SCA/9555/2008 1/8 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 9555 of 2008 For Approval and Signature: HONOURABLE MR.JUSTICE JAYANT PATEL ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================================= REVABHAI HARIBHAI PATEL - Petitioner(s) Versus GUJARAT STATE FINANCE CORPORATION & 1 - Respondent(s) ========================================================= Appearance : MR PR NANAVATI for Petitioner(s) : 1, MR HS MUNSHAW for Respondent(s) : 1 - 2. ========================================================= CORAM : HONOURABLE MR.JUSTICE JAYANT PATEL Date : 08/10/2008 ORAL JUDGMENT 1. Rule. Mr.Munshaw, learned Counsel waives service of notice of Rule for respondents No.1 and 2. With the consent of the learned Counsel SCA/9555/2008 2/8 JUDGMENT appearing for both the sides, the matter is finally heard. 2. Mr.Nanavati, learned Counsel for the petitioner, at the outset, declared before the Court that the suit being Civil Suit No.6174 of 2000 pending before the concerned Civil Court shall be withdrawn by the petitioner within two weeks from today. 3. The short facts of the case appears to be that the petitioner's husband stood as the surety/guarantor in the transaction in favour of M/s.Madhuveer Ceramics Pvt. Ltd. The loan was granted to the aforesaid Company (hereinafter referred to as 'Principal Borrower'). The husband of the petitioner also mortgaged the property in question in favour of Gujarat State Financial Corporation (hereinafter referred to as 'GSFC' for short), but as surety and the property stood as collateral security. 4. It appears that the respondent Corporation in exercise of the power under Section 29 of the State Financial Corporation Act (hereinafter referred to as 'the Act' for short), had taken SCA/9555/2008 3/8 JUDGMENT over the possession of the residential house (property in question) and the petitioner at that stage had preferred Civil Suit No.6174 of 2000. Pending the suit, a settlement was arrived at between the petitioner and the respondent Corporation, whereby the petitioner was re-entrusted with the possession and the petitioner also deposited a particular amount as per the settlement and as stated by the learned Counsel for the petitioner, the suit was also to be withdrawn. It appears that thereafter as per the petitioner, the respondent Corporation did not agree to abide by the settlement and communicated to the petitioner for deposit of the additional amount and also further threatened the action under Section 29 of the Act to take over the possession of the property and it is under these circumstances, the petitioner has approached this Court by the present petition. 5. Heard Mr.Nanavati, learned Counsel appearing for the petitioner as well as Mr.Munshaw, learned Counsel appearing for the respondent SCA/9555/2008 4/8 JUDGMENT Corporation. 6. This Court had an occasion to consider the question as to whether the Corporation has power under Section 29 of the Act against the properties of the guarantor/surety, who mortgaged the property as collateral security, in Special Civil Application No.15898 of 2007 decided on 11.9.2008. It was, inter alia, observed by this Court as under:- “3. The only question to be considered in the present petitions is as to whether it is open to the respondent No. 1 Corporation to invoke power under Section 29 of the State Financial Corporation Act against the property of the guarantor or not. 4. Heard Ms. Mehta learned Counsel for the petitioner and Mr. Munshaw learned Counsel for the respondent. 5. As such the issue is covered by the decision of the Apex Court in case of Karnataka State Financial Corporation v. N. Narasimahaiah and others reported at 2008(5)SCC 176. Wherein the conclusion inter SCA/9555/2008 5/8 JUDGMENT alia recorded at paragraph No. 37 as under: 37. The legislative intent, in our opinion, is manifest. The intentions of Parliament in enacting Section 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” 6. The aforesaid shows that the highest Court of land has observed that power under Section 29 of the Act is not available to the State Financial Corporation against the property of the guarantor, and if it is desirous to take possession of the property of the guarantor, it has to resort proceedings under Section 31 of the Act and only by intervention of the Court, the possession can be taken. SCA/9555/2008 6/8 JUDGMENT 7. In view of the aforesaid, answer to the question has to be negatived, and the powers under Section 29 of the Act are not available to the respondent Corporation against the property of the petitioner, who are admittedly guarantor. 8. As in the impugned notice the respondent Corporation has also threatened for action under Section 29 of the Act, such would not be available to the respondent.” 7. The same will be the situation so far as the exercise of the power by the respondent Corporation under Section 29 of the Act is concerned namely; that the Corporation now in view of the above referred legal position will not be in a position to take over the possession of the property in purported exercise of the power under Section 29 of the Act and it will be required for the respondent Corporation to resort to the proceedings under Section 31 of the Act for recovery of the amount. 8. Mr.Nanavati, learned Counsel appearing for the petitioner additionally submitted that the SCA/9555/2008 7/8 JUDGMENT petitioner would like to make representation to the Corporation to abide by the settlement and to consider the matter sympathetically. 9. If the Corporation as per the prevailing policy, is in a position to consider the representation, the same may be considered in accordance with law. 10.In view of the above, it is hereby observed that the contemplated action by the Corporation under Section 29 of the Act for taking over the possession of the property cannot be sustained in law. Hence, the action to that extent shall stand quashed and set aside with the further observations that it would be open to the Corporation to resort to the proceedings under Section 31 of the Act and at that stage, the rights and contentions of both the sides shall remain open. The aforesaid shall be on condition that the petitioner withdraws the civil suit within a period of two weeks as declared before this Court. 11.It is also observed that if the petitioner, without prejudice to the rights and contentions SCA/9555/2008 8/8 JUDGMENT in the proceedings under Section 31 of the Act, moves representation to the Corporation, the same shall be considered by the Corporation in accordance with law and as per the prevailing policy. 12.The petition is partly allowed to the aforesaid extent. Rule made absolute accordingly. No order as to costs. 8.10.2008 (Jayant Patel, J.) vinod