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Engineers (Overseas) Corporation Pvt. Ltd. and anr. Vs. West Bengal Financial Corporation and anr. - Court Judgment

LegalCrystal Citation
SubjectProperty;Civil
CourtKolkata High Court
Decided On
Case NumberA.F.O.O. No. 733 of 1977
Judge
Reported inAIR1986Cal132,89CWN700
ActsCode of Civil Procedure (CPC) , 1908 - Sections 4(1), 94 and 105 - Order 20, Rule 11 - Order 34, Rule 4; ;State Financial Corporations Act, 1951 - Sections 1, 31, 32, 32(8) and 32(9); ;Bengal Money Lenders Act, 1940 - Section 2(12); ;Constitution of India - Article 14; ;Evidence Act, 1872 - Section 68
AppellantEngineers (Overseas) Corporation Pvt. Ltd. and anr.
RespondentWest Bengal Financial Corporation and anr.
Appellant AdvocateR.N. Mitra and ;D.N. Lahiri, Advs.
Respondent AdvocateP.C. Chunder, Adv.
DispositionAppeal dismissed
Cases ReferredAsnew Drums Ltd. v. M.S.F. Corporation
Excerpt:
- g.n. ray, j. 1. this appeal arises out of the judgment and order passed by the learned district judge, 24-paraganas on march 17, 1977 in misc. case no. 176 of 1970. engineers (overseas) corporation private ltd. incorporated and registered under the companies act is the appellant in the instant appeal and the said misc. case arises out of an application made by the west bengal financial corporation a statutory corporation under the state financial corporations act, 1951 under sections 31 and 32 of the act against the engineers (overseas) corporation ltd. and sisir kumar arnab its director. the aforesaid application under sections 31 and 32 of the state financial corporations act (hereinafter referred to as the state act) was made for sale of mortgage properties belonging to the engineers.....
Judgment:

G.N. Ray, J.

1. This appeal arises out of the judgment and order passed by the learned District Judge, 24-Paraganas on March 17, 1977 in Misc. Case No. 176 of 1970. Engineers (Overseas) Corporation Private Ltd. incorporated and registered under the Companies Act is the appellant in the instant appeal and the said Misc. case arises out of an application made by the West Bengal Financial Corporation a statutory Corporation under the State Financial Corporations Act, 1951 under Sections 31 and 32 of the Act against the Engineers (Overseas) Corporation Ltd. and Sisir Kumar Arnab its Director. The aforesaid application under Sections 31 and 32 of the State Financial Corporations Act (hereinafter referred to as the State Act) was made for sale of mortgage properties belonging to the Engineers (Overseas) Corporation Private Ltd., It was stated in the said application under Sections 31 and 32 that the Engineers (Overseas) Corporation Private Ltd., was engaged in the manufacturing and processing of goods and was an industrial concern within the meaning of the State Act and the said Company had been carrying on its business at Premises No. 42, Raja Santosh Road, Alipore, and the respondent No. 2, Sisir Kumar Arnab was at all material time, a Director of the said Company. The Company was empowered by its memorandum and Article of Association to borrow and/or raise money and to secure the payment or repayment of all sum or sums so borrowed or taken on loan by creation of mortgage, charge or other security upon all or any part of the property of the respondent company. The said company borrowed certain sums of money from the West Bengal Financial Corporation under an Indenture of Mortgage and Guarantee dt. 9th August, 1965 executed by the said company in favour of the West Bengal Financial Corporation and the said Sisir Kumar Arnab was also a guarantor in his personal capacity in respect of the loan and advance and mortgage made under the said indenture.

2. It was contended by [he West Bengal Financial Corporation that in terms of the said Indenture of Mortgage and guarantee about Rs. 1,90,000/- had been advanced and it was agreed that the said company would make repayment of the said loan in instalments but the said company and/or its Director excepting payment of an instalment failed and neglected to make such payment as agreed upon. It was also contended that the said indenture of mortgage and guarantee was duly registered and the West Bengal Financial Corporation was entitled for a sum of Rs. 1,77,500/- towards the principal minus one instalment paid by the said Company and a sum of Rs. 43,800.88 as interest thereon and the total amount thus payable was Rs. 2,20,300.88. The Corporation by its letters dt. 31-1-1969 and 11-6-1970 duly called upon the said company to make payment of the dues but the said company and/or its Director failed and neglected to make such payment. Accordingly, the said application under Sections 31 and 32 was made for sale of the mortgage property specified in the schedules to the indenture of mortgage dt. August 9, 1965 and a prayer for attachment of the said property was made. It appears that in terms of the said prayer, the mortgage properties have been attached by the learned District Judge. It may be noted in this connection that such application under Sections 31 and 32 is to be presented before the learned District Judge having its jurisdiction over the properties since mortgaged by the company. It appears that initially, a preliminary objection was raised before the District Judge about the maintainability of the said application on the ground that the said State Act was ultra vires the Constitution because the State Act being in substance an Act for money lending business comes under the jurisdiction of the State Legislature under Schedule VII of the Constitution and the Central Government had no jurisdiction to enact the said State Act of 1951. The said contention, however, was not accepted by the learned District Judge and by an order No. 20 dt. August 9, 1971, the District Judge rejected the preliminary objection for making a reference to this Court under Section 113 of the Code of Civil Procedure for considering the Constitutional validity of the State Act. It appears that thereafter the said application was considered on merits and after a contesting hearing, the learned District Judge allowed the said application under Sections 31 and 32 of the Act by the impugned judgment passed on March 17, 1977 in Misc. Case No. 176 of 1970. By the said order, the learned District Judge affirmed the ad interim order of attachment of the mortgage properties and directed for sale of the attached properties. As aforesaid, the Engineers (Overseas) Corporation Ltd., has preferred the instant appeal.

