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1992 Supreme(Ori) 19
High Court Of Orissa
G. B. Pattanaik , D. M. PATNAIK
MISS K.T.SULOCHANA NAIR - Appellant
Versus
MANAGING DIRECTOR, ORISSSA STATE FINANCIAL CORPORATION - Respondent
ORIGINAL JURDN. 2057 Of 1991
Decided On : 02/11/1992
A.K.PATNAIK, B.M.PATNAIK, D.MOHANTY, D.P.Dhalsamant, P.PALIT, R.N.MISRA
The Corporation's right under Section 29 of the State Financial Corporations Act extends to the property mortgaged by a guarantor.
Headnote:
STATE FINANCIAL CORPORATIONS ACT - SECTION 29 - RIGHT TO TAKE POSSESSION OF PROPERTY - EXTENDS TO PROPERTY MORTGAGED BY GUARANTOR - CORPORATION CAN TAKE POSSESSION OF GUARANTOR'S PROPERTY UNDER SECTION 29 OF THE ACT.
Fact of the Case:
The petitioner had mortgaged her property to secure a loan granted by the Corporation to a third party. The loanee failed to pay the installments, and the Corporation issued a notice to the petitioner under Section 29 of the State Financial Corporations Act, calling upon her to clear the dues within 15 days, failing which the mortgaged property would be taken over. The petitioner challenged the notice, arguing that the Corporation's right under Section 29 did not extend to the property of a guarantor.
Finding of the Court:
The court held that the Corporation's right under Section 29 of the Act extended to the property mortgaged by a guarantor. The court reasoned that the language of Section 29 was broad and did not limit the Corporation's right to the property of the loanee. The court also noted that the Full Bench decision of the Allahabad High Court, which had held that the Corporation's right under Section 29 did not extend to the property of a guarantor, was distinguishable because it dealt with the Corporation's right to sell the mortgaged property under Section 31 of the Act, rather than its right to take possession of the property under Section 29.
Issues: Whether the Corporation's right under Section 29 of the State Financial Corporations Act extended to the property mortgaged by a guarantor.
Ratio Decidendi: The court held that the Corporation's right under Section 29 of the Act extended to the property mortgaged by a guarantor because: * The language of Section 29 was broad and did not limit the Corporation's right to the property of the loanee. * The Full Bench decision of the Allahabad High Court, which had held that the Corporation's right under Section 29 did not extend to the property of a guarantor, was distinguishable because it dealt with the Corporation's right to sell the mortgaged property under Section 31 of the Act, rather than its right to take possession of the property under Section 29.
Final Decision: The court dismissed the petitioner's writ petition, holding that the Corporation had the right to take possession of the petitioner's property under Section 29 of the Act.
G. B. PATNAIK, J.
( 1 ) THE short question that arises for consideration in the present writ application is whether the right conferred to the Financial Corporation under S. 29 of the State Financial Corporations Act (hereinafter referred to as 'the Act') extends over the property mortgaged with the Corporation by a guarantor or not. This question arises under the following circumstances: -the petitioner had mortgaged her property for securing a term loan that had been granted by the Corporation in favour of opposite party No. 4 for purchase of a vehicle bearing Registration No. 1267. As the loanee did not pay up the instalment dues, the Corporation served the notice on the petitioner under Annexure-7 calling upon her to clear the demanded dues with interest thereon within fifteen days from the date of the issue of the letter failing which the properties mortgaged by the petitioner in favour of opposite party No. 4 should be taken over under S. 29 of the Act. The petitioner averred in the writ application that opposite party No. 4 persuaded her to be a witness for sanction of the loan amount and in the process managed to get the petitioner's properties mortgaged with the Corporation and when the petitioner came to know of the same, she intimated the Corporation for withdrawal of the guarantorship but did not receive any reply from the Corporation until the notice under Annexure-7 was issued by the Corporation. She, therefore, moved this Court for the relief of quashing the letter of the Corporation, annexed as Annexure-7.
( 2 ) MR. Palit, appearing for the petitioner raises the sole contention that under S. 29 of the Act the Corporation can take possession of the property of the loanee but not the property of the guarantor and in support of the said contention reliance was placed on a Full Bench decision of the Allahabad High Court in the case of Munnalal Gupta v. Uttar Pradesh Financial Corporation, AIR 1975 All 416.
( 3 ) THE stand of the Corporation in the counter-affidavit filed is that the loanee, opposite party No. 4, took the loan amount of Rs. 2,70,600/- for purchase of a truck and for that purpose the petitioner became his guarantor and she mortgaged her property described in the schedule of the notice under Annexure-7. It is their further case that the Corporation took steps to seize the vehicle in question but having failed in their attempt to safeguard the loan advanced to opposite party No. 4 it had no other option than to take action under S. 29 of the Act and since the petitioner had voluntarily mortgaged her property with the Corporation, in view of the provisions of S. 29 of the Act there cannot be any fetter on the power of the Corporation to take action under S. 29 of the Act in respect of the property of a guarantor which had been mortgaged with the Corporation.
( 4 ) IN view of the rival stands of the parties, the sole question that arises for consideration is whether a guarantor's property which had been mortgaged with the Corporation can be taken possession under S. 29 of the Act when the loanee did not pay up the loan amount. To appreciate the contention raised, it would be appropriate to extract S. 29 (1) of the Act: -"where any industrial concern, which is under a liability to the Financial Corporation under an agreement, makes any default in repayment of any loan or advance or any instalment thereof for in meeting its obligation in relations 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 of 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. "a bare reading of the aforesaid provision makes it abundantly clear that the Financial Corporation shall have the right to take over the management o
