1. Loan default by industrial concerns — Recovery proceedings initiated under Section 31 of the State Financial Corporations Act — Subsequent attempt to realize dues under Section 29. (Para 2 , 3 )
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1994 Supreme(SC) 214
SUPREME COURT OF INDIA
KULDIP SINGH AND Dr. A. S. ANAND, JJ.
A.P. State Financial Corporation, Appellant
Versus
M/s. GAR Re-Rolling Mills and another, Respondents.
Civil Appeal Nos. 3216 of 1988 with 3689 of 1987,
D/-10-2-1994.
WITH
A.P. State Financial Corporation, Appellant
Versus
Kota Subba Reddy and others Respondents.
Important Points
The Court held that a Financial Corporation may invoke Section 29 of the State Financial Corporations Act even after obtaining an order under Section 31, provided it does not pursue both remedies simultaneously and abandons the Section 31 proceedings, as Section 31 is "without prejudice" to Section 29.
Subject
Judgement - FINANCIAL CORPORATION
Act Referred
Headnote
State F1nancial Corporations Act - Section 29 - Andhra Pradesh State Financial Corporation - Loan - Realization of Loan - Default in Repayment of Loan - Respondent borrowed a sum from appellant - For purpose of carrying on business of manufacturing agricultural implements - A mortgage deed was executed by respondent On account of defaults committed by respondent, Corporation filed an application before the District Judge, Guntur, under S. 31 of Act for realisation of sum together with further interest per annum – Held, Respondents did not have any intention of repaying any part of the debt. Even in this Court their attitude was no different. They have been merely adopting delaying tactics and putting forward one or the other ploy to keep Corporation divested of its legitimate dues. The learned single Judge was perfectly justified to dismiss writ petition, thereby upholding the action under Section 29 of Act since Corporation did not further pursue its remedy under Section 31 of Act. The Division Bench fell in error in setting aside the judgment of single Judge by following the full judgment, without considering peculiar facts of the case and the attitude of the respondent - the defaulting party. Consequently, C.A. 3216/88 is also allowed and the impugned judgment under appeal is set aside - Appeals allowed.
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A.V.RANGAM, D.D.THAKUR, M.B.RAO, Y.P.RAO
Table of Contents
2. Whether invoking Section 31 of the State Financial Corporations Act and obtaining a decree bars the Corporation from subsequently taking recourse to remedies under Section 29. (Para 1 , 2 , 3 )
3. Section 29 is a self-contained remedy; Section 31 is without prejudice to Section 29, allowing the Corporation to abandon court proceedings to pursue statutory rights. (Para 9 , 10 , 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 )
4. A Financial Corporation may invoke Section 29 of the State Financial Corporations Act after obtaining an order under Section 31, provided it abandons the latter proceedings. (Para 13 , 16 , 19 )
5. Appeals allowed — Impugned judgments set aside — Corporation's right to invoke Section 29 after abandoning Section 31 proceedings upheld. (Para 20 , 21 , 22 )
6. Can a Financial Corporation use Section 29 remedies after initiating proceedings under Section 31 of the State Financial Corporations Act?
Yes. Section 31 is without prejudice to Section 29. The Corporation can choose either remedy or initiate Section 31 and later abandon it to pursue Section 29, as the two are not mutually exclusive. (Para 12 , 13 , 16 , 17 )
7. Is a Financial Corporation permitted to pursue remedies under both Section 29 and Section 31 simultaneously?
No. While the Corporation has the choice between the two, it cannot simultaneously pursue both remedies. It must abandon or withdraw proceedings under Section 31 before taking recourse to Section 29. (Para 13 , 16 , 17 , 19 )
8. Does the Doctrine of Election prevent a Financial Corporation from switching from Section 31 to Section 29 remedies?
No. The doctrine does not apply because the ambit and scope of the two remedies are essentially different. The legislature intended to preserve the Corporation's rights under Section 29 regardless of Section 31 actions. (Para 15 , 16 )