3. At the hearing of this appeal, Mr. Chunder, learned Counsel appearing for the respondents raised a preliminary objection against the challenge sought to be made by the said company against the order of the District Judge upholding the constitutional validity of the State Act. It has been submitted by Mr. Chunder that such order having been passed on Sept. 9, 1971, the appellant-company should have preferred an appeal if it had intended to challenge the said finding of the learned District Judge. Mr. Chunder has contended that the District Judge had fully adjudicated the contentions of the parties so far as the constitutional validity of the State Act is concerned and in the absence of any challenge being made at the relevant time, the company is precluded from challenging such adjudication at the hearing of this appeal. He has, however, submitted that the said company will be entitled to challenge the subsequent decision of the learned District Judge disposing of the said 'application under Sections 31 and 32 on merits.

4. Mr. Chunder has submitted that Order No. 20 dt. September 9, 1971 by which the constitutional validity was adjudicated, cannot be treated as an interlocutory order within the meaning of Section 94(e) C.P. Code. He has submitted that an interlocutory order is an order by way of step in aid to the final adjudication of the claim and dispute involved in the suit itself but where a substantive claim by way of a preliminary issue is decided finally by the Court, such adjudication cannot be said to be an interlocutory order. In this connection, Mr. Chunder has referred to a Bench decision of the Bombay High Court made in the case of German Democratic Republic v. Dynamic Industrial Undertaking Ltd., reported in : AIR1972Bom27 . In the said case, on a notice of motion, an order was passed by the High Court of Bombay and the question arose as to whether or not, such order was an interlocutory order. The Bombay High Court had held that the order which was passed on the notice of motion was an order disallowing the prayer of the German Democratic Republic claiming immunity as foreign independent status under International Law and such order cannot be held to be an interlocutory order but the said order deciding the contention about immunity must be held to be a final order. It has been held in the said decision that it is the relief asked for and the order made thereon which will determine whether a particular order is or is not an interlocutory order. Referring to the said decision, Mr. Chunder has submitted that the Constitutional validity of the States Act had been finally determined by the learned District Judge and nothing remains to be decided so far as the said contention is concerned. In the aforesaid circumstances, the said order must be held to be a final order and not an interlocutory order open to be challenged subsequently in the appeal.

5. Mr. Chunder has also referred to a Full Bench decision of the Kerala High Court made in the case of State of Kerala v. Annam, reported in : AIR1969Ker38 . In that case, the validity of Kerala Rice and Paddy (Procurement by Levy) Order, 1966 was under consideration under Section 51 of the Kerala High Court Act and constitutional validity of the impugned provisions of the said levy order was decided as a preliminary issue and thereafter the case was posted for further hearing.

6. An appeal was preferred against such decision of the preliminary issue and the question arose as to whether or not, the said adjudication was appealable. It was held that such adjudication on the preliminary point was appealable and amounted to a judgment within the meaning of Clause 15 of the Letters Patent of the Bombay, Calcutta and Madras High Court and Section 2(9) of the Code of Civil Procedure. Mr. Chunder has submitted that the said order deciding the preliminary issue about the constitutional validity does not also show on the face of it, that the Court has granted any liberty to the appellant to agitate the said contention in future. In the aforesaid circumstances, the appellant not having moved against the said order will not be permitted to agitate the constitutional validity within the scope and ambit of the instant appeal.

7. Mr. Mitter, learned Counsel for the appellant, has, however, disputed the aforesaid contention of Mr. Chunder. He has contended that the lis between the parties arising out of the said application under Sections 31 and 32 of the State Act, had not been adjudicated by the said orderdt. Sept. 9, 1971. By the aforesaid order, the constitutional validity of the State Act had been adjudicated. Mr. Mitter has contended that unless all the rights involved in a lis are adjudicated, the order disposing a part of the lis cannot be treated as a final order. Mr. Mitter in this connection, has drawn our attention to the observation at page 225 of the 5th Edition of Sarker's Code of Civil Procedure under Section 109 of the Code. The learned author has observed as follows :

'The true test of finality is whether the order finally disposes of the rights of the parties. The finality must be finality in relation to the whole suit. An order is not final merely because it decides a vital question going to the root of the suit, e.g., jurisdiction or limitation. The finality must be a finality in relation to the suit. The test is -- Does the judgment or order finally dispose of the right of the parties.'

