Judgment:
Rajiv Sharma, J.
1. The brief facts necessary for the adjudication of this petition are that the respondent No. 1-Corporation had advanced loan to the petitioner through its sole proprietor on 22.6.1989 and 27.10.1990. The agreement(s) of hypothecation deeds were prepared on 22.6.1989 and 27.10.1990, besides creating equitable mortgage under Section 58 (f) of the Transfer of Property Act, 1882 by depositing the title deed of the properties of the petitioner concern in favour of the Corporation vide letters dated 22.6.1989 and 27.10.1990. The petitioner availed a term loan of Rs. 8.40 lacs during the years 1989-1990 on different dates. The mortgaged/hypothecated moveable assets were sold on 28.10.1995 for Rs. 0.70 lac and immoveable assets were also sold on 22.2.1997 for Rs. 1.38 lacs. There was a shortfall in the recovery of loan dues and a sum of Rs. 78,95,237/- as on 10.6.2005 was still outstanding in the loan amount of the petitioner concern including interest up to 9.6.2005. The Respondent No. 1-Corporation filed an application under Section 32-G of the State Financial Corporation Act, 1951, hereinafter referred to as the 'Act', for issuance of recovery certificate for Rs. 78,95,237/- before the Specified Authority appointed by the State Government under Section 32-G of the State Financial Corporation Act, 1951. The petitioner concern took various objections against the application and the relief prayed therein including that the application was barred by limitation. The Specified Authority passed an order on 19.7.2006 whereby the Recovery Certificate for recovery of Rs. 75,44,075/- was passed against the petitioner concern and the same was directed to be recovered as arrears of land revenue together with pendente lite and future interest at the rate of 12.5 per cent per annum.
2. In sequel to order dated 19.7.2006, Annexure P-7, the Collector (Recovery), J.P. Financial Corporation, Shimla has directed the petitioner concern on 11.4.2007 to deposit the amount on 8.5.2007.
3. Mr. R.K. Gautam, learned Senior Advocate has strenuously argued that orders dated 19.7.2006 passed by the Specified Authority and the Collector (Recovery), J.P. Financial Corporation, Shimla dated 11.4.2007 are not sustainable in the eyes of law. He has primarily relied upon Maharashtra State Financial Corporation v. Ashok K. Agarwal and Ors. : AIR2006SC1584 , to buttress the submission that the application was barred by limitation.
4. Mr. Ajay Sharma, learned Counsel for the respondents has supported the two orders dated 19.7.2006 and 11.4.2007.
5. I have heard the learned Counsel for the parties and have gone through the record carefully.
6. It is evident from the pleadings of the parties that the loan was advanced by the respondent-corporation on 22.6.1989 and 27.10.1990. The agreement of hypothecation was prepared on 22.6.1989 and 27.10.1990 itself. The equitable mortgage was created under Section 58(f) of the Transfer of Property Act, 1882 by depositing the title deeds of the property of the petitioner concerned. Mortgaged hypothecated moveable assets were sold on 28.10.1995 for Rs. 0.70 lacs and immoveable assets were sold on 22.2.1997 for Rs. 1,38,000/-. The application has been preferred by the respondent-corporation under Section 32-G of the State Financial Corporation Act, 1951.
7. A specific ground has been taken in the reply filed by the petitioner concern that the application was barred by limitation. According to Mr. R.K. Gautam, the loans were advanced in the years 1989-1990 and the same could be recovered within a period of three years. He further contended that while dealing with the application under Sections 31 and 32 of the Act, there is no decree or order of the Civil Court being executed and the same is covered under Article 137 of the Limitation Act.
8. Mr. Ajay Sharma, learned Counsel for the respondents has strenuously argued that the application under Sections 31 and 32 of the Act are in the nature of execution proceedings, therefore, Article 136 of the Limitation Act applies. According to him> orders could be executed within a period of twelve years. This questions, whether Articles 136 and 137 of the Limitation Act would apply to the proceedings under Sections 31 and 32 of the Act is no more res integra in view of the definite pronouncement of law by their Lordships of the Hon'ble Supreme Court in Maharashtra State Financial Corporation v. Ashok K. Agarwal and Ors. : AIR2006SC1584 . Their Lordships of the Hon'ble Supreme Court have held as under:
The argument is that an application under Section 31 is in the nature of execution proceedings, therefore, Article 136 applies which allows a period of twelve years for execution of decrees and orders and the application was thus within time. It was submitted that the Courts have upheld the legal fiction that applications under Section 31 of the State Financial Corporation Act are treated in the nature of execution proceedings. In support of this submission the learned Counsel referred to Gujarat State Financial Corporation v. Natson . It was observed by this Court in this case that:
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 a stage posterior to the passing of the decree.Section 31 of the Act contains special provisions for enforcement of claims by the State Financial Corporations. It is by way of a legal fiction that the procedure akin to execution of decrees under the Code of Civil Procedure has been permitted to be invoked. But one cannot lose sight of the fact that there is no decree or order of a civil Court when we are dealing with applications under Section 31 of the Act. The legal fiction at best refers to a procedure to be followed. It does not mean that a decree or order of a civil Court is being executed, which is a sine qua non for invoking Article 136. The proposition set out in Gujarat State Financial Corporation found support in Everest Industrial Corporation v. Gujarat State Financial Corporation. Again in Maganlal v. Jaiswal Industries, this Court noticed that an order under Section 32 is not a decree stricto sensu as defined in Section 2 (2) of the Code of Civil Procedure, the Financial Corporation could not be said to be a decree-holder. This makes it clear that while dealing with an application under Sections 31 and 32 of the Act there is no decree or order of a civil Court being executed. It was only on the basis of a legal fiction that the proceedings under Section 31 are treated as akin to execution proceedings. In fact this Court has observed that there is no decree to be executed nor is there any decree-holder or judgment-debtor and therefore in a strict sense it cannot be said to be a case of execution of a decree. Article 136 of the Limitation Act has no application in the facts of the present case. Article 136 specifically uses the words 'decree or order of any civil Court'. The application under Sections 31 and 32 of the State Financial Corporation Act is not by way of execution of a decree or order of any civil Court.
Article 137 of the Limitation Act applies in the facts of the present case. When Article 137 is applied, the application moved by the appellant Corporation on 2-1-1992 for proceeding against the sureties i.e. the respondents herein, was clearly barred by time and the Courts below were correct in holding so. To recall the facts of the present case, the notice demanding repayment of the amount of loan was issued against the borrower, that is, M/s Crystal Marketing Private Limited on 8.3.1983 and the application under Sections 31 and 32 of the State Financial Corporation was filed against the said borrower on 25-10-1983. The liability of sureties had crystallised then.
9. In the present case, as noticed above, the loans were advanced to the petitioner in the years 1989-1990. The same were recoverable within a period of three years under Article 137 of the Limitation Act. The respondent-corporation has preferred an application under Section 32-G of the Act on 9.3.2006. The same was barred by limitation. The petitioner has taken a specific ground in paragraph 8 of the reply that the application was barred by limitation. The learned Specified Authority though has taken note of specific ground with regard to limitation in the reply to the petition filed by the petitioner yet he has not considered and decided the same. It is necessary for the statutory authorities to take into consideration the plea of limitation raised by the parties.
10. Consequently, in view of the observations made hereinabove, it is held that the proceedings initiated under Section 32-G of the Act by respondent No. 1-Corporation were barred by limitation. Accordingly, the writ petition is allowed and Annexure P-7 dated 19.7.2006 and Annexure P-8 dated 11.4.2007 are quashed and set aside. No costs.