Supreme Court of India
MAHARASHTRA STATE FINANCIAL CORPORATIONversusJAYCEE DRUGS AND PHARMACEUTICALS PVT. LTD. AND ORS.
- Citation
- 1991 INSC 50
- Decided
- 19 February 1991
- Disposal
- Appeal(s) allowed
- Bench
- S RANGANATHAN
Holding
A petition under Sections 31 and 32 lies in the High Court when the liability exceeds Rs.50,000, and the 1985 amendment enables enforcement of any surety’s liability, but a money decree cannot be granted against a surety who has only a personal guarantee.
Summary
Maharashtra State Financial Corporation (the appellant) had sanctioned a Rs.30 lakh loan to Jaycee Drugs Ltd. (the respondent company) which was secured by a mortgage and a personal guarantee from the company's directors. After the company defaulted, the corporation sought recovery of Rs.15,87,391.20 from the directors under Sections 31 and 32 of the State Financial Corporations Act, 1951, filing the petition in the Bombay High Court. The respondents contested the petition on three grounds: (1) that such petitions could be filed only in the Bombay City Civil Court; (2) that the Act did not permit a money decree against sureties who had given only a personal guarantee; and (3) that the provision was ultra vires Article 14 of the Constitution. The Supreme Court held that if the liability exceeds Rs.50,000 the petition lies in the High Court, and that the 1985 amendment allows enforcement of the liability of any surety, including one who has given only a personal guarantee, but that a money decree cannot be passed in such proceedings. Consequently, the appeal was dismissed and the High Court's order denying the money decree was affirmed.
Issues considered
- Whether a petition under Sections 31 and 32 of the State Financial Corporations Act, 1951, can be filed before the Bombay City Civil Court or only before the High Court.
- Whether the Act permits the passing of a money decree against a surety who has given only a personal guarantee.
- Whether the provisions relating to enforcement of a surety’s liability are ultra vires Article 14 of the Constitution.
Legislation cited
Subjects
jurisdictionsurety liabilityState Financial Corporations Actmoney decreepersonal guaranteeAmendment Act 43 of 1985Bombay City Civil CourtHigh Court
Judgment
MAHARASHTRA STATE FINANCIAL CORPORATION
A v.
-14.
JAYCEE DRUGS AND PHARMACEUTICALS PVT. LTD.
AND ORS.
FEBRUARY 19, l991
B
[S. RANGANATHAN, S.C. AGRAWALANDN.D. OJHA,JJ.]
State Financial Corporation Act, 1951: Sections 31 and 32- .:>.
Scope of-Presidency town-Jurisdiction to entertain-Whether a peti-
tion under sections 31 and 32 is to be made before a City Civil Court or the
Hi1:h Court. Liability of a surety-Enforcement of-Whether in such a peti-
c tion a money decree for repayment of loan can be passed against a party
\.J_,
who stood surety personally without any security. Held if the claim is
up to Rs.50,000 the application would lie to City Civil Court and if it is
more than to the High Court-Amending Act 43 of 1985. By majority
held that after the amendment introduced by Act 43 of 1985 such an
y
D application shall lie for enforcing the liability of a surety who ha~ given
only personal guarantee.
Respondent No. 1 a Private Limited Company, was sanctioned a
loan of Rs.30 iakhs by the Appellant-Corporation for the setting up of a
factory. To secure this loan a mortgage deed of certain properties was
E executed by the Company and Respondents 2 to 4 as its directors bad >---
executed a personal Surety Bond without any security for its repay-
ment. After obtaining a part of the sanctioned loan, which was to be
given in phases, the Company became <iisinterested in availing of the
balance amount. Consequently the Corporation demanded back tb.e
amount already taken together with interest and 03 thlf. company's
F failure to do so, it took over the Industrial Concern under section 29 of
the Act and initiated steps to realise its dues by putting tile property to
sale. Having failed to recover the amount as no adequate offer was ~
forthcoming despite repeated advertisements, it moo a petitian before
the Bombay High Court under sections 31 and 32 of th~ Act both against
the Company as well as its directors-sureties praying for a decree in the
G sum of Rs.15,87 ,391.20 to be passed against them jointly and severally.
The respondents contested the petition contending (a) that a peti-
tion under sections 31 and 32 of the Act could be f'tled only before the
City Civil Court and the High Court bad no jurisdiction to entertain it,
>-
(b) that no money decree can be passed under sections 31and32 of the
H Act, and (c) that the provision in the Act relating to enforcement of the
480
MAHARASHTRA FINANCIAL CORPN. v. JAYCEE DRUGS 481
liability of surety were ultra vires of Article 14 of the Constitution. The
>-- learned single judge relying on an earlier decision of the Bombay High A
Court reported in 1987 Mah. L.J. 243 held that the High Court had
jurisdiction to entertain the petition but on merits took the view that no
money decree could be passed under sections 31 and 32 even against the
sureties and since in the instant case the sureties had not given any
security except their personal guarantee, the same could be enforced B
only in the ordinary course and not under the special machinery pro-
-i_ vided under the Act. In view of his f'mdings on the f'lrst two pleas no
arguments were entertained on the last plea and accordingly the peti-
tion was dismissed. The Division Bench while dismissing the appeal not
only upheld the f'mding of the single Judge on merits but also overruled
- '-~/
the decision reported in 1987 Mah. L.J. 243 and held that the High
Court had no jurisdiction to entertain a petition under sections 31 and
32 of the Act. The Corporation came up in appeal before this court by
c
¥ special leave against this decision of the High Court of Bombay.
The impugned judgment was assailed by the Appellant Corpora-
tion both on merits and on the plea of jurisdiction. The respondents in o
reply asserted that the fmdings of the High Court on both pleas were
unassailable. ·
Allowing the appeal, by a majority decision,
HELD: A. By the Full Court E
(i) The extent of the liability stated in the application as contemp-
lated by sub section (2) of section 31 of the Act would represent the
0
value of the claim of the Corporation and if such value is upto Rupees
, Fifty Thousand, the application would lie in the City City Court and if it F
~s more than that amount it would lie in the High Court. This interpre-
tation would give meaning and relevance to the words "having jurisdic-
tion" used in sub-section (11) of section 32. A different interpretation
would render superfluous or otiose not only the words "having jurisdic-
tion" but also the words "and in the absence of such court, by the High
Court" occurring in the said sub-section (11) inasmuch as in 2 G
Presidency-town, in terms of territorial jurisdiction, the jurisdiction of
~ the City Civil Court and of the High Court is co-terminus. [495D-F]
(ii) In the instant case the extent of liability of the surety being
more than Rupees fifty thousanci, the. ~tion could only have been
filed and was rightly fded in the Hilb. Court and the finding in the H
482 SUPREME COURT REPORTS (1991] 1 S.C.R.
judgment under appeal to the contrary for holding that the High Court -1(
A
had no jurisdiction to entertain the application cannot be sustained. (497A]
B. Per N.D. Ojha, J. for himself and Ranganathan, J.
(iii) There can be no doubt that the term, "any surety" used in
.B clause (aa) in sub-section (1) of section 31 of the Act, will include not
only a surety who has given some security but also one who has given
only a personal guarantee. In our opinion, in a case where the relief .~
claimed in the application under section 31(1) of the Act is for enforcing
the liability of a surety who has given only a personal guarantee, sub-
section 4(A) of section 32 where no cause is shown and clause (da) of ..,_;_,
sub-section (7) where cause is shown, contemplate cutting across and
c dispensing with the provisions of the Code of Civil Procedure from the
stage of filing a suit to the stage of obtaining a decree against the surety,
the passing of an order which can straightaway be executed as if it were
a decree against the surety which may be passed in the event of suit ¥
being filed. [498F, 499E]
D
(iv) In the absence of any provision such as sub-section (8) of
section 32 of the Act applying the manner provided in the Code for the
execution of a decree against a surety only "as far as practicable" the
entire provision contained in this behalf in the Code shall be applicable.
This would be so in view of the use of the expression "any other law for >-
E the time being applicable to an industrial concern" used in section 46B
of the Act. That the Code is applicable to an industrial concern also is
not in dispute and cannot be doubted. [500H-501A] ,•
(v) Even in the absence of section 46B of the Act the provisions of
the Code would have been attracted in the matter -of enforcing the
F liability of a surety in view of the decision of this Court in National ' ,
Sewing Thread Co. Ltd. v. James Chadwick & Bros. Ltd., [1953] SCR ._..,,.--
1028 inasmuch as the District Judge while exercising jurisdiction under
sections 31 and 32 of the Act is not a persona designata but a court of
ordinary civil jurisdiction. [501B D]
0
G (PerS.C. Agrawal, J. Dissenting.)
It· cannot be comprehended that while making provision which )....
would enable passing of an order in the nature of a money decree
against a surety oil an application under section 31 of the Act, Parlia-
ment would have refrained from making a corresponding provision
H prescribing the procedure for carrying into effect such an order. It
MAHARASHTRA FINANCIAL CORPN. v. JAYCEE DRUGS 483
)-. appears to be more in consonance with the scheme of the Act and the
A
object underlying sections 31 and 32 that by introducing the amend-
ments in sections 31 and 32 of the Act the Parliament intended to place
the surety on the same footing as the principal debtor so as to enable the
Financial Corporation to obtain relief against the properties of the
principal debtor as well as the surety. [515E~G]
B
If considered in this perspective, the expression "enforcing the
liability of any surety" in clause (aa) of section 31(1) would mean
enforcing the liability of a surety in the same maimer as the liability of
principal debtor is enforced, by attachment and sale of property keep-
ing in view that the proceedings under sections 3i and 32 of the Act are
akin to an application for attachment of property in execution of a
decree at a stage posterior to the passing of the decree. The relief of a c
money decree sought against the sureties-respondents 2 to 4 was not
maintainable and the said relief could not be granted to the appellant in
proceedings under section 31 of the Act. As a result, the petition (ded by
the appellant must be dismissed and for the same reason this appeal
must fail. [515G-516A, 516D-E] D
Munnalal Gupta v. Uttar Pradesh Financial CorporatiOn & Anr.,
A.I.R. 1975 Allahabad 416; Thressiamma Varghese v. K.S.F. Corpora-
·, tion, A.I.R. 1986 Kerala 222; Maharashtra State Financial Corpora-
~ .tion v. Hindtex Engineers Pvt. Ltd., [1987] M.L.J. 243; Kayastha Train-
ing & Banking Corporation Ltd. v. Sat Narain Singh, [1921] I.L.R. 43 E
All. 433; M. K. Ranganathan & Anr. v. Government of Madras & Ors.,
[1955] 2 S.C.R. 374; The Central Talkies Ltd., Kanpur v. Dwarka
Prasad, [1961] 3 S.C.R. 495, referred to.
