Patna High Court
Thakur Paper Mills Ltd. And Anr. vs Industrial Finance Corporation Of ... on 4 January, 1972
Equivalent citations: AIR1972PAT348, AIR 1972 PATNA 348
Author: N.L. Untwalia
Bench: N.L. Untwalia
JUDGMENT N.L. Untwalia, J.
1. These two miscellaneous appeals have been placed before me for hearing and disposal under orders of Hon'ble the Chief Justice passed in accordance with Rule 5 of Chapter II of Part I of the Patna High Court Rules. On a point of law there was a difference of opinion between Shambhu Prasad Singh, J., and Shiveshwar Prasad Sinha, J. It is not necessary for me to state all the facts in detail as they find mention in the judgment of his Lordship Mr. Justice Shambhu Prasad Singh. I shall mention a few of them.
2. The Industrial Finance Corporation of India, respondent No. 1 in Miscellaneous Appeal 240 of 1971, and the Bihar State Financial Corporation, respondent No. 1 in Miscellaneous Appeal 241 of 1971, advanced large sums of money to Messrs. Thakur Paper Mills Ltd. whose Managing Agents are Messrs, Ram Bahadur Thakur and Company. Both of them are appellants in the two appeals. The Industrial Finance Corporation is a body constituted under the Industrial Finance Corporation Act, 1948 (Central Act 15 of 1948), and granted loan to the appellants in accordance with the provision of the said Act. The Bihar State Financial Corporation functions as a corporate body under the State Financial Corporations Act, 1951 (Central Act 63 of 1951) and entered into transaction of advancement of loans to the appellants in accordance with the said Act. On default in repayment of the amounts of loan, both the Corporations filed their respective applications under the respective Acts, under which they are governed, before the District Judge of Darbhanga. The appellants filed show cause applications in both the cases. But at the time of hearing they were absent; their lawyer informed the learned Additional District Judge to whom the cases were transferred for disposal 'no instructions". The cases were taken up ex parte and orders in both the cases were made in accordance with the respective provisions of the two Acts. Miscellaneous Appeal 240 of 1971, was filed by the appellants in the case filed by the Industrial Finance Corporation of India and Miscellaneous Appeal 241 of 1971 arises out of the application filed by the Bihar State Financial Corporation. Both the appeals were heard together by a Bench of this Court consisting of Shambhu Prasad Singh and Shiveshwar Prasad Sinha, JJ. Three points were urged before their Lordships-- (i) that the cases ought not to have been heard ex parte and an opportunity should be given to the appellants to contest the cases afresh, (ii) that no order in terms of Sub-section (10) of Section 30 of Central Act 15 of 1948 and Sub-section (8) of Section 32 of Central Act 63 of 1951 could be made by the Court below at the time of making ex parte orders under Sub-section (9) and Sub-section (7) of the aforesaid provisions and (iii) that in any view of the matter, certain directions given by the Court below even with reference to sub-sections (10) and (8) of Sections 30 and 32 respectively are not warranted by law.
3. The first point was decided against the appellants by both the learned Judges, and no fresh argument was advanced before me--possibly it could not be--to persuade me to take a view contrary to the one taken by the Bench. After having read the Judgments of the learned Judges, I find myself in respectful agreement with then views in that regard.
4. The main difference between the learned Judges has been with reference to the interpretation of Sub-sections (10) and (8) of Sections 30 and 32 respectively. S. P. Singh, J., has taken the view that an order in terms of these sub-sections could be made at the time of making an order for sale under Sub-sections (9) and (7) while S. P. Sinha, J., has taken a contrary view. In his view, the latter part of the impugned orders could not be made at all in the proceedings as initiated; after the order directing sale was made, such orders could follow only on applications being made by the Corporations for executions of the orders of sale and not otherwise. It is for this reason that the case has come to me for hearing and disposal. In my considered judgment, the view expressed by S. P. Singh, J., on this disputed question of law is correct and the one expressed by S. P. Sinha, J., is incorrect, and I say so respectfully. I shall state my reasons immediately. But before I do so, I may state here that even then some of the directions given by the Court below in the two impugned orders have not been upheld by S. P. Singh, J. He has modified the directions given, as stated in his judgment. In that regard too, the matter is final as no argument was advanced before me on behalf of the Corporations to induce me to take a different view. Not only that, I am in respectful agreement with the modifications suggested by S. P. Singh, J. I now proceed to give my reasons in support of my view agreeing with that of S. P. Singh, J.
