TMI Blog1991 (2) TMI 412X X X X Extracts X X X X X X X X Extracts X X X X ..... od surety for repayment of the said loan. It was a case of personal guarantee only as no property was given in security. For the sake of brevity the appellant, Respondent No. I and Respondents 2 to 4 shall hereinafter be referred to as the Corporation, the Company and the sureties respectively. The amount of loan was to be advanced in phases and after the Corporation had advanced a part of the total sanctioned loan, the Company did not want to avail of the balance of the amount as it seems to have lost interest in setting up the factory for reasons with which we are not concerned. The Corporation consequently called upon the Company to repay the amount already advanced together with interest and on its failure to do so took possession under Section 29 of the State Financial Corporations Act, 1951 (for short the Act) over the industrial concern, a term defined under Section 2(c) of the Act and took steps to realise its outstanding dues by transfer of property in the manner provided therein. However, notwithstanding advertisement for sale thereof having been made on several occasions the Corporation could not get an offer of more than about Rupees five lakhs. Having failed to reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k the view that since an appeal was pending before a Division Bench of the High Court against the judgment of a Single Judge in Misc- Petition No. 357 of 1985, Maharashtra State Financial Corporation v. Hindtex Engineers Pvt. Ltd., decided on 3rd December, 1986 (since reported in 1987 Maharashtra Law Journal 243), in which it had been held that such a petition was maintainable in the High Court, he would proceed to decide- the petition on merits on the assumption that he had jurisdiction to entertain it. On merits, he took the view that no money decree could be passed in a petition under Sections 31 and 32 of the Act even against the sureties and since in the instant case sureties had admittedly not given any security except their personal guarantee the said surety could be enforced only in the ordinary course and not under the special machinery provided under the Act. The petition was accordingly dismissed. Aggrieved by the judgment of the learned Single Judge the Corporation preferred an appeal before a Division Bench which has been dismissed by the judgment under appeal. The Division Bench not only upheld the finding of the Single Judge on merits but also over ruled the decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Small Cause Court: Provided that the State Government may, from time to time, after consultation with the High Court, by a like notification extend the jurisdiction of the City Court to any suits or proceedings which are cognizable by the High Court as a court having testamentary or intestate jurisdiction or for the relief of insolvent debtor. The other Section which is relevant is Section 12 which reads: 12. Notwithstanding anything contained in any law, the High Court shall not have jurisdiction to try suits and proceedings cognizable by the City Court; Provided that the High Court may, for any special reason, and at any stage remove for trial by itself any suit or proceeding from the City Court. As regards Sections 31 and 32 of the State Financial Corporations Act, 1951, since the submissions made by learned counsel for the parties referred to most of the provisions contained therein these two Sections may be quoted in their entirety. They read: 31. (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 g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iability should not be enforced. (2) When the application is for the relief mentioned in clause (b) of sub-section (1) of section 31, the district judge shall grant an ad interim injunction restraining the industrial concern from transferring or removing its machinery, plant or equipment and issue a notice calling upon the industrial concern to show cause, on a date to be specified in the notice, why the management of the industrial concern should not be transferred to the Financial Corporation. (3) Before passing any order under sub- section I) or sub-section (2) or issuing a notice under sub-section (IA), the district judge may, if he thinks fit, examine the officer making the application. (4) At the same time as he passes an order under sub-section (1), the district judge shall issue to the industrial concern or to the owner of the security attached a notice accompanied by copies of the order, the application and the evidence, if any, recorded by him calling upon it or him to show cause on a date to be specified in the notice why the ad interim order of attachment should not be made absolute or the injunction confirmed. (4A) If no cause is shown on or before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt otherwise directs until the appeal is disposed of. (8) An order of attachment or sale of property under this section 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 Corporation were the decree holder. (8A) An order under this section transferring the management of an industrial concern to the Financial Corporation shall be carried into effect, as far as may be practicable, in the manner provided in the Code of Civil Procedure, 1908, for the possession of immovable property or the delivery of immovable property in execution of a decree, as if the Financial Corporation were the decree- holder. (9) Any party aggrieved by an order under sub-section (4A), sub-section (5) or sub-section (7) may, within thirty days from, the date of the order, appeal to the High Court, and upon such appeal the High Court may, after hearing the parties, pass such orders thereon as it thinks proper. (10) Where proceedings for liquidation in respect of an industrial concern have commenced before an application is made under sub-section (1) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suing a notice under sub-section (lA) were inserted. (iii) Sub-section (4) of Section 32 was substituted with an inclusion of sub-section (4A). (iv) The word or occurring at the end of clause (d) of sub-section (7) was omitted and a new clause (da) was inserted. (v) In the first proviso after sub-section (7) the words or making an order rejecting the claim to enforce the liability of the surety under clause (da) or making an order rejecting the claim to transfer the management of the industrial concern to the Financial Corporation under clause (e) and in the second provis1on the words or rejecting the claim to enforce the liability of the surety or rejecting the claim to transfer the industrial concern to the Financial Corporation were inserted and in sub-section (9) the words under sub-section (4A), sub-section (5) were substituted for under sub-section (5) By the same Act 43 of 1985 a new Section 32G was inserted which reads: 32G. Where any amount is due to the Financial Corporation in respect of any accommodation granted by it to any industrial concern, the Financial Corporation or any person authorised by it in writing in this behalf, may, wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 32 of the Act connotes territorial jurisdiction alone and that the concept of pecuniary jurisdiction is beyond the scope of Sections 31 and 32 in view of the decision of this Court in Gujarat State Financial Corporation v. Natson Manufacturing Co. Pvt. Ltd. and Ors., [1979] 1 SCC 193 relied on in M/s. Everest Industrial Corporation and Ors. v. Gujarat State Financial Corporation, [ 1987] 3 SCC 597 and Maganlal v. M/s. Jaiswal Industries, Neemach and Ors., [ 1989] 4 SCC 344 which lays down that an application under Section 31(1) of the Act is neither a plaint as contemplated by Article I of Schedule I nor an application in the nature of a plaint as contemplated by Article 7 of the Court Fees Act, 1870, that the special procedure contained in Section 3 1(1) was not even something akin to a suit of a mortgagee to recover mortgage money by sale of mortgaged property, that even if the Corporation- applicant so chooses it cannot pray for a preliminary decree for accounts or final decree for payment of money nor can it seek any personal liability, that the Corporation cannot pray for a decree of its outstanding dues, that the reliefs contemplated by Section 31(1) on being granted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... risdiction but also the words and in the absence of such court, by the High Court occurring in the said sub- section (11) inasmuch as in a Presidency-town, in terms of territorial jurisdiction, the jurisdiction of the City Civil Court and of the High Court is co-terminus. That it is so is clear from Section 3 of the Bombay city Civil Court Act and the definition of the term Presidency- town contained in Section 3(44) of the General Clauses Act, 1897 according to which Presidency- town shall mean the local limits for the time being of the ordinary original civil jurisdiction of the High Court of Judicature at Calcutta, Madras or Bombay, as the case may be. It is a settled rule of interpretation of statutes that if the language and words used are plain and unambiguous, full effect must be given to them as they stand and in the garb of finding out the intention of the Legislature no words should be added thereto or subtracted there from. Likewise, it is again a settled rule of interpretation that statutory provisions should be construed in a manner which subserves the purpose of the enactment and does not defeat it and that no part thereof is rendered surplus or otiose. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the High Court had no jurisdiction to entertain the application cannot be sustained. Now we come to the second plea raised on behalf of the respondents, namely, that the relief claimed in the petition could not be granted under Sections 31 and 32 of the Act inasmuch as these sections did not contemplate passing of a money decree not only against the principal debtor but also against the sureties. In so far as the special machinery provided under Sections 31 and 32 of the Act being applied to a surety who has given some property in security, it has been pointed out by learned counsel for the appellant that even before the amendment introduced in these sections by Act 43 of 1985 a Division Bench of the Kerala High Court had, in Thressiamma Varghese v. K. S. F. Corporation, AIR 1986 Kerala 222, taken the view that the provisions contained in these sections would be applicable. According to teamed counsel, in any view of the matter, after the amendment of these sections by Act 43 of 1985 introducing specific provisions for enforcement of the liability of a surety, the matter is now beyond doubt that the procedure contained in these sections shall be applicable for the enforcem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases dealing with the question of enforcement of the liability of such a surety and naturally, therefore, the provisions in this behalf specifically introduced in Sections 31 and 32 of the Act by Act 43 of 1985 were not considered in those cases. However, in this connection what is of significance is that clause (aa) inserted in sub- section (1) of Section 31 of the Act by Act 43 of 1985 uses the words any surety . On its plain grammatical meaning there can be no doubt that the term any surety will include not only a surety who has given some security but also one who has given only a personal guarantee. If the submission made by learned counsel for the respondents is accepted the words who has given property by way of security will have to be added after the words any surety . Such a course not only militates against the normal rule of interpretation but also tends to defeat the very purpose of the amendment introduced by Act 43 of 1985 enabling the Financial Corporation to make an application under Section 31(1) of the Act for enforcing the liability of any surety , inasmuch as it would have the effect of restricting or qualifying the amplitude of the term any surety w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the event of a suit being filed. As seen above, sub-section (2) of Section 31 enjoins upon the Financial Corporation to state the extent of the liability of the industrial concern in the application to be made under sub-section (1) thereof. Since the liability of the surety is co-extensive the same shall, in the absence of anything contrary in the surety bond, be the liability of