TMI Blog2008 (3) TMI 659X X X X Extracts X X X X X X X X Extracts X X X X ..... ein furnished sureties and/ or guarantees in respect of the loans taken by the industrial concerns (Respondent \026 Company) 3. We may notice the fact of the matter from the case of AP Rocks Private Limited (Writ Petition No. 37209 and 30907 of 2000) before the High Court. AP Rocks Private Limited is an industrial concern. It approached the appellant \026 Corporation for grant of loan in the form of non-convertible debenture facility to the extent of 100 lakhs to meet its working capital requirements. Respondents who were Directors of Company executed deeds of guarantee dated 15.05.1996 and 9.08.1996 agreeing to guarantee repayment/ redemption by the Company to the Corporation of the said non-convertible debenture subscription together with interest, etc. The said Company also executed a deed of hypothecation on or about 9.08.1996 whereby and whereunder its plants and machinery were hypothecated. A collateral security agreement was also executed by Shri S.K. Rajan wherefor a property bearing No. 49, House List Khata No. 100-A, Hennarayanapalya, Hemlet of Cholanayakamahalli, Kasba Hobli, Bangalore North Taluka was mortgaged as a security therefor. Respondent No. 1 execut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the power to take possession of the mortgaged property of the guarantor also, being incidental to the main power and/ or implied power of the Corporation. (iv) Section 31 confers the same benefit to the Corporation with an additional remedy, viz., to pray for an interlocutory order. (v) Section 69(c) of the Transfer of Property Act also confers power upon the mortgagee to sale the charged property privately wherefor taking over of possession being not a pre-requisite, the High Court committed a serious error in coming to the conclusion that before a property is to be sold, taking over possession thereof is mandatory. (vi) Section 31 of the Act would be applicable only when the loan is called back in terms of Section 30 of the Act. (vii) Special statutory power having been conferred on the Corporation so as to enable it to recover its debts which serves a larger economic interest of the country, Sections 29 and 31 of the Act should be interpreted in such a manner which would help it to achieve the said purpose. 6. Mr. Vikas Rojipura, learned counsel appearing on behalf of the respondents, on the other hand, submitted: (i) It is wrong to contend that similar relie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n .\027 (1) Where an industrial concern, in breach of any agreement, makes any default in repayment of any loan or advance or any instalment thereof or in meeting its obligations in relation to any guarantee given by the Corporation 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 advance under Section 30 and the industrial concern fails to make such repayment then, without prejudice to the provisions of Section 29 of this Act and of Section 69 of the Transfer of Property Act, 1882 (4 of 1882), any officer of the Financial Corporation, generally or specially authorised by the Board in this behalf, may apply to the District Judge within the limits of whose jurisdiction the industrial concern carries on the whole or a substantial part of its business for one or more of the following reliefs, namely\027 ( a ) for an order for the sale of the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation as security for the loan or advance; or ( aa ) for enforcing the liability of any surety; or ( b ) for tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ISSUE 8. A lender of money under the common law has the remedy to file a suit for realization of the amount lent if the borrower does not repay the same. The Act, however, provides for a special remedy in favour of the Financial Corporation constituted thereunder enabling it to exercise a statutory power of either selling the property or take over the management or possession or both belonging to the industrial concern. 9. Section 29, therefore, confers an extraordinary power upon the Corporation . It, being a State within the meaning of Article 12 of the Constitution of India, is expected to exercise its statutory powers reasonably and bona fide. 10. Apart from the said constitutional restrictions, the statute does not put any embargo upon the corporation to exercise its power under Section 29 of the Act. Indisputably, the said provision was enacted by the Parliament with a view to see that the dues of the Corporation are realized expeditiously. When a statutory power is conferred, it is a trite law that the same must be exercised within the four corners of the Statute. Power of a lender to realize the amount lent either by enforcing the charged and / or hypothecated o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Section 29 of the Act nowhere states that the corporation can proceed against the surety even if some properties are mortgaged or hypothecated by it. The right of the financial corporation in terms of Section 29 of the Act must be exercised only on a defaulting party. There cannot be any default as is envisaged in Section 29 by a surety or a guarantor. The liabilities of a surety or the guarantor to repay the loan of the principal debtor arises only when a default is made by the latter. 