N.D. Vyas, J.
1. This is an appeal from the judgment and order dated March 13, 1987 passed by the Second Additional District Judge, Pune, on the 'emergent application' taken out by the respondents in Miscellaneous Application No. 496 of 1983 filed by the applicants.
2. The appellants are a financial corporation established under the State Financial Corporation Act, 1951. The respondents, who are the original respondents in the said miscellaneous application, had borrowed certain amounts from the appellants. The loan transaction is governed by the State Financial Corporations Act, 1951 (hereinafter referred to as 'the said Act').
3. The brief facts giving rise to the present appeal are as follows :
On July 17, 1976, the appellants sanctioned a term loan of Rs. 39,000 to the respondents. On January 11, 1977, loan documents including a letter of hypothecation, also providing for schedule for repayment of the said amount, were executed. On January 11, 1977, and on August 7, 1977, the loan amounts less some small amounts were disbursed to the respondents. The regional manager of the appellants addressed a letter on February 9, 1981, to the respondents recalling the entire loan amount with interest as admittedly there were some defaults. This was followed by the appellants' advocate's notice dated March 17, 1981, recalling the entire loan amount. As the respondents did not respond to the said notice, the appellants filed an application being Miscellaneous Application No. 496 of 1983 under sections 31 and 32 of the said Act in the trial court for recovery of the entire loan amount with interest. In that application, an interim order of attachment of the hypothecated assets was passed in favour of the appellants pending the final disposal of the miscellaneous application. However, during the pendency of the said proceedings under section 31, the appellants gave notice under section 29 of the said Act, inter alia, informing the respondents about the appellant's decision to take over possession of the hypothecated assets in pursuance of the powers vested in the appellants under the said Act and called upon the respondents to forthwith pay the outstanding loan amount of Rs. 1,14,758 with expenses and future interest failing which the respondents were advised that they should remain present to hand over possession of the hypothecated assets to the appellants on January 7, 1987. This, according to the appellants, was a notice under section 29 of the said Act. On January 7, 1987, the appellants took possession of the entire factory premises of the respondents and locked it up. On January 12, 1987, an application was made by the appellants before the trial court by way of a purchase (sic) for withdrawing the said proceedings instituted by the under section 31. On 8th January, 1987, the respondent filed an application being 'emergent applicant' in the Miscellaneous Application No. 496 of 1983 against the appellants to return to them the possession of their factory and for a notice to be issued on the appellants for contempt of court. On January 12, 1987, the appellants filed an application for withdrawal of their miscellaneous application filed under section 31 of the said Act. A reply to the respondents' said emergent application was filed by the appellants on January 13, 1987. In the 'emergent application' the respondents contended that the action on the part of the applicants of taking possession was absolutely unwarranted as the matter was pending before the court and interim reliefs were also granted and that, therefore, the action taken by the appellants was illegal. In the reply filed by the appellants, it was contended that it was not correct to say that the proceedings were still pending as the appellants had already filed their withdrawal purchase and that they had taken possession under section 29 of the said Act on January 7, 1987, after due notice to the respondents on December 19, 1986, which was duly received by the respondents. It was further contended in the said reply that the powers of the appellants under both the provisions, viz., sections 29 and 31 of the said Act, were independent of each other and that the appellants were within their rights to take action under section 29 even during the pendency of their petition under section 31 and therefore, the action taken by the was legal. By the judgment and order dated March 18, 1987, the trial court came to the conclusion that once an application was filed under section 31, as was the case in the present matter, the appellants could not take action under section 29 during the pendency of the said application. The trial court raised three points, namely :-
(i) Whether the appellant's action in taking possession of the suit premises of the respondent was legal, valid and correct
(ii) Was the respondent entitled to restoration of the possession of the suit premises and
(iii) What order
and gave its findings -
(i) In the negative;
(ii) In the affirmative; and
(iii) As per final order.
Thus, the trial court held that the taking of possession of the suit premises by the appellants was illegal, invalid and incorrect and that the respondents were entitled to restoration of possession of the suit premises and directed the appellants to forthwith handover possession to the respondent. However, the prayer for issuing of notice for contempt of court was rejected on the ground that the matter involved a question of interpreting the provisions of sections 29 and 31 of the said Act and as such it was debatable whether the appellants had power to seek remedy under section 29 when its application under section 31 was pending and, thus, concluded that it could not be said that the appellants had committed contempt of the court. Being aggrieved by the said judgment and order, the present appeal was preferred and on the admission of the appeal, stay was granted. However, subsequently on account of the default on the part of the appellants, the appeal was dismissed for default and the stay vacated and on an application for restoration of the appeal, although the appeal was restored, stay was not granted. Thus, possession of the suit premises which was with the appellants by virtue of the stay order granted by this court, had to be returned on February 9, 1990.
