Full Judgment Text
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CASE NO.:
Appeal (civil) 3727 of 1999
PETITIONER:
Maharashtra State Financial Corporation
RESPONDENT:
Ashok K. Agarwal & Ors.
DATE OF JUDGMENT: 30/03/2006
BENCH:
Arun Kumar & R.V. Raveendran
JUDGMENT:
JUDGMENT
ARUN KUMAR, J.
The appellant Maharashtra State Financial Corporation (hereinafter
referred to as ’the Corporation’) had sanctioned a loan of Rupees Five lakhs
in favour of M/s. Crystal Marketing Private Limited on 14th November,
1978. The respondents in the present appeal were Directors of the said
borrower and stood sureties for the loan. The amounts under the said loan
were disbursed to M/s. Crystal Marketing Private Limited from time to time
in the year 1979. The company however failed to repay the loan amounts.
The Corporation issued various letters calling upon the borrower to clear its
dues. Ultimately, the Corporation got a legal notice dated 8.3.1983 issued
calling upon the borrower to repay the entire amounts due. On 25th October,
1983, the Corporation moved an application under Sections 31 and 32 of the
State financial Corporation Act, 1951in the Court of the District Judge,
North Goa, Panaji. The appellant Corporation prayed for an order of sale of
the hypothecated property of the borrower company so that the sale proceeds
could be appropriated towards meeting the outstanding liability of the
borrower towards the appellant. On 11th June, 1990 the attached properties
of the borrower company were put to sale. Because there was a shortfall in
the amount realized on sale of the hypothecated property, the appellant-
Corporation sent notices on 27th December, 1991 to the sureties, that is, the
respondents in this appeal. An amount of Rs.16,79,033/- was claimed as due
from the sureties together with interest at the rate of 14.5% per annum. On
2nd January, 1992, the appellant-Corporation filed an application under
Section 31 (1) (aa) of the State Financial Corporation Act against the
respondents for steps for recovery of the amount due. The respondents took
various objections against the application and the reliefs prayed therein
including that the application was barred by limitation. The learned
Additional District Judge vide his order dated 16th April, 1994 upheld the
objection regarding the application being barred by limitation. The
application was accordingly dismissed.
According to the respondents Article 137 of the Limitation Act was
applicable and as per that provision such an application could be made
within a period of three years. Article 137 applies in cases where no period
of limitation is specifically prescribed. It was submitted that as no period of
limitation is prescribed for an application under Sections 31 and 32 of the
Act, Article 137 would apply. The Addl. District Judge upheld the
contention of the respondents and the application of the Corporation was
dismissed as barred by limitation. The appellant Corporation filed an appeal
against the said order in the High Court of Judicature at Bombay, Bench at
Panaji. The appeal was dismissed by the High Court by the impugned order
dated 22nd July, 1998. The High court upheld the reasoning of the
Additional District Judge.
The learned counsel for the appellant placing reliance on Article 136
of the Limitation Act argued that the said Article prescribes a limitation
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period of twelve years in cases of execution of decrees and orders passed by
civil courts and therefore, the courts below erred in rejecting the application
as barred by limitation. Article 136 is reproduced below:
"Description of application Period of limitation Time from which period
begins to run
136. For the execution of any decree Twelve years When the decree or order
(other than a decree granting a becomes enforceable
or
mandatory injunction) or order where the decree or any
of any civil court. subsequent order dir
ects
any payment of money
or
the delivery of any
property
to be made at a cert
ain date
or at recurring peri
ods,
when default in maki
ng the
payment or delivery
in
respect of which exe
cution
is sought, takes pla
ce:
Provided that an app
lication
for the enforcement
or
execution of a decre
e granting
a perpetual injuncti
on shall not
be subject to any pe
riod of
limitation."
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. M/s. Natson Manufacturing Co.(P) Ltd. & Ors. 1979 (1)
SCR 372. 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."
Sections 31 of the Act contains special provisions for enforcement of
claims by 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 the case of Gujarat State Financial
Corporation (supra) found support in M/s. Everest Industrial Corporation
and Others v. Gujarat State Financial Corporation 1987 (3) SCC 597.
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Again in Maganlal etc. vs. Jaiswal Industries Neemach & Ors. 1989 (3)
SCR 696 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 there is 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 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 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.
Before parting with the judgment we would like to place on record that
since the respondents were not represented in the case, we requesterd Sh.
Ashok Grover, Senior Advocate, to assist the court as amicus curiae. We
record our appreciation of the services rendered by Shri Grover in this behalf