CANARA BANK Vs. STATE OF TAMIL NADU

JUDGEMENT

(1.) The appellant filed a writ petition in the High Court seeking for a writ or direction or order to the first respondent to pay a sum of Rs. 1,24,87,487.47 together with interest amount of Rs. 2,24,80,070.88 upto July 20, 1987 with further interest at the rate of 19.5% until date of discharge. The appellant in the course of its banking business had granted different kinds of loans on security like mortgage or pledge or hypothecation of floating charge of all assets of Madura Sugars Limited, Randiarajapuram, Medurai District, (for short 'the company'), a company registered under the Companies Act. The Government of Tamil Nadu took over the undertaking (i.e. Madura Sugars Ltd.) by the Madura Sugars Limited (Acquisition and Transfer of Undertaking) Act, 1984 (hereinafter referred to as 'the Act). The undertaking of the company is engaged in the manufacture or production of sugar by means of vacuum pans and with the aid of mechanical power stood transferred to and vested in the Government. Section 5 of the Act provides for extinguishment of all encumbrances such as mortgage, charge, lien or other interests and it is further provided therein that the payment of mortgage money or other dues who holds such charge, lien or other interest shall be paid in whole or in part out of the amounts specified in Section 9 but no such mortgage, charge, lien or other interest shall be enforceable against any property which is vested in the Government. Section 8 provides that the liability of the company prior to the appointed day shall be enforceable against it and not against the Government or the undertaking. Section 9 provides for payment of certain amount in cash in the manner specified therein. Section 15 makes provision for appointment of Commissioner for payments and entire Chapter VI deals with the manner in which claims have to be made to the Commissioner, Priority of Claims, Examination or admission or rejection of the same. Section 26 provides that in respect of certain category of amounts due to be paid mentioned in the Second Schedule if not discharged by the Commissioner out of amount paid to him under the Act, he shall intimate to the Government the extent of liability remaining undischarged and which shall be assumed as liability of the Government.

(2.) The learned single Judge considered the various aspects of the case and noticed that there was no material to show that the Managing Director or the Special Officer of the company had been served with a notice in respect of the claim made by the appellant and, on actual examination of the records this position was conceded to by the learned counsel for the appellant. A contention was raised that the company had knowledge of the award and, therefore, non-service of the notice would not be fatal to the award made for payment by the Commissioner. The learned single Judge held that where law require notice to be served and if the notice has not been served and a claim is foisted upon a party without such service of notice, there is clear violation of the principles of natural justice and an order passed in such a proceedings would be void. On that basis he took the view that the relief sought for by the appellant could not be granted and dismissed the writ petition. On appeal filed by the appellant, the Division Bench of the High Court considered the matter and, while agreeing with the learned single Judge, observed as under:-

(3.) The Division Bench on examination of the scheme of the Act particularly with reference to Sections 5(4), 8, 9, 16, 17, 20 and 26 of the Act, had no doubt that the liability of the Government under the provisions of the Act is to the extent only upto the total amount determined under Section 9 which the Government is bound to pay to the Commissioner for payments to the company. The Division Bench also noticed that the liability of the company continues to exist and it is not enforceable against the Government or the Government company. On that basis, the Division Bench dismissed the appeal.