4. It was submitted by Mr. Bharucha, learned counsel for the appellants, that on a plain reading of sections 29 and 31 of the said Act, it was clear that the powers under the said sections were independent of each other and to conclude that the powers were mutually exclusive was erroneous. It was further submitted that the statute did not contain any prohibition as to exercise of powers simultaneously and such a restriction or prohibition cannot be read into the provisions of the said Act. Secondly, he submitted that, in any view of the matter, the appellants had applied for withdrawal on January 12, 1987, meaning thereby that they wanted to proceed only under section 29 of the said Act and even otherwise the very fact of their adopting proceedings under section 29 even during the pendency of the section 31 proceedings amounted to abandoning the pending proceedings and pursuing the remedy available to the under the said Act. Thirdly, he submitted that in any view of the matter the trial court had no jurisdiction to entertain and pass any order on the emergent application of the respondent because it was not maintainable as the respondents had, assuming the appellant's action in taking possession was illegal, to file an independent action. Thus, the order appealed from was without jurisdiction and illegal. On the other hand, Mr. Peshave, learned counsel for the respondents, submitted that the appellants were not permitted in law to prosecute both the remedies simultaneously, viz., remedy under section 29 and under section 31. Secondly, he submitted that apart from the said Act prohibiting it, even by virtue of the doctrine of election the appellants having elected to file and prosecute the application under section 31 of the said Act, especially when interim orders were passed by the court in the said application, they cannot be allowed to have recourse to this power under section 29. This, according to him, amounted, to abuse of the powers of the court. Thirdly, it was submitted that the right to be heard under the pending proceedings which was given under section 31 of the Act cannot be allowed to be taken away. Lastly, it was submitted by Mr. Peshave that the order appealed from was legal and not erroneous or without jurisdiction as contended by the appellants.
5. From the above submissions advanced by learned counsel, the following questions arise for determination, viz. :
(1) Whether the powers under sections 29 and 31 are mutually exclusive
(2) Whether after having proceeded under section 31 of the said Act, the appellants are precluded in law from proceeding under section 29 of the said Act
(3) Whether the respondents' 'emergent application' on which the impugned order was passed was maintainable
6. It would be advantageous to reproduce the relevant provisions of the said Act in order to determine the above questions :
'29. (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 instalment 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 good 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 the concern.
31. (1) Where an industrial concern, in breach of any agreement, makes any default in repayment of any loan or advance or any instalment 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 or where the financial corporation requires an industrial concern to make immediate repayment of any loan or advance under section 30 and the industrial concern fails to make such repayment, then, without prejudice to the provisions of section 29 of this Act and of section 69 of the Transfer of Property Act, 1882 any officer of the financial corporation, generally or specially authorised by the Board in this behalf, may apply to the District Judge within the limits of whose jurisdiction the industrial concern carries on the whole or a substantial part of its business for one or more of the following reliefs, namely :-
(a) for an order for the sale of the property pledged, mortgaged, hypothecated or assigned to the financial corporation as security for the loan or advance; or
(aa) for enforcing the liability of any surety; or
(b) for transferring the management of the industrial concern to the financial corporation; or
(c) for an ad interim injunction restraining the industrial concern from transferring or removing its machinery or plant or equipment from the premises of the industrial concern without the permission of the Board, where such removal is apprehended.
(2) An application under sub-section (1) shall state the nature and extent of the liability of the industrial concern to the financial corporation, the ground on which it is made and such other particulars as may be prescribed.
32. (1) When the application is for the reliefs mentioned in clauses (a) and (c) of sub-section (1) of section 31, the District Judge shall pass an ad interim order attaching the security, or so much of the property of the industrial concern as would on being sold realise in his estimate an amount equivalent in value to the outstanding liability of the industrial concern to the financial corporation, together with the costs of the proceedings taken under section 31, with or without an ad interim injunction restraining the industrial concern from transferring or removing its machinery, plant or equipment...
(4) At the same time as he passes an order under sub-section (1), the District Judge shall issue to the industrial concern or to the owner of the security attached a notice accompanied by copies of the order, the application and the evidence, if any, recorded by him calling upon it or him to show cause on a date to be specified in the notice why the ad interim order of attachment should not be made absolute or the injunction confirmed.
(4A) If no cause is shown on or before the date specified in the notice under sub-section (1A), the District Judge shall forthwith order the enforcement of the liability of the surety ...
