CIVIL WRIT PETITION NO. 14287 OF 2009 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. DATE OF DECISION : September 14, 2009. Parties Name M/S Govinda Cotspin Ltd. and others ...PETITIONERS VERSUS State of Punjab and others ...RESPONDENTS CORAM: HON'BLE MR. JUSTICE JASBIR SINGH PRESENT: Mr. Ashok Aggarwal, Senior Advocate, with Ms. Radhika Suri, Advocate, for the petitioner. JASBIR SINGH, J. ORDER: Petitioner No. 1 raised a term loan of Rs. 175 Lacs from respondent No. 3. Bridge loan of Rs. 30 Lacs was also sanctioned to it against State subsidy. As per record, respondent No. 3 also made equity investment amounting to Rs. 40 Lakhs in venture of the petitioner No. 1with a condition for buy back of the shares, as per Undertaking signed by the petitioners on May 18, 1996. As per their case, a fire broke out in the factory premises of petitioner No. 1, which resulted into taking over of the Unit, by respondent No. 3, under Section 29 of the State Financial Corporation Act, 1951 (in short the Act). Valuation of the assets of the CIVIL WRIT PETITION NO. 14287 OF 2009 -2- Company was got done and it was assessed at Rs. 3,62,26,830/-. However, the property was sold for an amount of Rs. 37 Lacs on December 9, 2003. Admittedly, petitioners No. 2 to 4 stood as guarantors for repayment of the loan amount when it was sanctioned. On July 11, 2007, they received a notice from the respondent – Corporation for payment of an amount of Rs. 1508.81 lakhs. Thereafter, for recovery of the above said amount, proceedings were initiated against the petitioner under Section 32G of the Act. To the above said action, petitioners filed objections, which were rejected by respondent No. 2, vide order dated July 10, 2009 (P-1). Hence this writ petition. Counsel for the petitioner has vehemently contended that action of the respondents to claim the above said amount was barred by limitation. To say so, he has argued with vehemence that the amount due from the petitioner was yet to be determined. If that was so, in view of the provisions of Article 137 of the Limitation Act,1963, application to initiate proceedings under Section 32G could have been moved only within three years. By making reference to the judgment of the Hon'ble Supreme Court in the case of Maharashtra State Financial Corpn. v., Ashok K. Agarwal and others, JT 2006(4) SC 197 and State of Kerala and others v. V.R. Kalliyanikutty and another, (1999) Vol.96 Company Cases 613, counsel for the petitioner tried to impress upon this Court that the action taken, under Section 32G of the Act, being beyond the period of limitation is liable to be quashed. In the alternative, by placing reliance upon the judgment of the Hon'ble Supreme Court in E.S.I.C. v. C.C. Santhakumar, JT 2006(10) SC 549, argued that the action was not initiated within a reasonable time, as such it cannot be sustained. To say so, he has averred that the property CIVIL WRIT PETITION NO. 14287 OF 2009 -3- mortgaged by petitioner No. 1 was sold in the year 2003. Liability of the guarantors had become apparent by then and for a period of about six years, no action was taken. Inaction on the part of the authorities, was not justified, which resulted into huge interest liability against petitioners No. 2 to 4. He prayed that the writ petition be allowed and the impugned order be set aside. After hearing counsel for the petitioners, this Court is of the view that the writ petition is bound to be dismissed. It is an admitted fact that in the year 1995, petitioner No. 1 raised a term loan of Rs. 175 Lacs, out of which Rs. 157 Lacs were disbursed in terms of the agreement entered into between the parties. Recovery of loan amount was secured by mortgage of fixed assets of the Company and also against a personal guarantee of the petitioners No. 2 to 4. Respondent No. 3 also disbursed a bridge loan of Rs. 40 Lacs against State subsidy, out of which Rs. 24 Lacs was disbursed in terms of the bridge loan agreement dated November 6, 1995. That loan amount was also secured against mortgage of the fixed assets of the Company and personal guarantee of petitioners No. 2 to 4. When petitioner No. 1 failed to repay the loan amount, Unit was taken over, by invoking the provisions of Section 29 of the Act and the assets were sold for Rs. 37 Lacs, on December 9, 2003. After adjustment of the sale proceeds, an amount of Rs. 2087.59 lacs was found due to respondent No. 3, from the petitioners. It is also apparent from the records that vide notice dated July 11, 2007, petitioners were directed to repay the loan amount . When they failed, proceedings under Section 32G of the Act were initiated on July 30, 2008. Upon notice, petitioners put in appearance before the respondent No. 1 by filing objections. It was averred that the application, CIVIL WRIT PETITION NO. 14287 OF 2009 -4- filed by respondent No. 3, was barred by limitation. Authority of respondent No. 2 was also challenged to entertain that application, being an employee of respondent No. 3. It was further objected that only the State and not respondent No. 3 was competent to effect recovery of the disputed amount treating it as land revenue. It was also stated that application having not been filed by an authorised person was liable to be dismissed. Factum of giving personal guarantee was