THE HON'BLE THE CHIEF JUSTICE SATISH CHANDRA SHARMA
AND
THE HON'BLE SRI JUSTICE N. TUKARAMJI
W.A.No.108 of 2009
JUDGMENT: (Per the Hon'ble the Chief Justice Satish Chandra Sharma)
The present writ appeal is arising out of the order dated
22.10.2008 passed by the learned Single Judge in W.P.No.3733 of
2008.
The undisputed facts of the case reveal that the writ petition
was preferred by one Cheruku Swamy, aggrieved by the action of
A.P. State Financial Corporation in auctioning his property. The
undisputed facts also reveal that a partnership firm, in the name
and style of Sai Durga Tube Wells, availed financial assistance to
the tune of Rs.25,00,000/- from the appellants/Corporation on
25.01.2001 and respondent No.1 in the present writ appeal/writ
petitioner, Cheruku Swamy, offered his land as collateral security.
The facts further reveal that the principal borrower was not able to repay the loan and the property of the surety was sold by the appellants/Corporation, in exercise of powers conferred under Section 29 of the State Financial Corporations Act, 1951 (for short 'the Act'). The learned Single Judge has allowed the writ petition, keeping in view the judgment delivered in the case of Karnatka State Financial Corporation vs. N. Narasimhaiah and others1.
The statutory provisions governing the field, as contained under Sections 29 and 31 of the Act, are reproduced as under:-
"29.Rights of Financial Corporation in case of default:- (1) Where any industrial concern, which is under a liability to the Financial Corporation under an agreement, makes any default in repayment of any loan or advance or any instalment thereof or in 1 2008(4) SCALE 473 2 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, the Financial Corporation shall have the right to take over the management or possession or both of the industrial concerns, as well as the right to transfer by way of lease or sale and realise the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation.
(2) Any transfer of property made by the Financial Corporation, in exercise of its powers under sub-section (1), shall vest in the transferee all rights in or to the property transferred as if the transfer had been made by the owner of the property.
(3) The Financial Corporation shall have the same rights and powers with respect to goods manufactured or produced wholly or partly from goods forming part of the security held by it as it had with respect to the original goods.
(4) Where any action has been taken against an industrial concern under the provisions of sub-section (1), all costs, charges and expenses which in the opinion of the Financial Corporation have been properly incurred by it as incidental thereto shall be recoverable from the industrial concern and the money which is received by it shall, in the absence of any contract to the contrary, be held by it in trust to be applied firstly, in payment of such costs, charges and expenses and, secondly, in discharge of the debt due to the Financial Corporation, and the residue of the money so received shall be paid to the person entitled thereto.
(5) Where the Financial Corporation has taken any action against an industrial concern under the provisions of sub-section (1), the Financial Corporation shall be deemed to be the owner of such concern, for the purposes of suits by or against the concern, and shall sue and be sued in the name of the concern.
31.Special provisions for enforcement of claims by Financial Corporation:-(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 3 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:--
(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 concern without the permission of the Board, where such removal is apprehended. (2) An application under sub-section (1) shall state the nature and extent of the liability of the industrial concern to the Financial Corporation, the ground on which it is made and such other particulars as may be prescribed."
The Hon'ble Supreme Court, while dealing with the aforesaid statutory provisions of law, held in paragraphs 27 to 34 of the judgment rendered in the case of Karnatka State Financial Corporation (1 supra) as under:-
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 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 Section 29; (iii) to take recourse to Section 31; and (iv) to take recourse to Section 32G of the Act.4
29. In A.P. State Financial Corporation v. M/s GAR Re-Rolling Mills and Another [(1994) 2 SCC 647] , this Court held:
"19. The right vested in the Corporation under Section 29 of the Act is besides the right already possessed at common law to institute a suit or the right available to it under Section 31 of the Act."