the surety also. In a case where there is any provision confining the liability of the surety, the extent of the liability to be shown in the application shall be such as is in conformity with the surety bond. When no cause is shown by the surety on being served with the show cause notice the order which will be passed under sub-section (4A) of Section 32 would be for the enforcement against the surety of that liability which is stated in the application. Where, however, cause has been shown by the surety the extent of his liability shall be determined as contemplated in sub-section (6) of Section 32 and it is the liability so determined which shall be enforced under clause (da) of sub-section (7) of Section 32. It does not require any elucidation that the extent of the liability referred to above w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e shall be applicable. this would be so in view of the use of the expression any other law for the time being applicable to an industrial concern . That the Code is applicable to an industrial concern also is not in dispute and cannot be doubted. We may now state our reasons for holding that even if Section 46B of the Act was not there the provisions of the Code for the execution of a decree against a surety who had given only personal guarantee would, in the absence of any provision to the contrary in the Act, be applicable. In view of the decision of this Court in The Central Taikies Ltd. Kanpur v. Dwarka Prasad, [1961] 3 SCR 495, where it was held that a persona designata is a person selected as an individual in his private capacity, and not in his capacity as filling a particular character or office, since the term used in Section 31(1) of the Act is district judge it cannot be doubted that the district judge is not a persona designata but a court of ordinary civil jurisdiction while exercising jurisdiction under Sections 31 and 32 of the Act. In National Sewing Thread Co. Ltd. v. James Chadwick Bros. Ltd., [1953] SCR 1028 while repelling the objection that an appeal un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn the above rule were not exactly similar to the facts of the present case, the principle enunciated therein is one of general application and has an apposite application to the facts and circumstances of the present case. Section 76 of the Trade Marks Act confers a right of appeal to the High Court and says nothing more about it. That being so, the High Court being seized as such of the appellate jurisdiction conferred by section 76 it has to exercise that jurisdiction in the same manner as it exercises its other appellate jurisdiction and when such jurisdiction is exercised by a single Judge, his judgment becomes subject to appeal under clause 15 of the Letters Patent there being nothing to the contrary in the Trade Marks Act. And it is in view of this decision that we are of the opinion that the provisions of the Code would have, even in the absence of Section 46B of the Act, been attracted in the matter of enforcing the liability of a surety. In view of the foregoing discussion, the finding of the High Court even on this point cannot be sustained. Since, however, the High Court has not made a determination of the liability of the sureties as contemplated by sub-section (6) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of the Act and the industrial concern fails to make such repayment. It enables an officer of the Financial Corporation, generally or specially authorised by the Board in this behalf, to 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: (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 transferring the management of the industrial concern to the Financial Corporation; or (c) for an ad interim injunction restraining the industrial concern from transferring or removing its machinery or plant or equipment from the premises of the industrial conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncern to the Financial Corporation or confirm the injunction. (6) If cause is shown, the district judge shall proceed to investigate the claim of the Financial Corporation in accordance with the provisions contained in the Code of Civil procedure, 1908, in so far as such provisions may be applied thereto. (7) After making an investigation under sub- section (6), the district judge may- (a) confirm the order of attachment and direct the sale of the attached property: (b) Vary the order of attachment so as to release a portion of the property from attachment and direct the sale of the remainder of the attached property; (c) release the property from attachment; (d) confirm or dissolve the injunction; or (e) transfer the management of the industrial concern to the Financial Corporation or reject the claim made in this behalf: Provided that when making an order under clause (c) the district judge may make such further orders as he thinks necessary to protect the interests of the Financial Corporation and may apportion the costs of the proceedings in such manner as he thinks fit: Provided further that unless the Financial Corporation intimates to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (1A) which reads as under was inserted: (1A) When the application is for the relief mentioned in clause (aa) of sub-section (1) of section 31, the district judge shall issue a notice calling upon the surety to show cause on a date to be specified in the notice why his liability should not be enforced. (2) In sub-section (3), the words, or issuing a notice under sub-section (1A) were inserted after the words or sub-section (2) . (3) Subsection (4) was substituted by sub-sections (4) and (4A), which read as under: (4) At the same time as he passes an order under subsection (1), the district judge shall issue to the industrial concern or to the owner of the security attached a notice accompanied by copies of the order, the application and the evidence, if any, recorded by him calling upon it or him to show cause on a date to be specified in the notice why the ad interim order of attachment should not be made absolute or the injunction confirmed. (4A) If no cause is shown on or before the date specified in the notice under sub-section (1A), the district judge shall forthwith order the