Karnataka High Court
Sri I Mahabaleshwarappa vs Karnataka State Financial Corporation on 10 June, 2013
Author: N Kumar
Bench: N Kumar
IN THE HIGH COURT OF KARNATAKA AT
BANGALORE
DATED THIS THE 10TH DAY OF JUNE 2013
PRESENT
THE HON'BLE MR.JUSTICE N KUMAR
AND
THE HON'BLE MR.JUSTICE V.SURI APPA RAO
M.F.A. Nos.3621/2007 C/w 2902/2007 (SFC)
IN MFA No.3621/2007
BETWEEN:
1. Sri. I. Mahabaleshwarappa
S/o Siddaramappa I.,
Aged about 54 years,
No.2757, 17th Cross,
BSK II Stage, Kanakapura Road,
Bangalore - 560 070.
Since dead by his LR
1(a) Manu Ittina
S/o late I. Mahabaleshwarappa,
Major, No. 2757, 17th Cross,
II Stage, Kanakapura Road,
Banashankari,
Bangalore - 560 070.
2. Smt. I. Nagalambika
W/o Sri. I. Mahabaleshwarappa,
Aged about 51 years,
No.2757, 17th Cross,
BSK II Stage, Kanakapura Road,
Bangalore - 560 070.
3. Sri. I. Basavaraj
S/o Siddaramappa I.,
No.2757, 17th Cross,
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BSK II Stage, Kanakapura Road,
Bangalore - 560 070. Appellants.
(By Sri. Y.H. Ganesh Bhat, Adv.)
AND:
1. Karnataka State Financial Corporation,
Presently having its Head Office
At No.1/1, Thimmaiah Road,
Bangalore - 560 052, represented by
Its Manager, Legal Recovery.
2. Mr. Siva Basavaraj,
Aged about 57 years,
Son of Siva Santhappa,
337, II Block, Jayanagar,
Bangalore.
3. Mr. Basavaraj Jigalur,
Son of G.H. Channappa,
Aged about 62 years,
1213, V Block, Rajajinagar,
Bangalore.
4. M/s. Ittina Printers (P) Ltd.,
No.2757, 17th Cross,
II Stage, Kanakapura Road,
Banashankari,
Bangalore - 560 070. Respondents
(By Sri. Bipin Hegde, Adv. for R-1,
Sri. Harikrishna S. Holla, Adv. for R-2, R-3 - Served)
This Miscellaneous First Appeal is filed under Section 32(9) of the
State Financial Corporation Act, 1959, prays that this Hon'ble Court be
pleased to call for the records in Misc. No.56/1993 on the file of the II
Addl. District Judge, Bangalore Rural District, Bangalore; set aside the
order dated 12.01.2007 passed by the II Addl. District Judge, Bangalore
Rural District, Bangalore in Misc. No.56/1993 and dismiss the Misc.
No.56/1993.
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IN MFA No.2902/2007:
BETWEEN:
Siva Basavaraj
S/o Siva Santhappa,
Aged about 65 years,
Residing at No.337,
II Block, Jayanagar,
Bangalore - 11. ...Appellant
(By Sri. Hari Krishna S. Holla, Adv.)
AND:
1. Karnataka State Financial
Corporation, No.1/1,
Thimmaiah Road,
Represented by its
Manager, Legal Recovery.
2. S. Mahabaleshwarappa
S/o Siddaramappa,
Aged about 60 years,
No.2757, 17th Cross,
Banashankari II Stage,
Bangalore - 560 080,
Since dead represented by his LRs
2(a) Ittina Manu,
Aged about 29 years,
S/o Ittina Mahabaleshwarappa.
2(b) Ittina Mona,
Aged about 26 years,
D/o Ittina Mahabaleshwarappa.
2(c) Ittina Mina,
Aged about 23 years,
D/o Ittina Mahabaleshwarappa.
2(d) Ittina Mahadeva,
Aged about 21 years,
S/o Ittina Mahabaleshwarappa.
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All sons and daughters of
Mr. Ittina Mahabaleshwarappa
Residing at Kaikondanahalli,
Sarjapura Road,
Bangalore.
3. Smt. I. Nagalambika
W/o S. Mahabaleshwarappa,
Aged about 57 years,
No.2757, 17th Cross,
Banashankari II Stage,
Bangalore - 560 080.
4. Basavaraj C. Jigalur,
S/o G.H. Channappa,
Aged about 58 years,
No.1213, V Block,
Rajajinagar,
Bangalore - 10.