(6) If cause is shown, the District Judge shall proceed to investigate the claim of the financial corporation in accordance with the provisions contained in the Code of Civil Procedure, 1908, in so far as such provisions may be applied thereto.
(7) After making an investigation under sub-section (6), the District Judge may -
(a) confirm the order of attachment and direct the sale of the attached property;
(b) vary the order of attachment so as to release a portion of the property from attachment and direct the sale of the remainder of the attached property;
(c) release the property from attachment;
(d) confirm or dissolve the injunction;
(da) direct the enforcement of the liability of the surety or reject the claim made in this behalf; or
(e) transfer the management of the industrial concern to the financial corporation or reject the claim made in this behalf :
Provided that when making an order under clause (c) or making an order rejecting the claim to enforce the liability of the surety under clause (da) or making an order rejecting the claim to transfer the management of the industrial concern to the financial corporation under clause (e), the District Judge may make such further orders as he thinks necessary to protect the interests of the financial corporation and may apportion the costs of the proceedings in such manner as he thinks fit : ...
(8) An order of attachment or sale of property under this section shall be carried into effect as far as practicable in the manner provided in the Code of Civil Procedure, 1908, for the attachment or sale of property in execution of a decree as if the financial corporation were the decree holder ...
(12) For the removal of doubts it is hereby declared that any court competent to grant an ad interim injunction under this section shall also have the power to appoint a receiver and to exercise all the other powers incidental thereto ....'
7. In order to determine the first question, viz., whether the powers under sections 29 and 31 of the said Act are mutually exclusive, one has to see the scheme of the Act. The State Financial Corporations Act, 1951, was enacted by Parliament with a view to enable the State Governments to establish financial corporations for enhancing the pace of industrialisation by providing credit on easy terms for setting up industrial concerns and/ or for expanding the activities of the existing industrial concerns. Under the Act, the financial corporations have been given 'special privileges in the matter of enforcement of their claims against their borrowers' (vide Statement of Objects and Reasons). Section 25 enables the financial corporation to carry on and transact any of the business set out therein. The powers to recover the loans advanced by the financial corporation are to be found in section 29 and section 31 (read with section 32) of the said Act. Section 29 confers upon the financial corporation, in case of default by the 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 section 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. Section 31 enables the financial corporation in the event of breach of agreement or default in payment of the loan or advance or any instalment thereof to make an application to the court, not merely for sale or mortgage of the property but even for transferring the management of the industrial concern to the financial corporation or merely for injuncting the industrial concern from transferring or removing its machinery or plant or equipment from the premises of the industrial concern without the permission of the Board. However, in order to avail of the powers under section 31, the assistance of the court is to be taken. In Gujarat State Financial Corporation v. Natson ., : [1979]1SCR372 , the Supreme Court, inter alia, held : 'The substantive relief in an application under section 31(1) is something akin to an application for attachment of property in execution of a decree at the stage posterior to the passing of a decree... The claim of the corporation is not the monetary claim to be investigated though it may become necessary to specify the figure for the purposes of determining how much of the security should be sold ... It is not a money claim.' On the other hand, rights conferred under section 29 of the Act are not of substantive nature and are in the nature of special provisions for enforcement of the claims by the financial corporation without the help of a court. Thus, section 29 does not only deal with the question of the rights of the financial corporation in the case of default, but also provides for a remedy to take over the management of the defaulting industrial concern with or without possessing as well as the right to transfer by way of lease or sale and realise the property pledged, mortgaged or assigned to the financial corporation. Hence section 29 does not merely confer rights but provides a self-contained remedy also to the financial corporation for the enforcement of which it need not invoke the provision of section 31 of the Act. The question to be considered, however, in the present case is whether having resorted to the provisions of section 31 of the Act by filing the miscellaneous application in the trial court and obtaining an interim order, the financial corporation can change horses midstream and try to invoke the provisions of section 29 of the Act. Section 31 specially mentions that the power given to the financial corporation is without prejudice to the provisions of section 29 of the said Act.
