1994 (2) TMI 268 - SC - Indian Laws

State Financial Corporation may abandon Section 31 decree and proceed independently under self-contained enforcement code in Section 29

SC held that a State Financial Corporation, having obtained but not executed an order/decree under Section 31 of the State Financial Corporations Act, is ... Applicability of the Doctrine of Election - industrial concern - Whether the Financial Corporation set up under Section 3 of the State Financial Corporation Act is entitled to take recourse to the remedy available to it under Section 29 of the Act even after having obtained an order or a decree after invoking the provisions of Section 31 of the Act but without executing that decree/order? Held that:- Since Section 29 of the Act provides both the rights and the remedies as also the procedure for enforcement of the rights and is a complete code in itself, it is open to the Corporation to act under Section 29 of the Act to realise the dues from the defaulting concern by following the procedure prescribed under Section 29 of the Act. The Corporation does not require the assistance of the court to enforce its rights while invoking the provisions of Section 29 of the Act to recover its dues from the defaulting concern. The use of the expression 'without prejudice to the provisions of Section 29 of the Act' in Section 31 cannot be read to mean that the Corporation after obtaining a final order under Section 31 of the Act from a court of competent jurisdiction, is denuded of its rights under Section 29 of the Act. To hold so would render the above-quoted expression redundant in Section 31 of the Act and the courts do not lean in favour of rendering words used by the Legislature in the statutory provisions redundant. The Corporation which has the right to make the choice may make the choice initially whether to proceed under Section 29 of the Act or Section 31 of the Act, but its rights under Section 29 of the Act are not extinguished, if it decides to take recourse to the provisions of Section 31 of the Act. It can abandon the proceedings under Section 31 of the Act at any stage, including the stage of execution, if it finds it more practical, and may initiate proceedings under Section 29 of the Act. The right vested in the Corporation under Section 29 of the Act is besides the right already possessed at common law to institute a suit or the right available to it under Section 31 of the Act. Since, the Corporation can withdraw from the court its proceedings under Section 31 of the Act at any stage, it would imply that it has the right to withdraw from further proceedings under Sections 31 and 32 of the Act even after obtaining an order in its favour and take recourse to the proceedings under Section 29 of the Act without pursuing the proceedings under Section 31 of the Act any further. The Corporation cannot, indeed, execute the order under Section 31 of the Act and yet simultaneously take recourse to proceedings under Section 29 of the Act for the same relief The position may also be different if the claim of the Corporation is negatived, on facts, by the Court in the proceedings under Section 31 of the Act. In that event depending upon the facts of each case, it may be permissible to hold that fair play and justice demand that the Corporation is not allowed to take recourse provisions of Section 29 of the Act. Thus from the discussion it follows that the answer to the question posed inthe opening part of the judgment is in the affirmative. Action of the defaulting concern could not lead to the consequence that the remedy of the Corporation under Section 29 to recover its outstanding dues together with interest was lost because undoubtedly the Corporation did not proceed further with the proceedings under Section 31 of the Act which it abandoned by withdrawing from those proceedings impliedly. Therefore, when the Corporation, in the facts and circumstances of the case, took recourse to the provisions of Section 29 of the Act to recover its outstanding dues by abandoning the proceedings under Section 31 of the Act, it could not be faulted with and the final order/decree made under Section 31 which had remained unsatisfied, could not debar the Corporation to invoke the provisions of Section 29 of the Act, by giving up further proceedings under Sections 31/32 of the Act. Issues Involved:1. Whether the Financial Corporation can invoke Section 29 of the State Financial Corporation Act after obtaining an order under Section 31 but without executing it.2. The interpretation and interplay between Sections 29 and 31 of the State Financial Corporation Act.3. The applicability of the Doctrine of Election in the context of Sections 29 and 31 of the Act.4. The rights and remedies available to the Financial Corporation under Sections 29 and 31.Issue-wise Detailed Analysis:1. Invocation of Section 29 after Obtaining an Order under Section 31The primary issue was whether the Financial Corporation could take recourse to Section 29 of the State Financial Corporation Act after obtaining an order or decree under Section 31 but without executing it. The Supreme Court held that the Corporation could indeed invoke Section 29 even after obtaining an order under Section 31, provided it abandons or withdraws from the proceedings under Section 31 at any stage. The Court emphasized that the Corporation could not simultaneously pursue both remedies but could switch from one to the other to recover its dues.2. Interpretation and Interplay between Sections 29 and 31The Court analyzed Sections 29 and 31 of the Act. Section 29 provides the Corporation with the right to take over management or possession of the defaulting industrial concern and to transfer or sell the hypothecated property without the court's assistance. Section 31, on the other hand, allows the Corporation to seek judicial intervention for the sale of pledged property, transfer of management, or interim injunctions. The Court noted that Section 31 explicitly states that its provisions are 'without prejudice to the provisions of Section 29,' indicating that the Legislature intended to preserve the Corporation's rights under both sections.3. Applicability of the Doctrine of ElectionThe Doctrine of Election, which suggests that when two remedies are available for the same relief, the party must choose one, was discussed. The Court clarified that this doctrine does not apply when the scope and ambit of the two remedies are essentially different. The Corporation could initially proceed under Section 31 and then abandon it to take recourse to Section 29, as the remedies under these sections are distinct.4. Rights and Remedies under Sections 29 and 31The Court concluded that the rights and remedies under Section 29 are broader and more self-contained compared to those under Section 31. The Corporation could choose to act under Section 29 without the court's assistance or seek judicial intervention under Section 31. The Corporation's right to recover dues is not extinguished by choosing one remedy initially; it retains the right to switch to the other remedy if necessary.Separate Judgments:The Supreme Court delivered a consolidated judgment for both Civil Appeal No. 3689 of 1987 and Civil Appeal No. 3216 of 1988, addressing the common legal question and individual facts of each case.Civil Appeal No. 3689 of 1987The Corporation initially took recourse to Section 31 and obtained an order but could not enforce it due to the respondent's actions. The Court held that the Corporation's subsequent invocation of Section 29 was justified as it had abandoned the proceedings under Section 31.Civil Appeal No. 3216 of 1988The respondent adopted delaying tactics and did not repay the debt. The Court upheld the Corporation's action under Section 29, noting that it had not pursued the remedy under Section 31 further. The Division Bench's reliance on the Full Bench judgment was set aside.ConclusionBoth appeals were allowed, and the judgments under appeal were set aside. The Supreme Court ruled in favor of the Financial Corporation, allowing it to switch between the remedies under Sections 29 and 31 as long as it did not pursue both simultaneously. The appeals were allowed with costs of Rs. 5000 in each case.