w w w . L a w y e r S e r v i c e s . i n



HMP Cements Limited & Another v/s Karnataka State Industrial Investment & Development Corporation Ltd., & Others


Company & Directors' Information:- INDUSTRIAL DEVELOPMENT AND INVESTMENT CO PVT LTD [Active] CIN = U65990MH1941PTC003300

Company & Directors' Information:- K V DEVELOPMENT AND INVESTMENT CO PVT LTD [Active] CIN = U65922MH1979PTC021155

Company & Directors' Information:- R N B J INVESTMENT AND DEVELOPMENT PVT LTD [Strike Off] CIN = U65990MH1982PTC028451

Company & Directors' Information:- S P INVESTMENT AND DEVELOPMENT COMPANY PVT LTD [Strike Off] CIN = U67121ML1988PTC003133

Company & Directors' Information:- KARNATAKA INDUSTRIAL PRIVATE LIMITED [Strike Off] CIN = U29222KA1974PTC002711

Company & Directors' Information:- KARNATAKA INDUSTRIAL COMPANY LIMITED [Strike Off] CIN = U33130KA1916PLC000063

    Writ Petition No.7224 of 2008 C/w Writ Petition No.10811 of 2008

    Decided On, 23 March 2010

    At, High Court of Karnataka

    By, THE HONOURABLE MR. JUSTICE SUBHASH B. ADI

    For the Petitioners : C.G. Gopalaswamy, Advocate. For the Respondent: D.S. Joshi, Advocate.



Judgment Text

Petitioners are judgment debtors Nos.1 and 5 in Execution No.138/2006. They have called in question the order dated 10.4.2008 passed by 6th Additional City Civil Judge, Bangalore. Respondents Nos.2 to 4 are the co-judgment debtors. No relief is sought against respondent Nos.2 to 4. Their presence is not required for the disposal of this matter.


2. Heard the learned counsel Sri C.G.Gopalaswamy and Sri D.S.Joshi, learned counsel for petitioners and contesting respondent No.1.


3. Both the respondent No.1 as well as the petitioners have sailed the order passed by the executing court dated 10.4.2008. Insofar as the petitioners are concerned, they have questioned the maintainability of the execution proceedings. As far as respondent No.1 is concerned, it has assailed the order only as regard to the attachment once again.


4. Petitioner No.1 and respondents 2 to 4 are the borrowers and petitioner No.5 is a surety as well as the guarantor for the loan raised by them.


5. Respondent No.1 filed Misc.246/2000 under Section 31(1) (aa) and 32 of the State Financial Corporation Act, 1951, (hereinafter referred to as ?the Act?). In the said miscellaneous, proceedings by order dated 3.2.2005 the court passed order as under:


?Petition filed Under Section 31(1),(1)(aa) and 32 of the SFC, is allowed with costs.


The respondents 1 to 5 are jointly and severally liable to pay claimed amount of Rs.3 43,52,916,16 paise with future interest at 24.5% p.a. on the footing of compound intere4st on quarterly rests basis from 20.101999 till the realization of the entire claimed amount.


Issue Recovery Certificate against the respondents.?


6. The recovery certificate was issued against the petitioner and respondents 2 o 4. Thereafter, in the miscellaneous proceedings a notice was issued to the surety the respondent No.1, to show cause as to why an order should not be made against the surety. Despite the notice, petitioner and respondent No.2 to 4 did not file objections to the said show cause notice. In view of the same, Court passed the order on 3.2.2005 under Section 31(1)(aa) r/w 32, of the Act as under:


?Petition filed under Section 31(1),(1)(aa) and 32 of the SFC, is allowed with costs.


The respondents 1 to 5 are jointly and severally liable to pay claimed amount of Rs.3, 43, 52, 916, 16 paises with future interest at 24.5% p.a. on the footing of compound interest on quarterly rests basis from 20.10.1999 till the realization of the entire claimed amount.


Issue Recovery Certificate against the respondents.?


7. In view of the above order u/s 31 (1)(aa) R/W 32 of the Act, the respondent No.1 filed, an execution petition and in the said petition, it filed an application under Order 21 Rule 11 of CPC for execution of the order dated 3.2.2005 passed in Misc.246/2000 and sought for attachment and sale of the petition schedule movables and immovable property of judgment debtors, arrest of the judgment debtors and detention in civil prison and also for transfer of the decree to any other district court, if need be.


8. In terms of the prayer made in the execution case, a sale proclamation was issued for sale of immovable properties, as the sale did not ensured adequate amount, the spot sale was set aside.


9. Till the setting aside of the spot sale the Judgment Debtors had entered appearance or filed objections. It is only thereafter they filed objection as regard to the maintainability of the execution proceedings interalia alleging that, no decree for payment of any amount could have been passed by the learned District Judge and the order is not executable. Further, execution case is liable to be dismissed, as the goods hypothecated are seized by the DRT-III, Calcutta no charge is created over the schedule property, as the title deeds of the property were submitted subject to conditions. It is further stated that, there is no proper and valid attachment order passed as required under law, the provisions of The Recovery of Debt Due to Bank and Financial Institutions, would over rides the provisions of State Financial Corporation Act.


10. Executing Court considering the contentions raised by both the parties held that, an ad-interim order passed by the Court on 13.2.2006 requires to be confirmed and accordingly the order impugned herein was passed, directing the decree holder to furnish the khatha certificate, encumbrance certificate in respect of the schedule property along with verified statement regarding value of the schedule property for further reaction and adjourned the matter.