8. The learned author has made his comments on the basis of the adjudication made by the Privy Council in the case of Abdul Rahman v. Cassim, reported in AIR 1933 PC 58 : 60 Ind App 76 and the decision of the Federal Court made in the case of Kuppuswamy v. Governor General of India, reported in AIR 1947 FC 180 : (AIR 1949 FC 1 ?) 54 CWN page 874. In Abdul Rahaman's case, the Privy Council has held that an order is not a final order within the meaning of Section 109(a) C.P.C. unless it finally disposes of the rights of the parties in relation to the whole suit. Consequently, an appeal does not lie from an order under Order 41, Rule 23 reversing a decree which dismissed the suit on a prelimipary point and remanding the suit for trial. In Kupuswami's case, the Federal Court had to consider whether the impugned order was a judgment or a final order within the meaning of Section 205 of the Govt. of India Act, 1935. It has been held that the final order must be an order which finally determines the points in dispute and brings the case to an end. To constitute a final order it will not be sufficient to decide a very important and even a vital issue in the case but the decision must be such that it must not keep the matter alive for this trial in the ordinary way. Mr. Mitter has strongly relied on the observation of the Federal Court and has submitted that a very important and vital question namely the constitutional validity of the State Act had been adjudicated by the learned District Judge on Sept 9, 1971 but the lis between the parties had not been finally determined and the lis arising out of the said application under Sections 31 and 32 was required to be decided in the ordinary way and as a matter of fact, has been decided on merits subsequently and the instant appeal has been preferred against the said order of the learned District Judge, Mr. Mitter has, therefore, contended that in the aforesaid circumstances, it cannot be held that the appellant is precluded from raising the question of constitutional validity of the State Act and the preliminary objection raised by Mr. Chunder should be disallowed.

9. After giving my anxious consideration to the submissions of the respective parties, it appears to me that the said adjudication on the question of constitutional validity of the State Act did not finally dispose of the lis between the parties arising out of the application under Sections 31 and 32 of the State Act and although the appellant could challenge the said adjudication by moving a revisional application before this Court, it cannot be held that the validity of such decision cannot be agitated in the instant appeal. We, therefore, propose to consider the said contention about the constitutional validity of the State Act in this appeal.

10. Mr. Mitter has contended that the said State Act was enacted primarily for the purpose of advancing loan to the industrial units. He has submitted that in the statements of objects and reasons of the State Act it is stated that in order to provide medium and long term credit to an industrial undertaking which falls outside the normal activities of commercial banks, a Central Industrial Financial Corporation was set up under the Industrial Financial Corporation Act, 1948. The State-Govt. wish that a similar Corporation should also be set up in the State to supplement the work of the Industrial Financial Corporation The intention is that the State Corporation will confine their activities to financing the medium and small scale industries and will as far as possible, consider only such cases as are outside the scope of the financial corporation. The State Govt. also considers that the State Corporation should be established under a special statute in order to make it possible to incorporate in the Constitution the necessary provisions in regard to the majority control by the Govt guaranteed by the State Govt in regard to the repayment of principal and payment of immediate rate of dividends in the shares, restriction on distribution of profits and special provisions for the enforcement of the claims and recoveries of dues.' Mr. Mitter has submitted that to appreciate the legislative competence of a particular Act, the pith and substance of the legislation is to be considered In support of this contention. Mr. Mitter has referred to the decision of the Privy Council made in the case of Prafulla Kumar Mukherjee v. Bank of Commerce Ltd, reported in 74 Ind App 23 : (AIR 1947 PC 60). In that decision, the constitutional validity of the Bengal Money Lenders' Act was considered by the Privy Council and for such consideration the pith and substance of the Bengal Money Lenders' Act was taken note of. It may be noted that the legislation concerning the money lending and money lenders was under entry No. 27 of List II of the Seventh Schedule of the Govt. of India Act, 1935. The Privy Council has held that it is not always possible to make clearcut division of powers of authorised legislation under Lists 1, 2 and 3 of the 7th Schedule of the said Act They are bound to overlap from time to time and the rule of interpretation is to find out the pith and substance and its true nature and character. Applying the said test, the Privy Council has held that Bengal Money Lenders Act, is in substance, an Act concerning money lending and money lenders and such Act was therefore validly enacted by the State Legislature. Mr. Mitter has also referred to a decision of the Supreme Court made in the case of Ishwari Khetan Sugar Mills v. State of U.P., reported in : [1980]3SCR331 . The Supreme Court has also upheld the theory of pith and substance for testing the constitutional validity of an Act so far as the legislative competence is concerned It has been held by the Supreme Court that the pith and substance of the legislation must come within one entry or the other. But even when some portion of the subject-matter of the legislation incidentally trenches upon and might enter upon another list, the Act as a whole will be a valid legislation notwithstanding such trenching, provided the pith and substance of the legislation satisfies the list under which the Act in question was enacted by the concerned Legislature The Supreme Court has also relied on an earlier decision of the Supreme Court made in the case of State of Karnataka v: Raghunatha Reddy, reported in : [1978]1SCR641 wherein the aforesaid principle was enunciated by the Supreme Court.