8. Shri Bharucha, learned counsel for the appellants cited the decision in Maharashtra State Financial Corporation v. Amar Sea Foods in support of his contention that powers under sections 29 are not mutually exclusive. In the said judgment, it has been held that the very wording of section 31 leaves no ground for any doubt in that respect and it becomes exceedingly clear that sections 29 are entirely independent and the corporation is free at its opinion to act either under one or the other provisions of law. Mr. Bharucha, in support of his submission further cited the decision in Rose Potteries v. West Bengal Financial Corporation, : AIR1986Cal277 . In that decision, while holding that the right given to the financial corporation under sections 29 is not controlled by the procedure in section 31, it was held (at p. 278) : 'The procedure laid down for enforcement of claims by the financial corporation under section 31 is not only without prejudice to sections 29 of the Act but also section 69 of the Transfer of Property Act. Section 69 gives power to a mortgagee to sell the mortgaged property without the intervention of the court and is distinct from the power of a simple mortgagee to cause the mortgaged property to be sold by decree of the court. The provisions of sections 29 are similar to the power given to a mortgagee under section 69 of the Transfer of Property Act.' On the other hand, Shri Peshave, learned counsel for the respondents, submitted that the powers under the said provisions are mutually exclusive and relied on a Full Bench decision of the Andhra Pradesh High Court in K. Subba Reddy v. Andhra Pradesh State Financial Corporation : AIR1987AP119 [FB]. Incidentally, this decision is relied upon by the trial court in arriving at its decision. In the said Full Bench decision, the financial corporation, on a default being committed by the borrower industrial concern, had filed an application under section 31 of the said Act. A final order was passed on the financial corporation's said application under which certain amounts were ordered by the District Court to be paid. From the final order, the industrial concern had preferred civil miscellaneous application which was dismissed by the High Court. The financial corporation had also filed cross-objections with regard to the amounts that were not specifically allowed by the District Judge, Guntur. However, during the pendency of the industrial concern's said civil miscellaneous application, stay was granted to it on condition that he paid 1/4th of the amounts ordered by District Court which was paid but there was a subsequent default committed by the industrial concern and at that stage the financial corporation invoked sections 29 of the said Act. In these circumstances, the question which was decided by the Full Bench was that after having filed an application under section 31 of the said Act and after the final order was passed by the court on the said application, the financial corporation could not invoke the powers under sections 29 in respect of the 'subsequent default'. The Full Bench in fact, inter alia, held that the provisions of sections 29 are not controlled by section 31 nor section 31 lays down the procedure and sections 29 lays down the right and that sections 29 of the Act operate independently of each other in their own domain. The said authority does not support Mr. Peshave at all, even to the extent of supporting his submission that the powers under sections 29 are mutually exclusive. More about the Full Bench decision a little later. I find no prohibition anywhere in the said Act prohibiting the financial corporation from exercising the power under sections 29 after having invoked the provisions of section 31. In view of the reasons mentioned above, the powers under sections 29 are independent of each other and are not mutually exclusive.
9. This takes us to the second question requiring determination, viz., whether having proceeded under section 31, the appellants were precluded in law in proceedings under section 29. It was contended by Mr. Bharucha, learned counsel for the appellants, that both the powers being independent and there being no prohibition contained in the said Act, the financial corporation was free to invoke either of the powers and even simultaneously. On the other hand, Shri Peshave submitted that after having filed an application before the trial court under section 31 of the said Act on which an interim order was passed, the appellants were precluded from proceeding under sections 29 of the said Act as they did. He further submitted that even under the doctrine of election, the appellants having elected one remedy, i.e., under section 31, they cannot be allowed to switch over to another remedy under section 29, thus depriving the respondents of being heard under section 31 application. It was further contended that in any view of the matter adopting the sections 29 remedy after filing the application under section 31 of the said Act amounted to abuse of the process of the court, and, therefore, could not be permitted. Mr. Bharucha relied heavily, and according to e rightly, on the very wording of section 31 which specifically provides that the power under section 31 was without prejudice to the provisions of sections 29 of the said Act. Mr. Bharucha also relied on the Division Bench decision of the Andhra Pradesh High Court in the matter of Srinivasa Kandasari Sugars v. Government of Andhra Pradesh, : AIR1976AP93 . In that case, the financial corporation had, in view of the defaults committed by the industrial concern, filed an application with the court under section 31 of the said Act and after withdrawing the same had proceeded under sections 29 of the said Act and the Division Bench in the said decision held that such action of the financial corporation cannot be said to be illegal and that the financial corporation had every right to proceed under sections 29 of the act in the manner they had done. Incidentally, I may mention that this decision is approved by the very Full Bench decision of the same High Court on which heavy reliance is placed by Mr. Peshave. In the said Full Bench decision in K. Subba Reddy's case, : AIR1987AP119 as mentioned earlier, it was held that the financial corporation was not free to proceed under sections 29 after having obtained final orders in their application under section 31. It may be noted that the said Full Bench decision proceeded on the very facts of that case inasmuch as the final order was passed and that there were defaults thereafter at which stage sections 29 of the said Act was sought to be invoked. It was not a case where the earlier application under section 31 was either withdrawn, as was the case before the Division Bench of the very same High Court in Srinivasa Kandasari Sugars v. Government of Andhra Pradesh, AIR 1976 AP 3. In the present case before me, although some interim order was passed, the final orders have not been passed. Moreover, the appellants filed their application for withdrawal of their application under section 31 of the said Act. Even otherwise, the very fact that the financial corporation, viz., the appellants, decided to proceed under sections 29 and in fact took possession of the factory of the respondent after notice amounted to their having abandoned their application under section 31.