5. Basavaraj
S/o Siddaramappa,
Aged about 60 years,
No.2757, 17th Cross,
Banashankari II Stage,
Bangalore - 80.
(Deleted v/o dt. 18.6.2012)
6. M/s. Itlina Printers
(P) Limited, No.2757, 17th Cross,
Banashankari II Stage,
Bangalore - 80. Respondents
(By Sri. Bipin Hegde, Adv. for R-1, Notice to R-2(b) to (d) and
R-6 - dispensed with, R-5 - deleted v.o. dt. 18.6.2012)
This Miscellaneous First Appeal is filed under Section 32(9) of
State Financial Corporation Act r/w Order 41 Rule 1 of Code of Civil
Procedure, prays that this Hon'ble Court be pleased to allow and set aside
the order passed by the II Addl. District Judge, Bangalore Rural District,
Bangalore in Misc. Case No.56/1993 dated 12.01.2007.
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These appeals coming on for Orders this day, N KUMAR
J., delivered the following:
JUDGMENT
These two appeals are preferred by the Guarantors challenging the Judgment and Order passed by the II Additional District Judge, Bangalore Rural District, Bangalore, allowing the Miscellaneous Application filed under Section 31(1)(aa) and 32 of the State Financial Corporation Act, 1951.
2. For the purpose of convenience, the parties are referred to as they were referred in the Miscellaneous Case No.56/1993.
3. The applicant - Karnataka State Financial Corporation advanced loan to 6th respondent - M/s. Ittina Printers (P) Ltd., on 14.03.1984, 03.02.1986, 13.03.1986 and 23.06.1986. In order to secure the loan the 6th respondent executed several security documents. The appellants herein are the sureties who stood guarantee for repayment of the said loan. The 6th respondent committed default. Therefore, the applicant -6-
- Corporation invoking Section 29 of the State Financial Corporation Act, 1951, took over the possession of all the immovable properties belonging to the Company. Thereafter, they sold the entire assets of the Company. After adjusting the sale proceedings, still an amount of Rs.62,23,688.95 was due as on 20.08.1992. As the appellant - Guarantor had executed guarantee deeds dated 11.06.1984, 21.02.1986 and 27.03.1986 guaranteeing repayment of the loan amount a legal notice came to be issued to them on 20.10.1992 calling upon them to pay the balance amount. When they did not repay the said amount, Misc. Application No.56/1993 came to be filed.
4. After service of notice, the respondent Nos.1, 2 and 4 entered appearance, filed their written statement and contested the claim. They did not deny the transaction, they did not deny their executing the guarantee bonds. Their case was the claim is barred by limitation. Secondly, the Court had no territorial jurisdiction to adjudicate the dispute. -7-
5. On the aforesaid pleadings, the Court framed the following six issues.
1) Whether the applicant proves that respondent Nos.1 and 2 and respondent Nos.3 and 4 have executed separate deeds of guarantee dated 11.6.1984 in respect of the first loan, respondent Nos.1 to 5 have executed the deed of guarantee dated 21.2.1986 in respect of the second loan, respondent Nos.1, 2, 4 and 5 have executed the deed of guarantee dated 27.3.1986 in respect of the third loan and respondent Nos.1 to 5 have executed the deed of guarantee dated 23.6.1986 for the fourth loan ?
2) Whether the applicant proves that a sum of Rs.62,23,688.95 Paise is due to it as on 20.8.1992 towards the four loans borrowed by the respondents from the applicant ?
3) Whether the applicant proves that it is entitled to enforce the guarantee against the respondent Nos.1 to 5 for recovery of -8- the alleged outstanding dues of Rs.62,23,688.95 ?
4) Whether the respondents prove that the application is barred by the law of limitation ?
5) Whether the respondents prove that this Court has no jurisdiction to try the application ?
6) What order ?
6. The applicant in order to substantiate their claim examined 4 witnesses and produced 26 documents which are marked as Ex.P1 to Ex.P26. On behalf of the respondents Mahabaleshwarappa was examined as DW-1 and one document was marked as Ex.D1.
7. The Court on appreciation of the aforesaid oral and documentary evidence on record held that the applicant has proved the due execution of the guarantee deeds for all the three loans. Further, the applicant has proved that a sum of Rs.62,23,688.95 is due from the respondents as on 20.08.1992. Further, it held they have a right to enforce the guarantee against -9- respondent Nos.1 to 5. It also recorded a finding that application is in time and also held that the Court has territorial jurisdiction to decide the dispute. Accordingly, the application was allowed.