9. Does obtaining a decree under Section 31 bar the Corporation from using Section 29 if the decree remains unexecuted?
No. Since a Section 31 order is not a money decree for realization of dues, the Corporation can abandon the pursuit of that order and invoke Section 29 to recover its dues. (Para 15 , 16 , 19 )
10. Can a defaulting party invoke equitable jurisdiction to prevent a Corporation from switching recovery remedies?
No. There is no equity in favor of a defaulting party to assist in avoiding debt repayment. Equity promotes honesty and protects the legitimate rights of the Corporation to recover dues. (Para 17 , 18 )
Judgment
Dr. ANAND, J.:- The common question of law which arises in both these appeals, by special leave, is whether the Financial Corporation set up under S. 3 of the State F1nancial Corporations Act (hereinafter the Act) is entitled to take recourse to the remedy available to it under Section 29 of the Act even after having obtained an order or a decree after invoking the provisions of Section 31 of the Act but without executing that decree/ order? The facts in both the appeals are, however, different and we shall first notice the relevant facts in each of the two appeals, before answering the question posed herein above.
CIVIL APPEAL NO. 3689 OF 1987.
2. The respondent borrowed a sum of Rs. 99,500/- from the appellant, the Andhra Pradesh State Financial Corporation (hereinafter the Corporation), for the purpose of carrying on the business of manufacturing agricultural implements. A mortgage deed was executed by the respondent on 27-12-1966. On account of the defaults committed by the respondent, the Corporation filed an application being OP No. 211 of 1969 before the District Judge, Guntur, under S. 31 of the Act for realisation of the sum of Rs. 1,09,020.19 paise together with further interest at the rate of 8 1/2 per cent per annum. Vide order dated 7-9-1971, the learned District Judge allowed the petition, though restricting the future interest to 6 per cent per annum. The respondent filed Civil Misc. Appeal in the High Court of Andhra Pradesh and the execution of the order in OP 211/69 was stayed by the Court on 1-3-1973, subject to the condition of respondent depositing 1/4th of the amount due and furnishing security for the balance amount within two months thereafter. The respondent failed to comply with the order dated 1-3-1973 and neither deposited 1/4th of the amount due nor furnished the security. The Corporation had also filed cross-objections in the High Court, questioning the reduction of the rate of future interest from 8 1/2 per cent to 6 per cent per annum. A Division Bench of the High Court dismissed the appeal filed by the respondent but allowed the cross-objections filed by the Corporation on 5-3-1975. The Corporation, it appears, filed OS No. 13 of 1974 before the Chief Judge, City Civil Court, Hyderabad to enforce the personal liability of the first respondent and his guarantor Shri E. Narapareddy as per the provisions of the Act. The suit was decreed by the learned Chief Judge. The Corporation, however, was not able to enjoy the fruits of the decree as the respondent shifted his place of business and could not be traced. Faced with this situation, the Corporation, issued an advertisement in a local newspaper notifying that sale of the respondent-concern would be conducted under Section 29 of the Act and invited tenders for that purpose before 7-1-1982. The second respondent submitted a tender for the sum of Rs. 2,05,000/-, which was duly accepted by the Corporation. The second respondent, thereupon, deposited Rs. 52,000/- with the Corporation on 12-1-1982 being 1/4th of the tender amount. It was at this stage, that the first respondent filed Writ Petition No. 235/ 82 in the High Court of Andhra Pradesh, questioning the calling of tenders by invoking the provisions of Section 29 of the Act on various grounds. The High Court stayed the sale of the concern subject to the condition that respondent No. 1 should deposit a sum of Rs. 35,000/ -. When the writ petition came up for hearing, it was brought to the notice of the High Court that there was difference of opinion between two Benches of the High Court with regard to the vires of Section 29 of the Act. The writ petition was accordingly referred to a Full Bench. The Full Bench did not go into the question of vires of Section 29 of the Act but held that it was not open to the Corporation to invoke the provisions of Section 29 of the Act, having first successfully invoked the jurisdiction of the District Judge under Section 31 of the Act and consequently the w