11. Mr. Mitter has submitted that if a reference to Chapter III of the State Act is made and the provisions of the said State Act as contained in Section 4 are considered, it will be quite evident that the primary purpose of the Act was to form a statutory Corporation for the purpose of advancing loans to the industrial concerns of certain types. He has submitted that provisions have been made to ensure that such loans advanced to the concerned industrial undertakings are recovered in a particular manner. Mr. Mitter has submitted that precisely for the said purpose, the State Financial Corporation has been clothed with ancillary provisions regarding realisation of the loans. He has submitted that if the pith and substance theory is applied there will be no manner of doubt that the State Act is essentially an Act concerning money lending although some of the provisions have incidentally trenched upon the other field of legislation. Mr. Mitter has submitted that money lending is essentially a subject under the State List under Schedule VII of the Constitution and the Parliament was not competent to enact on the State subject. Accordingly, the Act must be held to be void for want of legislative competence.

12. Mr. Chunder has, however, submitted that it is not correct to contend that the principal purpose or the sole purpose of the State Act is to provide money lending to industrial undertakings. He has contended that the State Financial Corporation has been formed for the purpose of developing small and medium scale industries and financial assistance by way of loan is an important step in developing an industrial setup and precisely as one of the important means for developing certain types of industrial undertakings is advancement of required finance provisions for advancement of loan have been made in the State Act. Mr. Chunder has submitted that the incorporation of the State Financial Corporation itself cannot be made under the State list and such incorporation is within the exclusive jurisdiction of the Parliament under Schedule VII of the Constitution. Mr. Chunder has submitted that under the State Act the Industrial Financial Corporation has been permitted to purchase shares and debentures. Provisions have also been made for incorporation, regulation and winding up of the Financial Corporation. Provisions have also been made for liquidation of the Industrial Financial Corporation. Mr. Chunder has drawn our attention to the entry No. 43 of list 1 of Schedule VII of the Constitution which provides for legislation by the Parliament in the matter of incorporation of, regulation and winding up of the Financial Corporation. He has drawn our attenlion to Section 45 of the State Act which provides for the liquidation of the West Bengal Financial Corporation. Mr. Chunder has therefore, submitted that this Act, even applying the test of pith and substance of the Legislation, cannot be held to be an Act primarily for money lending business. Mr. Chunder has also submitted that under the provisions of the State Act, the Financial Corporation has the power to take management of the borrower firm. In this connection, he has referred to a decision of the Assam High Court made in the case of Chargola Tea Company v. Assam Financial Corporation, reported in AIR 1973 Gauhati 136. It was contended before the Assam High Court that the Assam Financial Corporation Act was ultra vires because of want of legislative competence. It was contended that thesaid Act was primarily an Act concerning money lending and as such the State Legislature and not the Parliament was competent to enact on the subject of money lending and as a matter of fact, Assam Money Lenders Act had been enacted by the State Legislature. The Assam High Court has, however, held in the said decision that the Parliament was quite competent to enact a Financial Corporation Act as it can be (raced not only to entry No. 43 but also to entry No. 45 of List I of Seventh Schedule of the Constitution. It has been held that although the Assam Financial Corporation has been permitted to charge interest on a loan, it cannot be held that the Act is primarily concerned with money lending business and as such State Legislature is only competent to enact the said Act primarily concerned with money tending under Entry No. 30 of List No. II of Schedule VII of the Constitution. In this connection, the Assam High Court has made a reference to Section 46(D) of the State Financial Corporation Act which provides as follows:

'The provision of this Act and of any rules or orders made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in the memorandum or articles of association of an industrial concern or in any other instrument having effect by virtue of any law other than this Act, but save as aforesaid, the provisions of this Act shall be in addition to, and not in derogation of, any other law for the time being applicable to an industrial concern.'

13. It may be noted in this connection that excepting this lone decision of the Assam High Court, the learned Counsel of the respective parties have not been able to point out any other decision dealing with the question of legislative competence of the Parliament in the matter of State Financial Corporation Acts.

