SURENRANATHAN Vs. KERALA FINANCIAL CORPORATION

JUDGEMENT

(1.) THE petitioner challenges the validity of S. 29 of the State Financial Corporations Act, 1951 (for short, the Act) under the following circumstances. He obtained a loan of Rs. 99,752/-from the Kerala Financial Corporation for purchasing machinery for a mini industry in the Mini Industrial Estate at Koduvayur, by hypothecating his properties and executing an agreement on 7-9-1977. He, however, defaulted in the payment of the instalments due to the Corporation and the Corporation therefore demanded by a written notice the payment of the balance amounts with interest and also warned the petitioner that on his failure to comply with the demand, possession of the premises would be taken over by the Corporation and assets disposed of under the provisions of the Act. THE petitioner did not pay the arrears demanded; nor did be show bis willingness even to pay any portion of the debt. Instead be replied that the steps may be dropped for a further period of six months and requested that his case for granting interest rebate, refixation of the loan amount and re-schedule of the instalment may be considered afresh. When he did not make any remittance as demanded, the Corporation was constrained to take possession of the factory premises on 14-8-1982. This writ petition is thus filed challenging the validity of S. 29 of the Act and for a direction commanding the Corporation to hand over possession of the factory to the petitioner and to direct them to reschedule the instalments after allowing interest rebate as claimed by him.

(2.) THE petitioner's rights and liabilities arise under a contract which he has entered into with the Corporation and therefore his claim as to the amounts actually due by him are outside judicial examination under Art. 226 of the Constitution of India as held by this Court in the decision in David v. Kerala State Financial Corporation (1988 (1) KLT 585) wherein it has been held thus:- " the jural relationship between the petitioners and the Corporation is purely contractual. For breach of any conditions in the said contract, or for enforcing the rights thereunder, or for getting redressal against recovery of amounts pertaining to such contract, the remedy of the petitioners should be, by filing a suit in the ordinary civil court. It is not open to the petitioners to invoke the extra ordinary jurisdiction vested in this Court under Art. 226 of the Constitution of India".

(3.) THE objects and reasons for enacting this law state that the Act was intended to provide medium and long term credit to industrial undertakings which fall outside the normal activities of commercial banks. A State Corporation, controlled and guaranteed by the Government was therefore constituted as a special statutory agency to advance loans to deserving industrial undertakings. While incentive to start industrial undertaking by affording financial assistance under the Act was ensured, the stability of the Corporation itself had to be assured and therefore the objects and reasons specifically provided that Corporation will have "special privileges in the matter of enforcement of its claims against recovery of dues".