Madras High Court
The Honourable Mr. Justice vs The Branch Manager on 29 September, 2023
C.R.P.Nos.2626 and 2627 of 2012
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved on : 20.07.2023
Pronounced on : 29.09.2023
CORAM
THE HONOURABLE MR. JUSTICE V. LAKSHMINARAYANAN
C.R.P.Nos.2626 and 2627 of 2012
and
M.P.Nos. 1 + 1 of 2012
C.R.P.No.2626 of 2012:
1.Durairaj (died),
S/o.Natesan,
Proprietor,
M/s.Selvam Mat Industries,
No.16/2, Main Road,
Thurai Mangalam,
Perambalur Taluk and District.
2.Selvaraj (died)
3.D.Sellammal
4.D.Premalatha
5.D.Chandramohan
6.Dureiselvamohan
7.D.Rajmohan
8.S.Krishnammal
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C.R.P.Nos.2626 and 2627 of 2012
9.N.S.K.Kalairaja
10.N.S.K.Karunairaja
11.R.Kalaiselvi
12.P.Kanitha … Petitioners/Respondents/Respondents
(Petitioners 3 to 7 are the legal representatives of the deceased 1st petitioner
vide order of this Court dated 06.07.2023 in C.M.P.Nos.7420, 7505 and 7509
of 2023 in C.R.P.No.2626 of 2012 by VLNJ)
(Petitioners 8 to 12 are the legal representatives of the deceased 2nd petitioner
vide order of this Court dated 06.07.2023 in C.M.P.Nos.7478, 7485 and 7480
of 2023 in C.R.P.No.2626 of 2012 by VLNJ)
Vs.
The Branch Manager,
Tamil Nadu Industrial Investment
Corporation Limited,
Tiruchirappalli Branch,
K.R.T. Building,
No.33, Bharathidasan Salai,
Cantonment,
Trichy – 620 001. … Respondent/Petitioner/Petitioner
C.R.P.No.2627 of 2012:
Selvaraj (died)
2.S.Krishnammal
3.N.S.K.Kalairaja
4.N.S.K.Karunai Raja
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C.R.P.Nos.2626 and 2627 of 2012
5.R.Kalaiselvi
6.P.Kanitha …Petitioners/Respondents/Respondents
(Petitioners 2 to 6 brought on record the legal representatives of the deceased
sole petitioner vide order of this Court dated 06.07.2023 in C.M.P.Nos.7356,
7361 and 7347 of 2023 in C.R.P.No.2627 of 2012 by VLNJ)
Vs.
The Branch Manager,
Tamil Nadu Industrial Investment
Corporation Limited,
Tiruchirappalli Branch,
K.R.T. Building,
No.33, Bharathidasan Salai,
Cantonment,
Trichy – 620 001. ...Respondent/Petitioner/Petitioner
Prayer in C.R.P.No.2626 of 2012: Petition filed under Article 227 of the
Constitution of India as against the Fair and Decreetal Order dated 20.04.2012
passed by the learned Principal District Judge, Perambalur, in the Memo filed
by the plaintiff in I.A.No.21 of 2011 in S.F.C.O.P.No.1 of 2009.
Prayer in C.R.P.No.2627 of 2012: Petition filed under Article 227 of the
Constitution of India as against the Fair and Decreetal Order dated 20.04.2012
passed by the learned Principal District Judge, Perambalur, in the Memo filed
by the plaintiff in I.A.No.22 of 2011 in S.F.C.O.P.No.2 of 2009.
For Petitioners : Mr.V.Ayyadurai, Senior Counsel
(in both petitions) for Mr.Ma.Pa.Thangavel
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C.R.P.Nos.2626 and 2627 of 2012
For Respondents : Mr.H.Adaikala Arockiaraj
(in both petitions)
COMMON ORDER
These Civil Revision Petitions arise against the Order passed under Order 23 Rule 3 read with Section 151 of the Code of Civil Procedure, permitting the respondent/Corporation to withdraw S.F.C.O.P.Nos.1 and 2 of 2009 with liberty to proceed against the properties of the respondents under Section 29 of the State Financial Corporations Act, 1951, and to proceed against the properties of the respondent under Section 31, in future, if necessity arises.
2.The Civil Revision Petitioner wanted to set up a “korai mat” factory at Perambalur. To that end, he made an application for loan to the Tamil Nadu Industrial Investment Corporation Limited (hereinafter referred to as the TIIC). The Corporation also sanctioned the loan for Rs.7,40,000/-. The petitioner executed a registered Mortgage Deed for a sum of Rs.50,000/- on 05.07.1989 and also executed a Deed of hypothecation and Deed of Guarantee. The petitioner also mortgaged the land, building and machinery in favour of TIIC.
