Haryana Financial Corporation vs Gurcharan Singh And Anr

2. M/s Amrit Steel Industries, Jagadhari, a proprietorship concern of which the first respondent is the sole proprietor, had obtained a loan of Rs.5,05,750/- on 15.9.1994 from the Appellant, Haryana Financial Corporation, by entering into hypothecation of machinery, fixture, as well as, personal guarantee bond dated 15.9.1994. The first respondent also gave a written undertaking dated 5.3.1994 that he would not dispose of his properties during the currency of the loan. The first respondent failed to repay the loan. Consequently, the Corporation took over the hypothecated property and sold the same and appropriated the amount. In the meantime, the second respondent, the wife of the first respondent filed Civil Suit No.767 of 1995 against the first respondent before the Court of Civil Judge (Jr. Divn.), Jagadhari, seeking a declaration that she is the absolute owner and in possession of the properties mentioned in the undertaking dated 5.3.1994. The suit was decreed on 3.2.1996 as against the first respondent.

3. The Corporation then filed Civil Suit No.167 of 2003 in the Court of Additional Civil Judge (Senior Division), Jagadhari, against the Respondents seeking a declaration that the decree dated 3.2.1996 was null and void. The Corporation also submitted that the decree was obtained by fraud to defeat the personal undertaking executed by the first respondent on 5.3.1994 in favour of the Corporation. The Court decreed the suit holding that the decree passed in Civil Suit No.767 of 1995 is a collusive one obtained to defeat the undertaking created by the first respondent on 5.3.1994 in favour of the Corporation. The second respondent filed Civil Appeal No.34 of 2005 in the Court of Additional District Judge, Yamunanagar. The Additional District Judge, however, allowed the Appeal vide judgment dated 30.8.2005 holding that the loan taken by the first respondent was not subject to charge over the property covered by the decree in Civil Suit No.767 of 1995 and that the Appellant had no locus standi to challenge the decree suffered by the first respondent in favour of the second respondent. The Corporation aggrieved by the aforesaid judgment filed RSA No.44 of 2006 before the Punjab and Haryana High Court, which was dismissed by the High Court on 9.1.2006. Aggrieved by the same, the Corporation has filed the present Appeal.

7. The above-mentioned undertaking dated 5.3.1994 was submitted by the first respondent on a duly attested Stamp Paper, but was not registered under the Registration Act. The above-mentioned undertaking was given before the loan was sanctioned to the first respondent on 15.9.1994. We also fully endorse the view taken by the Courts below that the decree in Civil Suit No.767 of 1995 was obtained by the second respondent as against the first respondent collusively to defeat the undertaking given by the first respondent on 5.3.1994 in favour of the Corporation. Still the question is whether the undertaking dated 5.3.1994 has created any charge over the properties mentioned therein in favour of the Corporation. This Court in J.K. (Bombay) Private Limited v. New Kaiser-I-Hind Spinning & Weaving Co. Ltd. & Others [(1969) 2 SCR 866], explained the difference between the charge and the mortgage as follows :-

14. In the result, the appeal fails and is accordingly dismissed. There will be no order as to costs.