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Bharat Chemical Works and ors. Vs. Gujarat State Financial Corporation, Ahmedabad - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtGujarat High Court
Decided On
Case NumberFirst Appeal No. 286 of 1982
Judge
Reported inAIR1983Guj104; (1982)2GLR550
ActsGujarat Public Moneys (Recovery of Dues) Act, 1979 - Sections 3(1), 3(4) and 7; State Financial Corporations Act, 1951 - Sections 31, 31(1), 32, 32(6), 32(7), 32(8) and 32(11); Bombay Court-fees Act, 1959 - Schedule - Articles 1 and 7; Motor Vehicles Act, 1939; Limitation Act - Sections 6(1)
AppellantBharat Chemical Works and ors.
RespondentGujarat State Financial Corporation, Ahmedabad
Appellant Advocate N.R. Oza and; P.B. Majmudar, Advs.
Respondent Advocate V.B. Patel, Adv.
DispositionAppeal dismissed
Cases ReferredGujarat State Financial Corporation v. Natson
Excerpt:
.....and articles 1 and 7 of schedule of bombay court-fees act, 1959 - order under section 31 (1) for sale of property of appellants passed - appeal against such order - section 31 (1) prescribed special procedure for enforcement of claims by corporation - corporation under section 31 (1) cannot pray for a decree for its outstanding dues - application under section 31 (1) neither plaint nor application in nature of plaint as contemplated by articles 1 and 7 - remedy provided under section 31 (1) not barred. - - 5. the premises on which this submission is based are not well founded. 32 and the nature of relief that can be granted and the manner of execution clearly show that the application under section 31(1) is neither a plaint as contemplated by article 1 of schedule i nor an..........contest can be that the jurisdictional fact which enables the corporation to seek the relief of sale of property is not available to it or no case is made out for transfer of management of the industrial concern..... sub-sections (6), (7) and (8) of section 32 read together would give an opportunity to the industrial concern to appear and satisfy the district judge that the situation envisaged by section 31(1) has not arisen and the relief should not be granted ..... the provision contained, in sub-section (6) does not expand the contest in the application made under s. 31(1) as to render the application to be a suit between a mortgagee and the mortgagor for sale of mortgaged property. it may be, as contended by mr. patel, that in the ultimate analysis the result would be that the.....
Judgment:

P.D. Desai, J.

1. This appeal arises out of an order made by the District Judge, Baroda in a proceeding under Sub-section (1) of Section 31 of the State Financial Corporations Act, 1951 (hereinafter referred to as the Corporation Act) for the sale of the property of the appellants specified in the schedule attached to the application. The order is challenged on several grounds. We shall deal with each of those grounds separately in the course of this Judgment.

Ground No. 1:--

2. In view of Sub-section (4) of Section 3 and. Section 7 of the Gujarat Public Moneys (Recovery of Dues) Act, 1979 (hereinafter referred to as 'the Recovery Act'), the proceeding under Section 31 of the Corporation Act could not have been continued and no order for the sale of the property in question could have been passed in such a proceeding.

3. Section 3, Sub-section (1) of the Recovery Act, in so far as it is relevant for the present purposes, provides that where any person is a party to any agreement relating to a loan, advance or grant given to him by the Corporation (the definition of which term covers the respondent-Corporation) by way of financial assistance and such person make any default in payment of the loan OF advance or any instalment thereof, or otherwise fails to comply with the terms of the agreement, then, the Managing Director of the Corporation, or where there is no Managing Director, the Chairman thereof, by whatever name called, may send to the Collector a certificate as early as possible in the prescribed form mentioning the sum due from such person and requesting that such sum may be recovered as if it were an arrear of land revenue. Section 3, Sub-section (4), which is invoked to support the sub-mission under consideration provides that no suit for the recovery of any such due as aforesaid shall lie in a civil court against any person referred to in Sub-section (1), and no injunction shall be granted by a civil court in respect of any action taken or intended to be taken in pursuance of the right conferred by this section. Section 7 which is also invoked in so far as relevant, provides that all suits of the nature referred to in Sub-section (4) of Section 3 pending in any Civil Court immediately before the commencement of this Act shall abate upon such commencement so however that such abatement shall be without prejudice to the right of the Corporation to recover any sum which may be the subject-matter of such suit in accordance with the provisions of this Act, or any other law for the time being in force.

