District Courts for relief under Section 31 and 32. No other party can avail the benefit of Sections 31 and 32. It is needless to set out these provisions because the issue as regards scope of enquiry under Sections 31 and 32 is no more res integra.
Cases Referred: MFA No. 597/2004; AIR 1967 SC 1105; (2003) 5 KLJ 164; AIR 1968 SC 1413; AIR 1977 Kar. 14; AIR 1977 204-C; AIR 1987 Kar. 2; AIR 1992 SC 1740; AIR 1979 SC 102 ; (1991)2 SCC 637 (At page 652); AIR 1987 SC 1950; AIR 1992 SC 1815-A; (1996) 5 SCC Page 357; AIR 1989 SC 2113; AIR 1997 Rajasthan 273.
State Financial Corporations Act, 1951- Sections 31 and 32 - Relief under - Is available only to Corporation in exclusion of all other parties.
Cases Referred: MFA No. 597/2004; AIR 1967 SC 1105; (2003) 5 KLJ 164; AIR 1968 SC 1413; AIR 1977 Kar. 14; AIR 1977 204-C; AIR 1987 Kar. 2; AIR 1992 SC 1740; AIR 1979 SC 102 ; (1991)2 SCC 637 (At page 652); AIR 1987 SC 1950; AIR 1992 SC 1815-A; (1996) 5 SCC Page 357; AIR 1989 SC 2113; AIR 1997 Rajasthan 273.
State Financial Corporations Act, 1951- Sections 32 - Nature of investigation under - Terms and conditions based on which loan was granted has to be looked into in an investigation under. [B. Padmaraj and S. Abdul Nazeer, JJ.]: Section 32 has been enacted by way of speed remedy. It is nothing but an execution proceedings. The relief sought for in an application under Section 31 (1) is something akin to an application for attachment of property in execution of a decree at a stage posterior to the passing of the decree. In an application under Section 31, the Corporation cannot ask for a decree against the mortgagors, or implead all parties that may be necessary to effectively dispose of all the claims of the Corporation against the mortgagors. It is a provision for a quick and expeditious but limited relief. The proceedings contemplated under Section 31 (1) is something in the nature of an application for attachment of property in execution of a decree at a stage posterior to the passing of the decree In this connection, a reference may be made to a decision of the Honble Supreme Court in the case of E.I AIR 1987 SC 1950 wherein it is held that the proceedings instituted under Section 31(1) of the Act is something akin to an application for attachment of property in execution of a decree at a stage posterior to the passing of the decree. The opening words of this Section in sub-section (1) suggest that where industrial concern, in breach of any agreement, make any default in payment of any loan or advance or any installment there of or fails to meet obligation in relation to any guarantee given by the Corporation or otherwise fails to comply with the terms of the agreement or where the Financial Corporation requires such industrial concern to make immediate repayment of any loan or advance under Section 30 and the industrial concern fails to make such repayment then. Without prejudice to the provision of Section 29 of the Act and of Section 69 of the Transfer of Property Act, any officer of the Corporation may apply to the District Judge within whose jurisdiction the industrial concern carries on the whole or a substantial part of its business for the reliefs enumerated in clauses (a) (aa) (b) and (c). Section 30 contains that not withstanding anything in any agreement to the contrary, the Corporation may, by notice in writing, require any industrial concern to discharge forthwith in full all liabilities. Thus, it is clear that Section 30 of the Act is in addition to and not in derogation of the provisions of Section 29 of the Act. The provision contained in Section 31 of the Act supports this view, because, it is emphatically mentioned that the follow up action in Court under Section 31 following the notice under Section 30 of the Act, may proceed without prejudice to the provision of Section 29 of the Act.
Cases Referred: MFA No. 597/2004; AIR 1967 SC 1105; (2003) 5 KLJ 164; AIR 1968 SC 1413; AIR 1977 Kar. 14; AIR 1977 204-C; AIR 1987 Kar. 2; AIR 1992 SC 1740; AIR 1979 SC 102 ; (1991)2 SCC 637 (At page 652); AIR 1987 SC 1950; AIR 1992 SC 1815-A; (1996) 5 SCC Page 357; AIR 1989 SC 2113; AIR 1997 Rajasthan 273.
Indian Contract Act, 1872 - Section 128 - Surety -Liability of - Is co-extensive with that of principal debtor.
Cases Referred: MFA No. 597/2004; AIR 1967 SC 1105; (2003) 5 KLJ 164; AIR 1968 SC 1413; AIR 1977 Kar. 14; AIR 1977 204-C; AIR 1987 Kar. 2; AIR 1992 SC 1740; AIR 1979 SC 102 ; (1991)2 SCC 637 (At page 652); AIR 1987 SC 1950; AIR 1992 SC 1815-A; (1996) 5 SCC Page 357; AIR 1989 SC 2113; AIR 1997 Rajasthan 273.