5. The relevant provisions with which we are concerned in these two appeals are identical in the two Acts, namely, the Industrial Finance Corporations Act (Act 15 of 1948) and the State Financial Corporations Act (Act 63 of 1951). Sections 29 and 30 of Act 63 of 1951 more or less correspond with the provision contained in Sections 28 and 29 of Central Act 15 of 1948. The two sub-sections of Section 31 of the former Act are more or less equivalent to Sub-sections (1) and (2) of Section 30 of Act 15 of 1948. Subsections (1) to (8) of Section 32 of Act 63 of 1951 correspond to Sub-sections (3) to (10) of Section 30 of Act 15 of 1948. Since the relevant provisions are word for word the same in the two Acts, I shall proceed to discuss them with reference to the provisions contained in Act 15 of 1948. The preamble shows the purpose of the Act and it runs as follows:--
"Whereas it is expedient to establish an Industrial Finance Corporation for the purpose of making medium and long-term credits more readily available to industrial concerns in India, particularly in circumstances where normal banking accommodation is inappropriate or recourse to capital issue methods is impracticable;".
The other Act being merely for the purpose of providing for the establishment of State Financial Corporations did not repeat the words of the preamble, but it goes without saying that the object is the same. And, since the facility of medium and long-term credit has been provided for the benefit of the industrial concerns in India, special protection and remedies have also been provided for speedy realisation of the advancement of loans under certain circumstance for the benefit of the Corporations. One such singularly special right given to the Corporation is to be found in Section 28 of Act 15 of 1948. It gives a right to the Corporation in case of default for repayment of any loan or advance or any instalment thereof or on the failure of the industrial concern to comply with the terms of the agreement with the Corporation to transfer by way of lease or sale and realise the property pledged, mortgaged, hypothecated or assigned to the Corporation even by private treaty without going to the Court. The properly vests in the transferee under Sub-section (2). The management of the industrial concern can be taken over in such a situation under Sub-section (3A) of Section 28. Section 29 gives power to the Corporation to call for repayment before the agreed period. In such a case, however, on failure of the industrial concern to repay the loan when the Corporation calls for such immediate repayment, the Corporation has to approach the District Judge under Section 30 under which provision it can approach the Court even in cases which are covered by Section 28. I would do better to quote Sub-sections (1) to (10) of Section 30 of Act 15 of 1948 in full--
"(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 otherwise fails to comply with the terms of its agreement with the Corporation or where the Corporation requires an industrial concern to make immediate repayment of any loan or advance under Section 29 and the industrial concern fails to make such repayment then, without prejudice to the provisions of Section 28 of this Act and of Section 69 of the Transfer of Property Act, 1882, any Officer of the Corporation generally or especially authorised by the Board in this behalf may apply to the District Judge, within the local 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 Corporation as security for the loan or advance, or
(b) For transferring the management of the industrial concern to the Corporation, or
(c) for an ad interim injunction where there is apprehension of the machinery or the equipment being removed from the premises of the industrial concern without the permission of the Board.
(2) An application under Sub-section (1) shall state the nature and extent of the liability of the industrial concern to the Corporation, the ground on which it is made and such other particulars as may be prescribed.
(3) When the application is for the reliefs mentioned in Sub-clauses (a) and (c) of Sub-section (1) 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 realise in his estimation an amount equivalent in value to the outstanding liability of the industrial concern to the Corporation together with the costs of the proceedings taken under this section with or without an ad interim injunction restraining the industrial concern from transferring or removing its machinery or equipment.