Magan/al v. M/s. Jaiswal Industries, Neemach & Ors., [1989] 4
'1'~ S.C.C. 344; Mis. Everest Industrial Corporation & Ors. v. Gujarat F
""'f'" State Financial Corporation, [1987] 3 S.C.C. 597; Parkash Playing Cards
Manufacturing Co. v. Delhi Financial Corporation, A.I.R. 1980 Delhi
48; Gujarat State Financial Corporation v. Natson Manufacturing Co.
Pvt. Ltd. & Ors., [1979] 1 S.C.C. 193, distinguished.
West Bengal Financial Corporation v. Gluco Series Pvt. !.,td., G
A.I.R. 1973 Cal. 268, approved.
CIVIL APPELLATE JURISDICTION:.Civil Appeal No. 782
of 199L
From the Judgment and Order dated 10.7.1990 of the Bombay H
')
484 SUPREME COURT REPORTS [1991] 1 S.C.R.
A High Court in Appeal No. 423of1987.
Ashok H. Desai, Vinay Tulzapurkar, Raghu Kothare and Rajiv
Dutta for the Appeallant.
-Soli J. Sorabjee, D.R. Poddar, Ms. Pumima, Atul Sharma, A.V.
B Palli, E.C. Agrawala and V.B. Joshi for the Respondents.
The Judgments of the Court was delivered by
OJHA, J. Special leave granted.
-
•-...J_,'
This appeal by special leave has been preferred against the
C judgment dated 10th July, 1990 of the Bombay High Court in Appeal
No. 423 of 1987. Respondent No. 1 is a private limited company
whereas Respondents 2 to 4 are its Directors. Respondent No. 1, for
setting up a factory, sought financial assistance from the appellant and
the appellant sanctioned a loan of Rupees thirty lakhs. In order to
D secure the loan Respondent No. 1 executed a deed of mortgage of
certain properties on 29th June, 1979 and Respondents 2 to 4 on the
same date by executing a deed of guarantee stood surety for repay-
ment of the said loan. It was a case of personal guarantee only as no
property was given in security. For the sake of brevity the appellant,
Respondent No. 1 and Respondents 2 to 4 shall hereinafter be referred
E to as the Corporation, the Company and the sureties respectively. 1be
amount of loan was to be advanced in phases and after the Corpora-
tion had advanced a part of the total sanctioned loan, the Company did
not want to avail of the balance of the amount as it seems to have lost
interest in setting up the factory for reasons with which we are not
concerned. The Corporation consequently called upon the Company
F to repay the amount already advanced together with interest aad on its
failure fo do so took p~ssession under Section 29 of the State Financial
Corporations Act, 1951 (for short the Act) over the industrial concern,
a term defined under Section 2(c) of the Act and took steps to realise
its outstanding dues by transfer of property in the manner provided
therein. However, notwithstanding advertisement for sale thereofhav-
G ing been made on several occasions the Corporation could not get an
offer of more than about Rupees five lakhs.
Having failed to recover the amount due to it in the manner
stated above, the Corporation proceeded to recover the same from the
sureties whose liability was co-extensive and for this purpose it filed a
H ,, 31and32 of the Act arraying
petition in the High Court under Sections
.>
MAHARASHTRA FINANCIAL CORPN. v. JAYCEE DRUGS [OJHA, J.) 485
>- 4,thewith
Company as Respondent No. 1 and the sureties as Resondents 2 to
the prayer that "the respondents be jointly and severally A
ordered and decreed to pay the petitioners the sum of Rs.15,87,391.20
as per particulars hereto annexed and marked Ex. H. with further
interest at the rates of 14-1/2% per annum till payment and may further
"be ordered to pay to the petitioners costs of the petition". Thus,
according to the relief claimed in the petition the liability of the B
respondents with regard to the amount payable to the Corpora,tion on
~ the date of making of the petition was for a sum which was more than
R.upees fifty thousand which, as will be presently shown, represents
maximum amount over which the Bombay City Civil Court has
... ~ pecuniary jurisdiction.
The respondents contested the petition and raised three pleas in c
defence: (1) A petition under Sections 31 and 32 of the Act could be
.....,,, filed only in the Bombay City Civil Court and the High Court had no
jurisdiction to entertain it, (2) the relief claimed in the petition could
not be grai:ited under Sections 31 and 32 of the Act inasmuch as these
sections did not contemplate passing of a money decree not only D
against the principal debtor but also against the sureties; and (3) the
provisions in the Act relating to enforcement of the liability of a surety
were ultra vires Article 14 of the Constitution.
-4(
The learned Single Judge of the High Court before whom the
petition came up for hearing did not, in view of his finding on the first E
two pleas, entertain any argument on the last plea nor has the said plea
..... been raised before us and as such the same does not need to be gone
into. As regards the second plea it was conceded before the learned
Single Judge on behalf of the Corporation by its learned counsel that
no such money decree could be passed against the Company as was
claimed in the petition. It was, however, asserted that such a decree F
~
could be passed as against the sureties. In this view of the matter the
petition was treated and decided as being confined against the sureties
only. In regard to the plea of jurisdiction the learned Single Judge took
the view that since an appeal was pending before a Division Bench of
the High Court against the judgment of a Single Judge in Misc. Peti-
tion No. 357 of 1985, Maharashtra State Financial Corporation v. G
Hindtex Engineers Pvt. Ltd., decided on 3rd December, 1986 (since
--/_
reported in 1987 Maharashtra Law Journal 243), in which it had been
held that such a petition was maintainable in the High Court, he would
proceed to decide the petition on merits on the assumption that he had
jurisdiction to entertain it. On merits. he took the view that no money
decree could be passed in a petition under Sections 31 and 32 of the Act H
486 SUPREME COURT REPORTS (1991] 1 S.C.R.
A even against the sureties and since in the instant case sureties had _...._
admittedly not given any security except their personal guarantee the
said surety could be enforced only in the ordinary course and not
under the special machinery provided under the Act. The petition was
accordingly dismissed.
B
Aggrieved by the judgment of the learned Single Judge the
Corporation preferred an appeal before a Division Bench which has ~
been dismissed by the judgment under appeal. The Division Bench not
only upheld fhe finding of the Single Judge on merits but also over-
ruled the decision reported in 1987 Maharashtra Law Journal 243 and '
held that the High Court had no jurisdiction to entertain a petition '-J.-
c under Sections 31 and 32 of the Act. ......
Shri Ashok Desai, Senior Advocate appearing for the Appellant-
Corporation has assailed the findings of the High Court in the judg- ¥
ment under appeal both on merits and on the plea about jurisdiction.
D Shri Soli J. Sorabjee, Senior Advocate appearing for the respondents
has in reply asserted that the findings of the High Court on both the
pleas were unassailable. An application for intervention being I.A.
No. 3 of 1990 has been made on behalf of Nav Bharat Udyog, a
parternship firm having its office at Mehta Building, 2nd Floor, 47,
Nagindas Marg, Bombay, confined to the plea with regard to jurisdic- ,.._. -
E tion and it has been urged by learned counsel for the intervenor also,
in line with the submission made by learned counsel for the respon-
dents, that it is only the Bombay City Civil Court and not the High
Court which has jurisdiction to entertain a petition under sections 31
and 32 of the Act.
For the sake of facility in considering the respective submissions
F made by learned counsel for the parties we find it useful to refer to the ~
statutory provisions relevant in this behalf. Section 2 of the Bombay
City Civil Court Act, 1948 contains definitions and inter alia provides:
"2. In this Act unless there is anything repugnant in the
subject or context,-
G
(1) "City Court" means the Court established under
Section 3; )-.-
(2) "High Court" means the High Court of Judica-
ture at Bombay"
H
MAHARASHTRA FINANCIAL CORPN. v. JAYCEE DRUGS [OJHA, J.) 487
,;.- Section 3 in its turn provides:
A
"3. The State Government may by notification in the Offi-
cial Gazette, establish for the Greater Bomaby a court, to
be called the Bombay City Civil Court. Notwithstanding
anything contained in any law' such court shall have juris-
diction to receive, try and dispose of all suits and other B
~ proceedings of a civil nature not exceeding fifty thousand
rupees in value, and arising within the Greater Bombay,
except suits or proceedings which are cognizable-
- '~
(a) by the High Court as a Court of Admiralty or
Vice-Admiralty or as a Colonial Court of Admiralty, or as
a Court having testamentary, intestate or matrimonial
jurisdiction, or
c
y
(b) by the High Court for the relief of insolvent
debtors, or
D
(c) by the High Court under any special law other
than the Letters Patent; or
-..-( (d) by the Small Cause Court:
Provided that the State Government may, from time E
to time, after consultation with the High Court, by a like
.. notification extend the jurisdiction of the City Court to any
suits or proceedings which are cognizable by the High
Court as a court having testamentary or intestate jurisdic-
tion or for the relief of insolvent debtor."
~ F
The other Section which is relevant is Section 12 which reads:
"12. Notwithstanding anything contained in any law, the
High Court shall not have jurisdiction to· try suits and pro-
ceedings cognizable by the City Court;
G
Provided that the High Court m'ay, for any special
reason, and at any stage remove for trial by itself any suit
or proceeding from the City Court."
