Special statutory recovery remedy under the Industrial Finance Corporation Act upheld despite objections to authority, interest, and loan defaults.

Proceedings under section 30 of the Industrial Finance Corporation Act, 1948 were treated as a special self-contained statutory remedy with overriding effect, so general civil procedure and equitable objections could not defeat recovery once default and statutory notice were established. The application was found validly signed and filed by an authorised officer on the basis of board authorisation. The Usurious Loans Act was held inapplicable, and the contractual interest was upheld. Defaults in repayment and breaches of loan covenants were proved, the statutory conditions for action were satisfied, and the secured assets were made available for recovery of the petitioner's dues from the borrower.

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Issues: (i) Whether the application was properly signed and filed by a duly authorised person; (ii) whether the Usurious Loans Act applied to the loan and, if so, whether the contractual interest was invalid; (iii) whether the petitioner was disentitled from bringing the proceedings on the grounds pleaded in the preliminary objections, including alleged management participation and alleged failure to disburse the full sanctioned loan; (iv) whether failure to release the balance loan of Rs. 4 lakhs hampered the viability of the project and affected the petitioner's right to proceed; (v) whether the borrower failed to comply with the loan agreement and whether the statutory conditions for action under section 30 were made out; and (vi) what amount was due to the petitioner and from whom.

Issue (i): Whether the application was properly signed and filed by a duly authorised person.

Analysis: The petition was instituted through an officer of the Corporation who deposed that he had been authorised by a board resolution. The authorisation was proved by documentary evidence from the Corporation's records. Section 30(1) of the Act permits an authorised officer of the Corporation to apply to the court when the industrial concern defaults or otherwise fails to comply with the agreement.

Conclusion: The application was validly signed and filed by a duly authorised person, in favour of the petitioner.

Issue (ii): Whether the Usurious Loans Act applied to the loan and, if so, whether the contractual interest was invalid.

Analysis: The proceedings under section 30 of the Act were treated as a special, self-contained statutory remedy, and the Act's overriding clause excluded the application of general procedural provisions and other inconsistent laws. The contractual rate of interest was proved by the loan agreement and the accounts evidence, and the court declined to import the discretion available in a civil suit for pendente lite or future interest. On the same reasoning, the Usurious Loans Act was held inapplicable.

Conclusion: The Usurious Loans Act did not apply, and the agreed interest was upheld, in favour of the petitioner.

Issue (iii): Whether the petitioner was disentitled from bringing the proceedings on the grounds pleaded in the preliminary objections, including alleged management participation and alleged failure to disburse the full sanctioned loan.

Analysis: The petitioner's statutory rights arose from a loan agreement with a separate corporate entity. The alleged participation of financial institutions in the management of the company did not extinguish the borrower's contractual obligations. The evidence showed defaults in repayment and breaches of covenant, including failure to appoint a whole-time technical director and failure to insure the security. The withholding of the balance amount was held to be justified in the circumstances of the agreement and did not create a defence to the petition.

Conclusion: The petitioner was not disentitled from bringing the proceedings, against the respondents.

Issue (iv): Whether failure to release the balance loan of Rs. 4 lakhs hampered the viability of the project and affected the petitioner's right to proceed.

Analysis: The loan was a project loan subject to compliance with contractual covenants, including appointment of a whole-time technical director. The balance amount was withheld after breaches and unresolved queries. The borrower's claim that the withholding caused sickness of the unit was rejected, and it was held that any alleged breach by the petitioner could not defeat the statutory remedy under section 30.

Conclusion: The alleged non-disbursement did not defeat the petitioner's right to proceed, against the respondents.

Issue (v): Whether the borrower failed to comply with the loan agreement and whether the statutory conditions for action under section 30 were made out.

Analysis: Defaults in repayment, closure of the factory, failure to insure the assets, and other breaches of covenant were established. The statutory notice under section 29 was served, and the Corporation thereafter invoked section 30. The contingencies contemplated by section 30(1) were found to have arisen, enabling the Corporation to seek sale of the secured assets.

Conclusion: The borrower failed to comply with the agreement, and the statutory conditions for action under section 30 were satisfied, in favour of the petitioner.

Issue (vi): What amount was due to the petitioner and from whom.

Analysis: The account statements proved the principal, interest, commitment charges and insurance premium claimed by the petitioner. The respondent did not successfully challenge the computation. The court accepted the amount due as proved and held the petitioner entitled to recover it with interest at the contractual rate till realisation.

Conclusion: A sum of Rs. 49,13,715.29 was held due from respondent No. 1 to the petitioner, in favour of the petitioner.

Final Conclusion: The petition succeeded on the merits, the secured assets were made available for recovery of the petitioner's dues, and the borrower's defences were rejected.

Ratio Decidendi: Proceedings under section 30 of the Industrial Finance Corporation Act, 1948 are governed by a special self-contained code with overriding effect, so general civil procedure and allied equitable defences cannot be used to defeat the Corporation's statutory remedy once default and statutory notice are established.

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