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



T.A. Kannan v/s Tamil Nadu Industrial Investment Corporation Ltd., through it's Managing Director, Arulmanai & Others


Company & Directors' Information:- P V T INVESTMENT LIMITED [Amalgamated] CIN = U74899DL1988PLC121600

Company & Directors' Information:- P V T INVESTMENT LTD [Not available for efiling] CIN = U67120PB1988PLC008068

Company & Directors' Information:- S T INVESTMENT PRIVATE LIMITED [Amalgamated] CIN = U65993WB1990PTC050032

Company & Directors' Information:- H. L. INVESTMENT COMPANY LIMITED [Amalgamated] CIN = U65990WB1975PLC128186

Company & Directors' Information:- M M INVESTMENT PRIVATE LIMITED [Converted to LLP] CIN = U65921CT2008PTC020533

Company & Directors' Information:- G. N. G. INVESTMENT LIMITED [Active] CIN = U65910GJ1981PLC004128

Company & Directors' Information:- A S G S INVESTMENT PRIVATE LIMITED [Active] CIN = U74120DL2008PTC173938

Company & Directors' Information:- G L INVESTMENT PVT LTD [Active] CIN = U65993WB1991PTC051072

Company & Directors' Information:- C & C INVESTMENT LTD [Active] CIN = U67120AS1976PLC001654

Company & Directors' Information:- S M S INVESTMENT CORPORATION PRIVATE LIMITED [Active] CIN = U74899DL1963PTC003988

Company & Directors' Information:- V R V INVESTMENT PRIVATE LIMITED [Active] CIN = U67120WB1985PTC039793

Company & Directors' Information:- S P INVESTMENT PVT LTD [Active] CIN = U70109WB1961PTC025099

Company & Directors' Information:- R H INVESTMENT PRIVATE LIMITED [Active] CIN = U99999MH1978PTC020633

Company & Directors' Information:- T N B INVESTMENT PRIVATE LIMITED [Active] CIN = U74899DL1986PTC025590

Company & Directors' Information:- A R S INVESTMENT PVT LTD [Active] CIN = U65993WB1990PTC048513

Company & Directors' Information:- V P INVESTMENT PRIVATE LIMITED [Active] CIN = U74899DL1983PTC015714

Company & Directors' Information:- S M D INVESTMENT LIMITED [Strike Off] CIN = U65993TN1995PLC033139

Company & Directors' Information:- G R D INVESTMENT PVT LTD [Amalgamated] CIN = U67120WB1980PTC032727

Company & Directors' Information:- C AND N INVESTMENT PRIVATE LIMITED [Active] CIN = U74899DL1983PTC015710

Company & Directors' Information:- R INVESTMENT PRIVATE LIMITED [Strike Off] CIN = U65993TZ1988PTC002181

Company & Directors' Information:- H N G L INVESTMENT PRIVATE LIMITED [Active] CIN = U74899DL1995PTC066774

Company & Directors' Information:- K M S INVESTMENT PRIVATE LIMITED [Active] CIN = U67120UP1993PTC015287

Company & Directors' Information:- U M INVESTMENT PVT LTD [Active] CIN = U70101WB1979PTC032160

Company & Directors' Information:- A S T INVESTMENT PRIVATE LIMITED [Strike Off] CIN = U67120DL1996PTC082812

Company & Directors' Information:- B N E INVESTMENT LTD [Not available for efiling] CIN = U67120WB1974PLC029360

Company & Directors' Information:- K S J INVESTMENT COMPANY PRIVATE LIMITED [Strike Off] CIN = U74899DL1994PTC061335

Company & Directors' Information:- M G INVESTMENT AND INDUSTRIAL CO LTD [Not available for efiling] CIN = U99999MH1947PTC007551

Company & Directors' Information:- P T INVESTMENT PVT LTD [Strike Off] CIN = U65999WB1995PTC067065

Company & Directors' Information:- K. S. R. INVESTMENT LIMITED [Strike Off] CIN = U65992UP1988PLC010253

Company & Directors' Information:- J T INVESTMENT PVT LTD [Strike Off] CIN = U65923WB1979PTC032344

Company & Directors' Information:- R K INVESTMENT LTD [Strike Off] CIN = U65993WB1969PLC027398