4. The submission on behalf of the appellants is that the proceeding under Sub-section (1) of Section 31 of the Corporation Act is a suit instituted in a civil Court for the recovery of the sum due from them under an agreement relating to a loan advanced to them by the Corporation by way of financial assistance and that in view of Sub-section (4) of Section 3 of the Recovery Act, such a suit would not lie and that, in the instant case, the suit which was pending when the Recovery Act came into force would abate under Section 7 and that, therefore, no order for the sale of the property in question could have been validly made in the said suit.

5. The premises on which this submission is based are not well founded. In Gujarat State Financial Corporation v. Watson ., AIR 1978 SC 1765, the Supreme Court had an occasion to consider the nature of the proceedings under Section 31 of the Corporation Act. The question which arose for consideration in the said case was whether an application under Section 31(1) was on par with a suit by a mortgagee to enforce the mortgage debt by sale of the mortgaged property and whether, therefore, it could be treated as a money suit falling within the purview of Article I of Schedule I of the Bombay Court-fees Act, 1959 and alternatively, whether such an application felt within the purview of Article 7 of Schedule I because it was made for obtaining a substantive relief which was capable of being valued in terms of monetary gain or prevention of monetary loss by recovery of the outstanding claim of the Corporation. The Supreme Court held that Section 31(1) prescribes a special procedure for enforcement of claims by the Corporation and that an application seeking reliefs provided thereunder is 'certainly not a plaint in a suit for recovery of mortgage money by sale of mortgaged property'. The Supreme Court proceeded to observe (at p. 1768):

'It would be inappropriate to say that on an analogy an application under Section 31(1) is something akin to a suit by a mortgagee to recover mortgage money by sale of mortgaged property. At any rate, in an application under S. 31(1) the Corporation does not and cannot pray for a decree for its outstanding dues.' The Supreme Court next considered the question as to what is the true nature of the proceeding contemplated by Section 31(1) if it is not a suit by the mortgagee for recovery of the mortgage money by sale of the mortgaged property. Having considered the scheme of Sections 31 and 32 the Supreme Court proceeded to make the following observations (at pp. 1769-70):--

'The claim of the Corporation is not the monetary claim to be investigated though it may become necessity to specify the figure for the purpose of determining how much of the security should be sold. But the investigation of the claim does not involve all the contentions that can be raised in a suit. The claim of the Corporation is that there is a breach of agreement or default in making repayment of loan or advance or instalment thereof and, therefore, the mortgaged property should be sold. It is not a money claim. The contest can be that the jurisdictional fact which enables the Corporation to seek the relief of sale of property is not available to it or no case is made out for transfer of management of the industrial concern..... Sub-sections (6), (7) and (8) of Section 32 read together would give an opportunity to the industrial concern to appear and satisfy the District Judge that the situation envisaged by Section 31(1) has not arisen and the relief should not be granted ..... The provision contained, in Sub-section (6) does not expand the contest in the application made under S. 31(1) as to render the application to be a suit between a mortgagee and the mortgagor for sale of mortgaged property. It may be, as contended by Mr. Patel, that in the ultimate analysis the result would be that the property will be sold for repayment of the loan or advance taken by the industrial concern from the Corporation but it could not be said that it is a substantive relief claimed by the Corporation which can be valued in terms of monetary gain or prevention of monetary loss as envisaged by Article 7 of Schedule I of Court-fees Act. The substantive relief in an application under Section 31(1) is something akin to an application for attachment of property In execution of a decree at a stage posterior to the passing of the decree. We are unable to appreciate the view taken by the High Court that the proceeding is not in the nature of execution of a decree because the question of enforcement of the order of attachment or sale would only arise after the same is made absolute under Sub-s. (7), One has to look at the whole conspectus of provisions in S. 32 coupled with the nature of relief sought under Section 31(1) and it becomes clear that special provision is made for certain types of reliefs that can be obtained by a Corporation by an application under Section 31(1) which could not be styled as substantive relief for repayment of mortgage money by sale of mortgaged property. Nor can it be said to be a proceeding to obtain substantive relief capable of being valued in terms of monetary gain or prevention of monetary loss. The form of the application, the nature of the relief, the compulsion to make interim order, the limited enquiry cantemplated by Sub-section (6) of S. 32 and the nature of relief that can be granted and the manner of execution clearly show that the application under Section 31(1) is neither a plaint as contemplated by Article 1 of Schedule I nor an application in the nature of a plaint as contemplated, by Article 7 o Schedule I of Court-fees Act'

While concluding the Judgment, the Supreme Court observed that it was 'a clear lack of wisdom on the part of the Corporation in asking for a decree for certain amount which could not be granted under S. 31(1)'.

