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1984 Supreme(Cal) 424
High Court Of Calcutta
S. C. SEN
ROSE POTTERIES - Appellant
Versus
W.B.FINANCIAL CORPN. - Respondent
Civrl Order 12261 (W) Of 1984
Decided On : 12/21/1984
A.K.DHANDHANIA, S.S.Hazra
Section 29(1) of the State Financial Corporation Act, 1951 confers an independent right on the Corporation to take over the management or possession of an industrial concern in case of default, and this right can be exercised without obtaining an order from the Court.
Headnote:
STATE FINANCIAL CORPORATION ACT, 1951 - SECTIONS 29, 31 - RIGHT TO TAKE OVER MANAGEMENT OR POSSESSION OF INDUSTRIAL CONCERN - PROCEDURE - SECTION 31 IS NOT THE ONLY METHOD OF ENFORCING THE RIGHT GIVEN BY SECTION 29(1) - SECTION 29(1) GIVES THE RIGHT TO TAKE OVER MANAGEMENT OR POSSESSION OF INDUSTRIAL CONCERN IN CASE OF DEFAULT - SECTION 31 PROVIDES FOR SPECIAL PROVISIONS WITHOUT PREJUDICE TO SECTION 29 - SECTION 29 IS SIMILAR TO THE POWER GIVEN TO A MORTGAGEE UNDER SECTION 69 OF THE TRANSFER OF PROPERTY ACT - SECTION 29(2) SPECIFICALLY PROVIDES THAT THE TRANSFEREE WILL ACQUIRE ALL RIGHTS IN OR TO THE PROPERTY TRANSFERRED AS IF THE TRANSFER HAD BEEN MADE BY THE OWNER OF THE PROPERTY - THIS CLEARLY INDICATES THAT SECTION 29 WAS DEALING WITH TRANSFER AND THE LEGAL CONSEQUENCE OF SUCH TRANSFER - IT DID NOT CONFER ONLY THE RIGHT TO FILE A SUIT.
Fact of the Case:
The petitioner, who had defaulted in making repayment of loans obtained from the West Bengal Financial Corporation, challenged a notice issued by the Corporation under Section 29(1) of the State Financial Corporation Act, 1951, which authorized the Corporation to take over the management or possession of the petitioner's industrial concern. The petitioner contended that the Corporation could not proceed under Section 29(1) without obtaining an order from the Court and that the proper procedure was to initiate proceedings under Sections 30 and 31 of the Act.
Finding of the Court:
The Court held that Section 31 of the Act, which provides for special provisions for enforcement of claims by the Financial Corporation, does not control or limit the right given under Section 29(1). Section 29(1) confers an independent right on the Corporation to take over the management or possession of an industrial concern in case of default, and this right can be exercised without obtaining an order from the Court. The Court further held that Section 29(2), which deals with the legal consequences of a transfer of property by the Corporation, clearly indicates that Section 29 was intended to deal with transfer and not merely with the right to file a suit.
Issues: Whether the Corporation could proceed under Section 29(1) of the Act to take over the management of the petitioner's industrial concern without obtaining an order from the Court.
Ratio Decidendi: The Court relied on the clear wording of Section 29(1) and Section 31 of the Act to conclude that Section 31 does not lay down the exclusive procedure for enforcing the right given under Section 29(1). The Court also noted that Section 29(2) specifically deals with the legal consequences of a transfer of property by the Corporation, which indicates that Section 29 was intended to confer a right to transfer property without the intervention of the Court.
Final Decision: The Court dismissed the petitioner's writ petition and vacated all interim orders.
( 1 ) THE petitioner defaulted in making repayment of loans obtained from the West Bengal Financial Corporation. A demand notice was served upon the petitioner by the Corporation on 12th July, 1984. It appears from the said demand notice that the amounts due to the Corporation amounted to Rs. 10,84,000/- towards principal, Rs. 7,22,077. 53 towards interest up to 30th June, 1984. A further sum of Rs. 43,123. 26 was also claimed towards other dues. The total claim amounted to Rs. 18,49,211. 79. The petitioner was called upon to make payment within 15 days from the date of the receipt of the notice. In the notice it was further stated that"in default of payment as stated above within 15 days from the date of receipt of this notice the provisions of the security deeds under reference and the State Financial Corporation Act, 1951 shall be enforced against you without further reference and you shall be held liable for all costs and consequence. "
( 2 ) THE case of the respondent is that the petitioner had executed deed of mortgage and other security documents in favour of the West Bengal Financial Corporation in connection with the loans which were given to the petitioner starting from 16th Aug. , 1978.
( 3 ) ON 1st Aug. , 1984 a further notice was given by the West Bengal Financial Corporation to the petitioner in which it was alleged that the petitioner had not observed the terms and conditions of the various security documents executed by the petitioner for the purpose of obtaining loan. It was also alleged that in spite of the notice dt. 12th July, 1984 the petitioner had failed to make any payment. The Corporation gave notice to the petitioner that in exercise of its right under S. 29 (1) of the State Financial Corporation Act, a representative of the Corporation will take possession of the factory of the petitioner on 10th Aug. , 1984.
( 4 ) THE petitioner has challenged this notice by this writ petition and an interim order was issued on Aug. 9, 1984 restraining the respondent from giving effect to the two notices dt. 12th July, 1984 and 1st Aug. , 1984. The question that arises now is whether the interim order should be continued or not.
( 5 ) THE contention of the petitioner is that the proceedings may be started against the petitioner under Ss. 30 and 31 which confer upon the Corporation the power to call for repayment, but the Corporation cannot proceed under S. 29 (1) to take over the management of the industrial concern of the petitioner without obtaining an order from Court. In support of his contention, reliance has been placed on a Full Bench judgment of the Allahabad High Court in the case of Munnalal Gupta v. Uttar Pradesh Financial Corporation, AIR 1975 All 416.
( 6 ) S. 29 of the State Financial Corporations Act, 1951 provides :-"s. 29. (1) Where any industrial concern, which is a liability to the Financial Corporation under an agreement, makes any default in repayment of any loan or advance or any instalment thereof or in meeting its obligations in relation to any guarantee given by the Corporation or otherwise fails to comply with the terms of its agreement with the Financial Corporation, the Financial Corporation shall have the right to take over the management or possession or both of the industrial concern, as well as the right to transfer by way of lease or sale and realise the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation. (2) Any transfer of property made by the Financial Corporation, in exercise of its powers under sub-sec. (1), shall vest in the transferee all rights in or to the property transferred as if the transfer had been made by the owner of the property. "
( 7 ) IT is not necessary to set out sub-secs. (3), (4) and (5) of S. 29 for the purpose of this case. S. 31 provides:"31. (1) Where an industrial concern, in breach of any agreement, makes any default in repayment of any loan or advance or any instalment thereof or in meeting its obligati