As regards Sections 31 and 32 of the State Financial Corpora-
tions Act, 1951, since the submissions made by learned counselfor the H
488 SUPREME COURT REPORTS [1991] 1 S.C.R.
parties referred to most of the provisions contained therein these two ...f...
A Sections may be quoted in their ~ntirety. They read: .
"31. (1) Where an industrial concern, in breach of any
agreement makes any default in repayment of any loan or
advance or any instalment thereof or in meeting its obliga-
B tions in relation to any guarantee given by the Corporation
or otherwise fails to comply with the terms of its agreement ~
with the Financial Corporation or where the Financial -
Corporation requires an industrial concern to make
immediate repayment of any loan or advance under section
30 and the industrial concern fails to make such repayment, ~-
then, without prejudice to the provisions of section 29 of ..,..
c this Act and of section 69 of the Transfer of Property Act,
1882 any officer of the Financial Corporation, generally or ·
specifically authorised by the Board in this behalf, may y
apply to the district judge within the limits of whose juris-
diction the industrial concern carries on the whole or a sub-
D stantial part of its business for one or more of the following
reliefs, namely:-
(a) for an order for the sale of the property pledged,
mortgaged, hypothecated or assigned to the Financial ~ _
Corporation as security for the loan or advance; or ,,...--
E
(aa) for enforcing the liability of any surety; or
(b) for transferring the management of the industrial
concern to the Financial Corporation; or
-
F (c) for an ad interim injunction restraining the '
industrial concern from transferring or removing its·~
machinery or plant or equipment from the premises of the
industrial concern without the permission of the Board,
where such removal is apprehended.
G (2) An application under sub-section (1) shall state
the nature and extent of the liability of the industrial con-
cern to the Financial Corporation, the ground on which it is >--
made and such other particulars as may be prescribed.
32. (1) When the application is for the reliefs mentioned in
H clauses (a) and (c) of sub-section (1) of section 31, the
MAHARASHTRA FINANCIAL CORPN. v. JAYCEE DRUGS [OJHA, J.] 489
district judge shall pass an ad interim order attaching the A
security, or so much of the property of the industrial con- ·
cern as would on being sold realise in his estimate an
amount equivalent in value to the outstanding liability of
the industrial concern to the Financial Corporation,
togethe; with the costs of the proceedings taken under
section 31, with or without an ad interim injunction rest- B
raining the industrial concern from transferring or remov-
ing its machinery, plant or equipment.
(lA) When the application is for the relief men-
tioned in clause (aa) of sub-section (1) of section 31, the
district judge shall issue a notice calling upon the surety to C
show cause on a date to be spcified in the notice why his
liability should not be enforced.
(2) When the application is for the relief mentioned
in clause (b) of sub-section ( 1) of section 31, the district
judge shall grant an ad interim injunction restraining the D
industrial concern from transferring or removing its
machinery, plant or equipment and issue a notice calling
upon the industrial concern to show cause, on a date to be
specified in the notice, why the management of the.indust-
rial concern should not be transferred to the Financial
Corporation. E
- (3) Before passing any order under sub-section (1) or
sub-section (2) or issuing a notice under sub-section (lA),
the district judge may, if he thinks fit, examine the officer
making the application.
F
(4) At the same time as he passes an order under
sub-section (1), the district judge shall issue to the indust-
rial concern or to the owner of the security attached a
notice accompanied by copies of the order, the application
' and the evidence, if any, recorded by him calling upon it or
him to show cause on a date to be specified in th~ notice G
why the ad interim order of attachment should not be made
absolute or the injunction confirmed.
(4A) If no cause is shown on or before the date
specified in the notice under sub-section (lA), the district
judge shall forthwith order the enforcement of the liability H
of the surety .
490 SUPREME COURT REPORTS [1991] 1 S.C.R.
A
(5) If no cause is shown on or before the date
specified in the notice under sub-sections (2) and (4), the
.._
district judge shall forthwith make the ad interim order
absolute and direct the sale of the attached property or
transfer the management of the industrial concern to the
Financial Corporation or confirm the injunction.
B
(6) If cause is shown, the district judge shall proceed
to inves~igate the claim of the Financial Corporation in ~
accordance with the provisions contained in the Code of
Civil Procedure, 1908, in so far as such provisions may be
applied thereto.
'd·
..
c (7) After making an investigation under sub-section
(6), the district judge may-
---
(a) confirm the order of attachment and direct the 'Y'
sale of the attached property;
D
(b) vary the order of attachment so as to release a
portion of the property from attachment and direct the sale
of the remainder of the attached property;
(c) release the property from attachment; ~--
E
(d) confirm or dissolve the injunction;
(da) direct the enforcement of the liability of the
surety or reject the claim made in this behalf, or
...
F ·(e) transfer the management of the industrial con-
cern to the Financial Corporation or reject the claim made -~
in this behalf;
Provided that when making an order under clause (c)
or making an order rejecting the claim to enforce the liabi-
G lity of the surety under clause (da) or making an order
rejecting the claim to transfer the management of the
industrial concern to the Financial Corporation under
clause (e), the district judge may make such further orders -~
as he thinks necessary to protect the interests of the Finan-
cial Corporation and may apportion the costs of the pro-
H ceedings in such manner as he thinks fit:
MAHARASHTRA FINANCIAL CORPN. v. JAYCEE DRUGS [OJHA, J.] 491
...... ,,-. Provided further that unless the Financial Corpora-
tion intimates to the district judge that it will not appeal
A
against any order releasing any propei:ty from attachment
or rejecting the claim to enforce the liability of the surety
or rejecting the claim to transfer the industrial concern to
the Financial Corporation, such order shall not be given
effect to, until the expiry of the period fixed under sub- B
section (9) within which an appeal may be preferred or, if
an appeal is preferred, unless the High Court otherwise
directs until the appeal is disposed of.
-
(8) An order of attachment or sale of property under
·~
this section shaU be carried into effect as far as practicable
in the manner provided in the Code of Civil Procedure, c
1908 for the attachment or sale of property in execution of
a decree as if the Financial Corporation were the decree-
holder.
(SA) An order under this section transferring the D
management of an industrial concern to the Financial
Corporation shall be carried into effect, as far as may be
practicable, in the manner provided in the Code of Civil
Procedure, 1908, for the possession of immovable property
or the delivery of immovable property in execution of a
decree, as if the Financial Corporation were the decree- E
holder.
(9) Any party aggrieved by an order under sub-
section (4A), sub-section (5) or sub-section (7) may, within
thirty days from..'the date of the order, appeal to the High
Court, and upon such appeal the High Court may, after F
~- hearing the parties, pass such orders thereon as it thinks
proper.
(10) Where proceedings for liquidation in respect of
an industrial concern have commenced before an applica-
tion is made under sub-section (1) of section 31, nothing in G
this section shall be construed as giving to the Financial
4 Corporation any preference over the other creditors of the
industrial concern not conferred on it by any other law ..
{11) The functions of a district judge under this
section shall be exercisable- H
I 492 SUPREME COURT REPORTS (1991] 1 S.C.R.
A (a) in a presidency town, where there is a City Civil
-~
Court having jurisdiction, by a judge of that court and in
the absence of such court, by the High Court; and
(b) elsewhere, also by an additional district judge or
by any judge of the principal court of civil jurisdiction.
B
(12) For the removal of doubts it is hereby declared
that any court competent to grant an ad interim injunction ~
under this section shall also have the power to appoint a
Receiver and to exercise all the court powers incidental
thereto."
c
At this place it may be pointed out that with regard to the
enforcement of the liability of a surety it was held by a Full Bench of
the Allahabad High Court in Munnalal Gupta v. Uttar Pradesh Finan-
cial Corporation and Another, A.LR. 1975 Allahabad 416 that from
the scheme of the Act it is clear that the speedy remedy contained in
D Section 31 is available not against the surety but against the borrower
only. In arriving at this conclusion reference was made inter alia to the
reliefs (a), (b) and (c) contained in sub-section ( 1) of Section 31 and to
sub-section (4) of Section 32 of the Act as it then stood. It was pointed
out that this sub-section (4) contemplated a notice to the borrower
industrial concern after an interim order had been passed to show
E cause why the ad interim injunction should not be made absolute but
did not contemplate a notice to the surety and that it would be
unthinkable that the Legislature intended that the property of the
surety may be attached and put to sale without even a notice to him.
It appears that in order to meet the difficulty in enforcing the
F liability of a surety as pointed out in the case of Munnalal Gupta
(supra) Parliament found it necessary to make specific provisions in
this behalf and passed the State Financial Corporations (Amendment)
Act, 1985 (hereinafter referred to as _Act 43 of 198_5). Among other
amendments made by Act 43 of 1985 were the following:
G (i) In sub-section (1) of Section 31 clause (aa) was
inserted.
(ii) In Section 32 a new sub-section (lA) and in sub-section
(3) thereof the words "or issuing a notice under sub-section
(lA)" were inserted.
H
MAHARAS.HTRA FINANCIAL CORPN. v. JAYCEE DRUGS [OJHA. J.] 493
(iii) Sub-section (4) of Section 32 was substituted with an
A
inclusion of sub-section (4A).
(iv) The word "or" occurring at the end of clause (d) of
sub-section (7) was omitted and a new clause (da) was inserted.
(v) In the firs.t proviso after sub-section (7) the words "or B
making an order rejecting the claim to enforce the liability of the
4 surety under clause (da) or making an order rejecting the claim
to transfer the management of the industrial concern to the
Financial Corporation under clause (e)" and in the second pro-
viso the words "or rejecting the claim to enforce the liability of
the surety or rejecting the claim to transfer the industrial concern C
to the Financial Corporation" were inserted and in sub-section
(9) the words "under sub-section (4A), sub-section (5)" were
substituted for "under sub-section (5)".
By the same Act 43 of 1985 a new Section 32G was inserted
which reads: D
"32G. Where any amount is due to the Financial Corpora-
tion in respect of any accommodation granted by it to any
industrial concern, the Financial Corporation or any
person authorised by it in writing in this behalf, may, with-
out prejudice to any other mode of recovery, make an E
application to the State Government for the recovery of the
amount due to it, and if the State Government or such
authority, as that Government may specify in this behalf, is
satisfied, after following such procedure as may be pre-
scribed, that any amount is· so due, it may issue a certificate
for that amount to the Collector, and the Collector shall F
proceed to recover that amount in the same manner as an
,,..arrear of land revenue.''
