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PUNJAB & HARYANA HIGH COURT
Rajendra Nath Mittal, J.
Man Singh
Versus
Punjab Financial Corporation, Chandigarh
First Appeal First Order No. 38 of 1976,
Civil MISCELLANEOUS No. 3837 of 1984,
Decided On : SEPTEMBER 26, 1984
STATE FINANCIAL CORPORATION ACT, 1951 - SECTIONS 31, 32 - INTERPRETATION - SCOPE OF INVESTIGATION UNDER SECTION 32(6) - FUTURE INTEREST - WHETHER CAN BE GRANTED BY DISTRICT JUDGE - HELD, YES.
Fact of the Case:
The Punjab Financial Corporation (PFC) sanctioned a loan of Rs. 1,46,000 to Man Singh (appellant) for purchasing a truck. He executed a hypothecation deed in favor of PFC. Man Singh failed to repay the loan, and PFC filed a claim under Section 31 of the State Financial Corporation Act, 1951 (the Act). The trial court ordered the sale of the hypothecated property for recovery of the outstanding amount with future interest. Man Singh appealed against the judgment.
Finding of the Court:
The court held that the District Judge has the authority to grant future interest as provided in the agreement between the industrial concern and the Corporation. The investigation under Section 32(6) of the Act is limited to determining whether the Corporation is entitled to the reliefs under Section 31(1) due to breach of the agreement. The court also held that the appellant cannot raise the issue of insurance premium paid by the Corporation in the appeal as it was not raised in the written statement or before the trial court.
Issues: 1. Whether the District Judge can grant future interest under Section 32(6) of the Act? 2. Whether the appellant can raise the issue of insurance premium paid by the Corporation in the appeal?
Ratio Decidendi: 1. The scope of investigation under Section 32(6) of the Act is limited to determining whether the Corporation is entitled to the reliefs under Section 31(1) due to breach of the agreement. The District Judge is not required to investigate all objections raised by the industrial concern. Therefore, the District Judge can grant future interest as provided in the agreement. 2. The appellant cannot raise the issue of insurance premium paid by the Corporation in the appeal as it was not raised in the written statement or before the trial court.
Final Decision: The appeal was dismissed with costs.
1. This is an appeal against the judgment of the Additional District Judge, Ludhiana, D/- 5th Dec. 1975, passed under the State Financial Corporation Act, 1951 (hereinafter referred to as the Act).
2. Briefly the facts are that the Punjab Financial Corporation (hereinafter called "the Corporation") sanctioned a loan of Rs. 1,46,000.00 in favour of Man Singh respondent 1 (now appellant) for purchasing a truck. He executed hypothecation deed on 16th Dec. 1970 in favour of the Corporation. Respondents 2 and 3 stood guarantors for repayment of the loan. Out of the sanctioned loan an amount of Rs. 1,44,647/- was advanced as loan to Man Singh respondent 1 which was repayable in instalments in terms of the agreement. Respondent 1 failed to pay the instalments as agreed. Consequently the Corporation served a notice on the respondents for payment of the arrears with interest within a period of 30 days. After the expiry of the period of notice it filed a claim under Sec.31 of the Act.
3. Respondent 1 contested the petition on various grounds. The Additional District Judge accepted the petition and ordered that the hypothecated property be sold for recovery of Rs. 44,450.34 with future interest at the rate of 8 1/2 per cent per annum with effect from 19th Nov. 1975. Respondent 1 has come up in appeal against the impugned judgment to this Court.
4. Mr. Bali, learned counsel for the appellant, has argued that the trial Court could not grant future interest and, therefore, the judgment requires modification to this extent. I have duly considered the argument but regret my inability to accept it. In order to determine the question it will be necessary to reproduce the relevant clause of the hypothecation deed which reads as follows :
"(3) the borrower hereby covenants with the Corporation that the borrower shall repay to the Corporation at the Head Office of the Corporation or such other place as the corporation may require, the said sum of Rs. 1,46,000.00 (Rupees one lakh and forty-six thousand only) hereinafter called "the said principal sum in 42 monthly instalments, the first twenty of Rs. 3,450.00 each and the last twenty two of Rs. 3,500.00 each beginning from the 15th Feb. 1971 with liberty to pay earlier than the due date any instalment or multiple thereof together with interest on the said principal sum or the balance thereof remaining unpaid, for the time being, at the rate of 9 (nine) per cent per annum calculated on the basis of daily products, on the said principal sum of Rs. 1,46,000.00 (Rupees one lakh and forty-six thousand only) from the date of the execution of this indenture and payable half yearly on the 15th of June and the 15th of December each year; the first of such payments of interest to be made on the 15th June, 1971 and shall in case and so long as the said principal sum or any part thereof shall remain unpaid, pay to the Corporation interest on the said principal sum or on so much thereof as shall for the time being remain unpaid, at the rate and place aforesaid and in half-yearly instalments............................".
From a reading of the clause it is evident that the Corporation is entitled to interest on the outstanding amount till the principal sum is wholly paid.
5 Special provisions have been made in the Act so that the Corporation may recover the amounts of loans advanced to the industrial concerns expeditiously. Section 31 relates to the special provisions for enforcement of claims by Financial Corporation and Sec.32 to the procedure of the District Judge in respect of applications under Sec.31. The relevant parts of the sections are set out below :
"31.(1) Where an industrial concerns, in breach of any agreement, makes any default in repayment of any loan or advance or any instalment thereof or otherwise fails to comply with the terms of its agreement with the Financial Corporation or where the Financial Corporation requires an industrial concern to make immediate repayment of any loan or adv
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