11. Sri C.G.Gopalaswamy, learned counsel appearing for the petitioner submitted that, Section 31 of the Act is a special provision for the purpose of enforcement of the claim of the financial corporation. Admittedly, the application filed by the respondent No.1 is under Section 31(1)(aa) of the Act, for which, a separate procedure is contemplated under Section 32(1A) of the Act, which requires to issue notice calling upon the surety to show cause as o why his liability should not be enforced, and it is after hearing the surety, the learned District Judge could pass an order under Section 32(4A). However, the said order could only be passed in the miscellaneous proceedings and not in execution case. He submitted that, the order passed in this case is per-se contrary to provisions of Section 31(1)(aa) r/w Section 32(A) and (4A) of the Act.


12. He further submitted, that, when specific objection is raised as regard to the maintainability of the execution proceedings, the Executing Court without going into the said aspect has passed an order. He also submitted that, the orders passed by the court in miscellaneous case are contrary to the provisions of Section 32(1A) of the Act. In this regard, he relied on the order earlier passed in the Misc.246/2000 and submitted that, it is only under the miscellaneous proceedings, further order should have been passed, as the proceedings u/s 32 of the Act are miscellaneous proceedings and are not execution proceedings. He further submitted that, there is no decree which is executable. The order of recovery certificate passed in miscellaneous case does not partake the character of decree, as there is no provision under the Act, which contemplates for issue of recovery certificate.


13. Sri D.S.Joshi, learned counsel appearing for the 1st respondent submitted that, fact that the petitioners are the sureties is not in dispute. They are also guarantors of the debt is also not in dispute and as such application was filed for enforcement of the recovery, under Section 31(1)(aa) and in consonance with the same, show cause notice the petitioner and respondents 2 to 4 did not contest the miscellaneous proceedings. In view of the same, the said Miscellaneous proceedings were allowed by passing an order under Section 32(4A) of the Act. Once the order u/s 32 (4A) is passed, it becomes enforceable, and to enforce the same, Execution Proceedings were initiated. He also submitted that, the provisions of the CPC are applicable. He further submitted that, only the immovable properties are attached, further attachment does not arise, to this extent order requires modification.


14. There is no dispute that the miscellaneous proceedings were initiated by the respondent No.1 by filing an application under Section 31(1)(aa) of the Act. Section 31(1)(aa) reads as under;


31(1)(aa): ?for enforcing the liability of any surety:.


15. For the purpose of enforcing the liability of the surety, a procedure is contemplated under Section 32 of the Act, which requires that the District Judge to issue notice u/s 32(1A) of the Act, calling upon the surety to show cause as to why the liability should not be enforced against him. For the proper understanding of the said provision, the same is extracted as under.


?Section 32(1A): When the application is for the relief mentioned in clause (aa) of sub-section(1) of Section 31, the district 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.?


16. The order dated 3.2.2005 refers to the show cause notice issued to the petitioners wherein at Court has observed as under:


Though the respondents appeared through counsel, did not file objections statement, despite number of adjournments granted to them.


17. It is true, as could be seen from the order sheet dated 28.11.2001 that the advocate for the respondents file a memo with two documents stating that, first respondent industry is sick industry under Section 22 of the Sick Industries Companies Act. Petitioner and respondent 2 to 4 did not question the maintainability of the proceedings.


18. Miscellaneous proceedings clearly shows that the procedure of issue of notice u/s 32(1A) of the Act was issued, it also show that opportunity was given to them, and the order was passed after hearing the parties. The order that was passed by the judge was u/s 32(4A) of the Act. Apart from this, the Court did consider the evidence led y the respondent No.1 and the documents and the procedure for recovery of the amount. Having satisfied that, the respondent has made out a case for enforcement of the liability against the surety in terms of Section 31(1)(aa) of the Act has passed an order on 3.2.2005 and it is not in dispute that, this order is not called in question by the petitioners or any one.





19. Section 32(4A) of the Act confers power on the court to pass order for enforcement of liability against the surety. Once the order is passed under this provision, it becomes executable. The provisions of Section 32(4A) reads as under:


Section 32(4A): If no cause is shown on or before the date specified in the notice under sub-section (1-A), the district judge shall forthwith order the enforcement of the liability of the surety.?





20. The order passed for enforcement of the liability against the surety, would be in accordance with the provisions of the CPC i.e. by seeking attachment and sale of the property.





21. The miscellaneous proceedings would get culminated in passing of the order under Section 32(4A) and after such order, recovery is required to be enforced in terms of the provisions of CPC.





22. Accordingly, for the purpose of recovery, proceedings have been initiated in the Execution case. Hence, I find the execution proceedings are maintainable.


23. The last contention of the learned counsel for the petitioner is that, the proceedings hve to be continued only under the miscellaneous case and not under the execution case. I do not find that, there is any merit in this contention. The District Judge in exercise of his power u/s 32(4A) holds that the liability is enforceable against the surety, for the purpose o

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f execution liability, it has to be under the execution proceedings. That is by way of attachment and sale of properties etc. 24. The contention raised by Sri D.S.Joshi, learned counsel regarding attachment of immovable property, once again I find there is merit in his contention. Once the property is attached, there cannot be second attachment to the said property. 25. Considering the matter from any angle, in my opinion, procedure contemplated under Section 32 of the Act insofar as application under Section 31(1)(aa) of the Act has been fully complied and after the recovery becomes enforceable in terms of the order passed under Section 32(4A), these proceedings have been initiated and Section 31(A) contemplates for attachment in terms of the provisions of CPC, as such, merely because the execution proceedings are initiated, it does not in any way go contrary to the provisions of either Section 31 or 32 of the Act. 26. In these circumstances, I find no merit in the writ petition No.7224/2008 and accordingly, it is dismissed. Writ Petition No.10811/2008 is allowed. Insofar as attachment of immovable properties are concerned, if they are already attached, no further attachment is necessary.
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