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3.The petitioner required some more loan and therefore, approached for the second term loan over and above the first loan. The said loan was also granted to the tune of Rs.4,10,000/-. Since there was a default, the TIIC initiated proceedings for realisation of Rs.14,42,360/- for the first loan and Rs.27,56,809.95 for the second loan. To that end, it filed a petition on 01.10.2009 before the learned District Judge, Perambalur. This petition was filed under Section 31 of the State Financial Corporations ct.
4.The respondent filed a counter denying its liability. Pending the proceedings, the State Financial Corporation wanted to withdraw the proceedings in S.F.C.O.P.No.2 of 2009 with liberty to proceed against the properties under Section 29 of the State Financial Corporations Act and to proceed against the properties of the petitioner in future under Section 31 of the Act. This application was taken on file as I.A.No.22 of 2011. The petition was resisted by the petitioner on the ground that the remedy under Section 29 is independent from remedy under Section 31 and therefore, the petitioner cannot withdraw the petition under Section 31 with liberty to proceed against the properties under Section 29 of the Act.
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5.The learned Principal District Judge was pleased to grant the permission on the ground that the petitioner is entitled to invoke Section 29 and Section 31 for the sale of the properties, in case, there is a default committed on repayment of loan. Consequently, he allowed I.A.No.22 of 2011. Challenge is made to the said proceedings.
6.I heard Mr.V.Ayyadurai, learned Senior Counsel appearing for Mr.Ma.Pa.Thangavel, learned counsel for the petitioners and Mr.H.Adaikala Arockiaraj, learned counsel appearing for the respondent.
7.According to Mr.V.Ayyadurai, Sections 29 and 31 of the State Financial Corporations Act are two methods in which the State Financial Corporation can bring the properties for sale and since the TIIC had opted to go under Section 31, it has to proceed only under Section 32 of the Act for sale of the properties. He would urge that Sections 29 and 31 of the State Financial Corporations Act and Section 69 of the Transfer of Property Act are remedies available to the TIIC and once they choose one remedy they are not not entitled to go to the other remedies.
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8.The learned counsel appearing for the petitioners would submit that the State Financial Corporation can exercise the powers under all the three and exercise of one does not denude the power of Corporation to proceed against other.
9.I have carefully considered the arguments on either side.
10.Prior to entering the Judgment, it is necessary to extract Sections 29 and 31 of the State Financial Corporations Act. They read as follows:
“Section 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 1 [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 2 [right to take over the management or possession or both of the industrial concerns], as well as the 3 [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 7/16 https://www.mhc.tn.gov.in/judis C.R.P.Nos.2626 and 2627 of 2012 Corporation, in exercise of its powers 4 *** under sub-section (1), shall vest in the transferee all rights in or to the property transferred 5 [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, 8 [charges and expenses which in the opinion of the Financial Corporation have been properly incurred] by it 9 [as incidental thereto] shall be recoverable from the industrial concern and the money which is received by it 10*** 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) 7 [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 11[the concern].” 8/16 https://www.mhc.tn.gov.in/judis C.R.P.Nos.2626 and 2627 of 2012 Section 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 1 [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, 2 [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 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 3 [Financial Corporation] as security for the loan or advance; or 4 [(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 9/16 https://www.mhc.tn.gov.in/judis C.R.P.Nos.2626 and 2627 of 2012 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.”
11.Under Section 29, a Financial Corporation like TIIC, when there is a default, has the right to take over the management of an industrial concern or possession of the industrial concern or both. It also has a right of transfer by way of lease or sale and realise the properties mortgaged, hypothecated and assigned to it. Section 31 of the Act is a special provision which has been incorporated in the Act. The said provision enables the Financial Corporation to move the District Court having the jurisdiction for the purpose of
(a)obtaining orders for the sale of the property pledged, mortagaged, hypothecated or assigned, (aa)for enforcing the liability of the surety,
(b)for transferring the Management of the industrial concern to the 10/16 https://www.mhc.tn.gov.in/judis C.R.P.Nos.2626 and 2627 of 2012 Financial Corporation and
(c)for obtaining orders of ad interim injunction from transferring or removing the machinery without permission of the Board.
12.It is pertinent to point out that Section 31 itself says the power available to a Financial Corporation is without prejudice to the provisions of Section 29 of the State Financial Corporations Act and Section 69 of the Transfer of Property Act. The words “without prejudice” shows that a State Financial Corporation like TIIC, can not only proceed under Section 29, but can also opt for moving the District Court under Section 31 of the Act. I am not able to read Sections 29 and 31 of the State Financial Corporations Act and Section 69 of the Transfer of Property Act, 1882 as three mutually exclusive remedies which are available by which, if the TIIC involves one of these remedies, it is barred from invoking the other two.
