TaxTMI 
TaxTMI 
TaxTMI 
2008 (3) TMI 659
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....ture facility to the extent of 100 lakhs to meet its working capital requirements. Respondents who were Directors of Company executed deeds of guarantee dated 15.05.1996 and 9.08.1996 agreeing to guarantee repayment/ redemption by the Company to the Corporation of the said non-convertible debenture subscription together with interest, etc. The said Company also executed a deed of hypothecation on or about 9.08.1996 whereby and whereunder its plants and machinery were hypothecated. A collateral security agreement was also executed by Shri S.K. Rajan wherefor a property bearing No. 49, House List Khata No. 100-A, Hennarayanapalya, Hemlet of Cholanayakamahalli, Kasba Hobli, Bangalore North Taluka was mortgaged as a security therefor. Respondent No. 1 executed an agreement on 15.05.1996 in terms whereof his property bearing Site No. 55 (old), New No. 59, Annammadevi Temple Extension, Subedar Chatram Road, B.C. C. Division No. 22, Bangalore was given as a collateral security. The 'Industrial Concern' allegedly committed defaults. PROCEEDINGS 4. Appellant \026 Corporation on or about 20.11.2000 in exercise of its power under Section 29 of the Act directed that the possession of the s....
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....not a pre-requisite, the High Court committed a serious error in coming to the conclusion that before a property is to be sold, taking over possession thereof is mandatory. (vi) Section 31 of the Act would be applicable only when the loan is called back in terms of Section 30 of the Act. (vii) Special statutory power having been conferred on the Corporation so as to enable it to recover its debts which serves a larger economic interest of the country, Sections 29 and 31 of the Act should be interpreted in such a manner which would help it to achieve the said purpose. 6. Mr. Vikas Rojipura, learned counsel appearing on behalf of the respondents, on the other hand, submitted: (i) It is wrong to contend that similar reliefs can be claimed both under Sections 29 and 31 of the Act as in that event it was not necessary for the Parliament to enact two different provisions. (ii) Clause (aa) of Sub-section (1) of Section 31 of the Act, which was inserted by Act No. 43 of 1985 with effect from 21.08.1985, clearly establishes that the purport and object of two sections are absolutely distinct and separate. (iii) Sections 29 and 31 confer two different rights on the corporation which are....
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....to make such repayment 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\027 ( a ) for an order for the sale of the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation as security for the loan or advance; or ( 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 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 ....
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....ng a 'State' within the meaning of Article 12 of the Constitution of India, is expected to exercise its statutory powers reasonably and bona fide. 10. Apart from the said constitutional restrictions, the statute does not put any embargo upon the corporation to exercise its power under Section 29 of the Act. Indisputably, the said provision was enacted by the Parliament with a view to see that the dues of the Corporation are realized expeditiously. When a statutory power is conferred, it is a trite law that the same must be exercised within the four corners of the Statute. Power of a lender to realize the amount lent either by enforcing the charged and / or hypothecated or encumbrance created on certain property and/ or proceeding simultaneously and/ or independently against the surety/ guarantor is a statutory right. Different statutes provide for different remedies. We may by way of example refer to Pawan Kumar Jain v. Pradeshiya Industrial and Investment Corporation of U.P. Ltd. and Others [(2004) 6 SCC 758] where a statutory mandate has been given to realize the dues from sale of the mortgaged properties and then to sell other properties of the borrower. We are, however, not co....
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.... opinion play a significant role. It confers two different rights but such rights are to be enforced against the same person, viz., the industrial concern. Submission of the learned senior counsel that the second part of Section 29 having not referred to 'industrial concern', any property pledged, mortgaged, hypothecated or assigned to the financial corporation can be sold, in our opinion cannot be accepted. It is true that sub-section (1) of Section 29 speaks of guarantee. But such a guarantee is meant to be furnished by the Corporation in favour of a third party for the benefit of the industrial concern. It does not speak about a surety or guarantee given in favour of the corporation for the benefit of the industrial concern. 16. The legislative object and intent becomes furthermore clear as in terms of Sub-section (4) of Section 29 of the Act only when a property is sold, the manner in which the sale proceeds is to be appropriated has categorically been provided therein. It is significant to notice that sub-section (4) of Section 29 of the Act which lays down appropriation of the sale proceeds only refers to 'industrial concern' and not a 'surety' or 'guarantor'. 17. The provi....