(4) Where the application is for the relief mentioned in Sub-clauses (b) and (c) of Sub-section (1) the District Judge shall grant an ad interim injunction restraining the industrial concern from transferring or removing its machinery 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 Corporation.
(5) Before passing any order under Sub-section (3) or Sub-section (4) the District Judge may, if he thinks fit, examine the officer making the application.
(6) At the same time as he passes an order under Sub-section (3), the District Judge shall issue to the industrial concern, a notice accompanied by copies of the order, the application and the evidence, if any, recorded by him, calling upon it 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.
(7) If no cause is shown on or before the date specified in the notice under Subsections (4) and (6), the District Judge shall forthwith make the ad interim order absolute and direct the sale of the attached property or transfer the management of the industrial concern to the Corporation or confirm the injunction.
(8) If cause is shown the District Judge shall proceed to investigate the claim of the Corporation and the provisions of the Code of Civil Procedure, 1908, shall as far as practicable apply to such proceedings.
(9) On an investigation made under Sub-section (8) the District Judge shall pass an order--
(a) confirming the order of attachment and directing the sale of the attached property, or
(b) varying the order of attachment so as to release a portion of the property from attachment and directing the sale of the remainder of the attached property, or
(c) releasing the property form attachment, if he is satisfied that it is not necessary in the interests of the Corporation, or
(d) confirming or dissolving the injunction, or
(e) transferring the management of the industrial concern to the Corporation or rejecting the claim made in this behalf;
Provided that when making any order under clause (c), District Judge may make such further orders as he thinks necessary to protect the interests of the Corporation, and may apportion the costs of the Proceedings in such manner as he thinks fit:
Provided further that unless the Corporation intimates to the District Judge that it will not appeal against any order releasing any property from attachment, such order shall not be given effect to until the expiry of the period fixed under Sub-section (11) within which an appeal may be preferred, or if an appeal is preferred, unless the High Court otherwise directs, until the appeal is disposed of.
(10) An order of attachment or sale of property under this section shall be carried into effect as far as may be 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 Corporation were the decree-holder."
6. It would be noticed from the relevant provisions of the Act extracted above that the Corporation can make an application to the District Judge for one or more of the reliefs mentioned in Clauses (a) to (c) of Sub-section (1) in all cases covered by the contingencies provided in Sections 28 and 29. It may, however, be made clear that both the Corporations had made their respective applications when the appellants had made default in payment of the loan or the instalments thereof. Sub-section (3) provides that the District Judge has to make an ad interim order attaching the security or so much of the property of the industrial concern, which must have been given in security, as would on being sold, realise in his estimation an amount equivalent in value to the outstanding liability. In both these cases, such an order was made by the Court below, and then notice was issued to the appellants in accordance with Sub-section (6). Since the appellants had shown cause, no order in accordance with Sub-section (7) was made making the ad interim order of attachment absolute and directing the sale of the attached property. But the investigation proceeded in accordance with Sub-section (8), and since on the date of the hearing of the cases and a few days prior to that the appellants absented themselves and left contesting them, their hearing proceeded ex parte in accordance with Order 9 of the Code of Civil Procedure, 1908 hereinafter called the Code. The ex parte order was made in terms of clause (a) of Sub-section (9) of Section 30. In the same order, however, the Court below gave certain directions for carrying into effect the order made under Clause (a) of Sub-section (9), and this the Court below did in accordance with Sub-section (10). Question is whether such a further direction was justified in law.