Court Fees Act, 1870 - Court Fee - Application of Financial Corporation for enforcing liabilities of surety - Not a plaint for purposes of payment of Court fee. [B. Padmaraj and S. Abdul Nazeer, JJ.]: The form of the application, the nature of the relief, the compulsion to make interim order, the limited enquiry contemplated by sub-section (6) of Section 32 and the manner of execution clearly show that the application under Section 31(1) is neither a plaint as contemplated by Article I of Schedule I nor an application in the nature of a plaint as contemplated by Article 7 of Schedule I of Court Fees Act.
Cases Referred: MFA No. 597/2004; AIR 1967 SC 1105; (2003) 5 KLJ 164; AIR 1968 SC 1413; AIR 1977 Kar. 14; AIR 1977 204-C; AIR 1987 Kar. 2; AIR 1992 SC 1740; AIR 1979 SC 102 ; (1991)2 SCC 637 (At page 652); AIR 1987 SC 1950; AIR 1992 SC 1815-A; (1996) 5 SCC Page 357; AIR 1989 SC 2113; AIR 1997 Rajasthan 273.
( 1 ) THIS Miscellaneous First Appeal filed by the appellant -guarantor under Section 32 (9) of the State Financial Corporation act is directed against the order dated 17-3-2001 of the II Addl. District and Sessions judge, Bangalore Rural District, Bangalore, in miscellaneous No. 61/1993, whereby the Learned district Judge has allowed the petition filed by the 1st respondent Corporation (KSFC)under Section 31 (1) (aa) of the State Financial Corporation Act in part holding that the appellant and the respondents 2 to 5 shall be jointly and severally liable to pay a sum of Rs. 1,11,91,338/- with interest at 12% per annum from the date of filing the petition, until actual payment. They have been directed to pay the amount within three months from the date of the order.
( 2 ) THE 1st respondent Corporation filed a petition under Section 31 (1 ) (aa) of the State Financial Corporation act for directing the appellant and the Respondents 2 to 5 to pay rs. 1,11,91,338/-with interest at 16. 5% from 20-9-1993. In the petition filed before the district Judge, the 1st respondent Corporation contended inter alia that at the request of M/s Vioryl India (P) Limited, it had sanctioned a term loan of Rs. 30,00,000/- for the establishment of industrial unit to be engaged in the manufacture of perfumery and aromatic compounds. The loan was sanctioned on 28-9-1993 and the same was communicated to the Company on 21-10-1983. The same was accepted by the Company. The Company had mortagaged its properties by a deed of mortage dated 7-2-1984. That at the request of the said Company and also in consideration of the loan advanced by the Corporation in favour of the Company, the appellant alongwith the other respondents (respondents 2 to 4 in the Court below) had executed a Deed of Guarantee con 7-2-1984 for a sum of rs. 30,00,000/- undertaking to pay the amount in case the Company has failed to pay the amount. The said deed of guarantee was filed at annexure-A. The Respondent No. 5 had also executed a Deed of guarantee at the request of the Company and in consideration of the loan advanced by the Corporation, thereby undertaking to pay to the corporation with interest and other charges in case the Company has failed to pay the amount. That the 1st respondent corporation had issued notice on 18-1 -1989 to the Company marking copies to all the guarantors to see that the Company pays the amount to the corporation. It was also informed in the notice that in case the company fails to pay the amount, the 1st respondent corporation would proceed to invoke the deeds of guarantee executed by the guarantors in favour ofthe Corporation. That the 1st respondent corporation had clearly indicated in the notice dated 18-1-1989 at annexure-C that the guarantors shall evince interest to see that the company pays the amount. Inspite off such notice, the appellant and the other respondents did not evince any interest to see that the amount is paid by the Company to the 1st respondent corporation. That the company failed to pay the amount inspite of demands made and hence the 1st respondent Corporation has invoked the Deeds of Guarantee executed by the appellant and the other respondents in favour of the 1std respondent Corporation dated 7-2-1984 undertaking to pay the amount in case the Company fails to pay the amount under a notice dated 14-5-1993 as per Annexure-D. Inspite of issue of such notice dated 14-5-1993 invoking the Deeds of Guarantee executed by the appellant and the other respondents, they did not pay the amount and hence the 1st respondent Corporation filed the petition under Section 31 (1) (aa) of the State Financial Corporation Act with a prayer for directing the appellant and the other respondents to pay jointly and severally a sum of Rs. 1,11,91,338/- with interest at 16. 5% from 20-9-1993 on the footing of compound interest at quarterly rest besis till the date of realization.
( 3 ) EXCEPT the appellant herein, no other respondents contes
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