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2001 Supreme(P&H) 905
PUNJAB & HARYANA HIGH COURT
Jawahar Lal Gupta and Ashutosh Mohunta JJ.
Jasbir Kaur
Versus
Punjab State Industrial Development Corporation Ltd., Chandigarh
Civil Writ Petition No. 6457 of 1999,
Decided On : AUGUST 23, 2001
The court established that under Sec. 29 of the State Financial Corporations Act, 1951, the Corporation had the authority to take over the property of the industrial concern as well as that of the surety or a Guarantor for the speedy recovery of public dues, and the omission to provide for notice in the section was intentional to ensure the same.
Headnote:
Punjab State Industrial Development Corporation Limited - Recovery of Outstanding Dues - State Financial Corporations Act, 1951, Sec. 29 - The court discussed the legality of the action of the Corporation in ordering the possession of properties including collateral securities for the recovery of outstanding dues. The court interpreted Sec. 29 of the State Financial Corporations Act, 1951 and held that the Corporation had the right to take over the property of the industrial concern as well as that of the surety or a Guarantor. The court also found that the omission to provide for notice in Sec. 29 was intentional to ensure speedy recovery of public dues.
Fact of the Case:
M/s. Royal Cements Limited undertook a project to set up a cement manufacturing unit and availed loans from the respondent-Corporation. The company did not repay the loan, and the Corporation took possession of the industrial unit and the houses belonging to the petitioners. The petitioners challenged the order, claiming they were merely Guarantors and the action was illegal.
Finding of the Court:
The court found that the Corporation's action was legal and valid under Sec. 29 of the Act, and the principles of natural justice did not apply in this context. The court also held that the Corporation could proceed against the Guarantors without recovering the money from the borrower, as the purpose of the Act was to ensure speedy recovery of public dues.
Issues: 1. Legality of the Corporation's action in ordering the possession of properties for recovery of outstanding dues. 2. Violation of principles of natural justice. 3. Corporation's authority to proceed against the Guarantors without recovering the money from the borrower.
Ratio Decidendi: The court interpreted Sec. 29 of the State Financial Corporations Act, 1951, and held that the Corporation had the right to take over the property of the industrial concern as well as that of the surety or a Guarantor. The court also found that the omission to provide for notice in Sec. 29 was intentional to ensure speedy recovery of public dues. The court emphasized the legislative intent to secure public funds and avoid delay in recovery.
Final Decision: The petition was dismissed, and the court upheld the Corporation's action, finding it legal and valid. The court also imposed costs on the petitioners.
JAWAHAR LAL GUPTA, J.
1. Is the action of the Punjab State Industrial Development Corporation Limited in ordering that"the possession of the properties including collateral securities". . . . . . . ."mortgaged/hypothecated property . . . . . . . .for the recovery of outstanding dues" illegal and violative of the principles of natural justice? This is the short question that arises for consideration in this petition.
2. A few facts as relevant for the decision of this case may be briefly noticed.
3. M/s. Royal Cements Limited (Respondent No. 2) undertook a project to set up a unit for the manufacture of cement. This company was promoted by three brothers viz. M/s. Kuldip Singh, Harmeet Singh and Jagjit Singh (petitioner No. 2). The promoters had applied to the respondent-Corporation for the sanction of loan. On 25/09/1996 an amount of Rs. 250 lacs was sanctioned by way of loan. Another amount of Rs. 30 lacs was sanctioned by way of a bridge loan. On 31/03/1997 an amount of Rs. 2 crores was disbursed. On 9/05/1997 the company got another amount of Rs. 35 lacs. It is also the admitted position that on 31/03/1997 the company had availed of a subsidy of Rs. 24 lacs. Thus, a total amount of Rs. 259 lacs was availed of by the company.
4. The company did not repay a penny out of the loan. Since the amount had fallen due, the respondent-Corporation finally decided to exercise power under Sec. 29 of the State Financial Corporations Act, 1951 . A copy of the communication dated May 11/21, 1998 issued by the respondent-Corporation indicating its intention to proceed under Sec. 29 is at Annexure P-1 with the writ petition. Having got a scent of the letter, the company filed Civil Writ Petition No. 8565 of 1998 in this Court. This petition was posted before a Bench of this Court on 12/06/1998. On Ju 15/06/1998, the Corporation took possession of the industrial unit as well as possession of the two houses belonging to the petitioners in the present writ petition.
5. It deserves mention that petitioner No. 1 is the wife of Mr. Harmeet Singh, the Director of the company. Petitioner No. 2 herein was initially the promoter of the company. He is alleged to have withdrawn at some stage. The exact date has not been given. However, he is the brother of both the Directors of the company viz. Kuldip Singh and Harmeet Singh. It is the admitted position that possession of the houses belonging to the two petitioners was taken over by the respondent-Corporation on 15/06/1998. This was done in pursuance to the order dated 15/06/1998 passed by the Additional Managing Director of the Corporation. A copy of this order is at Annexure P-2 with the writ petition. The possession of the industrial unit was also taken over under Sec. 29 of the Act.
6. Since the order dated 15/06/1998 had been passed during the pendency of C.W.P. No. 8565 of 1998, the company sought permission to amend the writ petition. The amended petition was filed so as to challenge the order dated 15/06/1998. This prayer for amendment was allowed. The amended petition was taken on record. It was heard and dismissed by a Bench of this Court vide its order dated 23/03/1999. The order was upheld.
7. A fact which deserves mention is that after the possession of the premises including the houses had been taken over, a Civil Miscellaneous No. 13633 of 1998 was filed during the vacation in Court. By an ex parte order passed on 22/06/1998 a direction for the restoration of the possession of the houses was given by a learned single Judge of this Court. In pursuance to this order, Mr. Chadha, learned counsel for the present petitioners, states that the possession was restored.
8. After the dismissal of C.W.P. No. 8565 of 1998 the present petitioners have approached this Court with the prayer that the order dated 15/06/1998, a copy of which has been produced as Annexure P-2 with the writ petition, be quashed. It is alleged that they were merely Guarantors and as such the provisions of Sec. 29 coul