7. The provisions contained in Section 30 would clearly show that when there is a relief asked for an order for sale of the property, the District Judge has to make an interim order attaching the property or a portion thereof, as the case may be. The notice issued under Sub-section (6) is to ask the industrial concern on a date to be specified in it why the interim order of attachment should not be made absolute. I am leaving out of consideration the injunction, part of the order and the relief of injunction claimed as it is not necessary to do so in these cases. I should have thought that once an interim order of attachment is made, the notice in terms should ask the industrial concern as to why the interim order of attachment should not be made final, and an order directing sale of the property or any portion thereof should not be made. Or, it may merely ask the concern to show cause why an order directing sale of the property or a portion thereof should not be made. And, in that case the interim order of attachment shall continue till the sale takes place or the order is revoked. As a matter of construction, therefore, to me it appears that the purport of the notice provided in Sub-section (6) is on that fine as the interim order of attachment is a step in the process for the purpose of sale, and making the interim order of attachment absolute means making it absolute for the purpose of directing sale, otherwise there would be no use in making the order of attachment absolute. The industrial concern is required to show cause why the interim order of attachment should not be made absolute for the purpose of directing sale and, therefore, in substance and in effect, it would mean asking it to show cause in the sense I have indicated above. If no cause is shown then the interim order of attachment is to be made absolute and the Court is to direct the sale of the property under Sub-section (7). But if cause is shown then after investigation made in accordance with the provision of the Code, an order as per one or more of the clauses of Sub-section (9) has to follow.
It would, thus be noticed that when Sub-section (10) speaks about an order of attachment of property under Section 30 got to be carried into effect in accordance with the provisions of the Code, it cannot mean carrying into effect an order of attachment in an execution; unmistakably this refers to carrying into effect the order of attachment to be made under Sub-section (3), (7) or (9) by following the procedure prescribed in Rules 41 to 54 of Order 21 of the Code wherein various modes of attachment of various kinds of movable, immovable property or shares, etc. have been provided. It is incorrect to say, as was urged on behalf of the appellants by Mr. J. C. Sinha, that an ad interim order of attachment or the absolute one made in the proceeding initiated on an application filed under sub-Sections (1) and (2) of Section 30 is like an order of attachment made before judgment in accordance with Rules 5 and 6 read with Rule 7 of Order 38 of the Code. The two are substantially different. The one is a special provision for preservation of the property and as a part of the process of selling it. The other is merely for its preservation until a decree is passed or executed. If by necessary implication the order of attachment is to be carried into effect as far as may be practicable in the manner provided in the Code, without there being any application for execution, I fail to understand how the latter part of the requirement of Sub-section (10) for carrying into effect the order of sale (and I find no difference between the order of sales and order directing the sale) can have a different meaning. The meaning must be that the order of sale made under Sub-section (7) or (9) has also got to be carried into effect in accordance with the provisions of the Code in so far as they are applicable. In other words, the procedure of issuing sale proclamation as provided by Rule 66 onward of Order 21 will be attracted. If the sale takes place, the provision of Section 47 or Rule 90 of Order 21 for setting aside the sale may be applicable; the provision contained in Rule 89 may also be applicable. But for making certain provisions of Order 21 of the Code applicable, it is not necessary that the provision of Rule 10 for filing an application for execution in accordance with Rule 11 must also apply.
8. The procedure prescribed in the Various sub-sections of Section 30 of Act 15 of 1948 for making ad interim order of attachment absolute and directing the sale of the attached property is in material particulars different from the procedure prescribed in Order 34, Rules 2, 4 and 5 of the Code for passing a decree of sale on the basis of a mortgage. When such a mortgage decree is executed under Order 21 of the Code, there is no attachment and no order for sale in terms of Rule 64 of Order 21 can possibly be made or is necessary to be made. There is no provision in the Code for carrying into effect the decree for sale based upon a mortgage. The holder of a decree has got to levy execution in accordance with the various other Rules, namely, Rules 10 and 11 of Order 21 of the Code while, as pointed out by S. P. Singh, J., the language of Sub-section (10) of Section 30 is different.