14. After giving anxious consideration to the respective contentions of the parties, it appears to me that the State Act is not solely or primarily an Act for authorising money lending business by the State Financial Corporation. The State Act, in my view, has been enacted primarily for the purpose of ensuring development of medium and small scale industries and for the purpose of such development, financial aid has become a matter of necessity and as such, provisions of financial aid by way of loan advance and recovery of such financial assistance have been provided for in the State Act. It appears that the West Bengal Financial Corporation has been authorised to take over management of the borrower unit in some cases. There is also provision for incorporation and liquidation of the State Financial Corporation. Accordingly, it cannot be held that the State Act is primarily an Act for money lending and as such, if the pith and substance theory is applied, the State Act must fall within the ambit of the State List concerning money lending as contended by Mr. Mitter.

15. I respectfully agree with the view expressed by the Assam High Court in Chargola Tea Company's Case (AIR 1973 Gauhati 136) (supra) and hold that there is no want of legislative competence so far as the State Act is concerned.

16. Mr. Mitter has also challenged the vires of the State Act on the ground of unreasonable discrimination offending Article 14 of the Constitution. Mr. Mitter has contended that the West Bengal Financial Corporation has been placed in an advantageous position under the State Act so far as the recovery of money lent by the Financial Corporation is concerned without any just or reasonable ground for such favour shown to the Corporation. He has submitted that a special procedure has been laid down under the State Act authorising the State Financial Corporation to recover loan advanced by the Financial Corporation by presenting the application under Sections 31 and 32 of the State Act. By taking recourse to such provisions, the West Bengal Financial Corporation has been authorised to sell the properties without taking recourse to the provisions of Order 34, Rule 4 of the C.P.C. Although the West Bengal Financial Corporation is a mortgagee in respect of loan advanced by it, it is not required to file a regular suit for enforcement of the mortgage. Mr. Mitter has drawn our attention that under Order 34, Rule 4 of the Code of Civil Procedure a preliminary decree is required to be passed in a suit for redemption of mortgage and even when an order for sale pursuant to a preliminary decree is effected, relief can still be obtained under Sub-rule (5) of Rule 4 of Order 34 C.P. Code by the borrower. He has contended that for redemption of mortgage, there is no justification of placing the West Bengal Financial Corporation in a separate and advantageous position than other lenders and there is no reasonable nexus to the object of the State Act in the matter of redemption of mortgage by treating the West Bengal Financial Corporation as a favoured litigant. He has, therefore, submitted that such discriminatory treatment must be held to be a naked violation of the guarantee of equality enshrined under Article 14 of the Constitution and on that score, the provisions of Sections 31 and 32 must be held to be ultra vires the Constitution.

17. Mr. Chunder, however, in reply to the aforesaid contention has submitted that under the provisions of Sections 31 and 32, the mortgagor has an opportunity to file a written statement and to raise defence in answer to the contention of the mortgagee namely the Financial Corporation. Under the State Act, the high authority like the learned District Judge has been empowered to adjudicate on the respective contentions of the parties and the provision of appeal has been made and such appeal from the order of the learned District Judge lies before the High Court of the State. He has submitted that the special procedures provided for in Sections 31 and 32 are not disadvantageous to the mortgagor and no real injury is to be suffered by the mortgagor because of the said special provisions. On the contrary, the provisions in Sections 31 and 32 ensure speedy disposal of the dispute before a competent and high judicial authority. In this connection Mr. Chunder has referred to a Full Bench decision of the Orissa High Court made in the case of State Financial Corporation v. Satpathy Brother & Nanda Co. (P) Ltd, reported in : AIR1975Ori132 . The Full Bench of the Orissa High Court has considered the provisions of Sections 31 , 32 and 46-B of the concerned State Act for appreciating the contention raised before it that by making special provisions for enforcing the mortgage, a discrimination has been made offending Article 14 of the Constitution. It has been held by the Orissa High Court that under the said provisions a very high judicial authority like the District Judge has been empowered to adjudicate the disputes between the parties and the appeal lies from such order to the High Court. It has also been held that for taking recourse to a civil suit for recovery of mortgage debt, it was to be filed before the competent Court of the lowest jurisdiction. A Subordinate Judge has an unlimited pecuniary jurisdiction who is likely to decide such suits for enforcing the mortgage. Under the State Act, instead of the Subordinate Judge, the application is to be presented before the District Judge and an appeal against the order, lies to the High Court. The Orissa High Court has held that the provisions of the State Act are more progressive and parties are likely to get better and quicker justice than what they would obtain if a civil suit is filed. At any rate, the provision of adjudication before the District Judge cannot be held to be less advantageous or unconscionable. It has further held that the provision is more liberal and the entire Civil Procedure Code is to be followed except to the extent it is inconsistent with the provision of the State Act. Under the State Act, the parties can get full opportunities to present their cases, Accordingly, Sections 31 and 32 of the State Act cannot be held to be ultra vires Article 14 of the Constitution. Mr. Chunder has also submitted that if a particular Act provides for adjudication after giving reasonable opportunity to the parties to contest and also provides for an appeal before a proper judicial authority, it cannot be held that the provisions are more onerous and on that score, discriminatory under Article 14 of the Constitution. In this connection, he has referred to a decision of the Supreme Court made in the case of Maganlal Chhagganlal (P) Ltd. v. Municipal Corporation of Greater Bombay, reported in : [1975]1SCR1 . A seven Judges Bench of the Supreme Court has upheld the validity of the Bombay Municipal Corporation Act as amended by Maharashtra Act 14 of 1961 and the Bombay Government Premises (Eviction) Act, 1955. The Supreme Court has held in the said decision to the following effect:

'It is also necessary to point out that the procedures laid down by the two Acts now under consideration are not so harsh or onerous as to suggest that a discrimination would result if resort is made to the provisions of these two Acts in some cases and to the ordinary Civil Court in other cases. Even though the officers deciding these questions would be administrative officers there is provision in these Acts for giving notice to the party affected, to inform him of the grounds on which the order of eviction is proposed to be made, for the party affected to file a written statement and produce documents and be represented by lawyers. The provisions of the Civil Procedure Code regarding summoning and enforcing attendance of persons and examining them on oath, and requiring the discovery and production of documents are valuable safeguards for the person affected. So is the provision for appeal..........'

18. Mr. Chunder has submitted that for the purpose of adjudication, learned District Judge has been authorised to apply the provisions of Civil Procedure Code as far as such provisions are applicable.

19. For the purpose of disposing of this application under Sections 31 and 32, the party affected gets all reasonable opportunities to defend before the high authority like the District Judge and has also a right to prefer an appeal before the High Court. Mr. Chunder has therefore submitted that even on the test indicated by the Supreme Court in the case of Maganlal Chhagganlal, : [1975]1SCR1 (supra), it cannot be held that the provisions are harsh and onerous so as to suggest a discrimination.

20. I agree with the submissions made by Mr. Chunder, I also respectfully agree with the views expressed by the Full Bench of the Orissa High Court in Satpathy Brother's case, : AIR1975Ori132 . In my view the provisions of Sections 31 and 32 of the State Act do not offend Article 14 of the Constitution and the said provisions are not ultra vires Article 14 of the Constitution.

21. Coming to the merits of the case Mr. Mitter has contended that the application of the West Bengal Financial Corporation under Sections 31 and 32 of the State Act is bound to fail because the mortgage deed has not been executed validly and that the mortgage deed has not been proved in accordance with law. He has contended that a valid mortgage is the foundation of the entire case of the West Bengal Financial Corporation and until the West Bengal Financial Corporation can establish that the Company was bound by a valid mortgage deed, the question of enforcement of the said deed cannot and does not arise. In this connection, Mr. Mitter has referred to the provisions of Section 68 of the Evidence Act. Section 68 of the Evidence Act provides for a proof of execution of the document required by law to be attested Under the proviso to Section 68 of the Evidence Act, a document required by law to be attested must be proved by calling the attesting witness if such attesting witness is available and is within the jurisdiction of the Court where the document is sought to be proved. Mr. Mitter has contended that the attesting witness in the instant case has not been called to prove the said mortgage deed and in the absence of such legal proof in accordance with the proviso to Section 68 of the Evidence Act, it must be held that the mortgage deed has not been proved. Mr. Mitter has contended that the learned District Judge has proceeded on the footing that since the execution of the document had been admitted by the Company and its Director, no proof of the execution of the document under Section 68 of the Evidence Act is necessary. Mr. Mitter has contended that the Company and its Director have not admitted the execution of the document in an unqualified manner. It has been alleged in the written statement filed by the Company and its Director that such document had been executed at the dictation of the West Bengal Financial Corporation and the Company did not receive the amount stated to have been advanced by the Corporation.

22. Mr. Mitter has submitted that if the mortgagor does not voluntarily execute the deed but is made to sign a document at the dictation of a person, such execution cannot be held to be a proper execution by the mortgagor and the admission of execution under such circumstances cannot be taken to be an admission of the execution of the document lawfully. In such circumstances, the requirement of proof according to the proviso to Section 68 of the Evidence Act remains. In this connection, Mr. Mitter has referred to a decision of this Court in the case of Ebrahim Mondal v. State of West Bengal, reported in (1936) 40 Cal WN 151. It has been held in the said decision that Section 68 of the Evidence Act is imperative and the Rule under Section 68 is mandatory. In a case where the attestation according to law is specially required to be so made, it is necessary to call at least one attesting witness to prove execution of the document. Mr. Mitter has also referred to the decision of the Privy Council in the case of Surendra Bahadur Singh v. Behari Singh, reported in 43 Cal WN 669 : (AIR 1939 PC 117). He has placed this decision of the Privy Council for the proposition that although the mortgage deed in question is a registered one, such registration will not enure to the benefit of the mortgagee if proof of valid execution of the said document is not made in accordance with the proviso to Section 68 of the Evidence Act. Mr. Mitter has also referred to a Full Bench decision of the Allahabad High Court made in the matter of Lachman Singh v. Surendra Bahadur Singh, reported in ILR 54 All 1051 : (AIR 1932 All 527) (FB). Section 68 of the Evidence Act was taken into consideration in the said decision and it was held that the signature of the Sub-Registrar and of the identifying witnesses were not sufficient attestation to a mortgage deed for the purpose of transfer of property. Mr. Mitter has also contended that admission must be taken as a whole. If the admission of execution of the mortgage deed is to be accepted, then the other part of the admission viz. execution of the document at the dictation and under coercion cannot be dispelled.