10. It is correctly held in Rose Potteries v. West Bengal Financial Corporation, : AIR1986Cal277 , that the powers under sections 29 is akin to power under section 69 of the Transfer of Property Act. There is an authority in support of the proposition that the power under section 69 of the Transfer of Property Act is independent of the right to have a receiver appointed under section 69A of the Transfer of Property Act and can be exercised even after a receiver has been appointed under section 69A of the Transfer of Property Act (see P. Saraswathi Bai v. P. T. Varadarajulu, AIR 1956 Mad. 385 and Krishnammal v. N. Krishna, AIR 1956 Mad. 424. The appointment of a receiver under section 69A of the Transfer of Property Act can also be made through court. Similarly in the present case the appellants were within their right, when they invoked sections 29 of the said Act after having applied to the court under section 31. There is no question of applying the doctrine of election or holding that the action of the appellants in invoking sections 29 of the Act amounted to an abuse of the process of the court inasmuch as what the appellants have done is under powers given to the by law. The respondent had a very limited right of say under section 31 application, but when the law permits invocation of sections 29 at any stage, no grievance can be made. There is no suit under section 31 but only an application, equated by the Supreme Court in Gujarat State Financial Corporation v. Natson ., : [1979]1SCR372 , with an application for attachment of property in execution of a decree at a stage posterior to the passing of a decree. Even the interim order of attachment is not the result of any direction by the trial court but it was obligatory upon it to pass such an order. In the result, I have no hesitation in holding that the appellants were not precluded in law from proceeding under sections 29 of the Act.
11. This brings me to the last question, viz., whether the respondents' 'emergent' application on which the impugned order is passed was maintainable. Admittedly, the respondents filed their 'emergent' application in Miscellaneous Application No. 496 of 1963 filed by the appellants challenging the action taken by the appellants under sections 29 in taking possession of the respondents' factory. The appellants' miscellaneous application was under section 31, and section 32 lays down the procedure of the District Court in respect of such applications. From the plain reading of section 32, it is abundantly clear that the powers of the District Court are very limited and for challenging the action under section 29, the Act does not give any right to the industrial concern/borrower to approach the District Court, because in fact special powers in the matter of enforcement of claims are given to the financial corporation. In these circumstances, the trial court was not competent to entertain and give relief to the respondent, and certainly not in the appellants' application under section 31. However, the emergent application also had a prayer for proceeding against the appellants for contempt. According to the respondents the matter being sub judice, the appellants could not have proceeded under sections 29 as they did. It is understandable that because of the allegation of contempt contained in the emergent application along with a prayer for restoration of possession the emergent application was entertained and the parties heard. However, when the trial court came to the conclusion that the appellants could not be said to have committed contempt, it should have dismissed the application in toto. As discussed above, such an application for restoration and that too in the appellant's application could not lie and the same required to be dismissed. Thus, neither was such an application maintainable nor did the trial court have the requisite jurisdiction, its powers circumscribed by the provisions of the Act.
12. In the result, the appeal is allowed. The order dated March 13, 1987, of the trial court granting restoration of possession is set aside. In order to do complete justice between the parties, status quo ante will have to be restored. This is necessary as, on coming to the conclusion that the action of the appellants in invoking sections 29 was legal and proper, the action of the appellants in taking possession in pursuance thereof has to be held legal, otherwise the relief granted by this court in the present appeal would be declaratory in nature without redressing the grievance of the appellants. But for the fact that the interim relief granted at the time of the admission of this appeal was not regranted when the appeal was restored after dismissal for default, the appellants would have still been in possession of the same. Not granting possession at the present stage to the appellants would amount to driving the to take fresh proceedings for recovery without any fault on their part. The respondents are hereby ordered and directed to put the appellants in possession of their factory situated at 1225/1, Shivajinagar, Fergusson College Road, Pune 411 004, on or before April 30, 1992. Needless to say the respondents can, in order to avoid doing this, satisfy the appellant's claim.
13. In view of the facts and circumstances of the case, no orders as to costs.