8. Aggrieved by the said order, the sureties have preferred these two appeals.
9. Learned Counsel appearing for the sureties contended that when one of the immovable properties belonging to the company was taken possession of and sold, on the day the petition was filed, there was no company in existence. The application is filed against the guarantor who are all residing outside the jurisdiction of the Court. Therefore, no part of the cause of action arose in so far as these respondents are concerned, as such the Court has no jurisdiction. The said contention has not been properly appreciated by the Court. Secondly, he contended when possession is taken on 16.02.1989 and property is sold, the application ought to have been filed within three years there from. The application having been filed beyond -10- three years, is barred by law of limitation. This contention also has not been appreciated by the Trial Court properly. Therefore, the Judgment is liable to be set aside. Per contra, the learned Counsel appearing for the Corporation supported the impugned order.
10. In the light of the aforesaid facts and relevant contentions, the points that arose for our consideration are :
a) Whether the finding recorded by the Trial Court that it has territorial jurisdiction to entertain this application calls for any interference ?
b) Whether the application was barred by time ?
11. Point a) Section 31 of the State Financial Corporation Act under which this application is filed reads as under :
"Sec.31--Where an industrial concern, in breach of any agreement makes any default in repayment of any loan or advance or any installment thereof, or in meeting its obligation in relation to any guarantee given by the corporation or otherwise fails to comply -11- with the terms of its agreement ......... any officer of the Financial Corporation, generally or specifically 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".
Perusal of the aforesaid provision makes it very clear that the Financial Corporation 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. One such relief is enforcement of liability of any surety. Therefore, where the surety is resides is immaterial. Wherever the surety resides if the Financial Corporation is proceeding against the surety, the application has to be filed to the District Judge within the limits of whose jurisdiction the industrial concern carries on the whole or a substantial part of its business. There is no scope for any ambiguity. Merely because by virtue of the power conferred under Section -12- 29 of the State Financial Act, possession of the company property is taken over and sold and thereafter whether the concern carries on business or not, still if the Corporation wants to proceed against the surety, such an application has to be filed within the jurisdiction of the of the District Court within the limits of the jurisdiction where the industrial concern was carrying on business. In other words, the only place where an application under Section 31 can be filed is the place where the industrial concern was established. After establishment of the concern, if it is sold or it ceases to carry on business, that would not affect the jurisdiction of the Court within whose jurisdiction such industrial concern was established and was carrying on business. The Trial Court Judge on proper appreciation of the provision of law has rightly held that the Court has territorial jurisdiction. In that view of the matter, we do not find any justification to interfere with the order passed by the Court on that issue.
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12. Point No.b) The State Financial Corporation Act, 1951 do not provide for any period of limitation for filing an application under Section 31. Therefore, the provision of the Limitation Act are attracted. If the application is only for recovery of money, then Article 137 is attracted, which provides for three years time. The said question was the subject matter of the decision by the Apex Court in the case of Syndicate Bank V. Channaveerappa Beleri & others reported in AIR 2006 SC 1874. After explaining Sections 126, 128, 129 and 130 of the Contract Act and Article 55 of the Limitation Act, it is held that when the terms of the guarantee makes it clear that the liability to pay would arise on the guarantors only when a demand is made. Article 55 provides that the time will begin to run when the contract is 'broken'. Even if Article 113 is to be applied, the time begins to run only when the right to sue accrues. When a demand is made requiring payment within a stipulated period, the breach occurs or right to sue accrues, if the payment is not made or refused within the period stipulated in the said notice. -14- If while making the demand for payment, no period is stipulated within which the payment should be made, the breach occurs or right to sue accrues, when the demand is served on the guarantor.
13. In the instant case, the material on record discloses possession of the property was taken on 06.02.1989, property was sold, the amount recovered by sale was adjusted towards loan amount and the balance amount due was Rs.62,23,688.95 as on 20.08.1992. Thereafter, on 20.10.1992 a legal notice came to be issued to the Guarantor calling upon him to pay the said amount. When the amount was not paid, Miscellaneous Application was filed on 16.11.1993 within the period of limitation from the date of legal notice i.e. within a year the petition is filed, whereas three years period is the period prescribed. Therefore, the Trial Court applying the law laid down by the Apex Court in the aforesaid Judgment has rightly held that the application is in time.
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14. In that view of the matter, we do not see any merit in any of the grounds urged in this appeal.
Accordingly, these appeals are dismissed.
Sd/-
JUDGE.
Sd/-
JUDGE.
Rbv