Having extracted the relevant statutory provisions we now take
up the question of jurisdiction. Sub-section (1) of Section 31 of the Act
contemplates making of the petition thereunder "to the district judge G
within the li_mits of whose jurisdiction the industrial concern carries on
...I the whole or a substantial part of its business". A petition so made is to
be decided in the manner provided by Section 32 of the Act, sub-
section (11) whereof inter alia provides that the functions of a district
judge undt=;r the said Section shall be exercisable, in a Presidency-
town, where there is a City Civii Court having jurisdiction, by a judge H
494 SUPREME COURT REPORTS [1991] 1 S.C.R.
of the court and in the absence of such court, by the High Court.
A
It has been urged by learned counsel for the appellant that in a
case to which the provisions contained in sub-section (1) of Section 32
of the Act and of the Bombay City Civil Court apply, if the extent of
the liability sought to be enforced against a surety is upto Rupees fifty
B thousand a petition under Section 31 read with Section 32 of the Act
would lie before the Bombay City Civil Court and if the liability is
more than the said amount it would lie before the High Court. This, ~
according to him, is apparent from the use of the words "having juris-
diction" in sub-section (11) of Section 32 of the Act and the extent of
the pecuniary jurisdiction of the Bombay City Civil Court as contained
in Section 3 of the Bombay City Civil Court Act. According to him
c since in the instant case the liability sought to be enforced against the
sureties was for a sum of more than Rupees fifty thousand the petition
made by the appellant was maintainable in the High Court alone and
not in the Bombay City Civil Court. On the other hand, it has been ilf
urged on behalf of the respondents and the intervenor by their learned
D counsel that word "jurisdiction" used in sub-section (1) of Section 31
and sub-section ( 11) of Section 32 of the Act connotes territorial
jurisdiction alone and that the concept of pecuniary jurisdiction is
beyond the scope of Sections 31 and 32 in view of the decision of this
Court in Gujarat State Financial Corporation v. Natson Manufacturing
Co. Pvt. Ltd. and Ors., [1979] 1 SCC 193 relied on in Mis. Everest ili>-
E Industrial Corporation and Ors. v. Gujarat State Financial Corpora-
tion, [1987] 3 SCC 597 and Magan/al v. Mis. Jaiswal Industries,
Neemach and Ors., [1989] 4 SCC 344 which lays down that an applica-
tion under Section 31( 1) of the Act is neither a plaint as contemplated
by Article 1 of Schedule 1 nor an application in the nature of a plaint as
contemplated by Article 7 of the Court Fees Act, 1870, that the special
F procedure contained in Section 31(1) was not even something akin to a
suit of a mortgagee to recover mortgage money by sale of mortgaged S:
property, that even if the Corporation-applicant so chooses it cannot
pray for a preliminary decree for accounts or final decree for payment
of money nor can it seek any personal liability, that the Corporation
cannot pray for a decree. of its outstanding dues, that the reliefs con-
G templated by Section 31( 1) on being granted do not result in a money
decree or decree for recovery of outstanding loans or advance, that a
substantive relief in an application under Section 31(1) is something
akin to an application for attachment of property in execution of a }...
decree at a stage posterior to the passing of the decree and that such
relief cannot be valued in terms of the monetary gain or prevention of
H monetary loss.
MAHARASHTRA FINANCIAL CORPN. v. JAYCEE DRUGS [OJHA, J.] 495
.... Having given our anxious consideration to the question we are
inclined to ag'ree with the submission made by learned counsel for the A
appellant. The three decisions of this Court referred to. above and
relied on by learned counsel for the respondents were not cases relat-·
ing to the enforcement of a liability of a surety made possible by the
amendments by Act 43 of 1985. In our opinion, what has been laid
down therein does not in any way militate against ascertaining in B
..{i'....
monetary terms value or the extent of the liability of a surety, which is
sought to be enforced and there is intrinsic evidence in Sections 31 and
32 themselves to support this view. Sub-section (2) of Section 31
makes it obligatory to state the "extent oLthe liability". Sub-section
~) (1) of Section 32 refers to "an amount/equivalent in value to the
outstanding liability". Sub-section ( lA) ·of Section 32 contemplates
notice to the surety to show cause "why his liability" should not be c
enforced. Sub-section (9) of Section 32 contemplates investigation and
...- determination of "the claim" of the Financial Corporation which is to
be recovered. If the application un.der Section 31( 1) is made before a
district judge, there is no difficulty because he has unlimited pecuniary
jurisdiction. The difficulty arises, as in the instant case, when such D
application is to be made either before the City Civil Court or the High
Court as contemplated by sub-section (11) of Section 32. In our
opinion, the extent of the liability stated in the application as contemp-
lated by sub-section (2) of Section 31 of the Act would represent the
+--'
value of the claim of the Corporation and if such value is upto Rupees
fifty thousand the application would lie in the City Civil Court and if it E
is more than that amount it would lie in the High Court. This interpre-
- tation would give meaning and relevance to the words "having juris-
diction" used in sub-section (11) of Section 32. A different interpreta-
tion would render superfluous or otiose not only the words "having
jurisdiction" but also the words "and in the absence of such court, by
the High Court" occurring in the said sub-section (11) inasmuch as in a F
~
Presidency-town, in terms of territorial jurisdiction, the jurisdiction of
the City Civil Court and of the High Court is co-terminus. That it is so
is clear from Section 3 of the Bombay City Civil Court Act and the
definition of the term "Presidency-town" contained in Section 3(44) of
the General Clauses Act, 1897 according to which "Presidency-town"
shall mean the local limits for the time being of the ordinary original G
civil jurisdictioll'of the High Court of J~dicature at Calcutta, Madras
" or Bombay, as the case may be.
It is a settled rule of interpretation of statutes that if the language
and words used are plain and unambiguous, full effect must be given to
them as they stand and in the garb of finding out the intention of the H
496 SUPREME COURT REPORTS [1991] 1 S.C.R.
A Legislature no words should be added thereto or subtracted there-
from. Likewise, it is again a settled rule of interpretation that. statutory
provisions should be construed in a manner which subserves the
purpose of the enactment and does not defeat it and that no part
thereof is rendered surplus or otiose. The aforesaid interpretation of
sub-section (11) of Section 32 of the Act is not only in conformity with
B the rule of interpretation referred to above, it also does not militate in
any way with the concept of an application under Section 31(1) of the
Act, not being a plaint in a suit for recovery of money.
Reliance in this behalf has been placed by learned counsel fur the
intervenor on a decision of the Delhi High Court in Parkash Playing
c Cards Manufacturing Company v. Delhi Financial Corporation, AIR
1980 Delhi 48. In our opinion, however, the said decision is of little
assistance in resolving the plea of jurisdiction raised in the instant
case, namely, whethet in a Presidency-town an application under
Section 31( 1) of the Act is to be made before a City Civil Court or
High Court. In the case of Parkash Cards Manufacturing Company
D (supra), the provision which came up for consideration in the forefront
was Section 5 of the Delhi High Court Act, 1966 and the question of
jurisdiction was largely considered on that basis. Sub-section (11) of
Section 32 with pointed reference to the jurisdiction exercisable by a
City Civil Court in a Presidency-town and the High Court did not fall
for consideration in that case.
E
The case, which throws some light on the point is a decision of the
Calcutta High Court in West Bengal Financial Corporation v. Gluco
Series Private Limited, AIR 1973Cal 268) where it was held:
"Section 32 sub-section ( 11) does not say that the City Civil
F
Court wiil have exclusive jurisdiction but states "in the
Presidency Town where there is City Civil Court having
jurisdiction, by a Judge of that Court and iffthe absence of
such Court by the High Court." The words "in the absence
of such Court" mean in the absence of such Court having
jurisdiction in the matter. The City Civil Court has no
G jurisdiction to entertain and try suits and proceedings of
Civil nature exceeding Rs.50,000 in value. Here the value
of the claims in the proceedings exceeds much more than
Rs.50,000 and, therefore, under Section 32, sub-section ·
(11) this proceeding has been duly instituted in the High·
Court."
H
MAHARASHTRA FINANCIAL CORPN. v. JAYCEE DRUGS [OJHA, J.] 497
In the instant case the extent of the liability of the surety being
..... more than Rupees fifty thousand, the application could only have been A
filed and was rightly filed in the High Court and the finding in the
judgment under appeal to the contrary for holding that the High Court
had no jurisdiction to entertain the application cannot be sustained.
Now we come to the second plea raised on behalf of the respon- B
dents, namely, that the relief claimed in the petition could not be
granted under Sections 31 and 32 of the Act inasmuch as these sections
did not contemplate passing of a money decree not only against the
principal debtor but also against the sureties.
In so far as the special machinery provided under Sections 31 and
32 of the Act being applied to a surety who has given some property in c
security, it has been pointed out by learned counsel for the appellant
that even before the amendment introduced in these sections by Act 43
of 1985 a Division Bench of the Kerala High Court had, in Thres-
siamma Varghese v. K.S.f. Corporation, AIR 1986 Kerala 222, taken
the view that the provisions contained in these sections would be ap- D
plicable. According to learned counsel, in any view of the matter, after
the amendment of these sections by Act 43 of 1985 introducing specific
provisions for. enforcement of the liability of a surety, the matter is
now beyond doubt that the procedure contained in these sections shall
be applicable for the enforcement of the liability of such surety who
has given some property in security. According to him even in the E
judgment under appeal the High Court has accepted this proposition
and has expressed its reservation with regard to•enforcement of the
liability of a surety who has not given any property in security and has
given only a personal guarantee. Reference in this conne<'tion has
been made to the following observations in the judgment under
appeal: F
"Even if the Corporation is now entitled to obtain relief
also· against any property which might have been given a
security by the surety, the further question would remain
whether the Corporation is entitled under Section
3l(l)(aa) to obtain any relief personally against such a G
surety."