enforcement of the liability of the surety. (4) In sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ors., [1979] 1 SCR 372. That case related to payment of court fee on an application submitted under section 31(1) of the Act and the question for consideration was whether such an application should be treated on par with a suit by a mortgagee to enforce the mortgage debt by sale of the mortgaged property which is being treated as a money suit failing within the purview of Article 1 of Schedule I to the Bombay Court Fees Act, 1959 or it should bear a fixed court fee under the residuary Article 1(c) to Schedule II of the said Act. This Court disagreeing with the view of the Gujarat High Court, held that an application under section 31(1) of the Act would be covered by the residuary Article 1(c) of Schedule II to the said Act and it should bear a fixed court fee. In this context, this Court has examined the nature of the proceedings contemplated by section 31(1) of the Act. After referring to the provisions of the Act, this Court has held that it would be inappropriate to say that an application under section 31(1) is something akin to a suit by a mortgagee to recover mortgage money by sale of mortgaged property and that in an application under section 31(1), the Corporation do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 of the Act from the date said order is governed by s. 34 of the- Code of Civil Procedure, 1908 or whether it is payable at the contractual rate. This Court held that s. 34 CPC was not applicable to these proceedings. After referring to the earlier decision in Gujarat State Financial Corporation v. M/s Natson Manufacturing Co. (P) Ltd. Ors. case (supra), this Court has reiterated that the proceedings instituted under s. 31(1) of the Act 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 and, therefore, no question of passing any order under s. 34 CPC would arise since s. 34 CPC would be applicable only at the stage of the passing of the decree and not to a stage posterior to the passing of the decree. In Maganlal etc. v. Jaiswal Industries Neemach Ors., [1989] 3 SCR 697, after referring to the decisions mentioned above, this Court has observed: In view of these two decisions, the law seems to be settled that an application under section 31(1) of the Act cannot be put on par to a suit for enforcement of a mortgage nor the order passed thereon under section 32 of the Act be put on par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even a notice to him. The amendments introduced in ss. 31 and 32 by Act 43 of 1985 seek to remove the lacunae in those provisions as pointed out in the aforesaid judgment of the Allahabad High Court and with that end in view clause (aa) has been inserted in sub-section (1) of section 31 whereby a Financial Corporation can move an application under s. 31(1) for enforcing the liability of any surety and amendments have been made in s. 32 to prescribe the procedure for grant of the said relief on such application. Express provision has been made in sub-section (1A) of s. 32 for issuing a notice to the surety requiring him to show cause why his liability should not be enforced. It is argued on behalf of the appellant that the words for enforcing the liability of any surety are wide in their amplitude to cover the monetary liability of a surety who has given personal guarantee only and has not given his property as security for repayment of the loan by the borrower industrial concern, though it is not disputed that in so far as the borrower industrial concern is concerned, the amendments introduced in ss. 31 and 32 by Act 43 of 1985 do not alter the existing law and no order in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interpretation of statutes, a principle which is well-recognised in England is: it is thought to be in the highest degree improbable that Parliament would depart from the general system of law without expressing its intention with irresistible clearness, and to give any such effect to general words merely because this would be their widest, usual, natural or literal meaning would be to place on them a construction other than that which Parliament must be supposed to have intended. (See: Mexwell on The Interpretation of Statutes, 12th Edition, p. 116). In Minet v. Leman, [1955] (20) Eeav. 269. Sir John Romilly, M.R. stated as a principle of construction, which could not be disputed, that the general words of the Act are not to be so construed as to alter the previous policy of the law, unless no sense or meaning can be applied to those words consistently with the intention of preserving the existing policy untouched . In this context, it would be of relevance to take note of the decision of this court in M.K.Ranganathan Anr. v. Government of Madras Ors., [1955] 2 SCR 374. In that case this Court was required to construe the words or any sale held without leave of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect. (p. 388) In my opinion, regard must be had of this principle of interpretation while construing the expression for enforcing the liability of any surety which has been inserted by way of clause (aa) in sub-section (1) of section 31 by Act 43 of 1985. Considering the amendments introduced in sections 31 and 32 of the Act by Act 43 of 1985 and having regard to the principle of interpretation referred to above I do not find any provision in the said amendments which may indicate that Parliament has evinced an intention to effect a fundamental alteration in the law with irresistible clearness. In this context, it would be of relevance to note that while introducing the said amendments Parliament has chosen not to make any alteration in relation to the following matters: (1) In the marginal note, section 31 is described as special provisions for enforcement of claims by Financial Corporation'. No alteration has been made therein by Act 43 of 1985 and section 31 continues to be a special provision for enforcement of claims by Financial Corporation. (2) Parliament has not expressly indicated that an order for payment of money only may be passed against the surety ..... X X X X Extracts X X X X X X X X Extracts X X X X
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