Madras High Court
A.Dhandapani vs The Tamil Nadu Industrial ... on 23 June, 2022
W.A.No.1340 of 2022
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 23.06.2022
CORAM :
THE HON'BLE MR.MUNISHWAR NATH BHANDARI, CHIEF JUSTICE
AND
THE HON'BLE MRS.JUSTICE N.MALA
W.A.No.1340 of 2022
A.Dhandapani ..Appellant
Vs
1.The Tamil Nadu Industrial Investment
Corporation Limited,
Rep. by its Branch Manager,
Special Loan Recovery Branch,
Division No.1, No.692, Anna Salai,
Nandanam,
Chennai - 600 035.
2.M/s.Link World System
Proprietor, K.Arumugam,
No.4, V.O.C.Street, 2nd Main Road,
Kodambakkam,
Chennai - 4. .. Respondents
Prayer : Appeal filed under Clause 15 of Letters Patent against the
order dated 17.11.2021 made in W.P.No.641 of 2011.
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W.A.No.1340 of 2022
For the Appellant : Mr.P.R.Thiruneelakandan
For the Respondents : Mr.P.T.Rakesh
for respondent No.1
JUDGMENT
(Delivered the Hon'ble Chief Justice)
This writ appeal has been filed to challenge the order dated
17.11.2021, whereby the writ petition preferred by the writ appellant
to challenge action of the Tamil Nadu Industrial Investment
Corporation Limited under Section 29 of the State Financial
Corporation Act, 1959 [for short, "the Act of 1951"] was dismissed
after recording detailed reasons.
2. Learned counsel for the writ appellant submitted that the
appellant was not a surety to the amount borrowed by the second
respondent in the appeal, yet an action was taken under Section 29
of the Act of 1951 while proceedings have also been initiated under
Section 31 of the Act of 1951. The simultaneous proceedings could
not have been initiated.
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W.A.No.1340 of 2022
3. The case has a chequered history and conduct of the writ
appellant was considered by the learned Single Judge while
dismissing the writ petition, thus, to be given. The writ appellant has
challenged the notice under Section 29 of the Act of 1951 to save his
properties, though at the same time it was submitted that the
properties were sold to one Logammal. If the properties were sold by
the writ appellant, then the question would be not only about his
locus, but also as to why he is entering into the litigation when the
properties do not belong to him.
4. We need to further give in reference to the litigation by
Logammal, who had filed O.S.No.82 of 2007 claiming herself to be a
bonafide purchaser of the properties, which were subject matter of
the proceedings under Section 29 of the Act of 1951. The suit
aforesaid was dismissed meaning thereby that she was not a bonafide
purchaser, though an appeal against the said judgment is pending.
The fact aforesaid is relevant for the reason that the sale by the writ
appellant itself is under question and, therefore, the notice issued
under Section 29 of the Act of 1951 is causing worry to the writ
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W.A.No.1340 of 2022
appellant, who stood as surety to the borrower. Though the fact
about the surety has been disputed by the writ appellant, the facts on
record proves him to be a surety and, therefore, his liability is co-
extensive with that of the borrower.
5. In the background given above, we do not find that it to be a
bonafide litigation, rather an indirect way to save the borrower for
making payment of the due amount so borrowed by it. It is for the
reason that if the writ appellant would have already sold the
properties having no lis, he would not have involved himself in the
litigation, but he has challenged the notice issued under Section 29 of
the Act of 1951. Looking into fact, it is not a bonafide litigation in the
hands of the writ appellant.
6. The fact aforesaid would be clear even from one more
document i.e. the proceedings under Section 29 of the Act of 1951,
which was initiated on 01.07.2004, while the writ petition was filed
by the writ appellant in the year 2011 without justifying the delay.
The possession of the properties was taken on 01.07.2004 itself.
Thus, the writ petition was even suffer from laches. Though the
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W.A.No.1340 of 2022
aforesaid was not taken to be a ground by the learned Single Judge,
it is relevant to find out the bonafide of the writ appellant and
otherwise the delay in filing the writ petition would be fatal in this
case.
7. It is only after completion of the proceedings under Section
29 of the Act of 1951 in the year 2004, action under Section 31 of the
Act of 1951 was initiated by the first respondent financial institution
in the year 2017 and, therefore, it is not a case of simultaneous
proceedings between the two provisions, rather, one after another.
8. Sections 29 and 31 of the Act of 1951 are extracted
hereunder for ready reference:
"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
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
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W.A.No.1340 of 2022
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
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W.A.No.1340 of 2022
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 of section 29 of this Act and of section 69 of
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W.A.No.1340 of 2022
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
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W.A.No.1340 of 2022
prescribed."
9. Section 29 of the Act of 1951 is invoked by the financial
institution to take over the management or possession of the
industrial concern to realise the property pledged, mortgaged,
hypothecated or assigned to the Financial Corporation. That part of
action was completed in the year 2004 itself, while Section 31 of the
Act of 1951 was resorted to in the year 2017 for enforcing the
recovery of the borrowed amount. The writ appellant is a party in
those proceedings. The initiation of the proceedings was during the
pendency of the writ petition and not at the time of filing, so as to
make a ground to challenge the proceedings under Section 29 of the
Act of 1951 on the ground that the proceedings under Sections 29
and 31 of the Act of 1951 cannot go simultaneously. The issue
aforesaid was not available to the writ appellant at the time of filing
of writ petition.
10. For all the reasons, we do not find any ground to cause
interference in the order of the learned Single Judge. The writ appeal
is dismissed finding no merit in it. However, looking to the conduct
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W.A.No.1340 of 2022
of the writ appellant, cost of Rs.25,000/- is imposed on him and the
appellant is directed to deposit the cost with the Tamil Nadu State
Legal Services Authority within fifteen days from today. The
Registrar (Judicial) would ensure the compliance of the said direction
and if it is not made, the disposed of writ appeal may be listed before
the Court for appropriate order for compliance.
(M.N.B., CJ.) (N.M., J.)
23.06.2022
Index : Yes/No
bbr
To:
The Branch Manager,
The Tamil Nadu Industrial Investment Corporation Limited,
Special Loan Recovery Branch,
Division No.1, No.692, Anna Salai,
Nandanam, Chennai - 600 035.
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W.A.No.1340 of 2022
THE HON'BLE CHIEF JUSTICE
AND
N.MALA,J.
bbr
W.A.No.1340 of 2022
23.06.2022
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