23. Mr. Chunder in reply to the aforesaid contentions of Mr. Mitter has submitted that in the instant case, the Company and its Directors have not denied the execution of the mortgage deed and in clear and unequivocal terms they have admitted that such mortgage deed had been executed by them. Whether or not such mortgage deed will fail for want of consideration or on the score of undue influence and coercion as alleged by the Company and or its Director will be entirely a different question but the execution of the document having been clearly admitted, the requirement of proof under Section 68 of the Evidence Act is not necessary and the learned Judge was justified in holding that in view of such admission of execution of the document, the proof of execution of a document by an attesting witness was not necessary. He has submitted that in Ebrahim Mondal's case, attestation according to law was specifically denied but in the instant case, there is no denial about execution or valid attestation. Mr. Chunder has also submitted that the facts and circumstances concerning the decision of the Privy Council in the case of Kunwar Surendra Bahadur's case, 43 Cal WN 669 : (AIR 1939 PC 117) and of the Allahabad High Court Lachman Singh's case, ILR 54 All 1051 : (AIR 1932 All 527) (FB) are entirely different.

24. After considering the respective contentions of the learned Counsel for the parties, it appears to me that in the facts and circumstances of this case, the Company and its Directors did not deny the execution of the mortgage deed sought to be enforced under Sections 31 and 32 of the said Act. It was specifically admitted that such mortgage deed had been executed by the said Company but it was alleged that such deed was the outcome of coercion and undue influence and there is also allegation that the entire sum referred to in the mortgage deed was not advanced. In our view, Mr. Chunder is justified in his contention that in the facts of this case, the execution has not been denied but the defendants have contended that on the score of undue influence and coercion and also for other reasons, the said deed of mortgage was not enforceable. In the aforesaid circumstances, examination of the attesting witnesses for the purpose of proof of the execution of the document was not necessary and the learned District Judge was justified in proceeding on the footing that the deed of mortgage has been duly proved.

25. Mr. Mitter has contended that under the State Act itself, the learned District Judge could grant instalments but he proceeded on the footing that such instalment was not permissible under the said Act. Mr. Mitter has submitted that under the State Act the provisions of the Code of Civil Procedure are applicable in so far as they do not militate against the State Act. Under the Code of Civil Procedure, the Court in the matter of enforcing the mortgage deed, is entitled to grant instalments and such grant of instalment does not militate against the provisions of the State Act. Hence, the learned District Judge was entirely wrong in holding that he had no authority to grant instalments under the State Act. Mr. Mitter has also submitted that under the State Act, the learned District Judge had also the authority to give the management of the Company to the West Bengal Financial Corporation for the purpose of liquidating the mortgage debt. If such step had been taken by the learned District Judge, the Company would have been saved The effect of impugned order is putting the company in utmost peril and if the plants and machineries are sold for the redemption of the mortgage debt, the Company will be doomed for ever and the very purpose of the Act namely, the protection of Industrial concern by the Financial Corporation will? get defeated. Mr. Chunder in reply to the said contention of Mr. Mitter has, however, submitted that the grant of instalments by the learned District Judge has practically become academic because under the provisions of the Act, within twenty years, the loan has got to be repaid. Such loan was advanced in August 1955 and as such the same is to be repaid by August, 1985. No useful purpose will be served in considering the case of instalments at this stage when the maximum period for refund is going to expire within a few months. Mr. Chunder has also submitted that the question of giving the Management to the Industrial Corporation could not and did not arise in the facts and circumstances of this case. The West Bengal Financial Corporation did not ask for taking over such management and the Company has also not suggested at any point of time that such management should be handed over to the Financial Corporation for the purpose of liquidating the mortgage debt. It is quite apparent that the Company was not running efficiently and the Company was heavily indebted to the Financial Corporation and had failed to pay instalments. It was therefore, not desirable to force the taking over of management of a losing concern on the West Bengal Financial Corporation. More so, neither of the parties had asked for such handing over of the management. In my view, there is enough force in the aforesaid contention of Mr. Chunder. Although it appears to me that the District Judge could have directed for payment by instalment, in the instant case, no such direction need be given at this stage. Firstly, the ad interim order of attachment has been made final and secondly, even twenty years' limitation for full payment of the loan is going to expire within a few months and as such no useful purpose will be served, by granting any instalment now. In the circumstances, no interference is called for in this appeal.

