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1992 Supreme(P&H) 893
PUNJAB & HARYANA HIGH COURT
G.R.Majithia and A.S.Mehra JJ.
Hemyog Hotels Pvt Ltd
Versus
Delhi Financial Corporation
Civil Writ Petition No. 7640 of 1990,
Decided On : SEPTEMBER 28, 1992
A financial corporation can pursue either remedy under Section 29 or Section 31 of the State Financial Corporations Act, 1951, but cannot invoke both remedies simultaneously.
Headnote:
STATE FINANCIAL CORPORATIONS ACT, 1951 - SECTION 29, 31 - ELECTION OF REMEDIES - FINANCIAL CORPORATION CAN PURSUE EITHER REMEDY UNDER SECTION 29 OR SECTION 31 BUT CANNOT INVOKE BOTH REMEDIES SIMULTANEOUSLY.
Fact of the Case:
Petitioner defaulted on a loan from the respondent corporation and the corporation filed an application under Section 31 of the State Financial Corporations Act, 1951, which was allowed by the court. Later, the corporation moved the court under Section 29 of the Act. The petitioner challenged this, arguing that the corporation could not initiate proceedings under Section 29 after the decision of the court on the petition under Section 31.
Finding of the Court:
The court held that once the respondent corporation has pursued action against the erring industrial concern under Section 31 of the Act, it cannot invoke the remedy available under Section 29 of the Act. The financial corporation has two remedies available against the erring industrial concern. It can invoke the provisions of Section 29 of the Act and seek the remedy provided thereunder or the one under Section 31 of the Act. Both these Sections operate independently of each other and the choice is that the financial corporation could resort to any of the remedial actions provided for in Section 29 or Section 31 of the Act, but having availed of the remedies under Section 31, it cannot invoke the remedies under Section 29 of the Act.
Issues: Whether the respondent corporation could initiate proceedings under Section 29 of the State Financial Corporations Act, 1951, after the decision of the court on the petition under Section 31 of the Act.
Ratio Decidendi: The court relied on the Full Bench decision of the Andhra Pradesh High Court in K. Subba Reddy V/s. Andhra Pradesh State Financial Corporation, AIR 1987 AP 119, which held that once the financial corporation has invoked the jurisdiction of the District Judge under Section 31 of the Act and obtained a decree, it cannot invoke the provisions of Section 29 of the Act.
Final Decision: The court directed the respondent-corporation to reschedule the loan within two months and the petitioner to make payment of the rescheduled instalments thereafter. Till the rescheduling is done, the petitioner was directed to deposit a sum of Rs.3,00,000.
Majithia, J.
1. The petitioner has moved this court for issuance of a mandate to the respondent not to proceed against it under Sec.29 of the State Financial Corporations Act, 1951 , in this petition under Article 226/227 of the Constitution of India.
2. The petitioner moved the respondent for a loan of Rs.15 lakhs in the year 1981, with a view to construct a hotel building on plot No.22, Sector 26, Chandigarh. The respondent agreed to advance a loan of Rs.14.75 lakhs. Out of this, loan facility to the extent of Rs.15.64 lakhs was availed of and the loan was repayable in 21 half-yearly instalments commencing from July 15, 1982, together with the stipulated interest. The petitioner defaulted in making payment of the instalment of loan. The respondent filed an application under Sec.31 of the State Financial Corporations Act, 1951 (for short, "the Act") on July 19, 1983. The application was allowed by the learned Additional District Judge, Chandigarh, on April 2, 1985. The United Bank of India filed a civil suit against the petitioner and the respondent was made a party defendant. In that suit, in the application under Order 38, Rule 5 read with Order 39, Rule 1, Civil Procedure Code, the petitioner made the following statement on October 18, 1986 :
"we shall keep on making the payment to the Delhi Financial Corporation as already settled, i. e. , Rs.45,000 per month for the time being and in future as per rescheduling of the loan and consequent instalments. "
3. In the light of the aforesaid statement, counsel for the respondent made the following statement :
"in view of the statement of counsel for defendants Nos.1 and 6, my client will not sell the mortgaged property without prior permission of the court and without associating the plaintiff-bank. "
4. And the court passed the following order :
"statement recorded. In view of their statements defendants Nos.1 and 6 will continue paying Rs.45,000 per month for the time being to defendant No.5 and in future as per rescheduling of the loan and instalments and in the meantime, defendant No.5 would not sell the mortgaged property without prior permission of the court and without associating the plaintiff-bank. Accordingly, stay order dated April 5, 1986, is confirmed. Now to come up for reply to the application moved by the plaintiff under Order 6, Rule 17 of the Civil Procedure Code, on November 7, 1986. "
5. After the order dated October 18, 1986, passed by the subordinate Judge, the respondent moved the court under Sec.29 of the Act. Learned counsel for the petitioner submits that after the decision of the court on a petition under Sec.31 of the Act, the respondent could not initiate proceedings under Sec.29 of the Act, and in support of his submission, he relied upon a Full Bench decision of the Andhra Pradesh High Court in K. Subba Reddy V/s. Andhra Pradesh State Financial Corporation, AIR 1987 AP 119. Their Lordships of the Full Bench of the Andhra Pradesh High Court, after analying the provisions of Sections 29 and 31 of the Act, held thus (at p.125) :
"in the matter before us, the undisputed fact of the case is that the financial corporation has invoked, after due consideration of the facts of the case, the remedy available to it under Sec.31 of the Act and has obtained a decree in O. P. No.211 of 1969. Having thus invoked the jurisdiction of the District Judge under Sec.31 of the Act and obtained a decree the Corporation cannot invoke the provisions of Sec.29 of the Act It is true that at the threshold of an action against the defaulting industrial concern the financial corporation has got the two remedies available to it, one under Sec.29 and another under Sec.31 of the Act, Once the chqice is made and necessary steps are taken, which in this case have Culminated in the passing of a decree, the financial corporation cannot resort to the remedies available under Sec.29 of the Act, which will result in a complete negation of what has been done after taking steps for
