ANDHRA PRADESH STATE FINANCIAL CORPORATION A P STATE FINANCIAL CORPORATION Vs. GAR RE ROLLING MILLS:KOTA SUBBA REDDY

JUDGEMENT

(1.) The common question of law which arises in both these appeals, by special leave, is whether the Financial Corporation set up under S. 3 of the State F1nancial Corporations Act (hereinafter 'the Act') is entitled to take recourse to the remedy available to it under Section 29 of the Act even after having obtained an order or a decree after invoking the provisions of Section 31 of the Act but without executing that decree/ order The facts in both the appeals are, however, different and we shall first notice the relevant facts in each of the two appeals, before answering the question posed herein above.

(2.) The respondent borrowed a sum of Rs. 99,500/- from the appellant, the Andhra Pradesh State Financial Corporation (hereinafter 'the Corporation'), for the purpose of carrying on the business of manufacturing agricultural implements. A mortgage deed was executed by the respondent on 27-12-1966. On account of the defaults committed by the respondent, the Corporation filed an application being OP No. 211 of 1969 before the District Judge, Guntur, under S. 31 of the Act for realisation of the sum of Rs. 1,09,020.19 paise together with further interest at the rate of 8 1/2 per cent per annum. Vide order dated 7-9-1971, the learned District Judge allowed the petition, though restricting the future interest to 6 per cent per annum. The respondent filed Civil Misc. Appeal in the High Court of Andhra Pradesh and the execution of the order in OP 211/69 was stayed by the Court on 1-3-1973, subject to the condition of respondent depositing 1/4th of the amount due and furnishing security for the balance amount within two months thereafter. The respondent failed to comply with the order dated 1-3-1973 and neither deposited 1/4th of the amount due nor furnished the security. The Corporation had also filed cross-objections in the High Court, questioning the reduction of the rate of future interest from 8 1/2 per cent to 6 per cent per annum. A Division Bench of the High Court dismissed the appeal filed by the respondent but allowed the cross-objections filed by the Corporation on 5-3-1975. The Corporation, it appears, filed OS No. 13 of 1974 before the Chief Judge, City Civil Court, Hyderabad to enforce the personal liability of the first respondent and his guarantor Shri E. Narapareddy as per the provisions of the Act. The suit was decreed by the learned Chief Judge. The Corporation, however, was not able to enjoy the fruits of the decree as the respondent shifted his place of business and could not be traced. Faced with this situation, the Corporation, issued an advertisement in a local newspaper notifying that sale of the respondent-concern would be conducted under Section 29 of the Act and invited tenders for that purpose before 7-1-1982. The second respondent submitted a tender for the sum of Rs. 2,05,000/-, which was duly accepted by the Corporation. The second respondent, thereupon, deposited Rs. 52,000/- with the Corporation on 12-1-1982 being 1/4th of the tender amount. It was at this stage, that the first respondent filed Writ Petition No. 235/ 82 in the High Court of Andhra Pradesh, questioning the calling of tenders by invoking the provisions of Section 29 of the Act on various grounds. The High Court stayed the sale of the concern subject to the condition that respondent No. 1 should deposit a sum of Rs. 35,000/ -. When the writ petition came up for hearing, it was brought to the notice of the High Court that there was difference of opinion between two Benches of the High Court with regard to the vires of Section 29 of the Act. The writ petition was accordingly referred to a Full Bench. The Full Bench did not go into the question of vires of Section 29 of the Act but held that it was not open to the Corporation to invoke the provisions of Section 29 of the Act, having first successfully invoked the jurisdiction of the District Judge under Section 31 of the Act and consequently the writ petition was allowed. The Corporation has assailed the judgment of the High Court, allowing the writ petition, through this appeal on special leave being granted.