26. The appeal, therefore, fails and is dismissed but I make no order as to costs.

S.P. Das Ghosh, J.

27. I agree. The appeal should be dismissed. But I want to make some additions to the judgment just now dictated by My Lord

28. This is an appeal under Section 32(9) of the State Financial Corporation Act, 1951 ('Act' in short). Under Section 32(8) of the Act, an order of attachment or sale of property under the Act shall be carried into effect as far as practicable 'in the manner provided in the Code of Civil Procedure, 1908' for the attachment or sale of property in execution of a decree as if the Financial Corporations were the decree-holder. It has been held by the Supreme Court in the case of Asnew Drums Ltd. v. M.S.F. Corporation, : [1972]1SCR351 that the words, 'in the manner provided in the Code of Civil Procedure' in Section 32(8) of the Act include also the provisions in the Code of Civil Procedure dealing with appeals. As such, on the basis of Section 105 of the Code of Civil Procedure, the appellant can agitate the question of competence of the Parliament to enact the Act or the vires of the Act, even though these questions were decided by the learned District Judge by his order dt. 9-9-1971.

29. A statute is examined to ascertain its pith and substance or its true nature and character for the purpose of determining whether it is legislation with respect to matters in List I or List II or List III. If any pith and substance of the legislation falls within one entry or the other, bul some other portion of the subject-matter of the legislation incidentally trenches upon and might enter upon any list, the Act as a whole will be valid notwithstanding such incidental trenching. In the present case, however, there is no question of incidental trenching as commercial loans have been excluded from the definition of the word, 'loan' in Section 2(12) of the Bengal Money Lenders Act, 1940. When commercial loans have been excluded from the purview of the Bengal Money Lenders Act, it is within the competence of the Parliament to legislate on incorporation, regulation and winding up of Trading Corporations and any Financial Corporation, as done in the case of enacting the Act. It is to be stated in this connection that though the Act was enacted to provide for medium and long-term credit to industrial undertakings, a scrutiny of the Act will reveal that the purpose of the Act was not only to provide for credit to industries but also to promote industries. The various provisions in the Act relating to guaranteeing of loans raised from industrial concerns, underwriting of issue of stock, shares, bonds or debentures by industrial concerns, retaining as part of its assets, stock, shares, bonds or debentures or loans into stock or shares of industrial concerns, power to impose condition for accommodation, power to call for repayment before the agreed period as well as power to take over management will show that apart from credit to industrial undertakings, the corporation had many other functions, which an ordinary money-lender does not have. Parliament was, thus, empowered under Entry 43 of List I to enact the Act.

30. For finding out if the guarantee of equal protection under Article 14 of the Constitution has been violated, the test is not the degree of inequality, but the reality of it. As the purpose of the Act appears to promote industries and to provide credits to as many industries as possible, special procedure has been laid down in the Act for recovery of the dues of the corporation. This procedure prescribes some additional powers of the District Judge as well as of the High Court in dealing with the matters mentioned in Section 32 of the Act Those provisions in Section 32 of the Act show that the parties would get much better and quicker justice than what they could obtain in an ordinary civil Court. This procedure for recovery of the dues of the corporation is saved by Section 4(1) of the Code of Civil Procedure, The Act is not thus, violative of Article 14 of the Constitution.

31. For attracting the provisions for granting instalments under Order 20, Rule 11 C.P.C or for invoking the provisions of Order 34 of the Code of Civil Procedure, a decree is at first to be passed by a civil Court. In view of the provisions in Section 32 of the Act, there is no question of passing of any decree by a civil Court, though the order of the District Judge under Section 32(7) of the Act will have the effect of a decree under the Code of Civil Procedure, in view of the special provisions in Section 32(8) of the Act. As no decree within the meaning of the Code of Civil Procedure is passed by a District Judge at the time of making of an order under Section 32(7) of the Act there is no question of granting instalments under Order 20 Rule 11 or for invoking the provisions of Order 34 of the Code of Civil Procedure. Moreover, as My Lord has just now pointed out, the period of 20 years is also going to expire soon. The appellant should not, thus, be granted any instalment for payment of the money due to the Corporation.

32. The learned Counsel for the appellant prays for leave to appeal to the Supreme Court on the ground that an important constitutional point is involved in the matter. In our view, the point sought to be agitated has been fully considered in judicial decisions and we do not think that it is a fit case where leave to appeal to the Supreme Court should be granted. The prayer is, therefore, rejected.


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