6. This decision, although it is rendered in the context of the provisions of the Bombay Court-fees Act, 1959, clinches the issue in favour of the Corporation. Since an application under Section 31(1) is held to be neither a plaint nor an application in the nature of a plaint and since it has been specifically held : (i) that such an application is not a suit a mortgagee for the recovery of mortgage money by the sale of mortgaged property; (ii) that the investigation therein of the claim of the Corporation, which is not a monetary claim, does not involve all the contentions that can be raised in a suit and (iii) that the substantive relief in such an application is something taking to an application for attachment of property in execution of a decree at a stage posterior to the passing of the decree, it is too late in the day to contend that the proceeding commenced upon such an application is a suit for the recovery of the dues of the Corporation within the meaning of Sub-section (4) of Section 3 of the Recovery Act and that it would abate under Section 7 upon the commencement of the Recovery Act.

7. A similar question was raised for consideration before a learned single Judge of this Court (S. B. Majmudar, J.) In Special Civil Application No. 3353 of 1980 and two other companion matters and it was rejected by the judgment delivered on July 14, 1982. We are in broad agreement with the reasoning and wholly endorse the conclusion reached by Brother Majmudar.

8. It was strenuously contended on behalf of the appellants that in Special Civil Application No. 1599 of 1969 and a companion matter decided, by another single Judge of this Court (J. B. Mehta, J.) on July 23/24, 1970 a view is taken that a claim petition under Section 110-A of the Motor Vehicles Act, 1939 is a suit within the meaning of Section 6(1) of the Limitation Act and that in reaching the said conclusion, the learned single Judge relied upon certain decisions of the Supreme Court which lay down tests for determining whether or not a proceeding is a suit and that if those tests are applied, an application under Section 31 must be treated as a suit. We are afraid this argument is not open to the appellants, in view of the clear declaration of law made by the Supreme Court on an interpretation of Section 31 itself. It would not be open to this Court to come to a different conclusion on the true nature of the proceeding under Section 31 by reference to some other decisions of the Supreme Court in view of the clear declaration of law on the interpretation of the very section under consideration. The challenge based on this ground must, therefore, be rejected.

Ground No. 2:--

9. Even if a proceeding under Sub-section (1) of Section 31 of the Corpora-Eon Act is not a suit within the meaning of Sub-section (4) of Section 3 of the Recovery Act, the proceeding under Section 31 would still be barred, because the true effect of Sub-section (1) of Section 3 is to provide a special and exclusive remedy for the recovery of the dues of the Corporation and the bringing into existence of such A remedy itself ousts the jurisdiction of any other authority to grant the same relief.

10. Obviously, the submission is that Although there is no express bar, a proceeding under Sub-section (1) of Section 31 is barred by necessary implication as a result of the enactment of Sub-section (1) of Section 3. This submission again proceeds upon a misconception about the true scope and effect of Sub-section (1) of Section 3 of the Recovery Act. In the first place, it must be remembered that whereas the remedy under Sub-section (1) of Section 3 is to send to the Collector a certificate mentioning 'the sum due' (which must be a sum ascertained and found recoverable according to law) and requesting that 'such sum' may be recovered as if it were an arrear of land revenue (provided, of course, the preconditions prescribed in the sub-section are satisfied,), the remedy under Sub-section (1) of Section 31 is to make an application to the District Judge for an order for the sale of the property or for transferring the management or for an ad interim injunction against the transfer or removal of the machinery or plaint or equipment from the premises of the industrial concern (provided, again, the pre-conditions prescribed in the sub-section are satisfied). Strictly speaking, therefore, the two remedies which may be pursued in two different formus, are not identical in form and content and upon the examination of the remedies and, the scheme of the two provisions, it is not possible to hold that the enactment of one amounts to the Implied annulment of the other. In the next place, even assuming, without deciding, that Sub-section (1) of Section 31 and Sub-section (1) of Section 3 are similar or alike In the sense that both are akin to execution proceedings, there is no question of two competing powers and much less of one displacing the other. The Corporation has only one power, namely, the power to take steps akin to the execution of a decree and that power may be exercised in either or even both of the two modes in certain cases. It is pertinent to note in this connection that both Sub-section (1) of Section 3 and Sub-section (1) of Section 31 use the word 'may' while conferring the power for the pursuit of the respective remedy and that that expression clearly indicates that discretion is left with the competent authority to take resort to anyone or both of the said remedies provided the conditions for the exercise of the power arej satisfied and the facts and circumstances of the case warrant such exercise. We are unable to agree, therefore, that by the very enactment of Sub-section (1) of Section 3, the remedy provided under Sub-section (1) of Section 31 is barred.

