IN THE HIGH COURT OF HIMACHAL PRADESH AT SHIMLA FAO No. 475 of 2009 Date of Decision: 15th December, 2010 __________________________________________________________ M/s Pankaj Hotels and another ….Appellants. Versus H.P.S.I.D.C. ….Respondent. ___________________________________________________________ Coram The Hon’ble Mr. Justice Dev Darshan Sud, J. Whether approved for reporting?1 ___________________________________________________________ For the Appellants: Mr. Ramakant Sharma, Advocate. For the Respondent: Mr. Balwant Kukreja, Advocate. __________________________________________________________ Dev Darshan Sud, J (oral). This appeal has been preferred by the respondent before the learned District Judge in proceedings instituted against it under Section 31 of the State Financial Corporation Act, 1951 (hereinafter referred to as Act). 2. The Himachal Pradesh State Industrial Development Corporation approached the Court under the provisions of aforesaid Act praying for sale of mortgaged/hypothecated property detailed in the petition invoking the provisions of Section 31(a) of the Act and sought the following relief: 1 Whether Reporters of Local Papers may be allowed to see the judgment?. 2 a) That order for sale of mortgaged/hypthecated properties detailed above be passed in favour ofd the petitioner under Section 31(1) (s) of State Financial Corporations Act, 1951; b) The liability of Respondent No. 2 may be enforced under Section 31(a)(aa) of State Financial Corporations Act, 1951 by passing order for the attachment and sale of the properties belonging to him, as he is the guarantor of the loan amount raised by respondent No.1 and have executed deed of guarantees as stated in the petition to secure the loan amount. The details of his properties shall be mentioned in the application under Order 21 Rule 66; c) That p[ending the orders of sale, ad-interim injuntion restraining the respondents be also passed so that the mortgaged/hypothecated properties are not transferred or removed or alienated in any manner under Section 31 (a) (c ) of the State Financial Corporations Act, 1951; d) That from the sale proceeds of the properties of above mentioned respondents, the payments of the amount due mentioned in para 10 together with future interest from 1.9.2008 to the date of payment, in accordance with the loan documents, be ordered to be made to the Petitioner Corporation and right be reserved tobe the petitioner to recover the short-fall of the dues from other properties of the Respondents by instituting civil suit for recovery or by taking such legal proceedings as are available to the Petitioner Corporation under the law. 3. The petition was resisted by the respondents- appellants on a number of grounds. I am not going into the merits of the respective claims putforth by the parties. But it is 3 only the terms of the adjudication made by the learned District Judge, which is being considered. 4. It is undisputed that the provision of Section 31 of the Act provides a speedy remedy to the respondent to recover any loans advanced. It is also undisputed that when such claim is made, the District Judge has to comply with the provisions of Section 32 of the Act. 5 After going through the order passed by the learned Court, what I find is that the petition has been taken up for consideration on a number of dates and ultimately on 17.4.2009 and 7.5.2009, two orders were passed, which read:- “17.4.2009 ……..Last opportunity given to the learned cunsel for the respondent to comply the previous order subject to cost of Rs. 500/- to be paid to the learned counsel for the petitioner and for the said purp[ose, the matter be listed for 7.5.2009. 7.5.2009…….Previous order complied with by the learned counsel for the respondent. In the light of the fact that an undertaking has been filed by the learned counsel for the respondent, therefore, the learned counsel for the applicant/petitioner has stated that in terms of the security bond as furnished by the respondent, the application under Order 38, Rule 5 and under Order 39, Rules 1 and 2 read with Section 151 C.P.C. be disposed of. Since adequate solvent security has been furnished by the respondent, hence, on its being placed on record, it appears to be furnishing an adequate, satisfactory and sufficient deterrent against the respondent alienating, it, during the pendency of the suit which in case he comes to do so which shall be open for this Court to take such action as it 4 deems and necessary. The application is accordingly disposed of. It be tagged with the main case file after due registration………..” 6. These are the orders which are relevant for adjudication. A reading of these orders shows that the Court interprets Section 32 as providing it with plenary powers of selling the mortgaged property merely on the asking of the Corporation. The Court also proceeds that statement was made by learned counsel appearing for the appellants herein that the amount would be deposited. The order dated 15.9.2009 again reveals that extension of time was sought for making such deposit. 7. Section 32 sub-section (1) mandates that when the relief sought are under Clauses (a) and (c ) of Sub-section (1) of Section 31, the District Judge shall pass an interim order attaching the security or so much of the property of the industrial concern as would necessitate to secure the interest of the Corporation. Sub section 1 (a) mandates that the notice be issued to the guarantor for enforcing the claim of the Corporation under Section 31 Clause (aa). Sub-section 3 then vests discretion with the District Judge to examine the Officer making an application before the order under Sub-section 1 or sub-section (2) or (1A) is passed. Sub-section 6 provides that in case any cause shows, the District Judge shall proceed to investigate the claim of the Corporation and thereafter procedure under sub- section 7 shall be followed. 8. I do not find any compliance to these provisions rather I notice that the District Judge has straight away 5 proceeded to pass an order directing the sale of the mortgaged property. 9. In these circumstances, the proceedings before the learned District Judge can be said to be without jurisdiction and against the mandatory provisions of the Act. 10. Learned counsel appearing for the Corporation submits that order was passed on an admission/undertaking having been made on behalf of the petitioner and in these circumstances, there is no illegality. This is contested by the claimant. In these circumstances, this case is remanded to the learned District Judge, who shall proceed with the case on following directions: (a) It will be open to the appellant herein to file a petition/application before the learned District Judge to show that no admission of the claim was made prompting the Court to exercise powers of sale of the mortgaged property forthwith; (b) It is well settled law that any admission/statement made and recorded before the Court which forms a part of the Court record, can be withdrawn only before that Court and cannot be the subject matter of proceedings before the Higher Court in case the Court comes to the conclusion that the liability has in fact been admitted by the petitioner, in that event the procedure under Section 32 of the Act cannot be followed. In case it is found that no admission was made the learned Court would obviously proceed under Section 32 of the Act; (c ) During the pendency of this appeal, a statement was made on behalf of the appellant that a sum of ` 10 lacs would be deposited. Let this 6 amount be deposited before the learned District Judge on or before 31st March, 2011, failing which the Court shall order to recover this amount by sale of proportionate part of property to realize this claim. 6. Appeal stands disposed of. No order as to costs. Parties to appear before the learned District Judge on 22nd February, 2011. Let record of the Court below be sent back. Needless to say that the case would be disposed of expediously. (Dev Darshan Sud) Judge December 15th, 2010(ms)