H.P. State Industrial Development Corpn. Ltd. vs Chanana Steel Tubes P. Ltd.

Arun Kumar Goel, J.—This is an application filed by defendant Nos. 1 to 3 with a prayer for framing additional issues, which according to them arise out of their pleadings.

By referring to the provisions of Section 2(h) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as ''1993 Act''), as well as the notification of the Government of India, Ministry of Finance, Department of Economic Affairs (Banking Division), dated 6-4-1988, it was submitted by Mr. Chaudhary, that the plaintiff is covered as an "Institution" established by the State Government as for its object the "financing of industrial concerns". According to learned Counsel, by necessary implication plaintiff shall be deemed to be a ''public financial institution''; within the meaning of Section 2(h) of 1993 Act, and Section 4A of the Companies Act, 1956. Thus, according to Mr. Chaudhary, this Court cannot entertain and try this suit.

All these pleas have been controverted by Mr. Balwant Kukreja, learned Counsel. Per him, submission urged on behalf of the defendants to oust the jurisdiction of this Court has no basis in law. For ready reference notification of 6-4-1988, issued by the Government of India, is extracted hereinbelow :

"Whereas the State Government of Himachal Pradesh have requested that the provisions of Sections 29, 30, 31, 32, 32A to 32G of the State Financial Corporations Act, 1951 (63 of 1951) may be made applicable to the Himachal Pradesh State Industrial and Development Corporation Limited an institution established by the State Government which has for its object the financing of industrial concerns :

Now, therefore, in exercise of the powers conferred by Sub-section (1) of Section 46 of the State Financial Corporations Act, 1951 (63 of 1951) the Central Government hereby directs that the provisions of the Sections 29, 30, 31, 32, 32A, 32B, 32C, 32D, 32E, 32F, and 32G of the said Act shall apply to the said Himachal Pradesh State Industrial and Development Corporation Limited."

It was not disputed at the time of hearing on behalf of the defendants, that this notification has been issued by the Central Government in exercise of powers conferred on it u/s 46, of the State Financial Corporations Act, 1951.

A perusal of Section 46 of the State Financial Corporations Act clearly shows, that after issuance of notification, an institution covered by such notification becomes a Financial Corporation by deeming provision contained in Section 46(1) supra.

What follows from this is that, plaintiff becoming a deemed Financial Corporation u/s 46(1), and that such of the provisions as are covered by the notification become applicable. In addition to this when a reference is made to Section 4A of the Companies Act, 1956, what follows from it is, that under Sub-section (1) of this section certain financial institutions have been named as "public financial institutions". Where the Central Government wanted to specify other institutions, and those having been created under some Central Act, then by virtue of Sub-section (2) of Section 4A (supra), such institutions have been again notified. A perusal of the provisions of Companies Act clearly indicates that beside other institutions, as many as 15 Financial Corporations of the country in different States, have been specified as ''public financial institutions''. All these Corporations so specified have been created under Central Act of 1951 (supra).

In case argument urged on behalf of the defendants to treat the plaintiff as a public financial institution within the meaning of Section 2(h) of 1993 Act coupled with Section 4A of the Companies Act is accepted, then there was no need for the Central Government to have specified Financial Corporations to be ''public financial institution''. In this view of the matter submission urged on behalf of defendants 1 to 3 cannot be accepted.

Another reason to take this view, is a decision of this Court reported in The H.P. The H.P. State Industrial Development Corpn. Ltd. Vs. Kesri Roller Flour Mills and Others, . In this case issue No. 4 was to the following effect :

"Whether this Court has no jurisdiction to entertain the present suit as alleged? OPD2&3."

After considering the provisions of Section 4A of the Companies Act the learned Judge held as under :

"26. In view of the above provisions, public financial institutions for the purposes of Sections 17 and 18 of the Act, will be those institutions as specified u/s 4A supra and such other institutions which may be specified as such institutions by the Central Government by a notification subject to the limitations provided in the proviso.

There is no dispute that the plaintiff is not an institution specified by the Central Government as a financial institution in exercise of its power either u/s 2(h) of the Act or 4A of the Companies Act. Evidently, the plaintiff is also not one of the public financial institutions as specified in Sections 4A(1)(i) to (v) of the Companies Act. Thus, the plaintiff is not one of such financial institutions which has to lay its claim for recovery of debts from its debtors before the Tribunal u/s 17 of the Act, therefore, this Court has the jurisdiction to entertain the suit. This issue is accordingly decided against the defendants." (p. 38)

Faced with this situation, learned Counsel for the defendants submitted that in this decision impact of Section 2(h) of 1993 Act was not considered. This argument has been raised simply to be rejected. This decision coupled with what has been said in the preceding paras is enough to turn down this plea: Ordered accordingly.

Now coming to the second plea on the basis of decision of the Supreme Court of India in Central Bank of India v. Ravindra JT 2001(9) SC 107, urged by Mr. Chaudhary. According to him, suit is liable to be dismissed since what was observed by the Supreme Court in the aforesaid case has not been followed by the plaintiff while filing this suit. It has been submitted by Mr. Kukreja, learned Counsel for the plaintiff, that the plaintiff has filed statement of accounts in the Registry with its copy having been made available to the defendants. A perusal of this statement clearly shows that though interest has been calculated on compound basis, yet while calculating it for filing of the suit, it has been applied at simple rate of interest and the suit amount has been calculated accordingly. Mr. Kukreja further submitted that compound interest etc. has been waived. Assuming that this was not the situation, then it will be a matter of evidence when the plaintiff produces its witnesses-on issue No. 3, that defendants 1 to 3 can ask for every entry as contained in the statement of accounts. As such no issue need to be framed on the basis of the decision of the Supreme Court and there is no ground which does call for dismissal as was urged by Mr. Chaudhary.

No other point is urged.

In view of the aforesaid discussion there is no merit in this application, which is accordingly dismissed.