Subeetha Beevi in W.P. No. 49 of 2007 and W.P. No. 6436 of 2009 vs The Tamil Nadu Industrial Investment Corporation Ltd. and Others

K. Ravichandra Baabu, J.—The petitioner filed the Writ Petition in W.P.(MD) No. 49 of 2007 challenging the proceedings dated

14.12.2006 of the 1st respondent insofar as her property is concerned at Survey No. 65 6 at Thulasiandipuram Village, Thirumullaivasal Taluk and

for further relief to forbear the respondents from conducting any auction in pursuant to the above said proceedings. The case of the petitioner is

that at out of her own funds she purchased house site comprised in Survey No. 65 6 Thulasiandipuram Village, Thirumullaivasal Taluk on 9.5.1993

and also put up a house in the said vacant site measuring to an extent of 3886 sq.ft. and she is enjoying the property as absolute owner. According

to the petitioner, her husband borrowed term loan and another working capital term loan from the 1st respondent to establish a twisting unit. The

petitioner''s husband offered a land and building at Survey Nos.648/4 and 658/5 situated at Thulasiandipuram Village, Thirumullaivasal Taluk

measuring an extent of 7848 sq.ft. as security and in addition to the same, the above said petitioner''s property was also offered as additional

security towards the said loan transaction.

The petitioner further stated that though the petitioner''s husband paid substantial amount towards the loan, the respondent through his letter

dated 31.10.2006 demanded a sum of Rs.47,74,852.70 wherein and whereby, the 1st respondent called upon the petitioner''s husband to settle

the amount within 7 days failing which, proceedings u/s 29 of the State Financial Corporation Act, 1951 would be initiated by making

advertisement for public auction of properties offered as security including that of the petitioner to realize their dues under the said provisions of

law. A copy of the said proceedings have been marked to the petitioner also.

It is further stated by the petitioner that she has sent representation on 15.11.2006 stating that the claim of the 1st respondent was barred by

limitation and that the 1st respondent did not follow any of the mandatory requirements, However, the 1st respondent proceeded to issue auction

notice on 14.12.2006. Therefore, she has filed the above Writ petition before this Court.

Notice of motion was ordered by this Court on 4.1.2007 and after notice, respondents entered appearance through counsel. No counter

affidavit has been filed by the respondents. I heard the learned counsel appearing for both parties.

The learned counsel for the petitioner contended that the 1st respondent ought not to have proceeded against her at the first instance u/s 29 of

the Act as she being only a surety and ought to have followed the procedure laid down u/s 31 (aa) of the Act.

In support of the said contention, the learned counsel for the petitioner has relied on the decision rendered by the Hon''ble Supreme Court

reported in Karnataka State Financial Corporation Vs. N. Narasimahaiah and Others, wherein, at paragraph 14, it has been held as follows:

Section 29 of the Act nowhere states that the corporation can proceed against the surety even if some properties are mortgaged or

hypothecated by it. The right of the financial corporation in terms of Section 29 of the Act must be exercised only on a defaulting party. There

cannot be any default as is envisaged in Section 29 by a surety or the guarantor to repay the loan of the principal debtor arises only when a default

is made by the latter.

The learned counsel appearing for the 1st respondent has also fairly conceded to the above proposition of law laid down by the Hon''ble

Supreme Court. Therefore, the action of the 1st respondent in proceeding against the petitioner''s property u/s 29 of the said Act is invalid as the

petitioner is only a surety.

In view of the settled proposition of law laid down by the Hon''ble Supreme Court as referred above, the impugned proceedings dated

14.12.2006 issued by the 1st respondent is liable to be set aside insofar the petitioner''s property is concerned and accordingly, the said is hereby

quashed in respect of petitioner''s property at S.No.656, Thulasiandipuram Village, Thirumullaivasal Taluk.

In Writ Petition being W.P.(MD) No.6436 of 2009, the petitioner herein has challenged the auction sale conducted in respect of her property

comprised in R.S.No.656, Door No. 18A, Pallivasal Street, Thulasendrapuram, Thirumullaivasal Village, Seerkali Taluk, Nagapattinam District by

the 1st respondent in favour of the 3rd respondent on 4.3.2009 and also challenged the communication of the 1st respondent dated 22.6.2009.

When the earlier Writ Petition being W.P.(MD) No. 49 of 2007 filed by the petitioner was pending, the property of the petitioner has been

sold to the 3rd respondent by the 1st respondent in pursuant to the auction sale. Therefore, the petitioner has filed the 2nd Writ Petition seeking for

the above said relief.

Since this Court has set aside the proceedings dated 14.12.2006 initiated u/s 29 of the SFC Act, 1951 as against the petitioner''s property is

concerned, the subsequent auction conducted by the 1st respondent in favour of the 3rd respondent is also not valid, as the 1st respondent''s

action initiated u/s 29 of the Act against the petitioner is bad in law as held by the Hon''ble Supreme Court in 2009-1-L.W.578. However, it is

now represented before this Court by the 1st respondent that the sale conducted in favour of the 3rd respondent on 4.3.2009 was subsequently

cancelled and the entire sale amount paid by the 3rd respondent has also been refunded to him. The said fact is not disputed by the learned counsel

for the 3rd respondent.

In view of the above said submissions made by the parties and also in view of the order made in W.P.(MD) No.49 of 2007, nothing survives

in Writ Petition (MD) No.6436 of 2009 to be adjudicated upon and the said is liable to be dismissed as infructuous. In the result, W.P.(MD)

No.49 of 2007 is allowed in respect of petitioner''s property at S.No.656, Thulasiandipuram Village, Thirumullaivasal Taluk alone. W.P.(MD)

No.6436 of 2009 is dismissed as infructuous. No costs. Consequently, connected MPs are closed.