15. The words as well as in our opinion play a significant role. It confers two different rights but such rights are to be enforced against the same person, viz., the industrial concern. Submission of the learned senior counsel that the second part of Section 29 having not referred to industrial concern , any property pledged, mortgaged, hypothecated or assigned to the financial corporation can be sold, in our opinion cannot be accepted. It is true that sub-section (1) of Section 29 speaks of guarantee. But such a guarantee is meant to be furnished by the Corporation in favour of a third party for the benefit of the industrial concern. It does not speak about a surety or guarantee given in f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retation by Justice G.P. Singh, 9th edition, page 365 : 10th edition, page 391: \005The rule of implied prohibition is, however, subservient to the basic principle that the Court must, as far as possible, adopt a construction which effectuates the legislative intent and purpose\005 We fail to see how the aforementioned statement of law comes to the aid to the contention of the learned counsel. Moreover Section 29 of the Act does not deal with a case where express and implied conditions have been laid down in the matter of exercise of power conferred upon a statutory authority under a Statute. Section 29 does not envisage any prohibition at all either express or implied. Let us consider the legal implication of the aforementioned statement of law in the light of a decision of this Court. In Jamal Uddin Ahmad v. Abu Saleh Najmuddin and Another [(2003) 4 SCC 257], this Court stated the law, thus: 11. Dealing with statutes conferring power; implied conditions, judicial review , Justice G.P. Singh states in the Principles of Statutory Interpretation (8th Edn., 2001, at pp. 333, 334) that a power conferred by a statute often contains express conditions for its exercis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part from the default on the part of the industrial concern, can be invoked where the financial corporation requires an industrial concern to make immediate repayment of loan or advance in terms of Section 30 if and when such requirement is not met. The aforementioned provision could be resorted to by the Corporation, without prejudice, to its rights under the provisions of Section 29 as also Section 69 of the Transfer of Property Act and for the said purpose it is required to apply to the District Judge having appropriate jurisdiction. Section 31 of the Act provides for the reliefs which may be sought for by the Corporation strictly in terms thereof. Clause (aa) of subsection (1) of Section 31 of the Act provides for a final relief. It does not speak of any interlocutory order. Clause (aa), as noticed hereinbefore, has been inserted by Act No. 43 of 1985. Thus, prior thereto even Section 31 could not have been taken recourse to against a surety. 23. Such a relief, if prayed for, would also lead to grant of a final relief and not an interlocutory one. Similarly, clause (b) of Sub-section (1) of Section 31 of the Act also provides for a final relief. Only clause (c) of Subsection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion has been amended and the other was not? Why one terminology has been used while inserting a statutory provision and a different clause in another? It is well-known that casus omissus cannot be supplied. [See Ashok Lanka v. Rishi Dixit (2005) 5 SCC 598 and J. Srinivasa Rao v. Govt. of A.P. Anr 2006 (13) SCALE 27 and Southern Petrochemical Industries Co. Ltd. v. Electricity Inspector and E.T.I.O. and Ors. (2007) 5 SCC 447] 27. The legislative intent, in our opinion, is manifest. The intention of the Parliament in enacting Sections 29 and 31 of the Act was not similar. Whereas Section 29 of the Act consists of the property of the industrial concern, Section 31 takes within its sweep both the property of the industrial concern and as that of the surety. None of the provisions control each other. The Parliament intended to provide an additional remedy for recovery of the amount in favour of the Corporation by proceeding against a surety only in terms of Section 31 of the Act and not under Section 29 thereof. THE EFFECT \026 OF 28. A Corporation, after coming into force of Section 32G of the Act has four remedies, viz.: (i) to file a suit (ii) to take recourse to Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Oxford) Ltd v. United Kingdom [2005] ECHR 921 [2005] 49 ERG 90, [2005] ECHR 921], The court herein tried to read the Human Rights position in the context of adverse possession. But what is commendable is that the dimension of human rights has widened so much that now property dispute issues are also being raised within the contours of human rights. 31. A surety may be a Director of the Company. He also may not be. Even if he is a close relative of the Director or the Managing Director of the Company, the same is not relevant. A Director of the Company is not an industrial concern. He in his capacity as a surety would certainly not be. A juristic person is a separate legal entity. Its veil can be lifted or pierced only in certain situations. [See Salomon v. Salomon and Co. [1897 AC 22], Dal Chand and Others v. Commissioner of Income Tax, Punjab (1944) 12 ITR 458, Juggilal Kamlapat vs. Commissioner of Income Tax, U.P. (1969) 1 SCR 988 = 1969 (73) ITR 702 and Kapila Hingorani v. State of Bihar (2003) 6 SCC 1] 32. Interpretation of a statute would not depend upon a contingency. It has to be interpreted on its own. It is a trite law that the court would ordinarily take recourse t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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