denied. Liability to pay amount of the bridge loan was also controverted. It was further stated that the loan amount was not repaid on account of breaking of fire in the Unit, which resulted into loss of some lives also. Respondent No. 2, after hearing both the parties, rejected contentions, raised by the petitioners, vide the impugned order dated July 10, 2009. To pass an order against the petitioners and also to know the amount due against them, following break up was given by respondent No. 2 regarding loan liability of the petitioners in the impugned order: Loan Account Principal Interest Total Rs. (in Lacs) Term Loan 157 833.79 990.79 Bridge Loan 24 190.39 214.39 Direct subscription 40 263.63 303.63 Before this Court, no attempt has been made to show as to how above said determination and break up was not justified. It was not argued that the amount claimed by respondent No. 3 was not due from the petitioners. Creation of personal guarantee for repayment of the loan is also not denied in this Court. By calculating the amount claimed against the petitioners, as mentioned above, respondent No. 2 opined that respondent No. 3 was not entitled to recover an amount of Rs. 2087.59 lacs, as was CIVIL WRIT PETITION NO. 14287 OF 2009 -5- claimed in the application. Above said finding was given by looking at the statement of accounts of respondent No. 3. Respondent No. 2 further opined that the proceedings under Section 32G of the Act are in the nature of execution proceedings and no period of limitation can be read in those proceedings. Respondent No. 2 by taking note of contents of the deed of guarantees executed by petitioners No. 2 to 4 and letter from Promoter – Director undertaking for buy-back of shares, rightly came to the conclusion that petitioners No. 2 to 4 had given an undertaking that they shall pay the loan amount raised by petitioner No. 1. Further petitioners No. 2 to 4 also indemnified the PSIDC against losses of principal sums, interest commitment charges etc. Respondent No. 2 has rightly held that in view of documents, mentioned above, petitioners No. 2 to 4 were personally liable to pay the outstanding amount to respondent No. 3. Argument of counsel for the petitioners that in view of ratio of the judgments of the Hon'ble Supreme Court in Maharashtra State Financial Corporation's case (supra) and V.R. Kalliyanikutty's case (supra), the claim raised by the respondent – Corporation was barred by limitation, is liable to be rejected. A similar controversy came up before a Division Bench of this Court in Jagdish Rai v. The Haryana Financial Corporation, 2008(2) R.C.R. (Civil) 421. After taking note of ratio of the judgments, mentioned above, and by placing reliance upon another judgment of the Hon'ble Supreme Court in Hindustan Times Ltd. v. Union of India, 1998(2) SCT 256, the Division Bench observed as under: “9. After hearing learned counsel for the parties, we are of the considered view that this petition is devoid of merit and is, thus, liable to be dismissed. It would be expedient to read CIVIL WRIT PETITION NO. 14287 OF 2009 -6- Section 32G of the Act, which is as under:- “32-G. Recovery of amounts due to the Financial Corporation as an arrear of land revenue.- Where any amount is due to the Financial Corporation in respect of any accommodation granted by it to any industrial concern, the Financial Corporation or any person authorised by it in writing in this behalf, may without prejudice to any other mode of recovery, make an application to the State Government for the recovery of the amount due to it and if the State Government or such authority, as that Government may specify in this behalf, is satisfied, after following such procedure as may be prescribed, that any amount is so due, it may issue a certificate for that amount to the Collector and the Collector shall proceed to recover that amount in the same manner as an arrear of land revenue.” 10.A perusal of the aforementioned provision makes it evident that when the Financial Corporation or any person authorised by it in writing makes an application to the State Government for recovery of the amount due to it then on the satisfaction of the State Government or any such authority specified in this behalf, may issue a certificate for that amount to the Collector. The amount so due is then to be recovered in the same manner as an arrear of land revenue. This provision was added in the year 1985 by the Amendment Act 43 of 1985. There is no reference either in Section 32G of the Act or any other section to the provisions of Limitation Act, which implies the intention of the CIVIL WRIT PETITION NO. 14287 OF 2009 -7- Legislature to exclude the application of the aforementioned Statue. It is well settled principle of interpretation of statute that the intention of Legislature is either expressed or could be inferred from necessary intendment. In that regard, reliance may be placed on Constitution Bench judgments of Hon'ble the Supreme Court in the cases of Shyam Sunder v. Ram Kumar, 2001(3) RCR (Civil) 754: (2001) 8 SCC 24 and R. Rajagopal Reddy v. Padmini Chandra sekharan, (1995) 2 SCC 630. We are also fortified in our view by the judgment of Hon'ble the Supreme Court in the case of Hindustan Times Ltd. (supra). The Supreme Court in the aforementioned judgment