Indeed, the submission even before us which was made by
learned counsel for the appellant has been that the only effect of the
1985 amendment is that it enables proceedings to be taken for the
realisation of the security given by the surety in respect of his own H
498 SUPREME COURT REPORTS [1991) 1 S.C.R.
liability whereas such proceedings could not be taken before the
A
amendment. He, however, asserted that the Act-even after the amend-
ment does not enable a monetary decree to be passed against the
surety any more than a decree can be passed against the principal
debtor. According to him, in this view of the matter, in the instant
case, the liability of the sureties could not be enforced under Sections
B 31 and 32 of the Act inasmuch as they had given only personal
guarantee and had not given any property in security.
In the background of the rules of interpretation of statutes
adverted to earlier and the specific provisions with regard to enforce-
ment of the liability of a surety introduced in Sections 31 and 32 of the \
-....k
Act by Act 43 of 1985 we find it difficult to agree with the submission
c made by learned counsel for the respondents. It is true, as has been
indicated above, that this Court has in the case of Gujarat State Finan-
cial Corporation (supra) taken the view that Sections 31and32 of the
Act do not contemplate the passing of a money decree and the princi-
ple laid down in that case has been relied on in two later decisions
D referred to above. The said principle would, in our opinion, not come
in the way of enforcing the liability under Sections 31 and 32 of the Act
even against the surety who has given only a personal guarantee. As
indicated earlier those were not cases dealing with the question of
enforcement of the liability of such a surety and naturally, therefore,
the provisions in this behalf specifically introduced in Sections 31 and
E 32 of the Act by Act 43 of 1985 were not considered in those cases. How-
ever, in this connection what is of significance is that clause (aa)
inserted in sub-sec'tion (1) of Section 31 of the Act by Act 43 of 1985
uses the words "any surety". On its plain grammatical meaning there
can be no doubt that the term "any surety" will include not only a
surety who has given some security but also one who has given only a
F personal guarantee. If the submission made by learned counsel for the
respondents is accepted the words "who has given property by way of
security" will have to be added after the words "any surety". Such a
course not only militates against the normal rule of interpretation but
also tends to defeat the very purpose of the amendment introduced by
Act 43 of 1985 enabling the Financial Corporation to make an applica-
G tion under Section 31(1) of the Act "for enforcing the liability of any
surety", inasmuch as it would have the effect of restricting or qualify-
ing the amplitude of the term "any surety" which the Legislature has
in its wisdom thought it fit to use in its widest sense. The procedure, in
our opinion, for enforcing the liability of a surety who has given only a
personal guarantee would, after the amendment introduced by Act 43
H of 1985, be that an application under Section 31(1) shall lie for enforc-
MAHARASHTRA FINANCIAL CORPN. v. JAYCEE DRUGS [OJHA, J.] 499
,... ing the liability of such surety as contemplated by clause (aa) of the
A
said section. On such an application being made notice shall be issued
to the surety as contemplated by sub-section (lA) of Section 32. This
may, in view of sub-section (3), be done after examining the officer
making the application. If no cause is shown in pursuance of the notice
served on him by the surety sub-section (4A) of Section 32 contemp-
lates passing of an order forthwith for the enforcement of the liability B
of surety. If, on the other hand, cause is shown the claim of the Finan-
4- cial Corporation shall be determined as contemplated by sub-section
( 6) of Section 32 and thereafter a direction as contemplated by clause
(da) of sub-section (7) shall be issued for the enforcement of the liabi-
lity of the surety or rejecting the claim made in this behalf. In the case
-
.\._/
of Maganlal (supra) which related to the relief contemplated by clause
(a) of Section 31( 1) of the Act it was pointed out that the purpose of c
enacting Sections 31 and 32 of the Act was apparently to provide for a
speedy remedy for recovery of the dues of the Financial Corporation
~
and that these sections had the effect of cutting across and dispensing
with the provisions of the Code of Civil Procedure, 1908 (hereinafter
referred to as the Code) from the stage of filing a suit to the stage of D
obtaining a decree in execution whereof such properties as are refer-
red to in clause (a) of sub-section (1) of Section 31 could be sold. In
our opinion, on the same principle, even in a case where the relief
claimed in the application under Section 31( 1) of the Act is for enforc-
ing the liability of a surety who has given only a personal guarantee,
sub-section (4A) of Section 32 where no cause is shown and clause (da) E
of sub-section (7) where cause is shown contemplate cutting across and
dispensing with the provisions of the Code from the stage of filing a
suit to the stage of obtaining a decree against the surety, the passing of
an order which can straightaway be executed as if it were a decree
against the surety which may be passed in the event of a suit being
filed. As seen above, sub-section (2) of Section 31 enjoins upon the F
._...J
Financial Corporation to state the "extent of the liability of the indust-
rial concern" in the avplication to be made under sub-section (1)
thereof. Since the liability of the surety is co-extensive the same shall,
in the absence of anything contrary in the surety bond, be the liability
of the surety also. In a case where there is any provision confining the
liability of the surety, the extent of the liability to be shown in the G
application shall be such as is in conformity with the surety bond.
;;.. When no cause is shown by the surety on being served with the show
cause notice the order which will be passed under sub-section (4A) of
Section 32 would be for the enforcement against the surety of that
liability which is stated in the application. Where, however, cause has
been shown by the surety the extent of his liability shall be determined H
500 SUPREME COURT REPORTS [1991] 1 S.C.R.
A as contemplated in sub-section (6) of Section 32 and it is the liability so
determined which shall be enforced under clause (da) of sub-section ....,
(7) of Section 32. It does not require any elucidation that the extent of
the liability referred to above will necessarily have to be in the very
nature of things in terms of monetary value even though it may not be
possible to call it a decree stricto sensu as defined in Section 2(2) of the
E Code for recovery of money.
Here, Section 46B of the Act may be usefully extracted: -4
"46B. The provision of this Act and of any rule or orders
made thereunder ·shall have effect notwithstanding anyth-
c ing inconsistent therewith contained in any other law for
the time being in force or in the memorandum or articles of
association of an industrial concern or in any other instru-
-
ment having effect by virtue of any law other than this Act,
but save as aforesaid, the provisions of this Act shall be in
addition to, and not in derogation of, any other law for the
D time being applicable to an industrial concern." '
On its plain language, in the absence of anything inconsistent in
the Act, the provisions of the Code shall obviously be applicable for
the enforcement of the liability of the surety directed to be enforced as
aforesaid in the same manner as a decree is enforced in a suit instituted -:A
E in this behalf. It is true, as has been emphasised by l~rned counsel for
the respondents, that there is no provision corresponding to sub-
section (8) of Section 32 for the enforcement of the liability of a surety
who has given only personal guarantee but, in our opinion, keeping in
view the amendments introduced by Act 43 of 1985, it is not very
significant. To us it appears that in view of Section 46B of the Act and
F for the reasons to be stated shortly even if Section 46B was not there,
in the absence of any provision to the contrary in the Act, that order ~
also, which was passed in a case where relief contemplated by clause
(a) of Section 31(1) of the Act was claimed, could have been enforced
in the manner provided in the Code. The purpose of yet inserting
sub-section (8) in Section 32 seems to be that it was not intended to
G apply the provisions of execution of a decree for attachment or sale of
property as contained in the Code in its entirety and to achieve this
purpose the words "as far as practieable" were used in that sub- ....}
section. To us it appears that in the absence of any provision such as
sub-section (8) of Section 32 applying the manner provided in the
Code for the execution of a decree against a surety only "as far as
H practicable" the entire provision contained in this behalf in the Code
MAHARASHTRA FINANCIAL CORPN. v. JAYCEE DRUGS [OJHA, J.] 501
-
..,__ shall be applicable. this would be so in view of the use of the expres- A
sion "any other law for the time being applicable to an industrial
concern". That the Code is applicable to an industrial concern also is
not in dispute and cannot be doubted.
We may now state our reasons for holding that even if Section
B
46B of the Act was not there the provisions of the Code for the execu-
tion of a decree against a surety who had given only personal
guarantee would, in the absence of any provision to the contrary in the
Act, be applicable. In view of the decision of this Court in The Central
Talkies Ltd. Kanpur v. Dwarka Prasad, [1961] 3 SCR 495, where it
- was held that a persona designata is a person selected as an indi-
vidual in his private capacity, and not in his capacity as filling a particu-
lar character or office,. since the term used in Section 31( 1) of the Act
is "district judge" it cannot be doubted that'the district judge is not a
c
persona designata but a court of ordinary civil jurisdiction while exer-
cising jurisdiction under Sections 31 and 32 of the Act. In National
Sewing Thread Co. Ltd. v. James Chadwick & Bros. Ltd., [1953]SCR
0
1028 while repelling the objection that an appeal under the Letters
Patent against the judgment of a Single Judge passed in an appeal
against the decision of the Registrar under Section 76(1) of the Trade
Marks Act, 1940 was not maintainable it was held at pages 1033-34 of
the Report:
E
"Obviously after the appeal had reached the High Court it
has to be determined according to the rules of practice and
procedure of that Court and in accordance with the provi-
• sions of the charter under which that Court is constituted
and which confers on it power in respect to the method and
manner of exercising that jurisdiction. The rule is well set-
F
··~
tled that when a statute directs that an appeal shall lie to a
Court already established, then that appeal must be
regulated by the practice and procedure of that Court. This
rule was very succinctly stated by Viscount Haldane L.C. in
National Telephone Co. Ltd. v. Postmaster-General, in
these terms:
G
"When a question is stated to be referred to an
established Court without more, it, in my opinion, imports
that the ordinary incidents of the procedure of that Court
are to attach, and also that any general right of appeal from
its decision likewise attaches." H
502 SUPREME COURT REPORTS (1991] 1 S.C.R.
The same view was expressed by their Lordships of
A the Privy Council in R.M.A.R.A. Adaikappa Chettiar v.