Company & Directors' Information:- N M G C INVESTMENT PRIVATE LIMITED [Strike Off] CIN = U74899DL1982PTC014603

Company & Directors' Information:- T M INVESTMENT CO PVT LTD [Active] CIN = U67120WB1971PTC028172

Company & Directors' Information:- S. A. F. INVESTMENT LIMITED [Active] CIN = U67120DL1997PLC088611

Company & Directors' Information:- H K (INVESTMENT) COMPANY PRIVATE LIMITED [Active] CIN = U65990GJ1950PTC000511

Company & Directors' Information:- P N INVESTMENT PRIVATE LIMITED [Under Liquidation] CIN = U65910GJ1988PTC010715

Company & Directors' Information:- INVESTMENT CORPORATION LIMITED [Under Liquidation] CIN = U65993KL1942PLC000449

Company & Directors' Information:- S R M INVESTMENT PVT LTD [Strike Off] CIN = U67120WB1979PTC031888

Company & Directors' Information:- A TO Z INVESTMENT PVT LTD [Dissolved] CIN = U67120WB1988PTC044464

Company & Directors' Information:- R J INVESTMENT PRIVATE LIMITED [Active] CIN = U67120MH1976PTC018954

Company & Directors' Information:- B N K INVESTMENT CO PVT LTD [Active] CIN = U65993WB1971PTC028169

Company & Directors' Information:- A D INVESTMENT CO PVT LTD [Active] CIN = U67120WB1971PTC028170

Company & Directors' Information:- T D INVESTMENT CO PVT LTD [Strike Off] CIN = U65921CH1987PTC007637

Company & Directors' Information:- C G K INVESTMENT P LTD [Strike Off] CIN = U65910AP1986PTC006088

Company & Directors' Information:- L D INVESTMENT COMPANY PVT LTD [Strike Off] CIN = U65921HP1988PTC008425

Company & Directors' Information:- G K INVESTMENT PRIVATE LIMITED [Active] CIN = U65993TZ1987PTC001919

Company & Directors' Information:- G V INVESTMENT PRIVATE LIMITED [Active] CIN = U65993TZ1987PTC001920

Company & Directors' Information:- B C K H INVESTMENT CO PVT LTD [Active] CIN = U67120MH1982PTC026819

Company & Directors' Information:- H V INVESTMENT PRIVATE LIMITED [Active] CIN = U67120MH1997PTC107686

Company & Directors' Information:- M L INVESTMENT PVT LTD [Strike Off] CIN = U67120WB1979PTC032180

Company & Directors' Information:- S & G INVESTMENT COMPANY PRIVATE LIMITED [Active] CIN = U65100DL2012PTC244271

Company & Directors' Information:- S B INVESTMENT PVT LTD [Liquidated] CIN = U99999RJ1959PTC001090

Company & Directors' Information:- R AND P INVESTMENT PVT LTD [Strike Off] CIN = U67120PB1995PTC016124

Company & Directors' Information:- M M B INVESTMENT PRIVATE LIMITED [Active] CIN = U65993RJ1996PTC012698

Company & Directors' Information:- M G A INVESTMENT COMPANY PRIVATE LIMITED [Strike Off] CIN = U99999MH1980PTC022406

Company & Directors' Information:- D S N INVESTMENT PVT LTD [Strike Off] CIN = U65993TG1988PTC008554

Company & Directors' Information:- V. I INVESTMENT PVT LTD [Strike Off] CIN = U67120HR1988PTC030206

Company & Directors' Information:- R J P INVESTMENT PRIVATE LIMITED [Strike Off] CIN = U65993GJ1981PTC004678

Company & Directors' Information:- D D P INVESTMENT PRIVATE LIMITED [Strike Off] CIN = U65910GJ1981PTC004695

Company & Directors' Information:- C J P INVESTMENT PVT LTD [Strike Off] CIN = U99999GJ1981PTC004662

Company & Directors' Information:- M P INVESTMENT CO PRIVATE LIMITED [Under Process of Striking Off] CIN = U65993KA1974PTC002646

Company & Directors' Information:- INVESTMENT COMPANY PRIVATE LIMITED [Dissolved] CIN = U65990KL1946PTC000461