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....f power conferred upon a statutory authority under a Statute. Section 29 does not envisage any prohibition at all either express or implied. Let us consider the legal implication of the aforementioned statement of law in the light of a decision of this Court. In Jamal Uddin Ahmad v. Abu Saleh Najmuddin and Another [(2003) 4 SCC 257], this Court stated the law, thus: "11. Dealing with "statutes conferring power; implied conditions, judicial review", Justice G.P. Singh states in the Principles of Statutory Interpretation (8th Edn., 2001, at pp. 333, 334) that a power conferred by a statute often contains express conditions for its exercise and in the absence of or in addition to the express conditions there are also implied conditions for exercise of the power. An affirmative statute introductive of a new law directing a thing to be done in a certain way mandates, even if there be no negative words, that the thing shall not be done in any other way. This rule of implied prohibition is subservient to the basic principle that the court must, as far as possible, attach a construction which effectuates the legislative intent and purpose. Further, the rule of implied prohibition does no....
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.... provides for the reliefs which may be sought for by the Corporation strictly in terms thereof. Clause (aa) of subsection (1) of Section 31 of the Act provides for a final relief. It does not speak of any interlocutory order. Clause (aa), as noticed hereinbefore, has been inserted by Act No. 43 of 1985. Thus, prior thereto even Section 31 could not have been taken recourse to against a surety. 23. Such a relief, if prayed for, would also lead to grant of a final relief and not an interlocutory one. Similarly, clause (b) of Sub-section (1) of Section 31 of the Act also provides for a final relief. Only clause (c) of Subsection (1) of Section 31 of the Act empowers the District Judge in the event any application is filed by the Corporation to pass an ad interim injunction. The very fact that Section 31 uses the terminology "without prejudice" to the provisions of Section 29 of the Act and/ or Section 69 of the Transfer of Property Act, it clearly postulates an additional relief. What can be done by invoking Section 29 of the Act can inter alia be done by invoking Section 31 thereof also but therefor a different procedure has to be adopted. Section 31 also provides for a relief again....
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....ar. Whereas Section 29 of the Act consists of the property of the industrial concern, Section 31 takes within its sweep both the property of the industrial concern and as that of the surety. None of the provisions control each other. The Parliament intended to provide an additional remedy for recovery of the amount in favour of the Corporation by proceeding against a surety only in terms of Section 31 of the Act and not under Section 29 thereof. THE EFFECT \026 OF 28. A Corporation, after coming into force of Section 32G of the Act has four remedies, viz.: (i) to file a suit (ii) to take recourse to Section 29; (iii) to take recourse to Section 31; and (iv) to take recourse to Section 32G of the Act. 29. In A.P. State Financial Corporation v. M/s GAR Re-Rolling Mills and Another [(1994) 2 SCC 647], this Court held: "19. 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\005" Section 32G of the Act provides for an additional remedy. It is, however, interesting to note that while upholding the right of the Corporation to opt for eith....
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....ty as a surety would certainly not be. A juristic person is a separate legal entity. Its veil can be lifted or pierced only in certain situations. [See Salomon v. Salomon and Co. [1897 AC 22], Dal Chand and Others v. Commissioner of Income Tax, Punjab (1944) 12 ITR 458, Juggilal Kamlapat vs. Commissioner of Income Tax, U.P. (1969) 1 SCR 988 = 1969 (73) ITR 702 and Kapila Hingorani v. State of Bihar (2003) 6 SCC 1] 32. Interpretation of a statute would not depend upon a contingency. It has to be interpreted on its own. It is a trite law that the court would ordinarily take recourse to the golden rule of literal interpretation. It is not a case where we are dealing with a defect in the legislative drafting. We cannot presume any. In a case where a court has to weigh between a right of recovery and protection of a right, it would also lean in favour of the person who is going to be deprived therefrom. It would not be the other way round. Only because a speedy remedy is provided for that would itself lead to the conclusion that the provisions of the Act have to be extended although the statute does not say so. The object of the Act would be a relevant factor for interpretation only wh....