Ra. Chandrasekhara Thevar, wherein it was said:
"Where a legal right is in dispute and the ordinary
Courts of the country are seized of such dispute the Courts
B are governed by the ordinary rules of procedure applicable
thereto and an appeal lies if authorised by such rules, ~-
notwithstanding that the legal right claimed arises under a
special statute which does not, in terms confer a right of
appeal."
c '-
Again in Secretary of State for India v. Chellikani
Rama Rao, when dealing with the case under the Madras
Forest Act their Lordships observed as follows:
"._J
-
~
"It was contended on behalf of the appellant that all
further proceedings in Courts in India or by way of appeal
D were incompetent, these being excluded by the terms of the
statute just quoted. In their Lordships' opinion this objec~
tion is not well-founded. Their view is that when proceed-
ings of this character reach the District Court, that Court is
appealed to as one of the ordinary Courts of the country,
with regard to whose procedure, orders, and decrees the
E ordinary rules of the Civil Procedure Code apply."
Though the facts of the cases laying down the above
rule were not exactly similar to the facts of the pres~nt
case, the principle enunciated therein is one of general
application and has an apposite application to the facts and
F circumstances of the present case. Section 76 of the Trade ~
y-
Marks Act confers a right of appeal to the High Court and
says nothing more about it. That being so, the High Court
being seized as such of the appellate jurisdiction conferred
by section76 it has to exercise that jurisdiction in the same
manner as i't exercises its other appellate jurisdiction and
G when sudl jurisdiction is exercised by a single Judge, his ·
judgmentl;ieoomes subject to appeal under clause 15 of the
~.
Letters Patent there being nothing to the contrary in the
Trade MaiksAct."
And it is in view of this decision that we are of the opinion that
H the provisions of the Code would have, even in the absence of Section
MAHARASHTRA FINANCIAL CORPN. v. JAYCEE DRUGS [AGRAWAL, J. 1503
.-4.- 46B of the Act, been attracted in the matter of enforcing the liability of
A
a surety. In view of the foregoing discussion, the finding of the High
Court even on this point cannot be sustained. Since, however, the
Sigh Court has not made a determination of the liability of the sureties
as contemplated by sub-section (6) of Section 32 of the Act, the matter
has to be sent back to it for doing so and thereafter to pass an or:der as
contemplated by clause (da) of sub-section (7) of Section 32 of the Act B
and to proceed to enforce the liability so determined against the
~- sureties.
In the result, this appeal succeeds and is allowed with costs and
- 0 the judgment of the Division Bench and also of the Single Judge of the
High Court are set aside. The High Court shall now decide the applica-
tion made by the appellant in accordance with law and in the light of c
the observations made above.
_..,
S.C. AGRAWAL, J. Special leave granted.
In this appeal two questions arise for consideration: 1) whether a D
petition under sections 31 and 32 of the State Financial Corporations
Act, 1951 (hereinafter referred to as 'the Act') can be filed only
in the Bombay Civil City Court and the Bombay High Court, on its
original side, has no jurisdiction to entertain it? and 2) whether in such
~ a petition,· a decree/order can be passed directing payment of money
by respondents nos. 2 to 4 who stood surety for repayment of the loan E
advanced by the appellant, Financial Corporation to respondent
no. 1? The Division Bench of the Bombay High Court has answered
both these questions against the appellant. My learned brother Ojha,
J. has disagreed with this view of the Bombay High Court on both the
questions. He has held that as the extent of the liability of the surety is
more than Rupees fifty thousand the application could only have been F
---,....,. filed and was rightly filed in the High Court which had the jurisdiction
to entertain it. He has also held that in view of the amendments intro-
duced in the Act by the Amending Act 43 of 1985, an order for pay-
ment of money can be passed against the surety who has given only a
personal guarantee. While I am fully in agreement with the decision of
my learned brother on the first question with regard to the jurisdiction G
of the Bombay High Court to entertain the petition filed by the appel-
'!"-· ]ant, I have not been able to persuade myself to agree with the view
taken by him on the second question.
Section 31 of the Act has been described in the marginal note as
special provisions for enforcement of claims by the Financial Corpora- H
504 SUPREME COURT REPORTS [1991] 1 S.C.R.
tion. It deals with a situation where an industrial concern, in breach of
A
any agreement, makes any default in repayment of any loan or
advance or any instalment thereof or in meeting its obligations in
relation to any guarantee given by the Corporation or otherwise fails
to comply with the terms of its agieement with the Financial Corpora-
tion or where the Financial Corporation requires an industrial concern
B to make immediate repayment of any loan or advance under section 30
of the Act and the industrial concern fails to make such repayment. It
enables an officer of the Financial Corporation, generally or specially
authorised by the Board in this behalf, to apply to the District Judge
within the limits of whose jurisdiction the Industrial concern carries on
c
the whole or a substantial part of its business for one or more of the
following reliefs:
(a) for an order for the sale of the property pledged, mort-
gaged, hypothecated or assigned to the Financial Corporation as ·..;..
-
security for the loan or .advance; or
D (aa) for enforcing the liability of any surety; or
{b) for transferring the management of the industrial con-
cern to the Financial Corporation; or
(c) for an ad interim injunction restraining the industrial
E concern from transferring or removing its machinery or plant or
equipment from the premises of the industrial concern without
the permission of the Board, where such removal is apprehended.
Clause (aa) was inserted in sub-section (1) of section 31 by
section 19 of Act 43 of 1985.
F
Section 32 of the Act prescribes the procedure to be followed by
the District Judge in respect of applications under section 31 of the
Act. Prior to the amendments introduced in it by Act 43 of 1985, the
said section read as under:
G "32. Procedure of district judge in respect of applications
under Section 31. (1) When the application is for the reliefs
mentioned in clauses (a) and (c) of sub-section (1) of
section 31,_ the dist_rict iudge shall pass an ad interim order
attaching the security, or so much of the property of the
industrial concern as would on being sold realise in his
H estimate an amount equivalent in value to the outstanding
MAHARASHTRAFINANCIALCORPN. v. JAYCEEDRUQS [AGRAWAL, J.]505
..... liability of the industrial concern to the Financial Corpora- A
tion, together with the costs of the poceedings taken under
section 31, with or without an ad interim injunction rest-
raining the industrial concern from transferring or remov-
ing its machinery, plant or equipment.
B
(2) When the application is for the relief mentioned in
clause (b) of sub-section (1) of section 31, the district judge
f- shall grant an ad interim injunction restraining the indust-
rial concern from transferring or removing its machinery,
plant or equipment and issue a notice calling upon the in-
... \..- dustrial concern to show cause, on a date to be specified in
the notice, why the management of the industrial concern c
should not be transferred to the Financial Corporation.
.-· (3) Before passing any order under sub-section (1) or sub-
section (2) the district judge may, if he thinks fit, examine
the officer making the application.
D
(4) At the same time as he passes an order under sub-
section (1), the district judge shall issue to the industrial
concern a notice accompanied by copies of the order, the
-;.: application and the evidence, if any, recorded by him cal-
ling upon it to show cause on a date to be specified in the
notice why the ad interim order of attachment should not E
be made absolute or the injunction confirmed.
(5) If no cause is shown on or before the date specified in
the notice under sub-sections (2) and (4), the district judge
shall forthwith make the ad interim order absolute and
direct the sale of the attached property or transfer the man- F
' -..-.._..
I
agement of the industrial concern to the Financial Corpora-
tion or confirm the injunction.
(6) If cause is shown, the district judge shall proceed to
investigate the claim of the Financial Corporation in
accordance with the provisions contained in the ·Code of G
Civil procedure, 1908, in so far as such provisions may be
applied thereto.
(7) After making an investigation under sub-section (6),
the district judge may-
H
506 SUPREME COURT REPORTS [1991) 1 S.C.R.
(a) confirm the order of attachment and direct the sale of ~
A
the attached property:
(b) Vary the order of attachment so as to release a portion
of the property from attachment and direct the sale of the
remainder of the attached property;
B
(c) release the property from attachment;
~
I
(d) confirm or dissolve the injunction; or
( e) transfer the management of the industrial concern to \.J
the Financial Corporation or reject the claim made in this •
c behalf:
Provided that when making an order under clause (c) the
district judge may make such further orders as he thinks
necessary to protect the interests of the Financial Corpora-
. •..
D tion and may apportion the costs of the proceedings in such
manner as he thinks fit:
Provided further that unless the Financial Corporation inti-
mates to the district judge that it will not appeal against any
order releasing any property from attachment, such order ~
E shall not be given effect to, untill the expiry of the period
fixed under sub-section (9) within which an appeal may be
preferred or, if an appeal is preferred, unless the High
Court otherwise directs until the appeal is disposed of.
(8) An order of attachment or sale of property under this
F section shall be carried into effect as far as practicable in
the manner provid~d in the Code of Civil Procedure, 1908
;;:r
for the attachment or sale of property in execution of a
decree, as if the Financial Corporation were the decree-
holder.
G (8A) An order under this section transferring the manage-
ment of an industrial concern to the Financial Corporation
shall be carried into effect, as far as may be practicable, '.A:
in the manner provided in the Code of Civil Procedure,
1908, for the possession of immovable property of the
delivery of movable property in execution of a decree, as if
H the Financial Corporation were the decree-holder.
MAHARASHTRAFINANCIALCORPN. v. JAYCEE DRUGS [AGRAWAL, J.] 507
~ (9) Any party aggrieved by an order under sub-section (5) A
or sub-section (7) may, within thirty days from the date of
the order, appeal to the High Court, and upon such appeal
the High Court may, after hearing the parties, pass ·such
orders thereon as.it thinks proper.
B
(10) Where proceedings for liquidation in respect of an
industrial concern have commenced before an application
'
~-
is made under sub-section (1) of section 31, nothing in this
section shall be construed as giving to the Financial Corpo-
ration any preference over the other creditors of the indust-
- 0 rial concern not conferred on it by any other law.
(11) The functions of a district judge under this section
shall be exercisable-
c
'!if
(a) in a presidency town, where there is a city civil court
having jurisdiction, by a judge of that court and in. the
D
absence of such court, by the High Court; and
(b) elsewhere, also by an additional district judge or by any
judge of the principal court of civil jurisdiction.
