IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH Civil Writ Petition No.19615 of 2008 Date of Decision : September 30, 2010. Saroj Sharma .....Petitioner versus Punjab State Industrial Development Corporation Ltd. & anr. ..Respondents CORAM : HON'BLE MR.JUSTICE SURYA KANT. Present : Mr.Kamal Sehgal, Advocate, for the petitioner. Ms.Sonal Datta, Advocate, for respondent No.1. Mr.Diwan Sharma, Advocate, for respondent No.2. -.- 1. Whether Reporters of Local papers may be allowed to see the judgment? 2. To be referred to the Reporters or not? 3. Whether the judgment should be reported in the Digest? --- Surya Kant, J. (Oral) The petitioner impugns the sale notice dated 19.10.2008 (Annexure P-3) issued by the Punjab State Industrial Development Corporation Limited (for short 'the PSIDC'), proposing to sell her property she being the surety of respondent No.2, purportedly in exercise of its powers under Section 29 of the State Financial Corporation Act, 1951 (for short 'the Act'). The undisputed facts are that the petitioner stood surety for a bridge loan advanced by the PSIDC-respondent No.1 in favour of M/s Subham Papers Limited-respondent No.2. The borrower having failed to discharge its loan liability, that the PSIDC-respondent No.1 firstly sold the primary assets of respondent No.2-borrower in the year 1998 and then C.W.P.No .19615 of 2008 2 invoked its powers under Section 31 of the Act and issued the impugned notice dated 19.10.2008 (Annexure P-3) for the auction of the immovable property of the surety. The solitary contention raised on behalf of the petitioner is that the PSIDC has taken no action under Section 29 of the Act against the borrower-company before initiating the proceedings against the surety under Section 31 of the Act. I have heard learned counsel for the parties at some length and perused the records. The petitioner's plea merits acceptance in view of the Hon'ble Supreme Court decision in Karnataka State Financial Corporation versus N.Narasimahaiah and others, (2008) 5 Supreme Court Cases 176, para Nos.19 & 37 whereof reads as follows:- “......The heading of Section 29 of the Act states “Rights of financial Corporation in case of default”. The default contemplated thereby is of the industrial concern. Such default would create a liability on the industrial default in repayment of any loan or advance or any instalment thereof under the agreement. It may also arise when it fails to meet its obligation(s) in relation to any guarantee given by the corporation. If it otherwise fails to comply with the terms of the agreement with the financial corporation, also the same provisions would apply. In the eventualities contemplated under Section 29 of the Act, the corporation shall have the right to take over the management or possession or both of the industrial concern. The provision does not stop there. It confers an additional right as the C.W.P.No .19615 of 2008 3 words “as well as” are used which confer a right on the corporation to transfer by way of lease or sale and realise the property pledged, mortgaged, hypothecated or assigned to the corporation........” xx xx xx xx “37. The legislative intent, in our opinion, is manifest. The intention of Parliament in enacting Sections 29 and 31 of the Act was not similar. Whereas, Section 29 of the Act consists of the property of the industrial concern. Section 31 takes within its sweep both the property of the industrial concern and as that of the surety. None of the provisions control each other. Parliament intended to provide an additional remedy for recovery of the amount in favour of the Corporation by proceeding against a surety only in terms of Section 31 of the Act and not under Section 29 thereof.........” (emphasis applied) Following the dictum in Karnataka State Financial Corporation's case (supra), the writ petition is allowed; the impugned auction notice dated 19.10.2008 (Annexure P-3) is quashed with liberty to the respondent-PSIDC to proceed against the petitioner under Section 31 of the Act, if so permissible under the law. Needless to say that the petitioner shall also be entitled to raise all the objections before the appropriate forum. Dasti. September 30, 2010 (SURYA KANT) Mohinder JUDGE