JOSEPH Vs. KERALA FINANCIAL CORPN

JUDGEMENT

(1.) THE plaintiffs in a suit for perpetual injunction restraining the defendants and 2 (who are respondents 1 and 2 herein) from taking any steps for transfer by sale or lease, either by private negotiations or by public auction or by tender, or by otherwise, of the plaint schedule properties or any portions of the same, except by recourse to S. 31 of the State financial Corporations Act, 1951 (for short THE Act), are the revision petitioners. THE interim injunction sought for by the petitioners was denied by the trial court. THE appellate court on appeal confirmed the order of the trial court. THE judgment of the appellate court is under challenge in this revision petition.

(2.) FAILURE to repay the loan, the petitioners had taken from the first respondent, resulted in the first respondent taking over the management of the industrial concern owned by the third respondent, a public limited company, under S. 29 of the Act. The first defendant after the taking over of the industrial concern, it is seen from the pleadings, has taken steps to sell the properties, the third respondent had mortgaged to it as security for the loan. The third respondent, ever since it came to know of the steps taken by the first respondent to sell the properties has been trying to avert the sale and with this in view had instituted a suit (O. S. 138/83) and also preferred an Original Petition under Art. 226 of the Constitution of India (O. P. No. 6488/82 ). The suit aforesaid has been dismissed. So is the case with the O. P. While disposing of the O. P. this court had allowed the third respondent to repay the loan in instalments. The third respondent however, has not so far repaid the loan amount. Instead, the third respondent has made one of the share holders (who is none other than the brother of the Managing director) and two employees to institute the suit from out of which this revision arises.

(3.) IT should in this connection be remembered that such a report is not a material, as observed by the Supreme Court (See R. P. Kapur v. Pratap Singh A. I. R. 1964 SC. 295) which could legitimately be taken into account while construing a statute where the provision coming up for construction is clear. There is another reason why we cannot look at what the committee recommended, or in any event, if we do look at, we should not be unduly influenced by it because the legislature, as remarked by Lord Denning mr, may, and often does, decide to do something to cure the mischief, for the removal of which the committee has made the recommendation-Letang v. Cooper (1964 (2) Al1. E. R. 929 ). Let us therefore see whether the section is in fact clear. Dealing with S. 29, the Supreme Court in Gujarat State Financial corporation v. Natson Mfg. Co. (AIR 1978 SC. 1765) has observed that "it confers upon the Financial Corporation, in case of default by industrial concern, 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, and any transfer of property made by the Corporation in exercise of the power conferred by S. 29 shall vest in it all rights in or to the property transferred as if the transfer had been made by the owner of the property". IT is therefore clear from this Section that the Financial corporation has the right to convert the property into cash and adjust the same towards the loan. By such transfer the properties would become vested in the transferees as if the transfer was made by the owner of the properties. We should in this connection make specific reference to sub-section 5 of S. 29. IT provides that, where the Financial Corporation takes action against an industrial concern under 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 the concern. And therefore as an owner of the concern, the Financial Corporation has the right to have transactions including sale of the properties of the concern for the purpose of recovery of the amounts due under the loan transaction, without the junction of the courts. This right will extend to the property of the surety also. But that right can be enforced only by taking recourse to the proceedings contemplated under S. 31 or by instituting a regular suit, the reason being that the industrial concern cannot be said to be the owner of the property belonging to surety.