Industrial Finance Corporation of India vs Jagannath Prosad Sha

P.N. Mookerjee, J.—This Rule raises an important point of procedure touching inter alia the question of the appropriate form of action, or, rather, the form of description of the "Corporation" (the Industrial Finance Corporation of India) suing or being sued u/s 28(4) of the Industrial Finance Corporation Act, 1948 (Act XV of 1948). It also involves in a certain measure consideration of the scope and effect of the entire Section 28 of the Act. Sub-section (4) does not appear to be quite happily worded and its involved and some what inapt and inartistic phraseology has given rise to the present complications. The intention, however, may be reasonably gathered from a reading of the entire Act and, particularly, the entire Section 28, and the language of Sub-section (4) may, on a fair construction be made to work reasonably in accord with that intention in the matter of its practical application.

It is necessary to state a few facts for appreciation of the situation which has arisen in the present case.

The Plaintiff Opposite Party No. 1 supplied certain articles, to wit, 502 maunds 4 seers of straw, valued at Rs. 1,442-15-6 pies, to the Defendant Opposite Party No. 2, Messrs. Sodepur Glass Works Ltd., on different dates between December 15, 1950 and January 1, 1951. Part payment of the price namely, to the extent of Rs. 642-15-6p. was made, but the balance having remained outstanding, the present suit (S.C.C. Suit No. 1418 of 1954) was filed for its recovery in the Court of Small Causes, Sealdah. The suit was filed on May 21, 1954, and the total claim including interest) was laid at Rs. 950.

In the suit, Messrs. Sodepur Glass Works Ltd. was originally the only Defendant and its written statement which was filed on July 12, 1954, disclosed inter alia that; in the meantime, in or about March, 1953, the Industrial Finance Corporation of India, a statutory body established under the Industrial Finance Corporation Act, 1948, had taken over management of the Defendant company. This was apparently done by the "Corporation" in the exercise of its power u/s 28 of the Act and, in view of the disclosure, noted above the Plaintiff applied on July 18, 1954, for amendment of the plaint by addition of the Industrial Finance Corporation as Defendant No. 2 in the suit under the following description, viz., "The Industrial Finance Corporation of India established by Act XV of 1948 representing Messrs. Sodpur Glass Works Ltd. having its office at No. 15 Netaji Subhas Road in the town of Calcutta." Notice of this application appears to have been served on the original Defendant Messrs. Sodepur Glass Works Ltd. and, eventually, the amendment was allowed on July 21, 1954, and the Court ordered inter alia as follows: "Amend plaint and register." The actual amendment which was made was, however, the addition as Defendant No. 2 of "The Industrial Finance Corporation of "India" and the summons that was issued was against "Messrs. "Industrial Finance Corporation of India" without any qualifying words. The summons being served, the Corporation appeared and denied its liability for the Plaintiff''s claim and took objection that the Plaintiff had no cause of action against it and the plaint did not disclose any and that the suit should be dismissed against it with costs. At the hearing, the suit was contested by the added Defendant No. 2, the Industrial Finance Corporation of India, but the learned Judge was pleased to hold as follows:

By the petition of 19-7-54 the Plaintiff brought in the "Industrial Finance Corporation of India as a party thus:

The Industrial Finance Corporation of India established by "Act XV of 1948 representing Messrs. Sodepur Glass "Works Ltd. having its office at 15 Netaji Subhas Road "in the town of Calcutta.

So, Sodepur Glass Works Ltd. would no longer be liable as "Defendant No. 1 and the Industrial Finance Corporation as "Defendant No. 2, but the Industrial Finance Corporation as the "owner of the concern in view of Section 28, Sub-section (4) of the Act, "already referred to, would be the proper party and be liable for "the amount. It is not necessary at this stage to go in to the "question of the extent of the liability of the Industrial Finance "Corporation or of the goods or of the properties mortgaged from "before to the Industrial Finance Corporation" and he decreed the suit on contest with costs against "the Industrial Finance "Corporation of India representing Messrs. Sodepur Glass Works "Ltd. as the owner". In the decree, however, which was actually drawn up. Defendant No. 52 was shown as "Industrial "Finance Corporation of India" though, in the column "By "whom payable". The description was "Industrial Finance "Corporation representing Messrs. Sodpur Glass Works Ltd. as "owner".

The proceedings as mentioned above has been somewhat irregular and they are not altogether free from ambiguity. The decree, as it stands, may give rise to complications and lead to multiplicity of proceedings which it may be possible to avoid and for clarification of the true position, so far as the instant case is concerned, and to some extent generally, I issued the present Rule.

I have heard the learned Advocate at some length and it seems to me that, as far as the present case goes all difficulties could have been avoided if the plaint had been amended a little more precisely in the light of Section 28 of the Industrial Finance Corporation Act, 1948. It was expressly admitted in the written statement, filed by the original Defendant Messrs. Sodepur Glass Works Ltd., that all its assets were mortgaged in favour of Industrial Finance Corporation of India and that the said statutory body had taken over management of the said Defendant company under the above Act. In view of this admission the plaint could and should have been amended by adding to the description of Defendant No. 1 "Messrs. Sodepur "Glass Works Ltd." a representation clause, namely, "represented by the Industrial Finance Corporation of India "under Section 28(4) of the Industrial Finance Corporation Act (Act "XV of 1948) 1948". This amendment would have been quite sufficient and in perfect compliance with the statute and it was necessary too, in my view to indicate the true position and to identify fully the proper Defendant and remove possible complications and the ambiguity which might otherwise have arisen.

