[1] IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JAIPUR BENCH, JAIPUR J U D G M E N T S.B. CIVIL MISC. APPEAL NO. 177/2001 PREM CHAND JAIN Vs. THE RAJASTHAN FINANCIAL CORPORATION & ANR. DATE: 04.01.2008 HON'BLE MR. JUSTICE H.R. PANWAR Mr. Sanjay Mehrishi for the appellant. Mr. N.S. Chauhan for Mr. R.D. Rastogi for the respondent No.1. Mr. Rajpal Choudhary for respondent No.2. **** This appeal under Section 32(9) of the State Financial Corporation Act, 1951 (for short 'the Act' herein after) is directed against the judgment and decree dated 02.12.2000 passed by the Additional District Judge No.2, Kota (for short 'the trial Court' herein after), whereby the application filed by the respondent Rajasthan Financial Corporation (for short 'the RFC' herein after) under Section 31(1)(aa) of the Act for recovery of sum of Rs. 4,09,132.34 was allowed and a decree for recovery of Rs. 3,92,469.34 after adjusting sum of Rs. 12,000/- realised from the sale proceeds of the Industrial Concern of respondent No.2 was passed. [2] Aggrieved by the judgment and decree impugned, the appellant who is a guarantor surety, has filed the instant appeal. The facts and circumstances giving rise to the instant appeal are that the respondent No.2 M/s Nakoda Electrodes took a loan for establishment of industrial Concern and the defendant-appellant stood Surety and executed guarantee deed for re-payment of the loan advanced to respondent No.2. When the respondent No.2 failed to repay the loan amount taken from RFC, the respondent RFC filed an application for recovery of the outstanding loan amount of Rs. 4,09,132.34 under Section 31(1)(aa) of the Act before the trial Court. During pendency of the application, the industrial Concern of the respondent No.2 was attached and thereafter put to auction sale and sold for a sum of Rs. 12,000/-. The trial Court on appreciation of the evidence and the material placed before it, came to the conclusion that the respondent RFC is entitled for an amount of Rs. 3,92,469.34 from the respondent No.2 M/s Nakoda Electrodes and the present appellant jointly and severally. Accordingly, a decree has been passed. I have heard learned counsel for the parties at length and carefully gone through the judgment and decree impugned as also the record of the trial Court. [3] It is contended by the learned counsel for the appellant that the trial Court failed to follow the procedure as envisaged under Section 32(1) and (4) of the Act which provides that the trial Court by an ad interim order attaching the security, or so much of the property of the industrial concern as would on being sold realise in his estimate an amount equivalent in value to the outstanding liability of the industrial concern to the Financial Corporation. The trial Court failed to issue to the industrial concern or owner of the security attached a notice accompanied by copies of the order and, therefore, the judgment and decree is bad in law. Counsel for the appellant relied on a decision of the Madhya Pradesh High Court in M/s Ganga Ice Factory, Chhatarpur and another Vs. Madhya Pradesh Financial Corporation, Indore, AIR 1997 Madhya Pradesh 113. Learned counsel appearing for the respondent RFC contended that in the instant case since before attaching the Industrial Concern of respondent No.2, notice was served on the respondent No.2 as also on the appellant and the industrial Concern of respondent No.2 had already been attached and put to auction sale and had been auctioned and sold in auction proceedings for [4] a sum of Rs. 12,000/- and that amount had already been adjusted by the trial Court while decreeing the application of the respondent RFC under Section 31(1) (aa) of the Act, therefore, the judgment and decree is passed on sound and proper appreciation of the evidence and material produced before the trial Court. It has not been disputed by the learned counsel for the appellant that the respondent No.2 borrowed the amount from the respondent RFC and the appellant stood surety and executed guarantee deed for re-payment of the said loan amount along with the respondent No.2. Liability of respondent No.2 as well as of appellant has not been disputed. So far as facts of taking loan from the respondent RFC and the appellant having stood guarantor has not been disputed. The fact that the respondent No.2 failed to repay the loan amount to the respondent RFC has also not been disputed. Even before the trial Court, the respondent No.1 RFC by cogent evidence proved the loan agreement and the loan amount having been advanced to the respondent No.2 and the appellant having stood surety and executed guarantee deed and the agreement executed by the respondent No.2 and the appellant has been established by cogent and reliable evidence. Even before the trial Court, the appellant who was defendant [5] No.2 therein filed the written statements before the trial Court and did not specifically dispute the fact that the respondent No.2 was advanced a loan by the respondent RFC and the appellant signed the guarantee deed. Respondent No.2 despite service of notice and affording opportunities did not choose to file written statement and controvert the facts stated in the application under Section 31(1)(aa) of the Act. Signature on guarantee deed dated 04.05.1990 has been admitted by the appellant. Thus, the terms and conditions mentioned in the agreement and guarantee deed have been admitted by the appellant and the respondent No.2 in their written statements before the trial Court. Before the trial Court, the respondent No.2 as also the appellant failed to lead any evidence to controvert the case