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IN THE HIGH COURT OF BOMBAY
(APRIL 13, 2005) 2005
2005-Mhlj-3-67
SICOM LIMITED
Versus
CO-NICK ALLOYS (INDIA) LTD.
Decided On Date: 13/04/05
State Financial Corporations Act (63 of 1951) - Section 29 - Exercise of power under Section 29 of Act. - Financial institution in exercise of power under Section 29 of Act, can only recover their dues either by transfer, sale or handing over management. - Held, it exercises only a power to recover their dues either by transfer, sale and/or handing over management. It does not become owner of the property of the principal debtor.
State Financial Corporations Act (63 of 1951) - Section 29 - Powers under - Possession of mortgaged property - Financial Institutions cannot become owner by exercising power under Section 29 of Act - It exercises only a power to recover their dues either by transfer, sale and or handing over management - By virtue of taking over possession, company or guarantor can make any payment. - The financial institutions do not become owner by exercising power under Section 29 but it exercises only a power to recover their dues either by transfer, sale and/or handing over management and thus seek recovery from such concern which has become defunct or inoperative. The transfer of properties and/or assets from one person to another can only he done in the manner and method recognised by law Court is not inclined to accept the contention that either by virtue of deemed ownership or by virtue of taking over possession the company or the guarantor do not hate to make any payment.
State Financial Corporations Act (63 of 1951) - Section 31(1) - ’Industrial concern’ - Carrying on business - Includes both places where such concern carrying on its manufacturing activities and where its office situated - Jurisdiction of High Court - The plea where Industrial concern cames on its business Court has jurisdiction to entertain and try petition. - The definition of the word Industrial concern carries on business includes within its scope both the place where such concern carries on its manufacturing activities and where the office of such an industrial concern is situated. It would also mean the place where the business of the industrial concern is carried on. It is not possible to accept the contention of the counsel for the respondent Nos. 2 and 3 that the word ’industrial concern’ as defined means the concern which carries on certain type of activities. It is only where its jobs or activities are carried on that such place will alone have jurisdiction. It is well-settled that the business of the Industrial concern can be carried on at many places including the place where the manufacturing activities is undertaken or whether the place where the office of the company is situated. In my opinion thus the provision of Section 31(1) must be so read that where any industrial concern carries on its business either by carrying on manufacturing activities or where their office is situate. Now, turning to the fact that the registered office of the company is shifted from Bombay to Thane I am of the opinion that such contention cannot be accepted for more than one reason. Firstly, it is an admitted position that is business address given by the company themselves at Mumbai. The factory has already been taken over by the petitioner. Thus, the business of the company cannot be carried on from the factory nor the registered office of the company can be located in the factory premises which has already been taken over by the petitioner herein. Advisedly therefore the respondent No. 1 changed the address of the company to another address at Bombay and the respondents them selves have given the said address by their letter dated 2.6.1999 namely D-13. Everest Chamber 156. Tardeo Road, Mumbai 400 034. Thus ultimately the aforesaid address is the address at which the company’s industrial concern is carrying on its business and therefore this Court has jurisdiction to entertain and try the present petition.
State Financial Corporations Act (63 of 1951) - Section 31(1) - Jurisdiction of High Court under Section 31(1) of Act. - If an industrial concern, carries on its business within jurisdiction of Bombay High Court, then Bombay High Court shall have jurisdiction to entertain petition under Section 31(1) of Act. - The industrial concern if carries on business within the jurisdiction of this Court then this Court shall have jurisdiction to entertain the present petition under Section 31(1) of the State Financial Corporation Act, 1951. It is an admitted position that there is business address given by the company themselves at Mumbai. The factory has already been taken over by the petitioner. Thus, the business of the company cannot be carried on from the factory nor the registered office of the company can be located in the factory premises which has already been taken over by the petitioner herein. Advisedly, therefore, the respondent No. 1 changed the address of the company to another address at Bombay and the respondent themselves have given the said address by their letter dated 2.6.1999 namely, D-13, Everest Chambers, 156, Tardeo Road, Mumbai 400 034. Thus, ultimately the aforesaid address is the address at which the company’s industrial concern is carrying on its business and therefore this Court has jurisdiction to entertain and try the present petition.