(3.) The first respondent applied for and obtained loan of Rs. 2,94,000/- for the purpose of carrying on its business of re-rolling mills at Vijayanagaram in the name and style of M/s. GAR Re-Rolling Mills. The first respondent on loan being sanctioned executed a mortgage deed dated 10-11-1970 in favour of the Corporation. The first respondent committed defaults in the matter of repayment of both the principal amount as well as the interest and the Corporation issued an advertisement for the sale of the unit invoking the provisions of Section 29 of the Act in 1975. The tender of Sh. Jaganmohan Gupta was accepted by the Corporation in response to the advertisement and he deposited the earnest money. While the matters rested thus, a suit, being OS No. 106/ 76, was got filed by respondent No. 1, through a third party, in the Sub-Court at Visakhapatnam and an order of attachment before judgment was obtained in respect of the properties of the first respondent which were already under mortgage with the Corporation. The Corporation entered its appearance before the sub-court and pleaded that it had the first charge on the property. The plea was accepted by the sub-court and it vacated its earlier order and permitted the Corporation to effect the sale under Section 29 of the Act, subject to the condition that the excess sale proceeds would be deposited by the Corporation in the Court'. Since, Sh. Jaganmohan Gupta whose tender had been accepted by the Corporation was unable to get the property, because of the pendency of proceedings in OS No. 106/76, he resiled from his offer and sought refund of the earnest money deposited by him in view of the pending litigation. Faced with this situation, that Corporation initiated proceedings against he respondent by invoking provisions of Section 31 of the Act by filing OP No. 162 /77 before the District Judge at Visakhapatnam. The petition was allowed on 16-1l-78 and the first respondent was given six months time to make the payment to the Corporation. The first respondent, however, failed to do so even after obtaining a number of extensions of time for making the payment from the Court. The first respondent, it transpires from the record, got yet another suit, O.S. 133 / 79 filed by the same plaintiff in the High Court who had earlier filed O.S. 106/ 76 seeking, the setting aside of the sale in favour of Sh. Jaganmohan Gupta, the party whose tender had been accepted in the proceedings under Section 29 of the Act but who had resiled from the same due to pending litigation. An injunction against the Corporation was also sought. However, no injunction was granted and the plaintiff in the suit was given time to make the deposit within the stipulated period but he failed to do so within the period granted for the purpose. The Corporation having remained unsuccessful in enjoying the benefit of the order of the District Judge dated 16-11-1978, because of the pendency of the proceedings in the Civil Courts, at the instance of the first respondent, once again took recourse to the provisions of Section 29 of the Act and advertised the unit for sale. The first respondent filed CMA No. 403 / 79 in the High Court of Andhra Pradesh and obtained an order of stay of the sale by the first respondent (or Corporation). The order of the stay was later on made absolute by the High Court, subject to the first respondent depositing 1/4th of the amount due by 29-12-79 and a further 1/4th by 29-2-80. The time, for deposit, was, however, extended at the request of the first respondent, but despite the extension of time, the first respondent did not deposit the amount and the Corporation, therefore, was once again driven to advertise the unit for sale. The effort of first respondent to obtain stay of the sale pursuant to the fresh advertisement issued by the Corporation, failed on 13-5-80 when CMP 6566/80 filed by it was dismissed by the High Court. Undettered by various orders against it and the continued default in making repayment or depositing the amounts under directions of the Court, it appears that the first respondent filed Writ Petition 4187/80 questioning the fresh invitation of tenders by the Corporation by invoking the provisions of Section 29 of the Act and succeeded in obtaining an order of stay. The writ petition, however, was dismissed on 14-12-81, by the High Court upholding the action taken by the Corporation under Section 29 of the Act and the stay order was vacated. After the vacation of the stay order, tender of one M/ s. Bhagchandka Brothers was accepted by the Corporation, being the highest bidder, and they were put in possession of the property. The first respondent filed an appeal against the order of the learned single Judge dated 14-12-1981 in Writ Petition No. 4187 / 80 before the Division Bench. The Division Bench relying upon the Full Bench judgment in Kota Subba Reddy's case (AIR 1987 Andh Pra 119) (subject-matter of C.A. 3689/87) held that the Corporation having moved the Court for relief under Section 31 of the Act was not entitled to recover the amount of debt due by taking recourse to the provisions of Section 29 of the Act and allowed the writ appeal filed by the first respondent. After obtaining special leave, the Corporation has filed the present appeal.