Civil Revision Petition No.2881 of 2005

8th July, 2009

Petitioner Counsel: C. RAGHU
Respondent Counsel: M. VIDYA SAGAR

JUDGMENT

JUDGMENT :- The 1st respondent filed S.F.C.O.P. No.242 of 1999 before the Court of II Additional District Judge, Vijayawada, under Section 31 of the State Financial Corporations Act, 1951 (for short 'the Act'), with a prayer to pass an order against the assets of the 2nd respondent-Rice Mill and its Directors. It was pleaded that the 2nd respondent availed the loan facility by executing necessary documents and failed to repay the same. An amount of Rs.4,75,34,752/- is said to have become due, as on 31.01.1999.

2. The application was resisted by the petitioner and respondents 2 to 6. It was pleaded that the entire property, offered as security, was seized in exercise of power under Section 29 of the Act, and O.S. No.120 of 1999, filed in the Court of Junior Civil Judge, Gannavaram, questioning the auction of the seized properties; was pending. An objection was also raised, as to the liability of the Directors. The trial Court allowed the O.P., through its order, dated 04.02.2003. Interest at 19.6% was awarded.

3. The 1st respondent filed E.P. No.118 of 2003, before the trial Court, under Rule 37 of Order 21, CPC, with a prayer to cause arrest of judgment debtors 2 to 4 and commit them to civil prison. The petitioner, who is the Managing Director of the 2nd respondent herein, filed this C.R.P., under Article 227 of the Constitution of India, challenging the action of the trial Court in entertaining the E.P.

4. Sri C. Raghu, learned counsel for the petitioner, submits that the Act is a self-contained code and the proceedings instituted under Section 31 of the Act, do not warrant any independent execution, at all. He further submits that Section 31 of the Act itself provides for the nature of steps to be taken, which are comparable to execution, against the property. Learned counsel contends that an order passed under Section 31 of the Act cannot be equated to that of a money decree and there is no scope, or possibility for filing of E.P.

5. Sri Vidya Sagar, learned counsel for the 1st respondent, on the other hand, submits that the adjudication undertaken by a civil Court on an application filed under Section 31 of the Act, would result in a decree, and as in the case of any other decree, it is always open to a decree holder to chose the mode of execution. He contends that the C.R.P. is not maintainable, since no order adverse to the interests of the petitioner has ensued so far.

6. The petitioner feels aggrieved by the very act of the trail Court in entertaining the E.P., for enforcement of the order in S.F.C.O.P. No.242 of 1999. Apart from providing for State Financial Corporations and Management thereof, the Act prescribes different methods for recovery of the amount, due to them. Normally, a citizen, or a legal entity, has to approach a Civil Court for recovery of amount due to it. Extraordinary power was conferred upon the Corporations created under the Act, to take steps, on their own accord, for recovery of the amounts due to them. Section 29 of the Act, empowers the Corporations to seize the property offered as security and to put it to sale.

7. One more facility created in favour of Corporations is to approach the concerned District Court. The nature of relief that can be granted by the District Court and the steps that are to be taken, are mentioned in Section 32 of the Act.

8. It is relevant to extract Section 31 of the Act. It reads :

"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 the Transfer of Property Act, 1882 (4 of 1882), any officer of the Financial Corporation, generally or specially authorized 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."

9. Section 32 of the Act is large in its content, having 12 sub-sections. It is so comprehensive that it provides for not only passing of an order granting the relief, under Section 31 of the Act, but also for implementation thereof, by causing attachment and sale of the property. Having regard to the size and content of that Section, this Court has not chosen to reproduce the same here.

10. The 1st respondent did institute proceedings against the petitioner and respondents 2 to 6 under Section 31 of the Act. The prayer in the petition was to pass an order against the assets of the Company and also against respondents 2 to 6 therein personally, with a direction to them to pay the amount of Rs.4,75,39,352/-. An objection was raised by the respondents therein to the effect that Section 31 of the Act cannot be invoked, once the Corporation has chosen to exercise its power under Section 29 of the Act. Another objection was that the Directors cannot be held liable personally. Both the objections were rejected and the petition was allowed.

11. The decree passed by the trial Court is worded in terms of Section 31 of the Act. What should follow in the event of an order passed under Section 31 is provided for, in Section 32 of the Act. Sub-section (1) thereof, reads as under :

"Procedure of District Judge in respect of applications under Section 31.- (1) When the application is for the reliefs mentioned in clauses (a) and (c) of sub-section (1) of Section 31, the District Judge shall pass an ad interim order attaching the security, or so much of the property of the industrial concern as would on being sold realize in his estimate an amount equivalent in value of the outstanding liability of the industrial concern to the Financial Corporation, together with the costs of the proceedings taken under Section 31, with or without an ad interim injunction restraining the industrial concern from transferring or removing its machinery, plant or equipment."

12. The process under this Section continues, till the property is brought to sale. This is a clear substitute for the mechanism of execution, provided for, under the relevant sections as well as Order 21, C.P.C.. Instead of initiating further steps under Section 32 of the Act, the 1st respondent has chosen to file the E.P., that too, under Order 21, Rule 37, C.P.C.. Section 4(1) of C.P.C. makes it amply clear, that wherever a special form of procedure is prescribed, under special or local law, nothing in the Code shall be deemed to limit, or otherwise affect the same. It reads as under :

"Savings :- (1) In the absence of any specific provision to the contrary, nothing in this Code shall be deemed to limit or otherwise affect any special or local law now in force or any special jurisdiction or power conferred, or any special form of procedure prescribed, by or under any other law for the time being in force."

13. Therefore, when Section 32 of the Act has prescribed a special procedure for implementation of the orders passed in a petition presented under Section 31 of the Act, it becomes impermissible to institute the execution proceedings under the Code. At any rate, the prayer for arrest of the Directors for implementation of the orders passed under Section 31 lacks bona fides, apart from being opposed to the letter and spirit of the Act.

14. If this Court comes across an instance of exercise of jurisdiction by Subordinate Court, which is not vested in it, the same can be scuttled by this Court, in exercise of its supervisory jurisdiction, under Article 227 of the Constitution of India.

15. Hence, the C.R.P., is allowed, and it is held that the trial Court has no jurisdiction to entertain the E.P. No.118 of 2003, for enforcement of the order in S.F.C.O.P. No.242 of 1999. Consequently, the very registration of E.P., is set aside.

16. There shall be no order as to costs.

Order accordingly.