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Judgment
Petition filed u/s 31(1)(aa) of the State Financial Corporation Act, directing respondents 2 and 3 to pay the petitioner a sum of Rs.24,19,380.20
with further interest at 16% per annum from the date of filing till the date of realisation.
The case in brief is as follows:
The 1st respondent through its partners applied for a term loan for business for manufacturing audio cassettes and a term loan of Rs.7.35 lakhs
was sanctioned, by an order dated 30.6.82 by the petitioner. The terms of repayment and rate of interest are specified in the sanction order. The
1st respondent executed a deed of hypothecation on 29.11.92 thereby hypothecating the machineries financed by the petitioner. Respondents 2
and 3 executed a deed of guarantee on 29.11.82 thereby fully guaranteeing the due repayment of the above loan. The guarantee is a continuing
one. It is also joint and several. The first respondent did not care to repay the loan and became a chronic defaulter. In spite of reminders and
warnings, they failed to pay the instalments. The loan was foreclosed on 3.11.92 and even then, the loan was not repaid, and brought the
hypothecated assets through auction cum tender after due publicity in the leading dailies. The sale was held on 18.8.94 and the machineries were
sold for a sum of Rs.1.01 lakhs and the said sale consideration was credited to the loan account.
The petitioner caused a notice dated 30.6.97 to the respondent calling upon them to pay the remaining amount. As on 3.8.97, a sum of
Rs.24,19,380.20 is due and payable and as such the petitioner is filing this Petition invoking the deed of guarantee dated 28.11.82.
The 3rd respondent alone filed a counter statement and denied the various averments. The availing of loan by the first respondent as well as the
deed of guarantee executed are admitted. While the loan extended was Rs.7.35 lakhs, only a sum of Rs.5.15 lakhs was drawn and deducting an
amount of Rs.75,000 from Rs.5.15 lakhs, being subsidy not disbursed by the petitioner to the respondent. The actual amount availed by the first
respondent comes to Rs.4.40 lakhs only. He sought for extension of time for repaying the amount, but the petitioner prematurely foreclosed the
loan in the year 1992. The petitioner brought the hypothecated assets for sale through public auction. If they had carried on their business of music
recording, they would have realised about Rs.5.25 lakhs. When the loan was foreclosed in 1992 and the sale was held in 1994, there was no
communication also. The petitioner has not given details as to what amount of the loan was outstanding on the date of the sale and how much
exactly was credited to the loan account. Now the interest has been claimed at Rs.19,75,734.35 without stating how it has been worked out. The
claim is also barred by time. Between 1994 and 1997, there is absolutely no communication from the petitioner to the respondents. The petitioner
ought to have instituted the proceedings much earlier. Hence, the petition is liable to be dismissed.
On the above pleadings, the following issues arise for consideration:
(1) Whether the petitioner is entitled to claim the petition amount?
(2) Whether the claim is barred by lime as contended by the 3rd respondent ?
(3) To what relief?
Issues 1 to 3: The first respondent through the partners applied for a term loan for business for manufacturing audio cassettes and availed a loan
of Rs.7.35 lakhs. The instalments have not been paid properly. The 1st respondent also executed a deed of hypothecation. Respondents 2 and 3
also executed a deed of guarantee on 29.11.92. Learned counsel for the petitioner contended that the guarantee is a continuing one. The loan was
foreclosed by the petitioner Corporation on 3.11.92 and hypothecated assets were brought to auction and a sum of Rs.1.01 lakhs was realised
and it was given credit to the loan account. Now the petition has been filed to enforce the guarantee against respondents 2 and 3.
The 3rd respondent alone resisted the petition stating that even at the time of sanctioning the loan, the subsidy amount of Rs.75,000 was not
given and disbursed to the 1st respondent. The actual amount availed was only Rs.4.40 lakhs. Learned counsel further stated that the petitioner has
not given details as to what amount of the loan was out standing and how the interest amount of Rs.19 lakhs and has been worked out are not
stated. Between 1994 and 1997, there is absolutely no communication from the Corporation to the respondents. When the loan was foreclosed in
1992, the petition was filed in the year 1997 and, as such, it is clearly barred by time and the liability cannot be enforced against respondents 2 and
3.