Company & Directors' Information:- INVESTMENT CORPORATION LIMITED [Not available for efiling] CIN = U99999MH1943PLC007730

    W.P. (MD) No. 9927 of 2009 & M.P. (MD) Nos. 1 of 2014, 2 of 2009

    Decided On, 15 April 2019

    At, Before the Madurai Bench of Madras High Court

    By, THE HONOURABLE MR. JUSTICE ABDUL QUDDHOSE

    For the Petitioner: J. Ravichandran, Advocate. For the Respondents: R1 & R2, S. Suresh for M/s. Aiyar, Dolia, R4, R6 & R8, Md. Imran for M/s. Ajmal Associates, Advocates.



Judgment Text

(Prayer: Writ Petition filed under Article 226 of the Constitution of India for issuance of a Writ of Certiorari, to call for the records pertaining to the impugned Auction Notice in TIIC:MDU:SRB:LAO: (F-244):2008-09 dated 01.09.200 on the file of the respondent No.1 and Serial No.13 in Advertisement No.MDU/RO/2008-2009/07 dated 01.09.2008 and consequently quash the notice and the Sale Deed dated 13.04.2009 executed by the respondent No.2 illegal.)

1. The instant writ petition has been filed challenging the auction notice dated 01.09.2008 issued by the first respondent and consequently to quash the same as well as the sale deed dated 13.04.2009 executed by the second respondent.

2. According to the petitioner, he is the proprietor of Shri Vinayaga Industries, Paramakudi and one of the partners of S.B. Industries, Paramakudi. According to him, he was granted two loan facilities. One a term loan for a sum of Rs.10,00,000/- in favour of Shri Vinayaga Industries, Paramakudi and another loan for a sum of Rs.19.90 lakhs in favour of S.B. Industries, Paramakudi. According to the petitioner, as collateral security towards the repayment of the aforesaid loans, the property belonging to the petitioner's father Athilingampillai was given. Since the petitioner committed default in the repayment of the loan, the first respondent brought the mortgaged property for sale exercising the power available to them under Section 29 of the State Financial Corporation Act 1951. The auction notice dated 01.09.2008 was issued by the first respondent under Section 29 of the State Financial Corporation Act 1951. The petitioner has challenged the auction notice in this writ petition on the ground that only the property of the industry concerned can be brought for sale by the first respondent under Section 29 of the State Financial Corporation Act 1951 and not the property which has been given as a collateral security.

3. A counter affidavit has been filed by the first and second respondents before this Court wherein, they have stated that the petitioner is a chronic defaulter in the repayment of the loans availed by S.B.Industries and Shri Vinayaga Industries, in which he is the Partner and Proprietor respectively. According to them, in view of the default, exercising the power available to them under Section 29 of the State Financial Corporations Act 1951, the property mortgaged by late Athilingampillai, the father of the petitioner was taken possession on 02.11.2004. Even after taking possession of the property, they offered interest concessions to the petitioner on various occasions but the petitioner did not come forward to settle the loan. They have stated that in the auction conducted on 19. 09.2008, in respect of the subject property, the third respondent submitted a bid for a sum of Rs.14,50,000/-. It is also stated in the counter affidavit that the third respondent had remitted the bid amount and took delivery of the property from the first respondent on 17.03.2009. Thereafter, according to the first and second respondents, a Deed of Conveyance was also executed by them in favour of the third respondent on 13.04.2009. The amount realised in auction has been credited to the loan accounts and even after adjustment of the sale proceeds, according to the first respondent there is still a balance of Rs.1,75,31,000/- payable by the petitioner to the first respondent as on 15.06.2009.

4. It is also stated in the counter that the petitioner is bent upon causing obstruction to the recovery of loan. According to them, in the year 1997, the petitioner obtained a power of attorney from his father late Athilingampillai and obtained the loan from corporation Bank, Paramakudi suppressing the earlier mortgage in favour of first respondent. According to the first and second respondents, the petitioner illegally induced the Commercial Tax Officials to initiate recovery proceedings against the same property for obstructing the loan recovery. According to the first and second respondents, the petitioner's brother Rajeswaran filed a suit in O.S.No.22 of 2009 before the Sub Court, Paramakudi, seeking partition, ignoring the loan liability, although the late Athilingampillai purchased the property and mortgaged it during his life time. With the aforesaid averments, the first and second respondents have categorically stated that the writ petition is not maintainable and has to be dismissed with cost.