had considered the question as to whether the provisions of Limitation Act would apply to the 1952 Act. Rejecting the arguments that the Limitation Act was to apply, it has been held as under:- “19. Now the Act does not contain any provision prescribing a period of limitation for assessment or recovery of damages. The monies payable into the Fund are for the ultimate benefit of the employees but there is no provision by which the employees can directly recover these amounts. The power of computation and recovery are both vested in the Regional Provident Fund Commissioner or other officer as provided in Section 14-B. Recovery is not by way of suit. Initially, it was provided that the arrears could be recovered in the same manner as arrears of land revenue. But by Act 37 of 1953 Section 14-B was amended providing for a special procedure under Sections 8-B CIVIL WRIT PETITION NO. 14287 OF 2009 -8- to 8-G. By Act 40 of 1973 Section 11 was amended by making the amount a first charge on the assets of the establishment if the arrears of employee's contribution were for a period of more than 6 months. By Act 33 of 1988, the charge was extended to the employee's share of contribution as well. 20.In spite of all these amendments, over a period of more than thirty years, the legislature did not think fit to make any provision prescribing a period of limitation. This in our opinion is significant and it is clear that it is not the legislative intention to prescribe any period of limitation for computing and recovering the arrears. As the amounts are due to the Trust Fund and the recovery is not by suit, the provisions of the Indian Limitation Act, 1963, are not attracted. In Nityananda M. Jishi v. LIC of India, (1969) 2 SCC 199, it has been held that the Limitation Act, 1963, has no application to Labour Courts and, in our view, that principle is equally applicable to recovery by the authority concerned under Section 14-B...” 11. We are further of the view that the recovery proceedings are in the nature of execution proceedings, as has been held by Hon'ble the Supreme Court in Rajiv Anand's case (supra). The object of issuance of a show cause under Section 32G of the Act is only to effect recovery in accordance with the books of accounts where the amount due is always available. This process of determination of the amount due has been evolved by issuance of show cause notice to the borrower CIVIL WRIT PETITION NO. 14287 OF 2009 -9- and thereafter the amount is determined and no period of limitation can be read in these proceedings. Therefore, we are of the view that the provisions of the Limitation Act cannot be made applicable to the proceedings initiated under Section 32G of the Act because neither there is any express provision made nor any necessary intendment is inferable.” By observing as above, the Division Bench further held that the ratio of the judgments of the Hon'ble Supreme Court in the case of Maharashtra State Financial Corporation's case (supra) and V.R. Klalliyanikutty's (supra) is not applicable to the facts of that case because those judgments were rendered while interpreting the provisions of Sections 31 and 32 of the Act. It was further held that the remedy available to the Financial Corporation under Section 32G of the Act was added by effecting an amendment in the year 1995 and the same is in addition to any other remedy available to the Corporation under any provisions of the Act. This Court is also of the opinion that in the present case, no entitlement regarding amount due was necessary. Principal amount, bridge loan amount and the interest to be charged everything was mentioned in the agreement entered into between the parties. It was a simple arithmetical calculation / verification on the basis of which amount was to be calculated. Before this Court also, no attempt was made to show as to how amount calculated was not justified and correct. As such there was no lis between the parties to be adjudicated upon by the competent authority under the Act. Amount due was known to both the parties. Furthermore, respondent No. 2 after making arithmetical calculations has determined the amount due from the CIVIL WRIT PETITION NO. 14287 OF 2009 -10- petitioners. In such like cases, the bar of limitation will not be made applicable. Further contention of counsel for the petitioners that there was unreasonable delay in initiating the proceedings is also not justified. Loan amount was raised in the year 1995. Unit was taken over by the respondent – Corporation in the year 1999. Secured mortgage assets of petitioner No. 1 were sold in the year 2003. In the year 2007, notice was issued to the petitioners to pay the balance amount. During this entire period, it was known to the petitioners that the huge amount is due to respondent No. 3. They made no attempt to ever approach the authorities to settle the dispute. During this period, 'one time settlement' could have been entered into between the parties if the petitioners were eager to discharge their liability. The public money cannot be allowed to go waste simply on account of some delay in action on the part of officials of respondent No. 3. In view of facts, mentioned above, this writ petition fails and the same is dismissed. ( Jasbir Singh ) Judge September 14, 2009. DKC