“6. Article 137 of the Limitation Act Applies in the Facts of the Vs. State of Punjab and Others - Court Judgment

RA No.560 o”

1. IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH RA No.560 of 2012(O & M) in CWP No.6507 of 2011 Date of decision:20.05.2013 Shanti Sarup Sharma .....Applicant Versus State of Punjab & others ......Respondents CORAM: HON'BLE MR.JUSTICE AJAY KUMAR MITTAL HON'BLE MR.JUSTICE G.S.SANDHAWALIA Present: Mr.Prateek Pandit, Advocate, for the applicant. Mr.Amit Singh Sethi, Addl.A.G., Punjab. Mr.B.B.Sethi, Advocate, for respondents No.2 & 3. ***** G.S.Sandhawalia J.CM No.18323 of 2012 Application filed under Section 5 of the Limitation Act, 1963 read with Section 151 CPC for condonation of delay of 98 days in filing the review petition is allowed in view of the averments made in the application which are duly supported by an affidavit of the petitioner. CM stands disposed of. CM No.18324 of 2012 Application filed under Section 151 CPC for exemption from filing the certified copies of Annexures RA-2 to RA-8 (collectively) is allowed in view of the averments made in the application which are duly supported by an affidavit of the petitioner. RA No.560 o”

2. RA No.560 of 2012 in CWP No.6507 o”

1. The present review application has been filed under Order 47 Rule 1 of the Code of Civil Procedure, 1908 for review of the order dated 01.05.2012 passed by this Court in CWP No.6507 of 2011.

2. The applicant-petitioner is aggrieved from the following observations made in the judgment dated 01.05.2012: “However, the petitioner shall not alienate the house till the clearance of the liability under the deed of guarantee of the loan amount by the principal borrower which ever is earlier.”

3. The writ petition had been filed by the applicant-petitioner wherein he had challenged the action under Section 29 of the State Financial Corporation Act, 1951 (hereinafter referred to as the 'Act') whereby the residential property belonging to the petitioner bearing No.2709/2719 situated in ward No.8, Sirhind Mandi, District Fatehgarh Sahib had been taken over and for issuance of a writ in the nature of mandamus directing the release of the said property. The writ petition was allowed vide order dated 01.05.2012 by holding that the petitioner was only a guarantor and Section 29 of the Act nowhere envisaged that the Corporation had right to proceed against the surety and the remedy lay under Sections 31 & 32G of the Act. Accordingly, the action of the respondents in taking symbolic possession of the house of the petitioner was quashed and the Corporation was directed to deliver the possession of the house in question to the petitioner within four weeks from the date of receipt of certified copy of the order. However, as noticed above, it was directed that the petitioner shall not alienate the house till the clearance of the liability under the deed of guarantee of the loan amount by the principal borrower, whichever is earlier.

4. In the review application, it has been averred that the Corporation had a remedy of proceeding against the guarantor under Section 31 of the Act which provided complete procedure for enforcing the liability of a surety and that RA No.560 o”

3. law of limitation provided period of three years from the date the right to proceed against the principal borrower accrued to the Corporation. It was, accordingly, submitted that the default was made by the industrial concern on 15.03.1994 and thus, the statutory period of three years for enforcing the right of the Corporation expired on 14.03.1997. It was further pleaded that the order dated 01.05.2012 would make the property inalienable for eternity as the Corporation had slept over its right and the same could not be legally enforced upon the review- applicant who is the father of the principal borrower. It was urged that in para No.11 of the writ petition itself, plea had been taken that as per Article 137 of the Limitation Act, 1963, the prescribed period of limitation for enforcing the liability of the surety is three years and the said fact had not been specifically denied in the written statement filed by the respondents. The only plea taken was that the possession of the house had been taken on 17.10.2002 and the auction could not materialise as no bidder had turned up and the interest of the State exchequer was involved.

5. Corporation, on the other hand, in its reply to the review application, defended the order dated 01.05.2012 and took the plea that the son of the petitioner was convicted for disposing of the machinery in violation of the agreement. The petitioner had acknowledged the debt on 06.11.2009 by submitting representation dated 22.12.2009 along with letter dated 10.12.2010 and therefore, the limitation would run from the said dates.

6. After hearing counsel for the parties, we are of the opinion that the said order is liable to be reviewed and condition imposed upon the petitioner is liable to be expunged from the judgment. The facts would show that the term loan had been taken by the son of the petitioner on 31.03.1993 and the house in question which belonged to the grandfather of the loanee had been offered as a surety for the purpose of raising loan which was mortgaged vide mortgage deed RA No.560 o”

4. dated 31.03.1993. The property belonging to industrial concern measuring 1 kanal 14 marlas was also mortgaged. The industrial concern defaulted from 15.03.1994 onwards and the Corporation took over the property of the industrial concern on 15.03.1994. The action against the guarantor was taken on 17.10.2002 and from 1994 onwards, no action was taken against the guarantor and no application under Section 31 of the Act had been filed inspite of the fact that cause of action had arisen and the right to apply had accrued. A Full Bench of Karnataka High Court in Karnataka State Financial Corporation Vs. Smt.Jaya MeNo.& another 2004 AIR (Karnataka) 370 while examining the issue as to the applicability of Article 137 to the application under Section 31 of the Act, came to the conclusion that the State Financial Corporation had not provided any period of limitation. Therefore, the period of limitation had to be attracted as per the residuary clause of Article 137 of the Limitation Act, 1963 and held that the application filed under Section 31 of the Act was to be governed by it. The relevant paragraph of the judgment reads as under:

“24. The learned Counsel appearing for the Corporation Sri Joshi, in alternate submitted that, if the Limitation Act is held applicable, then the appropriate article prescribing the period of limitation that would be applicable to application filed under Section 31 of the Act is Article 112 or Article 136 and not Article 137. There is no merit in this contention as Article 112 of the Limitation Act prescribes the limitation for a suit filed by or on behalf of the Central Government or the State Government including, the State of Jammu and Kashmir and in view of the definition of suit under the Limitation Act it is clear that suit does not include an appeal or application. Even otherwise, an application filed by the State Financial Corporation which is a statutory body established pursuant to the provisions of the SFC Act cannot be said to be an application filed by the State or Central Government. Similarly, the provisions of Article 136 prescribing the period of limitation for filing application for execution of any decree or order of any Civil Court is also not applicable to an application filed under Section 31 of the SFC Act as the said application RA No.560 o”

5. so filed cannot be said to be in execution of any decree. Having regard to the nature and scope of the provisions of Sections 31 and 32 of the Act explained by the Supreme Court in Maharashtra State Finance Corporation case referred to above. Therefore the only article that would be applicable to the application filed under Section 31 of the Act would be 137 of the Limitation Act which prescribes limitation of three years from the date when the right to apply accrues. The Full Bench decision relied upon by the learned Counsel appearing for the Corporation in the case of GODAN NAMBOOTHIRIPAD v. KERALA FINANCE CORPORATION, which deal with the applicability of Article 112 of the Limitation Act to an application filed under Kerala Land Revenue Recovery Act is not helpful to contend that the said article applies to application filed under Section 31 of the SFC Act and the said decision would be helpful to the Corporation only when an application is filed under Section 32G of the Act for recovery of amount due to the Financial corporation as arrears of land revenue if appropriate notifications are issued as in the facts of Full Bench decision of Kerala High Court. Accordingly, we answer questions 2 and 3 by holding that the application filed under Section 31 of the Act is governed by the provisions of Article 137 of the Limitation Act, 1963.”

7. The Hon'ble Apex Court in Maharashtra State Financial Corporation Vs. Ashok K.Agarwal & others 2006 (9) SCC 61.noticed that Section 31 of the Act was amended in the year 1985 which gave the right to proceed against the surety. Accordingly, it was held that Article 137 applies and the application filed against the surety which had been rejected on the ground that it was barred by limitation, having been filed on 02.01.1992 against a default of the year 1983 was upheld. The relevant paragraph of the judgment reads as under:

“6. 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 2nd January, 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 RA No.560 o”

6. notice demanding repayment of the amount of loan was issued against the borrower, that is, M/s. Crystal Marketing Private Limited on 8th March, 1983 and the application under Sections 31 and 32 of the State Financial Corporation was filed against the said borrower on 25th October, 1983. The liability of sureties had crystalised then. The amendment under Section 31 of the State Financial Corporation Act which authorises the State Financial Corporations to take action under Section 31 of the Act for enforcing the liability against the sureties, was brought about in the year 1985 by introduction of sub-section (aa) in Section 31 (1) of the Act. Even after this amendment the appellant did not wake up to take any step against the sureties in the present case. Notice was issued to the sureties only on 7th December, 1991 and the application for enforcement of liability against them was filed on 2nd January, 1992. The application, therefore, was clearly barred by time and the decisions of the courts below cannot be faulted. The courts below rightly dismissed the application on the ground that it was barred by limitation. The appeal has no merit. It is dismissed with no order as to costs.”

8. The submissions of the learned counsel for the Corporation that the deed had been acknowledged and the limitation still subsisted on account of the communications dated 18.03.2009 and the representation made on 03.07.2010 along with the representations dated 17.10.2010 and 10.12.2010 are without any basis. A perusal of the aforesaid communications shows that a one-time settlement offer was made by the Corporation to the loanee on 18.03.2009 and vide letter dated 03.07.2010, the present review-applicant had only prayed for release of the property which was mortgaged. Thus, prayer for release of the property would not extend the limitation as has been contended by the learned counsel for the Corporation. The judgment in M/s Ormi Textiles & another Vs. State of U.P. & others AIR 200.SC 2177.on which reliance has been placed by learned counsel for the Corporation, is not applicable in the facts and circumstances of the case. In the said judgment, the Hon'ble Apex Court held RA No.560 o”

7. that Section 29 of the Act could only be invoked against the property mortgaged and not against the one which was not the subject matter of the mortgage.

9. Accordingly, in view of the above legal position, the present review application is allowed and the observations that “However, the petitioner shall not alienate the house till the clearance of the liability under the deed of guarantee of the loan amount by the principal borrower which ever is earlier”. are expunged. This order shall be read in continuation of the order dated 01.05.2012. (G.S.SANDHAWALIA) JUDGE 20 05.2013 (AJAY KUMAR MITTAL) sailesh JUDGE