P.W.1 is working as an Officer in the petitioner Corporation and he narrated the case of the petitioner. Ex.P 1 is the loan sanction order. Ex.P 2
is the hypothecation deed executed by the first respondent. Ex.P 3 is the mortgage deed executed by the 1st respondent relating to the land and
building. Respondents 2 and 3 also executed the deed of guarantee under Ex. P 4 and Ex.P 5 is the notice sent to the respondents and after
foreclosure of the loan. The movables were taken possession on 22.3.93 and they were sold in public auction on 19.8.94 after due publication and
after observing all the formalities. Ex.P 6 is the notice sent to the respondents before confirmation of sale. They also sent another notice under Ex.P
Ex. P 8 is the true copy of the ledger extract and according to which, the amount payable is Rs.24 lakhs and odd.
Learned counsel for the 3rd respondent first contended that the subsidy amount of Rs.75,000 has not been given credit to. Admittedly, the first
respondent has not raised any such claim. In fact, the petitioner also sent a notice to the respondents and no reply has been sent. The 1st
respondent alone is competent to say how much amount was given by way of loan. Now, the deed of guarantee executed by respondents 2 and 3;
but they may not have personal knowledge as to how much loan was secured by the 1st respondent. There is absolutely no material to come to the
conclusion that a sum of Rs.75,000 was not given credit to in the loan account.
Learned counsel for the 3rd respondent next contended that the petition claim is barred by time. The loan was foreclosed in the year 1992 and
the property was brought to auction in the year 1994 and from the date of August, 94, the petition has been filed within a period of three years.
Learned counsel further contended that when the loan was foreclosed in 1992 the petition ought to have been filed within a period of three years
and as such, according to Article 137 of the Limitation Act, the claim is barred by time. I am unable to agree with this contention of the learned
counsel for the 3rd respondent. The deed of guarantee is a continuing one and respondents 2 and 3 are jointly and severally liable to pay the
amount. Article 137 of the Limitation Act is not applicable to the case on hand.
Learned counsel for the petitioner also relied on M/s.Easwari Industries, Shencottai and others v. Tamil Nadu Indl. Investment Corporation
Ltd. by its Branch Manager, Tirunelveli , 1998 (I) MLJ 1 wherein it is observed that the order passed u/s 31 of the State Financial Corporation
Act is not a decree under the Code and procedure of making, the calculation held, was a process of execution of a decree already passed under
the Act. Learned counsel for the petitioner also relied upon Maganlal Vs. Jaiswal Industries, Neemach and Others, , and also Rajasthan Financial
Corporation Vs. Banwari Lal and Others, . It is stated that where an application is filed by State Financial Corporation u/s 31(1) for enforcing the
liabilities of the sureties which are co-extensive with the principal debtor who did not make the repayment of loan, the substantive relief sought in
the application is like the relief sought in an execution proceedings. Hence, it cannot be treated as a plaint and it would not be barred by limitation
provided under Article 137 of Limitation Act. These decisions are applicable to the case on hand.
Learned counsel for the 3rd respondent relied on Gujarat State Financial Corporation Vs. Natson Manufacturing Co. Pvt. Ltd. and Others,
and The Kerala State Electricity Board, Trivandrum Vs. T.P. Kunhaliumma, and they are not applicable to the case on hand.
Learned counsel for the 3rd respondent next contended that the payments made under Exs.D1 to D3 were not given credit to. The statement
of account was filed under Ex.P 8. On a perusal of Exs.D1 to D3 it is evidently clear that all these payments have been given credit to in the
statement of account. I am of the view that there is absolutely no defence on the part of respondents 2 and 3. The petitioner Corporation is entitled
to enforce the guarantee and as the guarantee is a continuing one and the petition, is filed within-three years after the public auction, it is well within
the time. One other contention raised by the 3rd respondent is that there was no proper publication and the sale has been made for a lesser price.
Except the bald suggestion made in the course of the cross examination, no legal evidence has been adduced on the side of the respondents
relating to this aspect. Under the circumstance, I am of the view that the petitioner Corporation is entitled to claim the amount and the claim is also
not barred by time.
For the reasons stated above, the petition is allowed with costs.