5. The third respondent viz., A.M.M.Raja Mohammed was the successful bidder under the auction, who was originally the third respondent in this writ petition. He died during the pendency of the writ petition and thereafter the respondents 4 to 8 were impleaded as his legal representatives. The legal representatives of Raja Mohammed have filed a counter affidavit and they have stated that Raja Mohammed was the successful bidder of the subject property and he has paid the entire sale consideration of Rs.14,50,000/- and also taken possession of the same on 13.04.2009. The sale deed has also been registered in favour of the third respondent on 24.04.2009 before the concerned sub registrar office. They have also stated that there is an inordinate delay on the part of the petitioner to file the writ petition. They have further stated that the auction sale notice is dated 01.09.2008, whereas the writ petition was filed only during October 2009, that is nearly after one year from the date of auction sale notice. According to them, Raja Mohammed is a bona fide purchaser and therefore the writ petition is not maintainable.

6. Heard Mr.J.Ravichandran, learned counsel appearing for the petitioner, Mr.S.Suresh, for M/s.Aiyar and Dolia, learned counsel appearing for the respondents 1 and 2 and Mr.Md.Imran for M/s.Ajmal Associates, learned counsel appearing for the respondents 4, 6 and 8.

7. The learned counsel for the petitioner, referring to section 29 of the State Financial Corporation Act 1951, submitted that only the property of the industrial concern can be brought for sale under the said provision and not a property offered as collateral security by a third party. He also cited two decisions of the Honourable Supreme Court, in the case of Karnataka State Financial Corporation Vs. N.Narasimahaiah and others reported in 2008 5 STC 176 and in particular, he referred to Paragraph Nos.20, 21 and 22 of the said judgment which is extracted hereunder:

20. Section 29 of the Act nowhere states that the corporation can proceed against the surety even if some properties are mortgaged or hypothecated by it. The right of the financial corporation in terms of Section 29 of the Act must be exercised only on a defaulting party. There cannot be any default as is envisaged in Section 29 by a surety or a guarantor. The liabilities of a surety or a guarantor to repay the loan of the principal debtor arises only when a default is made by the latter.

21. The words “as well as” in our opinion play a significant role. They confer two different rights but such rights are to be enforced against the same person viz. the industrial concern. Submission of the learned Senior Counsel that the second part of Section 29 having not referred to “industrial concern” any property pledged, mortgaged, hypothecated or assigned to the financial corporation can be sold, in our opinion cannot be accepted. It is true that sub Section (1) of Section 29 speaks of guarantee. But such a guarantee is meant to be furnished by the corporation in favour of a third party for the benefit of the industrial concern. It does not speak about a surety or guarantee given in favour of the corporation for the benefit of the industrial concern.

22. The legislative object and intent becomes furthermore clear as in terms of Sub-Section (4) of Section 29 of the Act only when a property is sold, the manner in which the sale proceeds is to be appropriated has categorically been provided therein. It is significant to notice that sub-Section (4) of Section 29 of the Act which lays down appropriation of the sale proceeds only refers to “industrial concern” and not to “surety” or “guarantor”.

8. The learned counsel for the petitioner referred to another decision of the Honourable Supreme Court in the case of Subhransu Sekhar Padhi Vs. Gunamani Swain and others rendered on 21.08.2014 in Civil Appeal No.7936 of 2014. Referring to the aforesaid decision, the learned counsel for the petitioner would contend that if the property of the surety is brought for sale and the auction purchaser is the victim of the said illegal sale, the only remedy for the auction purchaser is to get refund of the sale consideration paid by him from the State Financial Corporation together with interest. In particular he referred to Paragraph No.11 of the aforesaid judgment which is extracted hereunder:

11. However, the appellant before us is the purchaser of the property sold under Section 29 of the Act, who parted with the money in order to purchase the property. He is a victim of an illegal procedure adopted by the Orissa State Financial Corporation. The law regarding the authority of the State Financial Corporation to invoke the provisions of Section 29 with respect to properties other than those belonging to defaulter industrial concern is clearly declared by this Court in Karnataka State Financial Corporation (Supra) by its Judgment dated 30th March 2008 whereas the sale in question before us is dated 9th February, 2009, almost a year later. The authorities of the 9th respondent corporation sold the properties to the appellant herein in flagrant violation of the settled position of law. We, therefore, direct the 9th respondent to refund the amount of Rs.10,09,000/- (Rupees ten lakhs nine thousands) to the appellant with interest calculated at the rate 12% per annum. However, it is open to the Orissa State Financial Corporation to recover the amounts either from the defaulter industrial concern or from such other third party against whom the corporation has a legal right to proceed.

9. According to him referring to the aforesaid judgment, if at all the property of the surety can be brought for sale by the State Financial Corporation, it can be done only as per Section 31 of the State Financial Corporation Act and not under Section 29 of the State Financial Corporation act. According to the learned counsel for the petitioner regarding the delay, he would submit that there were 10 legal heirs for Athilingampillai and they could not arrive at a consensus and because of that fact, there was some delay in filing the writ petition.

10. Per contra, the learned counsel for the first and second respondents would submit that subject property originally belonged to late Athilingampillai, the father of the petitioner, who had mortgaged the property with the first respondent while the petitioner availed the loan facilities. Thereafter, Athilingampillai, died in the year 1998 which is not disputed by the petitioner. After his father's death, according to the learned counsel for the first respondent, the petitioner was in possession of the property as his legal representative. Further, S.B Industries for whom the loan was granted is a partnership firm in which the petitioner is one of the partners. Therefore, according to the learned counsel for the first and second respondents, the only property of the industrial concern was brought for sale by the first respondent in accordance with the provisions of Section 29 of the State Financial Corporation Act. Further, the learned counsel for the first and second respondents would contend that there is an inordinate delay in filing this writ petition. According to him, the auction notice is dated 01.09.2008, whereas the writ petition was filed only after the sale deed was executed in favour of the successful bidder namely, the original third respondent Raja Mohammed who died during the pendency of this Writ Petition under the auction and possession having been already delivered to him. On the ground of laches, the learned counsel for the first respondent submitted that the writ petition will have to be dismissed.

11. Per contra, the learned counsel for the respondents 4, 6 and 8, who are the legal representatives of the auction purchaser namely A.M.M.Raja Mohammed, would refer to the decision of the Honourable Supreme Court in the case of Satya Pal Anand Vs. State of Madhya Pradesh and others reported in 2016 10 STC 767 and submitted that when the sale deed has been registered in favour of the auction purchaser, a writ petition under Article 226 of the Constitution of India is not maintainable.

DISCUSSION:

12. Section 29 of the said State Financial Corporation Act, 1951 reads as follows:

“29. Rights of Financial Corporation in case of default—(1) Where any industrial concern, which is under a liability to the Financial Corporation under an agreement, makes any default in repayment of any loan or advance or any installment 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 agreement with the Financial Corporation, the Financial Corporation shall have the [right to take over the management or possession or both] of the industrial concern], as well as the [right to transfer by way of lease or sale] and realise the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation.

(2) Any transfer of property made by the Financial Corporation, in exercise of its powers under sub-section (1), shall vest in the transferee all rights in or to the property transferred [as if the transfer] had been made by the owner of the property.

(3) The Financial Corporation shall have the same rights and powers with respect to goods manufactured or produced wholly or partly from goods forming part of the security held by it as it had with respect to the original goods.

(4) [Where any action has been taken against an industrial concern] under the provisions of sub-section (1), all costs, [charges and expenses which in the opinion of the Financial Corporation have been properly incurred] by it [as incidental thereto] shall be recoverable from the industrial concern and the money which is received by it shall, in the absence of any contract to the contrary, be held by it in trust to be applied firstly, in payment of such costs, charges and expenses and, secondly, in discharge of the debt due to the Financial Corporation, and the residue of the money so received shall be paid to the person entitled thereto.]

(5) [Where the Financial Corporation has taken any action against an industrial concern] under the provisions of sub-section (1), the Financial Corporation shall be deemed to be the owner of such concern, for the purposes of suits by or against the concern, and shall sue and be sued in the name of l)[the concern].”