established by respondent RFC. Thus the amount outstanding to the respondent No.2 has not been disputed. It is not the case of appellant or the respondent No.2 having paid outstanding loan amount. Before the trial Court, the respondent RFC produced PW1 Kuldeep Rastogi, Deputy Manager of RFC and has proved the document Ex.1, agreement to sale dated 04.05.1990 executed by the respondent No.2 i.e. loan agreement. [6] It has also been established that the respondent No.2 agreed to pay interest on loan amount @ 13.50% p.a. and in default of payment of installment, in addition to 13.50%, interest @ 7.50% was also agreed to be paid. The document of guarantee deed Ex.2 has been proved and the appellant Prem Chand Jain executed a deed of guarantee and also filed an affidavit Ex.3 and power of attorney Ex.4. It has also been stated that the appellant Prem Chand mortgaged title deed of his house as security in the guarantee deed situated at Aklera vide Ex.5. Site map of the house is Ex.6. Since the respondent No.2 failed to repay the amount, a notice under Section 30 of the Act was issued and served upon respondent No.2 and the appellant vide Ex.9 and Ex.13 respectively. Industrial Concern of the respondent No.2 was taken in possession vide Ex.10. The respondent No.2 removed the machinery, plant and the equipments of machinery unit for which a crime report i.e. First Information Report was lodged against the respondent No.2 vide Ex.11 for criminal breach of trust and misappropriation of the machinery etc. and a copy of letter was served upon respondent No.2 vide Ex.12. He has also proved the statement of account Ex.14 which is admissible in evidence in view of the provisions of [7] Bankers Books Evidence Act. The industrial Concern of respondent No.2 was auctioned and was sold for a sum of Rs. 12,000/- and that amount has been adjusted in the statement of account Ex.15 on 30.03.96 and thus, there remained outstanding amount of Rs. 3,92,469.34. The appellant and the respondent No.2 were afforded opportunities to lead evidence in defence which they failed to lead and, therefore, their evidence was closed. The evidence of the respondent RFC was closed on 20.07.99 and the matter was posted for evidence of non-applicant therein i.e. appellant herein and the respondent No.2 to 25.08.99. From 25.08.9 to 23.09.2000, the matter was adjourned on as many as 7-8 occasions but the appellant and the respondent No.2 failed to lead evidence. On 19.07.2000 the appellant and the respondent No.2 were granted last opportunity to produced evidence and the matter was adjourned to 23.09.2000. Even on 23.09.2000, neither the appellant nor the respondent No.2 produced any evidence and their evidence was closed. Thereafter vide judgment impugned, the application filed by the respondent RFC was allowed and a decree has been passed. In M/s Ganga Ice Factory, Chhatarpur and another Vs. Madhya Pradesh Financial Corporation, [8] Indore (supra), the Madhya Pradesh High Court has held that on failure of the debtor to repay the loan, the State Financial Corporation filed an application under Section 31 before the District Judge. Thereon further the Court did not follow the procedure prescribed under Section 32 for granting the relief under Section 31. On the other hand straightway in the absence of reply of the debtor a preliminary decree under Order 34 Rule 2 and 3 was passed. Passing of such decree is illegal. Therefore, the decree was set aside and the case remitted to trial Court for passing orders afresh on application under Section 31 after following the procedure prescribed under Section 32. The decision relied on by the learned counsel for the appellant has no application to the facts and circumstances of the instant case. In the instant case, principle debtor and the guarantor both were afforded opportunity to file reply (written statements). Principle debtor respondent No.2 did not file written statement, however appellant filed written statement and has not specifically denied the execution of surety/guarantee deed. The industrial Concern was attached and put to auction in auction proceedings and it was sold for a sum of Rs. 12,000/- and that amount has already been given adjustment in the outstanding [9] loan amount and, therefore, the decision relied on by the counsel for the appellant is of no help to the appellant. In the facts and circumstances of the case, admittedly the provisions as envisaged under Section 32 of the Act have already been followed to the extent of issuance of notice, attaching the industrial Concern and putting to auction sale. So far as restraining the industrial Concern from transferring or removing its machinery or plant or equipment is concerned, as stated what above, the respondent No.2 has removed machinery, plant and equipments therein in violation of the terms and conditions of hypothecation for which a crime report has been lodged by the respondent RFC against the respondent No.2 vide Ex.11. From the oral as well as documentary evidence produced by the respondent RFC which remained uncontroverted as neither the appellant nor the respondent No.2 led any evidence to controvert the evidence led by the respondent RFC. In my view, the respondent-petitioner RFC has proved its case and, therefore, the trial Court was justified in passing the judgment and decree impugned. I do not find any error, illegality or perversity in the judgment and decree impugned warranting [10] interference by this Court. In this view of the matter, I do not find any merit in the appeal and it is dismissed accordingly. There shall be no order as to costs. (H.R. PANWAR),J. /KKC/