Section 32g of the Act provides for an additional remedy. It is, however, interesting to note that while upholding the right of the Corporation to opt for either Section 29 or Section 31 of the Act, it was opined:
"In our opinion the Corporation can initially take recourse to Section 31 of the Act but withdraw or abandon it at any stage and take recourse to the provisions of Section 29 of the Act, which section deals with not only the rights but also provides a self-contained remedy to the Corporation for recovery of its dues. If the Corporation chooses to take recourse to the remedy available under Section 31 of the Act and pursues the same to the logical conclusion and obtains an order or decree, it may thereafter execute the order or decree, in the manner provided by Section 32(7) and (8) of the Act. The Corporation, however, may withdraw or abandon the proceedings at that stage and take recourse to the provisions of Section 29 of the Act."
30. RIGHT of property, although no longer a fundamental right, is still a constitutional right. It is also human right. In absence of any provision either expressly or by necessary implication, depriving a person there from, the court shall not construe a provision leaning in favour of such deprivation. Recently, this Court in P.T.
Munichikkanna Reddy & Ors. v. Revamma & Ors. [(2007) 6 SCC 59] dealing with adverse possession opined:
"human rights have been historically considered in the realm of individual rights such as, right to health, right to livelihood, right to shelter and employment etc. but now human rights are gaining a multifaceted dimension. Right to property is also considered very much a part of the new dimension. Therefore, even claim of adverse possession has to be read in that context. The activist approach of the English Courts is quite visible from the judgment of Beaulane Properties Ltd. v. Palmer [2005 (3) WLR 554 : 2005 EWHC 817 (Ch.)] and JA Pye (Oxford) 5 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 to the golden rule of literal interpretation. It is not a case where we are dealing with a defect in the legislative drafting. We cannot presume any. In a case where a court has to weigh between a right of recovery and protection of a right, it would also lean in favour of the person who is going to be deprived therefrom. It would not be the other way round. Only because a speedy remedy is provided for that would itself lead to the conclusion that the provisions of the Act have to be extended although the statute does not say so. The object of the Act would be a relevant factor for interpretation only when the language is not clear and when two meanings are possible and not in a case where the plain language leads to only one conclusion.
33. Even if the legislation is beneficent, the same by itself would not be held to be extendable to a situation which the statute does not contemplate. [S. Sundaram Pillai, etc. v. V.R. Pattabiraman AIR 1985 SC 582 ]. In Attorney General v. Milne [1914-15] All E.R. Rep. 1061], Lord Dunedin states:
"Now, prima facie one would expect that the scope of the two sets of provisions would be the same, i.e., in other words that the question must be answered as to those kinds of property which are swept in by s.2, just as much as to those which fall under s.1. Inasmuch, however, as this is a taxing 6 statute, and the duty here is an additional duty, I consider that it must be shown that the words would clearly cover the individual case to which it is right to apply them."
34. It is now well-settled that when more than one remedy is provided for an option is given to a suiter to opt for one or the other remedy. Such a provision is not ultra vires as has been held by this Court in Maganlal Chhaganlal (P) Ltd. v. Municipal Corporation of Greater Bombay and Others [(1974) 2 SCC 402] , Director of Industries, U.P. and Others v. Deep Chand Agarwal [(1980) 2 SCC 332] Rajiv Anand (supra)."
In the light of the ratio laid down by the Hon'ble Supreme Court in the aforesaid case and also keeping in view the fact that the property in question was one of the properties offered as collateral security, this court is of the considered opinion that the same could not ha ve been sold by invoking Section 29 of the Act and therefore, the learned Single Judge was justified in setting aside the same. The learned Single Judge has also granted a liberty to the appellants/Corporation to work out appropriate remedy as available under the law. This Court does not find any reason to interfere with the order passed by the learned Single Judge.
The writ appeal is dismissed.
Pending miscellaneous applications, if any, shall stand closed. There shall be no order as to costs.
___________________________ SATISH CHANDRA SHARMA, CJ _______________________ N. TUKARAMJI, J 09.12.2021 JSU