Shanti Sarap Sharma vs. State of Punjab & Ors AIR 2013 Punjab & Haryana 13
The case of the petitioner as pleaded was that the son of the petitioner Rupinder Kumar Sharma was the sole proprietor of industrial concern M/s Aditi Agro Mills, which had obtained a term loan of Rs. 40 lakh from the Corporation vide mortgage deed dated 31-3-1993. The house in question was the absolute ownership of Ved Parkash Sharma, father-in-law of the present petitioner and said Ved Parkash Sharma being the maternal grandfather of Rupinder Kumar Sharma in his capacity as surety/guarantor offered the said house as collateral security with respondent No. 2 for the purpose of raising loan and the same was, thus, mortgaged with the Corporation as per mortgage deed dated 31-3-1993. The properties belonging to the industrial concern as well as the factory building alongwith the machinery was also mortgaged. The said industrial concern M/s Aditi Agro Mills, started committing default from 15-3-1994 and accordingly, the Corporation took over the property u/s. 29 of the Act. The father-in-law of the petitioner Ved Parkash Sharma passed away on 4-2-2008 executing a will dated 13-11-2006 whereby he bequeathed the said residential house in favour of his son-in-law, on the basis of which the present petitioner has become owner of the property. The Corporation purportedly exercising its powers u/s. 29 of the Act has taken over the deemed possession of the house on 17-10-2002 in order to enforce the liability of the guarantor/surety.
It was further pleaded that proceedings u/s. 29 of the Act could not be invoked against the guarantor and the Corporation had a right u/s. 31(aa) for enforcing the liability of any surety and the claim of the Corporation was also time barred as default in repayment of loan was on 15-3-1994 and the last payment was due against the industrial concern on 15-3-2001.
On behalf of the respondents, it was pleaded that the liability of the principal debtor and the surety was co-extensive and the value of the property was highly insufficient to discharge the liability and since the principal debtor has committed default in not paying the amount so advanced with stipulated interest, the Corporation was justified in taking action u/s. 29 of the Act for recovery of the loan with interest by taking over possession of the residential house.
The court observed that section 29 of the Act specifically provides that whenever an industrial concern which is under liability to the Financial Corporation in pursuance to an agreement, makes any default in repayment of any loan or advance in relation to any guarantee given by the Corporation or otherwise fails to comply with the terms of its agreement with the Financial Corporation, the Corporation shall have the right to take over the management or possession or both of the industrial concern and realise the property pledged, mortgaged, hypothecated or assigned to the Corporation. Similar matter came up for consideration before the Honourable Apex Court in Karnataka State Financial Corporation’s vs. N. Narasimahaiah & Ors AIR 2008 SC 1797, where while upholding the judgment of the Karnataka High Court, it was held that Section 29 confers an extraordinary power upon the Corporation and it is expected to exercise its statutory powers reasonably and bona fide. The powers of the Corporation u/s. 31 & 32G of the Act were also taken into consideration and it was observed that there would not be any default as envisaged in Section 29 of the Act by a surety or a guarantor and the power was granted to the Corporation against the surety only in terms of Section 31 of the Act and not u/s. 29 of the Act.
The Full Bench decision of this Court in Shiv Charan Singh v. Haryana State Industrial & Infrastructure AIR 2012 P & H 50. The question which was referred to the Full Bench was as under:-
Whether the parties can agree to confer jurisdiction to the financial Institution to proceed against the guarantor in exercise of the powers conferred u/s. 29 of the Act?
After taking into consideration the provisions of the bond of guarantee and the judgment of the Apex Court in Karnataka State Financial Corporation’s case (supra), the Full Bench came to the conclusion that the parties could not confer jurisdiction under the statute which was not provided and accordingly, held that the Corporation has no right to proceed against the guarantor u/s. 29 of the Act and can only proceed against him u/s. 31 and 32G of the Act.
