Chopra Industrial Complex vs Punjab Financial Corporation

V.S. Aggarwal, J.

The present revision petition has been preferred by M/s. Chopra Industrial Complex, hereinafter described as the petitioner, directed against the order of the learned Additional District Judge, Jalandhar, dated 7.9.1992. By virtue of the impugned order, learned Additional District Judge had dismissed the application filed by the petitioner.

The relevant facts are that the respondent Punjab Financial Corporation (for short "the Corporation") had filed an application under Section 31 of the State Financial Corporation Act, 1951 (for short "the Act") for recovery of Rs. 5,30,747.70 alleging that no payment has been made. The said application had been contested by the petitioner. The learned trial Court had fixed the matter for evidence. The petitioner submitted an application under order 6 Rule 17 of the Code of Civil Procedure (for short "the Code") seeking amendment of the reply contending that earlier the petitioner had filed a civil revision in this Court which was dismissed by the this Court with the remarks that it shall be open to the petitioner to take all defences in reply to the application under section 31 of the State Financial Corporation Act, 1951. The petitioner wanted to incorporate that during the pendency of the case some new development have taken place which could not be mentioned in the reply that was filed earlier. The same is very material and legal for the just and proper adjudication of the controversy in issue. The petitioner wanted to claim that his industry was starved of funds because the respondent failed to discharge its obligations to back up financial arrangement from scheduled Banks. The respondent had sought sale of assets and properties and petitioner was restrained from removing or transferring machinery or other assets pledged with the respondent. After attachment of the plot, machinery was stolen from the premises of the petitioner and pilferaged. The details of the same have been given. No steps were taken by the respondent to guard the plant and the machinery, thereby loss has been caused to the petitioner. Set off the said loss was purported to be claimed.

The application as such was opposed. The learned trial Court dismissed the application holding that the scope of Sections 31 and 32 of the Act is limited and such a set off cannot be allowed to be claimed. Aggrieved by the same, present revision petitions has been filed.

While the revision petition was pending, an application was filed pointing out that the main application has been withdrawn by the respondentCorporation and since the main application has been withdrawn, the present revision petition has become infructuous. In the reply, attention of the Court was drawn to the fact that passing of the final order was stayed by this Court and, therefore, the main application could not be withdrawn.

The explanation of the Presiding Officer had been called as to under what circumstances despite direction of this Court that passing of final order was stayed, the main application was allowed to be dismissed as withdrawn. In the reply filed the said Officer has pointed that inadvertently the order of stay passed by this Court was not brought to his notice and there is a bona fide mistake. It is abundantly clear from aforesaid that, in fact, there has been a mistake which is inadvertent. Even the order was in the knowledge of the respondentCorporation and still the main application was withdrawn from the trial Court. Seemingly, the stay that was granted had never been brought to be notice of the trial Court. Thus, the rule as such is discharged qua the said Presiding Officer.

All the same, once there is stay granted by this Court not to pass the final order, necessary result would be that the said order was without jurisdiction and a nullity. Consequently, subject to this observation, one can conveniently proceed to decide the application on its merits.

Section 31 of the Act provides special provision for enforcement of claims by Financial Corporation. When an industrial concern in breach of any agreement makes any default in repayment of any loan or advance or any instalment thereof given by the Corporation and repayment has not been made, an application can be submitted to the District Judge within the limits of whose jurisdiction the industrial concern carries on the business. Section 32 of the Act prescribes the procedure of District Judge in respect of application under Section 31. Subsection (6) to Section 32 of the Act reads as under :

"(6) It cause is shown, the District Judge shall proceed to investigate the claim of the Financial Corporation in accordance with the provisions contained in the Code of Civil Procedure, 1908, in so far as such provisions may be applied thereto."

A perusal of subsection (6) to Section 32 to the Act clearly shows that the Code of Civil Procedure itself cannot be made applicable. It is only applicable in so far as such provisions have been applied thereto. This is in relation to the claim of the respondentCorporation. Therefore, to state that the entire Code of Civil Procedure including the right to set off have been made applicable will not be correct.

Supreme Court has considered this question in the case of The Gujarat State Financial Corporation v. M/s. Natson Manufacturing Co. Pvt. Ltd. and others, AIR 1978 Supreme Court 1765. The scope of Section 32 of the had been considered and the Court held as under :

".....The provision contained in subsec. (6) does not expand the contest in the application made under S. 31(1) as to render the application to be a suit between a mortgagee and the mortgagor for sale of mortgaged property. It may be, as contended by Mr. Patel, that in the ultimate analysis the result would be that the property will be sold for repayment of the loan or advance taken by the industrial concern from the Corporation but it could not be said that it is a substantive relief claimed by the Corporation which can be valued in terms of monetary gain or prevention of monetary loss as envisaged by Art. 7 of Sch. I of Courtfees Act. The substantive relief in an application under S. 31(1) is something akin to an application for attachment of property in execution of a decree at a stage posterior to the passing of the decree......"