,)( (12) For the removal of doubts it is hereby declared that
any court competent to grant an ad interim injunction E
under this section shall also have the power to appoint a
Receiver and to exercise all the other powers incidental
thereto."
By Act 43 of 1985, the following amendments have been intro-
F
. .,.,, duced in section 32 of the Act:
......--'
(1) Sub-section (lA) which reads as under was inserted:
"(lA) When the application is for the relief mentioned in
clause (aa) of sub-section (1) of section 31, the district
G
judge shall issue a notice calling upon the surety to show
cause on a date to be specified in the notice why his liability
!- should not be enforced."
(2) In sub-section (3), the words, or issuing a notice under gub-
section (lA) "were inserted after the words" "or sub-section (2)". H
508 SUPREME COl.JRT' REPORTS [1991] 1 S.C.R,
A
(3) Sub-section (4) was substituted by sub-sections (4) and (4A), --t
which read as under:
"(4) At the same time as he passes an order under sub-
section (1)., the district judge shall issue to the industrial
concern or to the owner of the security attached a notice
B accompanied by copies of the order, the appication and the
evidence, if any, recorded by him calling upon it or him to
show cause on a date to be specified in the notice why the
ad interim order of attachment should not be made abso-
lute or the injunction confirmed.
(4A) If no cause is shown on or before the date specified in
c the notice under sub-section (lA), the district judge shall
forthwith order the enforcement of the liability of the
surety."
(4) In sub-section (7), clause (da) was inserted which provides as
D under:
"(da) direct the enforcement of the liability of the surety or
reject the claim made in this behalf; or"
(5) In the first proviso to sub-section (7), the words "or making
E an order rejecting the claim to en(orc¢ the liability of the surety under
clause (da) or making an order rejecting the claim to transfer the
management of the industrial concern to the Financial Corporation
under clause (e)" were inserted after the words "order under clause
( c )".
p (6) In the second proviso to sub-section (7), the following words
were inserted after words "any property from attachment":
"or rejecting the claim to enforce the liability of the surety
or rejecting the claim to transfer the industrial concern to
the Financial Corporation."
G
(7) In sub-section (9), for the words "sub-section (5)", the
words "under sub-section (4A), sub-section (5)" were substituted. ·...l
In order to find an answer to the second question, it is necessary
to construe the words "for enforcing the liability of any surety" which
H were introduced by way of clause (aa) in sub-section (1) of section 31
MAHARASHTRA FINANCIALCORPN. v. JAYCEE DRUGS [AGRAWAL, J.)509
by the Act 43 of 1985, and also find mention in sub-sections (lA), (4A)
~- A
and (7) of section 32. The learned counsel for the appellant has urged
that the said words are wide in their amplitude and would cover a
case where the surety has given a personal guarantee only and his
liability is purely monetary. The learned counsel for the sureties, viz.,
respondents Nos. 2, 3 and 4, has, on the other hand, submitted that the
said words must be construed in a more limited sense to cover only B
those cases where surety has given security of property to guarantee
~ the repayment of loan and in such an event the remedy provided by
sections 31 and 32 of the Act can be invoked against the surety and that
the said provisions do not enable passing of an order for payment of a
u monetary sum against the surety who has given personal guarantee
only. In order to deal with these rival contentions, it would be of
~
relevance to take note of the state of law existing on the date of the c
enactment of Act 43 of 1985 whereby amendments were introduced in
. )( sections 31 and 32 of the Act .
The provisions contained in sections 31 and 32 of the Act came
up for consideration. before this Court in Gujarat State Financial D
Corporation v. Mis Natson Manufacturing Co. (P) Ltd. & Ors., [1979]
1SCR372. That case related to payment of court fee on an application
submitted under section 31(1) of the Act and t.he question for consi-
deration was whether such an application should be treated op par
,.... '. with a suit by a mortgagee to enforce the mortgage debt by sale of the
mortgaged property which is being treated as a money suit falling E
within the purview of Article 1 of Schedule I to the Bombay Court
.... Fees Act, 1959 or it should bear a fixed court fee under the residuary
Article 1(c) to Schedule II of the said Act. This Court disagreeing with
the view of the Gujarat High Court, held that an application under
section 31(1) of the Act would be covered by the residuary Article l(c)
of Schedule II to the said Act and it should bear a fixed court fee. In F
"\.) this context, this Court has examined the nature of the proceedings
contemplated by section 31( 1) of the Act. After referring to the provi-
sions of the Act, this Court has held that "it would be inappropriate to
say that an application under section 31(1) is something akin to a suit
by a mortgagee to recover mortgage ·money by sale of mortgaged
property" and that "in an application under section 31(1), the Corpe- G
ration does not and cannot pray· for a decree for its outstanding dues"
;;... and that none of the three reliefs .mentioned in sub-section (1) of
section 31, if granted, "results in a money decree or decree for reco-
very of outstanding loans or advance" (pages 378-379). After referring
to the provisions contained in sub-section (6) of section 32, which
provides for investigation of the claim of the Financial Corporation in H
510 SUPREME COUR'I REPORTS [1991] 1 S.C.R.
accordance with the provisions contained in the code of Civil Proce-
~ A -~
<lure, 1908, this Court has laid down:
"The claim of the Corporation is not the monetary claim to
be investigated though it may become necessary to specify
the figure for the purpose of determining how much of the
B security should be sold. But the investigation of the claim
does not involve all the contentions that can be raised in a
suit. The claim of the Corporation is that there is a ~reach -"'(
of agreement or default in making repayment of loan or
advance or instalment thereof and, therefore, the mortga-
c
ged property should be sold. It is not a money claim. The
contest can be that the jurisdictional fact which enables the
Corporation to seek the relief of sale of property is not
u
...
available to it or no case is made out for transfer of
management of the industrial concern." (p.381)
')!'"
• This Court has further emphasised that sub-section (7) of section
D 32 "prescribes what reliefs can be given after ~nvestigation under sub-
section (6) is made, and it clearly gives a clue to the nature of contest
under sub-section (6)" and further that sub-section (8) of section 32
"only prescribes the mode and method of executing the order of
attachmant or sale of property as provided in the Code of Civil Proce-
dure". According to this Court, "the provision contained in sub- 7--
E section ( 6) does not expand the contest in the application under
s. 31(1) as to render the application to be a suit between a mortgagee
and the mortgagor for sale of mortgaged property" (p.381). This
Court has held that "the substantive relief in an application under
s. 31( 1) is something akin to an application for attachment of property
in execution of a decree at a stage posterior to the passing of the
F decree" (p.382).
\:;:r·
In Everest Industrial Corporation & Ors. v. Gujarat State Finan-
cial Corporation, [ 1987] 3 SCR 507 this Court was examining the ques-
tion whether the rate of interest on the amount payable under an order
passed under s. 32 of the Act from the date said order is governed by
G s. 34 of the Code of Civil Procedure, 1908 or whether it is payable at
the contractual rate. This Court held that s. 34 CPC was not applicable
to these proceedings. After referring to the earlier decision in Gujarat ·.-..l_
State Financial Corporation v. Mis Natson Manufacturing Co. (P) Ltd.
& Ors. case (supra), this Court has reiterated that the proceedings
instituted
. under-s, 31(1) of the Act is something
. akin to an application
H for attachment of property in execution of a decree at a stage posterior
MAHARASHTRA FINANCIAL CORPN. v. JAYCEE DRUGS [AGRAWAL, J.] 511
to the passing of the decree and, therefore, no question of passing any
+- order under s. 34 CPC would arise since s. 34 CPC would be applicable
A
only at the stage of the passing of the decree and not to a stage pos-
terior to the passing of the decree.
In Magan/al etc. v. Jaiswal Industries Neemach & Ors., [1989] 3
SCR 697, after referring to the decisions mentioned above, this Court B
has observed:
~
"In view of these two decisions, the law seems to be settled
that an application under section 31( 1) of the Act cannot be
put on par to a suit for enforcement of a mortgage nor the
- \) order passed thereon under section 32 of the Act be put on
par as if it was an o!der in a suit between a mortgagee and
the mortgagor for sale of mortgaged property. On the other
c
hand the substantive relief in an application section 31( 1) is
#,
something akin to an application for attachment of pro-
perty in execution of a decree at a stage posterior to the
passing of the decree." (p. 710) D
The question whether the provisions of ss. 31 and 32 of the Act
could be invoked against the property of the surety came up for con-
sideraion befNe a full bench of the Allahabad High Court in Munnalal
r><. Gupta v. Uttar Pradesh Financial Corporation &Anr., AIR 1975 ALL
416. In that case, the surety had mortgaged his house by way of collat- E
~.
eral security for the loan granted to the borrower industrial concern
and the Financial Corporation had moved an application under s. 31 of
the Act for sale of the property of the surety which had been mort-
gaged as well as the property of the principal debtor which had been
mortgaged and the question was whether an order for sale of the
'I property of the surety could be passed on an application under s. 31( 1)
of the Act. It was held that the relief which can be granted by a District
Judge under s. 32 of the Act must be confined against the borrower
industrial concern and its property and that the District Judge can pass
F
an ad-interim order attaching the security or so much of the property
of the industural concern as would be sufficient in his opinion to satisfy
the outstanding liability. It was laid down that the order of attachment G
is restricted to the property of industrial concern given to the Corpora-
~ tion by way of surety and he is not empowered to attach the property
of a person other than an industrial concern. According to the said
decision, a surety, who is not a partner or otherwise interested in the
industrial concern, cannot be proceeded against under s. 31 so that his
property, even if mortgaged with the Corporation, cannot be attached H
r
512 SUPREME COURT REPORTS [1991] 1 S.C.R.
by the District Judge. In this context, the learned Judges pointed out
A -~
the sub-section (4) of s. 32 contemplates a notice to the borrower
industrial concern after an interim order has been passed to show cause
why the ad interim injunction should not be made absolute and the said
provision does not contemplate a notice to the surety and that it would
be unthinkable that the legislature intended that the property of the
B surety may be attached and put to sale without even a notice to him.