Here, the order directing sale which, to all intents and purposes, is an order or sale has to be carried into effect by the Court. No application is necessary for the purpose. I must, however, hasten to add that the Court is under no compulsion or obligation to carry into effect the order of sale simultaneously when it makes an order directing sale under Sub-section (7) or (9). It may do so by a separate order. It may even do so on an application by the Corporation. There is no bar to the filing of an application and asking the Court to carry into effect the order of sale in accordance with Sub-section (10) if it has not already done so while making the order directing the sale under Sub-section (7) or (9). It is, however, manifest that such an application cannot be treated as an application in execution or at par with an application filed in accordance with Rule 10 or 11 of Order 21 so as to attract the procedure of issuing fresh notice under Rule 22. It was pointed out by Mr. Shankar Prasad, learned Counsel for the Bihar State Financial Corporation, that there may be cases where it may not be possible for the court which has made an order under Sub-section (7) or (9) directing the sale to carry that order into effect in accordance with the provision of the Code as required by Sub-section (10). For that purpose, it may be necessary to transfer that order for execution to some other court, and in such an event it is plain that a separate application may be necessary. But that apart, ordinarily and generally I am of the opinion that that Court disposing of the application filed under sub-sections (1) and (2) and directing the sale either under Sub-section (7) or (9) should, in the same order, give directions for carrying that order into effect in accordance with the provisions of the Code, meaning thereby issuing sale proclamations, etc., in accordance with Rule 66.
9. Mr. Shankar Prasad learned Counsel for the Bihar State Financial Corporation, led himself--and, as it appears to me, wrongly--to make a concession on the disputed question of law on the basis of an unreported decision of the Supreme Court in Civil Appeals Nos. 1021-1022 of 1971 and 1852 of 1970 (As new Drums Pvt.
Ltd. v. Maharashtra State Finance Corpn.) decided on 24-8-1971 = (Since reported in AIR 1972 SC 801), In that, case on an application filed under Section 31 of Act 63 of 1951 at the instance of Maharashtra State Finance Corporation an order directing sale was made on April 11, 1966, and it appears to me, in the same order a direction was given for issuance of sale proclamation as required by Order 21, Rule 66 of the Code sale proclamations were issued repeatedly. Eventually after the sale of the property the Company which was the appellant before the Supreme Court filed an application on October 3, 1969 for setting aside the sale.
This application was dismissed on January 16, 1970. The Company filed an appeal before the Bombay High Court from this Order dismissing the application for setting aside the sale. The appeal was purported to be filed under Sub-section (9) of Section 32 of Act 63 of 1951. Obvi ously, no appeal from the order dated January 16, 1970 could be filed under the said provision of law. The Bombay High Court dismissed the appeal summarily on the ground that no appeal lay as also on merits. The Supreme Court pointed out that in carrying into effect the order of sale the provisions of the Code are attract ed as provided in Section 32 (8) of Act 63 of 1951 (corresponding to Section 30 (10) of Act 15 of 1948). That being so, an order refusing to set aside a safe in execution of a decree is appealable under Order 43, Rule 1 (J) as an appeal from an order under Rule 92 of Order 21 of the Code refusing to set aside the sale. The law laid down by the Supreme Court is not only binding on me but, if I may say so with respect, provisions of the Code would surely be attracted in all matters after the issuance of the sale proclamation. In the matter of the investigation of show cause filed, under Sub-section (8) of Section 30 also, the provisions of the Code are attracted. In other words, wherever there is any special provision in the Acts with which we are concerned in these cases, that special provision will govern the matter. But in absence of any special provisions, the provisions of the Code would be attracted including the provision for filing an appeal. But wherever there is a conflict between the provisions of the Acts and the Code either expressly or by necessary implication, the former would prevail and not the latter. In regard to the making of an order for carrying into effect the order of sale in the same order directing sale, I am definitely of the opinion that by necessary implication there is a conflict between the provisions of Subsection (10) of Section 30 of Act 15 of 1948 and Rules 10 and 11 of Order 21 of the Code. It is difficult to accept the contention that without an application for execution such an order cannot be made either in the same order in which a direction for sale has been made or even by a separate order. That being so, I think the disputed question of law has got to be decided against the appellants in two appeals.
10. For the reasons stated above, I respectfully agree with the order proposed to be made by Shambhu Prasad Singh, J., in the two miscellaneous appeals and not with that proposed by Shiveshwar Prasad Sinha, J., I order accordingly.