Himachal Pradesh High Court also looked into this controversy in the case of Bhawani Parshad Kapur v. The Himachal Pradesh Financial Corporation, AIR 1983 Himachal Pradesh 43. Almost identical question came up for consideration and Himachal Pradesh High Court in paragraph 12 of the judgment held as under :

"A conjunctive reading of the provisions of Section 31 and subsection (6) of Section 32 of the Act would suggest that the scope of investigation within the contemplation of subsection (6) of S. 32 is very narrow and limited. This subsection does not contemplate the investigation of each and every plea that might be raised before the District Judge by either party. The scope of the investigation is restricted to the claim of the Financial Corporation which has to be established in order to entitle it for any of the reliefs as mentioned in subsection (1) of Section 31. Under Section 31 of the Act, the Financial Corporation can approach the District Judge for any of the three reliefs mentioned in subclauses (a), (b) and (c) of subsection (1) of that section. Any of such reliefs can be granted to the Financial Corporation on its showing (i) that the industrial concern in breach of any agreement has made any default in repayment of any loan or advance or any instalment thereof, or (ii) that the industrial concern has otherwise failed to comply with the terms of its agreement with the Financial Corporation, or (iii) that the Financial Corporation had required the industrial concern to make immediate repayment of the loan or advance under Section 30 of the Act and the industrial concern has failed to make such repayment...."

Learned Single Judge of this Court in the case of M/s. Amar Cold Storage & Ice Factory and others v. Punjab Financial Corporation, 1990(2) PLR 415 while considering subsection (6) to Section 32 of the Act repelled the claim that defence can be raised to claim damages and paragraph 14 of the judgment held as under :

"Clause 6 does not suggest such an enquiry as has to be done in a suit for recovery of the mortgage amount. The scope of the investigation is restricted to the clam of the Corporation which has to be established in order to entitle it to any of the reliefs mentioned in Section 31(1). However, if breach of the contract has been committed by the Corporation, the loanee may file a suit for recovery of damages which he has suffered but his liability to repay the loan with interest is not wiped out merely on the ground that the Corporation has committed breach of contract. If the loanee succeeds in a suit for damages and secures a decree against the Corporation, he may ask for adjustment of the principal amount of loan together with interest thereon out of the decretal amount. He cannot raise such defence entitling him to claim damages and ask for adjudication of the same in a petition by the Corporation for a relief under Section 31(1) of the Act."

Against the abovesaid decision of the learned Single Judge, a Division Bench of this Court heard the Letters Patent Appeal reported as M/s. Amar Cold Storage Ice & Factory and another v. Punjab Financial Corporation, AIR 1994 Punjab & Haryana 235 : 1994(2) RRR 301 (P&H). The decision of the Himachal Pradesh High Court in Bhawani Parshad Kapur''s case (supra) was followed. The findings of the learned Single Judge of this Court were approved and in paragraph 17 of the judgment it was held as under :

"Mr. Nehra, learned counsel appearing for the respondents, vehemently joined an issue and urged that the scope of enquiry under Ss. 31 and 32 of the Act is very limited. In an enquiry of this nature, no claim for damages can be looked into or decided. In support of his submission, he drew our attention to Ss. 31 and 32 of the Act. Section 31 of the Act enables the Corporation alone to approach the District Courts for relief under Ss. 31 and 32 of the Act. No other party can avail the benefit of Ss. 31 and 32 of the Act. It is needless to set out these provisions because the issue as regards scope of enquiry under Ss. 31 and 32 of the Act is no more res integra. There are catena of judgments of the Supreme Court, this Court as well as other High Courts wherein time and again this issue has been dealt with and it has been finally concluded that the scope of enquiry under Ss. 31 and 32 of the Act is very limited and it is in the nature of an application for attachment of property in execution of a decree before a judgment. Mr Nehra rightly drew our attention to various authorities. With a view to complete the judgment, we may only refer to few of them...."

It is abundantly clear from the aforesaid that the scope of enquiry under Sections 31 and 32 of the Act is very limited. If the petitioner has to claim any set off, it can do so by filing a separate suit. In the claim filed under section 31 of the Act where there is a limited scope, the provisions of Code of Civil procedure or order 8 Rule 6 of the Code of Civil Procedure will not be attracted. This is clear from the plain language of Section 32(6) of the Act. The trial Court, therefore, rightly dismissed the application as not maintainable.

Once it is so, the revision petition must be held to be without merit, it is accordingly dismissed.