13.The reason why I am not able to agree with the submission of the learned senior counsel for the petitioner is where there is a default, the State Financial Corporation would obviously be desperate to make good the loss which it would suffer. The Parliamentary legislation has given it three options. 11/16 https://www.mhc.tn.gov.in/judis C.R.P.Nos.2626 and 2627 of 2012 The procedure under Section 29 can be invoked by the Corporation itself, whereas the provision measures under Section 31 requires the assistance of the Court. Therefore, they cannot be compared to as the same remedy.
14.Apart from that, the words “without prejudice to the provisions of Section 29 and Section 69 of the Transfer of Property Act, 1882” found under Section 31 shows that the power under Section 31, is in addition to and not in derogation of the powers available under the other two Sections.
15.Further, I would rely upon the Judgment in Transcore v. Union of India, [(2008) 1 SCC 125)], in particular, Para 64. The Supreme Court held that in order for doctrine of election to apply, three elements should be satisfied, namely, (1)the existence of two or more remedies, (2)inconsistencies between such remedies and (3)the choice of one of them.
The Court held, even if any one of the three elements is not there, the doctrine 12/16 https://www.mhc.tn.gov.in/judis C.R.P.Nos.2626 and 2627 of 2012 will not apply. I am not able to see any inconsistencies between the remedies sought for under Sections 29 and Section 31 and therefore, I necessarily have to hold that the doctrine of election will not apply.
16.Therefore, I am of the view that exercise of the powers under Sections 29 and 31 of the State Financial Corporations Act and Section 69 of the Transfer of Property Act, are independent and can be proceeded with accordingly. Any one of the remedies is without prejudice to the other remedies. In fact, the petitioner had correctly understood the scope of Sections 29 and 31 as it would be clear from the counter filed by it before the District Court. In para 6, the stand taken by the petitioner is as follows:
“6....As per the State Financial Corporations Act, 1951 the remedies available to the Corporation under Section 29 and 31 of the Act is independent of each other. Under such circumstances, the petitioner cannot come forward with the present application to withdraw the petition already filed under Section 31 of the Act, with a liberty to proceed against the properties of the respondents under Section 29 of the Act.”
17.Perhaps, finding that this stand would be unsustainable before this 13/16 https://www.mhc.tn.gov.in/judis C.R.P.Nos.2626 and 2627 of 2012 Court that has been given up before the court below and a new argument is being raised. Being an interesting question of law raised by the learned Senior Counsel, I permitted him to argue on the point.
18.Therefore, the first submission of the learned Senior Counsel for the petitioners that having opted for the remedy under Section 31 the respondent is foreclosed from proceeding under Section 29 of the State Financial Corporations Act and Section 69 of the Transfer of Property Act does not appeal to me and therefore, rejected.
19. The learned counsel then points out that the petition for withdrawal does not answer on the rigours of order 23. It is here that Section 32 becomes relevant. Section 32(6) shows that the learned Judge should apply the Civil Procedure Code only insofar as it applies to investigation of the claim of the Financial Corporation. It is not as if the entire Code of Civil Procedure is made applicable to a proceeding under Section 32 of the State Financial Corporations Act. The mere fact that the TIIC has quoted Order 23 in its petition does not mean the rigours of Order 23 is automatically applicable to a petition under Section 31 of the State Financial Corporations Act. Suffice it to say that the learned District Judge has the power to permit withdrawal under 14/16 https://www.mhc.tn.gov.in/judis C.R.P.Nos.2626 and 2627 of 2012 Section 151 of the Code of Civil Procedure because he is sitting as a Court and when he is sitting so the provision of Section 151 would apply. Therefore, to state that Order 23 has not been strictly complied with, does not appeal to me since the said provision is inapplicable to a proceeding under Section 31 of the State Financial Corporations Act.
20. In the light of the above, I do not find any merits in this revision and the same is dismissed. No Costs. Consequently, connected Miscellaneous Petitions are closed.
29.09.2023
Index : Yes/No
Speaking Order : Yes/No
Neutral Citation Case : Yes/No
mps
To
The Principal District Judge,
Perambalur.
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C.R.P.Nos.2626 and 2627 of 2012
V. LAKSHMINARAYANAN, J.
mps
Pre-Delivery Orders in
C.R.P.Nos.2626 and 2627 of 2012
and M.P.Nos. 1 + 1 of 2012
29.09.2023
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