The amendments introduced in ss. 31 and 32 by Act 43 of 1985 -1
seek to remove the lacunae in those provisions as pointed out in the
aforesaid judgment of the Allahabad High Court and with that end in
view clause (aa) has been inserted in sub-section (l)of section 31
v
c
whereby a Financial Corporation can move an application under s. 31
( 1) for enforcing the liability of any surety and amendments have been
made in s. 32 to prescribe the procedure for grant of the said r!'!lief on
-
such application. Express provision has been made in sub-section (lA)
of s. 32 for issuing a notice to the surety requiring him to show cause.
why his liability should not be enforced.
•.
D
It is argued on behalf of the appellant that the words "for enforc-
ing the liability of any surety" are wide in their amplitude to cover the
monetary liability of a surety who has given personal guarantee only
and has not given his property as security for repayment of the loan by
the borrower industrial concern, though it is not disputed that in so far '?-
E as. the borrower industrial concern is concerned, the amendments
introduced in ss. 31 and 32 by Act 43 of 1985 do not alter the existing
law and no order in the nature of a money decree can be passed against
him in these proceedings. It is, however, urged that in sci far as the
surety is concerned the position is different and in view of the amend-
ments introduced in ss. 31 and 32, an order in the nature of a money
F decree can be passed against the surety who has given personal
'
guarantee only and has not given security of his property for repay- ·~
ment of the loan. This argument implies that as a result of the amend-
ments introduced in sections 31 and 32 by Act 43 of 1985 while the
nature of the proceedings as against the borrower industrial concern
remains unchanged and the said proceedings continue to be proceed-
G ings akin to an application for attachment of property in execution of a
decree at a stage posterior to the passing of the decree, the nature of
these poceedings has been changed in so far as the surety is concerned -it
and they have become proceedings in which an order in the nature of a
money decree can be passed. In other words, in a case where the
borrower industrial concern has obtained a loan from the Financial
H Corporation without furnishing the security of property on the basis of
MAHARASHTRAFINANCIALCORPN. v.'JAYCEEDRUGS [AGRAWAL, J.J 513
+ ahave
personal guarantee given by the surety, the Financial Corpoation will
to proceed against the borrower industrial concern by instituting
A
a regular suit for recovery of the dues whereas it can proceed against
the surety under sections 31 and 32 of the Act. It means that as com-
pared to the principal debtor the Financial Corporation vis-a-vis the
surety has been placed on a more advantageous position. It may, how"
ever, be mentioned that under the common law, which finds re- B
enactment in section 128 of the Indian Contract Act, 1872, the liability
~'
of the surety is co-extensive with that of the principal debtor unless {t .
is otherwise provided by the contract. It means that the liability must be
proved against the surety in the same way as against the principal
~ debtor. Thus under the general law the sure~y stands on the same
footing as the principal debtor. These submissions raise the question:
can the legislature be attributed the intention to alter the existing law c
so as to bring about a change in the nature of proceedings under
·~ sections 31 and 32 of the Act and also to alter the gener~l law relating
to the enforcement of the liability of the surety? I find it difficult to
answer this question in the affirmative.
D
In the matter of interpretation of statutes, a principle which is
well-recognised in England is: "it is thought to be in the highest degree
improbable that Parliament would depart from the general system of
law without expressing its intention with irresistible clearness, and to
x give any such effect to general words merely because this would be
their widest, usual, natural or literal meaning would be to place on E
them a construction other than that which Parliament must be supposed
to have intended." ( See: Mexwell on The Interpretation of Statutes,
12th Edition, p. 116). In Minet v. Leman, [1955] (20) Eeav. 269. Sir
John Romilly, M.R. stated as a principle of construction, which could
not be disputed, that "the general words of the Act are not to be so
-~ construed as to alter the previous policy of the law, unless no sense or F
meaning can be applied to those words consistently with the intention
of preserving the existing policy untouched". In this context, it would
be of relevance to take note of the decision of this Court in M.K.
Ranganathan & Anr. v. Government of Madras & Ors., [1955] 2 SCR
374. In that case this Court was required to consture the words "or any
sale held without leave of the Court of any of the properties of the G
Company" which were added ins. 232 (1) of the Indian Companies
......
Act, 1913 by Act 22 of 1936. the said amendment was introduced with
a. view to get over the decision of the Allahabad High Court in
Kayastha Training and Banking Corporation Ltd v. Sat Narain Singh,
[ 1921] ILR 43 All. 433. The question was whether the words which had
been added refer only to sales held through the intervention of the H
514 SUPREME COURT REPORTS (1991) 1 S.C.R.
court or ·whether they included the sales effected by the s~cured cre-
A ditors outside the winding up and without the intervention of the
+
court. This Court held that the said words referred only to sales held
through the intervention of the court and that the amendments
whereby these words were introduced were not intended to bring
within the sweep of the general words "sales effected by the secured
B creditors outside the winding up". In order to arrive at this conclusion,
this Court placed reliance on the principle of interpretation referred to
above and it was observed:
"If the construi::tion sought to be put upon the words "or
any sale held without leave of the Court of any of the
. properties" by the Appellants were accepted it would
c effect a fundamental alteration in the law as it stood before
the amendment was inserted in section 232 by Act XXII of
1936. Whereas before the amendment the secured creditor
stood outside the winding up and could if the mortgage
deed so provided, realise his security without the interven-
D tion of the Court by effecting a sale either by private treaty
or by public auction, no such saie could be effected by him
after the amendment and that was certainly a fundamental
alteration in the law which could not be effected unless one
found words used which pointed unmistakably to that con-
clusion or unless such intention was expressed with
E irresistible clearness. Having regard to the circumstances
under which the amendment was inserted in section 232 by
Act XXII of 1936 and also having regard to the context we
are not prepared to hold that the Legislature in inserting
that amendment intended to effect a fundamental altera-.
tion in law with irresistible clearness. Such a great and
F sudden change of policy could not be attributed to the
Legislature and it would be legitimate therefore to adopt
the narrower interpretation of those worc\s of the amend-
ment rather than an interpretation which would have the
contrary effect." J(p.388)
G In my opinion, regard must be had of this principle of interpreta-
tion while construing the expression "for enforcing the liability of any
surety" which has been inserted by way of clause {aa) in sub-section
(1) of section 31 by Act 43 of 1985. Considering the amendments
introduced in sections 31 and 32 of the Act by Act 43 of 1985 and
having regard to the principle of interpretation referred to above I do
H not find any provision in the said amendments which may indicate that
MAHARASHTRA FINANCIAL CORPN. i·. JAYCEE DRUGS [AGRAWAL, J.] 51.'.:>
Parliament has evinced an intention to effect a fundamental alteration
+ in the law with irresistible clearness. In this context, it would be of
A
relevance to note that while introduc;ing the said amendments Parlia-
ment has chosen not to make any alteration in relation to the following
matters:
( 1) In the marginal note, section 31 is described as 'special provi- B
sions for enforcement of claims by Financial Corporation'. No altera-
~- tion has been made therein by Act 43 of 1985 and section 31 continues
to be a special provision for enforcement of claims by Financial
,_ Corporation.
J
(2)Parliament has not expressly indicated that an order for pay-
ment of money only may be passed against the surety. c
(3)Aithough in sub-sections (8) and (SA) of section 32, express
-.r provision has been made prescribing the procedure for carrying into
effect an order of attachment and sale of property and an order trans-
ferring the management of an industrial concern to the Financial D
Corporation passed under sub-section (7) of section 32, no specific
provision was made prescribing the procedure for carrying into effect of
an order passed under clause (da) of sub-section (7) of section 32
directing the enforcement of the liability of the surety. It cannot be
~
>< comprehended that while making a provision which would enable
passing of an order in the nature of a money decree against a surety on E
an application under section 31 of the Act, Parliament would have
refrained from making a corresponding provision prescribing the pro-
---.. cedure for carrying into effect of such an order.
Having regard to the features referred to above, it appears to be
more in consonance with the scheme of the Act and the object under- F
~ lying sections 31 and 32 that by introducing the amendments in
sections 31 and 32 of the Act, Parliament intended to place the surety
on the same footing as the principal debtor in the matter of enforce-
ment of the claims of the Financial Corporation so as to enable the
Financial Corporation· to obtain relief against the properties of the
principal debtor as well as the surety. If considered in this perspective, G
the expression "enforcing the liability of any surety" in clause (aa) of
j.. section 31( 1) would mean enforcing the liability of a surety in the same
manner as the liability of principal debtor is enforced, i.e., by attach-
ment and sale of property keeping in view that the proceedings under
sections 31 and 32 of the Act are akin to an application for attachment
to
of property in execution of a decree at a stage posterior the passing H
516 SUPREME COURT REPORTS [1991] 1 S.C.R.
A of the decree. This construction would obviate the need for a proce-
dure for carrying into effect of the order passed under clause (da) of +
sub-section (7) of section 32 of the Act because such an order would be
an order for attachment and sale of the property of the surety and it
can be carried into effect in accordance with sub-section (8) of section
32 which prescribes the procedure for carrying into effect an order for
B attachment and sale of property. This construction will also preserve
the special nature of the proceedings under section 31 and would not
result in bringing about a fundamental alteration in the law laid down
by this Court with regard to the nature of these proceedings as well as
the general law whereunder a surety is to be treated on par with the
principal debtor. ·
c
For the reasons aforesaid, I am in agreement with the view of the
Division Bench of the High Court on this question and I am unable to
concur with the decision of my learned brother Ojha, J.
I would, therefore, uphold the decision of the Division Bench of
D the High Court that the petition whereby the appellant had sought the
relief of a money decree for payment of Rs.15,87 ,391.20 paise against
respondents 2 to 4 was not maintainable and the said relief could not
be granted to the appellant in proceedings under section 31 of the Act.
As a result, the petition filed by the appellant must be dismissed and
for the same reason this appeal also must fail.
R.N.J. Appeal allowed.
--
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