13. Admittedly, the subject property was mortgaged by the petitioner's father in the year 1996 in favour of the first respondent to secure the loan availed by S.B Industries in which the petitioner is one of the partners and Shri Vinayaga Industries in which the petitioner is a proprietor. The other partner of S.B industries is the petitioner's mother. It is also an admitted fact that Athilingampillai died in the year 1998 and the petitioner was in possession of the property thereafter. Therefore, subsequent to the death of Athilingampillai in the year 1998, the petitioner has become a major shareholder in the subject property. The property was brought for sale by the first respondent only in the year 2008. Even though, S.B Industries in which the petitioner was a partner was a defaulter in the repayment of the loan from the year 2004 and possession of the property was taken by the first respondent in the same year, the petitioner did not challenge the taking over of possession of the property by the first respondent in the year 2004 itself, but has challenged only the auction notice issued by the first respondent of the year 2008. The grounds raised by the petitioner in this writ petition namely that an auction under Section 29 of the State Financial Corporation act, 1951 can be taken only against the property of the industrial concern could have been taken by the petitioner, when the first respondent took possession of the property from the petitioner in the year 2004 but that has not been done in the instant case. Further, in the instant writ petition even though the learned counsel for the petitioner pleaded there was no delay on the part of the petitioner to approach this Court due to the fact that there were 10 legal representatives for the deceased Athilingampillai and it took some time for them to reach a consensus, nothing has been stated in the affidavit filed in support of the writ petition explaining the reasons for the delay. The brother of the petitioner namely Rajeswaran filed a partition suit against the petitioner as well as the other legal representatives of Athilingampillai claiming partition and it was also brought to the knowledge of this Court that a compromise memo dated 02.01.2013 was entered into between the parties. Further it is the contention of the learned counsel appearing for the respondents that since the compromise was not acted upon by the legal representatives of Athilingampillai, the said suit came to be dismissed on merits on 05.01.2013. The learned counsel for the petitioner is not aware of the aforesaid fact. The judgments relied upon by the learned counsel for the petitioner namely Karnataka State Financial Corporation Vs. N.Narasimahaiah and others reported in 2008 5 STC 176 and Subhransu Sekhar Padhi Vs. Gunamani Swain and others rendered on 21.08.2014 in Civil Appeal No.7936 of 2014 are not applicable for the facts of the instant case. In the instant case admittedly, the petitioner is a major shareholder of the subject property along with his mother after the death of the Athilingampillai in the year 1998. Further, the possession of the property was taken over by the first respondent as early as in the year 2004 itself. The said fact is not disputed by the petitioner. Therefore, it can be inferred that the subject property is the property o

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f the industrial concern which availed the loans and therefore, the first respondent has got the powers under section 29 of the State Financial Corporation Act, 1951, to bring the property for sale. 14. In view of the aforesaid observations, the judgments relied upon by the learned counsel for the petitioner are not applicable to the facts of the instant case. Further, on the ground of laches also, there is no merit in the Writ Petition as possession of the property was taken over by the first respondent as early as in the year 2004 itself but, the Writ Petition was filed only in the year 2009. 15. As rightly contended by the learned counsel for the respondents 4, 6 and 8, the writ petition is not maintainable after the auction purchaser has obtained a registered sale deed in his name and possession has also been handed over to him by the first respondent State Financial Corporation. If there are disputed questions of fact and law involved, the only remedy available to the petitioner is to file a civil suit. Instead the petitioner has filed this writ petition under Article 226 of Constitution of India which in the considered view of this Court, is not maintainable. 16. Further, in the instant case, excepting for the petitioner, the other legal representatives of the deceased Athilingampillai who were also having shares in the subject property have not challenged the auction sale before this Court. From the foregoing facts, it is evidently clear that the conduct of the petitioner is not bona fide as he has been adopting delaying tactics to deprive the legitimate right of the auction purchaser to enjoy the property absolutely without any interference whatsoever. 17. In the result, there is no merit in the writ petition. Accordingly, the writ petition is dismissed with cost of Rs.5,000/- payable by the petitioner to the respondents 4 to 8, within a period of two weeks from the date of receipt of a copy of this order. Consequently, connected miscellaneous petitions are closed.
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