State Financial Corporations Act (63 of 1951) - Section 31(1) - Recovery of Debts Due to Banks and Financial Institutions Act, 1993, Section 34(1) - Jurisdiction of High Court - Provisions of DRT Act is in addition to provisions of State Financial Corporations Act - Not in derogation - No principle in law that because one of creditors filed claim in one particular Court or Forum, all creditors must file proceedings in same Court or Forum - Contention that appropriate Forum is D.R.T. cannot be accepted. - The provisions of Section 34(1) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 in terms provides that the provisions of the DRT Act is in addition to the provisions of the State Financial Corporations Act and not in derogation thereof, therefore, the contention raised by the counsel for the respondent Nos. 2 and 3 that the appropriate Forum is the Debt Recovery Tribunal merely because the State Bank of India has filed the proceedings in exercise of their right under the said Act, therefore cannot be accepted and thus Court reject the same. Apart therefrom Court do not see any such principle in law that because one of the creditors has filed a claim in one particular Court and/or Forum all creditors must file the proceedings in the same Court and/or Forum. In view thereof Court reject the said contention of the respondent company.
State Financial Corporations Act (63 of 1951) - Section 31(1) - Recovery of Debts Due to Banks and Financial Institutions Act (51 of 1993), Section 34(1) - Provisions of Section 31(1) of Act. - Provisions of DRT Act, 1993 are in addition to provisions of State Financial Corporation Act, 1951.
( 1 ) THE present petition is filed under section 31 (l) (aa) of the State Financial Corporations Act against the respondent Nos. 2 and 3 as the guarantors.
( 2 ) SOME of the material facts can be briefly enumerated as under
( 3 ) THE petitioner is the financial corporation incorporated by the Government of Maharashtra with an object to provide inter alia assistance to industries in the State of Maharashtra. The petitioner is a deemed State Financial corporation under the provisions of section 46 of the State Financia corporations Act, 1951. The respondent No. 1 approached the petitioner for sanction of a term loan of Rs. 320 lacs and accordingly by a letter dated 10-2- 1990 the said loan was sanctioned by the petitioner in favour of the responden no. 1 herein. The said loan was availed and in consideration thereof the assets of respondent No. 1 company including plant and machinery and building were mortgaged under a deed of mortgage dated 13-8-1998.
( 4 ) IN consideration of the said amount lent and advanced to the responden no. 1 company by the petitioner, the respondent Nos. 2 and 3 executed the deec of guarantee dated 14-8-1998 for guaranteeing the repayment of the said loan amount in an event there is a failure on the part of the respondent No. 1 to repay the same. The said deed of guarantee is unconditional and without any demur relying upon the aforesaid representation of the respondent Nos. 2 and 3, the petitioner disbursed the said sum of Rs. 320 lacs to the respondent No. 1 in various instalments from time to time. However, the respondent No. 1 committed defaults in repayment of instalments of principal amount and interest to the petitioner herein and committed breach of the terms and conditions of the sanction of the loan on which the said amount was disbursed. Ultimately, on 22-6-1999 the petitioner issued a recall notice and also threatened to take over possession of the assets of the respondent No. 1 company which are mortgaged by the respondent No. 1 in favour of the petitioner herein. By that time the outstanding amount was Rs. 3. 74,53,186/ -. In spite of the said written notice, the respondent No. 1 did not make payment of the dues which are admittedly due and payable by the respondent company to the petitioner herein. Ultimately on 22-9-1999 the petitioner took over possession of the mortgaged assets of the respondent No. 1 company in exercise of powers conferred under section 29 of the State Financial Corporations Act. On 9-/-2001 the petitioner also invoked the personal guarantee of the respondent Nos. 2 and 3 and called upon them to pay the amount then outstanding of Rs. 6,20. 44,689/- being the principle along with interest upto 31-/-2001 failing which it was threatened that the proceedings under section 31 (l) (aa) of the State Financial Corporations Act will be invoked. In sp'te of the said invocation of the Bank Guarantee the respondent Nos. 2 and 3 did not make payment and accordingly the present petition is filed under section 31 (1) (aa) for recovery of the said dues from the respondent Nos. 2 and 3.
( 5 ) THE respondent company has filed an affidavit in reply to the present petition and has raised the following contentions. Firstly it has been contended that this Court has no jurisdiction to entertain the present petition under section 31 (l) (aa) of the State Financial Corporations act. Secondly it is contended that the present petition is not maintainable because of the delay in invoking the bank guarantee. It has been contended that the possession is taken under section 29 of the State Financial Corporations Act on 2-/-1999. However, the bank guarantee is invoked only on 9-/-2001 and, therefore, this Court has no jurisdiction to entertain the present petition. Thirdly, it has been contended that this Court is not an appropriate forum. it has been contended that the State Bank of India being one of the lender has already initiated a proceeding in the Debt Recovery Tribunal and the tribun
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