Ground No. 3

11. An application under Section 31 can be instituted only before the District Judge and such an application can be tried only by the District Judge and not by an Assistant Judge. In the present case, however, the application was at one stage tried by the Assistant Judge who raised the issues and recorded a part of the evidence. The proceedings before the Assistant Judge were without authourity and jurisdiction and on the strength of such proceedings, the District Judge could not have made the impugned order for sale.

12. The argument has been stated merely to be rejected. In Asnew Drums (Private) Ltd. v. Maharashtra State Finance Corporation, AIR 1972 SC 801, one of the contentions raised for consideration was that the Corporation Act conferred jurisdiction on the District Judge as persona designate and that, therefore, the Joint Judge could not: have made an order under Section 32. The submission was considered in paragraph 11 of the decision and it was held that Sub-section (11) of Section 32 clearly showed that the District Judge is not a persona designate.

13. A similar contention was raised before a Division Bench of this Court in First Appeal No. 1663 of 1980 which was decided on March 4, 1981. The submission there was that the Assistant Judge had no power, authority and jurisdiction to entertain, try and decide an application under Section 31 because the District Judge under the relevant provisions of the Corporation Act was a persona designate. Relying upon the decision in Asnew Drums (Private) Ltd.'s case (AIR 1972 SC 801), the Division Bench rejected the said contention.

14. In view of these two decisions, there is no substance in the submission that the Assistant Judge could not have dealt with the application in question during some of its earlier stages.

Ground 4.

15. In view of the scheme of Section 32, the learned District Judge ought to have considered all the contentions on merits.

16. We are unable to appreciate as to how the occasion for making this submission arises. A mere look at the issues framed, by the learned District Judge and the findings given by him on those issues would show that all the questions which were raised for consideration including several disputes on merits have been dealt with and decided by him. The learned District' Judge found that a sum of Rs. 9,81,190-24 p. was due from the appellants to the Corporation; that the breach of the agreement was committed by the appellants and not by the Corporation and that the Corporation was entitled to penal interest. It is true that in para. 16, the learned District Judge has observed that having regard to the decision in Gujarat State Financial Corporation v. Natson . (AIR 1978 SC 1765) (supra) the scope of the inquiry in an application under Section 31(1) was limited and that it was not open to him to decide whether any breach of the agreement was committed by the Corporation. However, in the latter part of the judgment and, more particularly, in paras 19, 20 and 21 of the judgment, the learned District Judge has specifically dealt with the question and found that the Corporation had not committed any breach of the agreement. Similarly, the question of penal interest has been dealt with in para. 24 of the judgment. In our opinion,' therefore,' there, is no merit in the contention that the dispute raised on merits has not been decided by the learned District Judge.

17. We should not be understood as laying down however, that in an application under Section 31(1) it is open to the District Judge to decide all sorts of issues on merits. The parameters of the jurisdiction of the District Judge in such a proceeding are laid down in the decision in Gujarat State Financial Corporation v. Natson . (AIR 1978 SC 1765) (supra). We have dealt with this contetention merely on the assumption that it was open to the learned District Judge to decide on merits all such issues.

18. These were the only four submissions made for our consideration at the preliminary hearing of this appeal and since we find no merit in any one of them, the appeal is summarily dismissed.


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