The drafting of Section 28(4) is undoubtedly not very happy and it appears to be rather crude and incomplete and it would have been better if a form of description for purposes of that section had been indicated or incorporated in the statute at an appropriate place. But, reading Section 28 as a whole, it is reasonably clear that the position of the Industrial Finance Corporation of India, taking over the management of an industrial concern under the section, was somewhat akin to that of a statutory mortgagee in possession and it was to be deemed to be the owner for certain purposes to wit, inter alia, purposes of transfer (sale and realisation (vide Section 28(1) and (2)) of "the property pledged, "mortgaged, hypothecated or assigned to the Corporation" by the particular industrial concern u/s 28(2) and purpose of suits (vide Section 28(4)). It was given "the right to take over the "management of the (defaulting) concern as well as the right to "sell and realise the property pledged, mortgaged, hypothecated "or assigned to it (the Corporation)" and certain other incidental rights and powers (vide Sub-Sections 3 and 3A of Section 28) for recovery of its debt from the defaulting concern, but it is quite plain from the Act that the liabilities of the said concern would not be the liabilities of the Corporation or in other words, it would not be the owner for purposes of those liabilities in the sense that they would be recoverable from it or from its own assets. The conduct of the proceedings, so far as the particular industrial concern is concerned, in respect of those liabilities also would undoubtedly be in its hands but any decree obtained or any amount held payable would have to be recovered from the assets of the concern after or subject to payment of all costs, charges and expenses properly incurred by it (the Corporation) as incidental to its statutory management, sale or realisation" "and discharge of the debt due to it (the Corporation)" by the particular concern concerned. It is clear also from Section 28(4) that the Corporation which under this Sub-section is to be "deemed to be "the owner" of the concern concerned "for purposes of suits by "or against such concern shall sue and be sued in the name of "the owner of the concern" that is, in the name of the person or body in whose name that particular concern would have been entitled to sue or liable to be sued, apart from or but for the Industrial Finance Corporation Act (Act XV of 1948). The phrase "owner of the concern" is perhaps inappropriate and unfortunate as the "concern" which obviously means an "industrial concern" can have reference only to a "public "limited company or Co-operative society" duly incorporated under the law (vide the definition Section 2(c) of the Act), but, when the legislature has used that phrase, we have to make the best use of it and give it a workable meaning within the scope of its words.

In the light of what has gone before, the proper description of the Defendant "concern" u/s 28(4) of the Act would be by its representation by the Industrial Finance Corporation of India for purposes of the suit under that Sub-section where there is no dispute between the Defendant "Industrial concern" and the "Corporation", and, where there is such dispute, it would be better to have the particular "concern" on the record as a Defendant, represented by its normal management apart from and independently of the Act and also as Defendant, represented by the "Corporation" under the Act. This will safeguard the right of the Plaintiff and prevent unnecessary complications.

In the present case, as I have already said, there is no dispute between the "concern", concerned, namely, Messrs. Sodepur Glass Works Ltd., and the "Corporation" about the applicability of Section 28 and the Corporation''s right to represent the company under that section is admitted. Admittedly also, the Plaintiff is an unsecured creditor. In these circumstances, the proper representation of the Defendant "concern" should be by the "Corporation" u/s 28(4) of the Act (Act XV of 1948) and the plaint should be amended, and this is agreed to by the Plaintiff Opposite party''s learned Advocate, by having only one Defendant under the following description, namely, "Messrs. "Sodepur Glass Works Ltd., represented by the Industrial "Finance Corporation of India u/s 28(4) of the Industrial "Finance Corporation Act (Act XV of 1948)" and there should be a decree against the Defendant for the amount, found by the learned Judge in the Court below, namely, for Rs. 1,130-2-0 (including costs), made up of Rs. 800 (principal claim) plus Rs. 150 (interest) plus Rs. 180-2-0 (costs), there being no challenge in this Court as to any of these amounts or the liability of Messrs. Sodepur Glass Works Ltd. for any of them. In the event of non-payment, this decree will be executable against and the decretal dues recoverable from the available assets of Messrs. Sodepur Glass works Ltd. u/s 28 of the Act. What will be these available assets will be determined, if necessary, at the execution stage in the light of the provisions of Sub-Sections 1 to 3A of Section 28 of the Act after taking into consideration the respective pleas of the Parties in the matter of such determination and disposing of them in accordance with law.

In the above view of the matter the record of the proceeding of the court below will require modification and, for that purpose, the case must go back to the trial court.

The Rule is made absolute as above and the decision of the Court below is modified accordingly and the case is sent back to that court for necessary action in the light of this judgment.

In the circumstances of this case, and having regard to the nature of the question involved, the parties will bear their own costs in this Court.