Case: Maharashtra State Financial Corporation Vs. Jaycee Drugs and Pharmaceuticals Private Limited &amp; Others

2. This appeal by special leave has been preferred against the judgment dated July 10, 1990 of the Bombay High Court in Appeal No. 423 of 1987. Respondent 1 is a private limited company whereas respondents 2 to 4 are its Directors. Respondent 1, for setting up a factory, sought financial assistance from the appellant and the appellant sanctioned a loan of Rs. 30 lakhs. In order to secure the loan respondent 1 executed a deed of mortgage of certain properties on June 29, 1979 and respondents 2 to 4 on the same date by executing a deed of guarantee stood surety for repayment of the said loan. It was a case of personal guarantee only as no property was given in security. For the sake of brevity the appellant, respondent 1 and respondents 2 to 4 shall hereinafter be referred to as the Corporation, the Company and the sureties respectively. The amount of loan was to be advanced in phases and after the Corporation had advanced a part of the total sanctioned loan, the Company did not want to avail of the balance of the amount as it seems to have lost interest in setting up the factory for reasons with which we are not concerned. The Corporation consequently called upon the Company to repay the amount already advanced together with interest and on its failure to do so look possession under Section 29 of the State Financial Corporations Act, 1951 (for short the Act) over the industrial concern, a term defined under Section 2(c) of the Act and took steps to realise its outstanding dues by transfer of property in the manner provided therein. However, notwithstanding advertisements for sale thereof having been made on several occasions the Corporation could not get an offer of more than about Rupees five lakhs3. Having failed to recover the amount due to it in the manner stated above, the Corporation proceeded to recover the same from the sureties whose liability was co-extensive and for this purpose it filed a petition in the High Court under Sections 31 and 32 of the Act arraying the Company as respondent 1 and the sureties as respondents 2 to 4, with the prayer that "the respondents be jointly and severally ordered and decreed to pay to the petitioners the sum of Rs. 15, 87, 391.20 as per particulars hereto annexed and marked Ex. H with further interest at the rate of 14 1/2 per cent per annum till payment and may further "be ordered to pay to the petitioners costs of the petition". Thus, according to the relief claimed in the petition the liability of the respondents with regard to the amount payable to the Corporation on the date of making of the petition was for a sum which was more than Rupees fifty thousand which, as will be presently shown, represents maximum amount over which the Bombay City Civil Court has pecuniary jurisdiction4. The respondents contested the petition and raised three pleas in defence : (1) A petition under Sections 31 and 32 of the Act could be filed only in the Bombay City Civil Court and the High Court had no jurisdiction to entertain it, (2) the relief claimed in the petition could not be granted under Sections 31 and 32 of the Act inasmuch as these sections did not contemplate passing of a money decree not only against the principal debtor but also against the sureties; and (3) the provisions in the Act relating to enforcement of the liability of a surety were ultra vires Article 14 of the Constitution5. The learned Single Judge of the High Court before whom the petition came up for hearing did not, in view of his finding on the first two pleas, entertain any argument on the last plea nor has the said plea been raised before us and as such the same does not need to be gone into. As regards the second plea it was conceded before the learned Single Judge on behalf of the Corporation by its learned counsel that no such money decree could be passed against the Company as was claimed in the petition. It was, however, asserted that such a decree could be passed as against the sureties. In this view of the matter the petition was treated and decided as being confined against the sureties only. In regard to the plea of jurisdiction the learned Single Judge took the view that since an appeal was pending before a Division Bench of the High Court against the judgment of a Single Judge in Misc. Petition No. 357 of 1985, Maharashtra State Financial Corporation v. Hindtex Engineers Pvt. Ltd. 1987 MLJ 243) decided on December 3, 1986, in which it had been held that such a petition was maintainable in the High Court, he would proceed to decide the petition on merits on the assumption that he had jurisdiction to entertain it. On merits, he took the view that no money decree could be passed in a petition under Sections 31 and 32 of the Act even against the sureties and since in the instant case sureties had admittedly not give any security except their personal guarantee the said surety could be enforced only in the ordinary course and not under the special machinery provided under the Act. The petition was accordingly dismissed6. Aggrieved by the judgment of the learned Single Judge the Corporation preferred an appeal before a Division Bench which has been dismissed by the judgment under appeal. The Division Bench not only upheld the finding of the Single Judge on merits but also overruled the decision reported in MSFC v. Hindtex Engineers Pvt. Ltd. 1987 MLJ 243) and held that the High Court had no jurisdiction to entertain a petition under Sections 31 and 32 of the Act

Court's reasoning:
13. Having extracted the relevant statutory provisions we now take up the question of jurisdiction. Sub-Section (1) of Section 31 of the Act contemplates making of the petition thereunder "to the District Judge within the limits of whose jurisdiction the industrial concern carries on the whole or a substantial part of its business". A petition so made is to be decided in the manner provided by Section 32 of the Act, sub-section (11) whereof inter alia provides that the functions of a District Judge under the said section shall be exercisable, in a presidency town, where there is a city civil court having jurisdiction, by a judge of that court and in the absence of such court, by the HighHaving given our anxious consideration to the question we are inclined to agree with the submission made by learned counsel for the appellant. The three decisions of this Court referred to above and relied on by learned counsel for the respondents were not cases relating to the enforcement of a liability of a surety made possible by the amendments by Act 43 of 1985. In our opinion, what has been laid down therein does not in any way militate against ascertaining in monetary terms value or the extent of the liability of a surety, which is sought to be enforced and there is intrinsic evidence in Sections 31 and 32 themselves to support this view. Sub-section (2) of Section 31 makes it obligatory to state the "extent of the liability". Sub-section (1) of Section 32 refers to "an amount equivalent in value to the out stand liability". Sub-section (1-A) of Section 32 contemplates notice to the surety to show cause "why his liability" should not be enforce. Sub-section (6) of Section 32 contemplates investigation and determination of "the claim" of the Financial Corporation which is to be recovered. If the application under Section 31(1) is made before a District Judge, there is no difficulty because he has unlimited pecuniary jurisdiction. The difficulty arises, as in the instance case, when such application is to be made either before the city civil court or the High Court as contemplate day sub-section (11) of Section 32. In our opinion, the extent of the liability stated in the application as contemplated by sub-section (2) of Section 31 of the Act would represent the value of the claim of the Corporation and if such value is up to Rs. 50, 000 the application would lie in the city civil court and if it is more than that amount it would lie in the High Court. This interpretation would give meaning and relevance to the words "having jurisdiction" used in sub-section (11) of Section 32. A different interpretation would render superfluous or otiose not only the words "having jurisdiction" but also the words "and in the absence of such court, be the High Court" occurring in the said sub-section (11) inasmuch as in a presidency town, in terms of territorial jurisdiction, the jurisdiction of the city civil court and the High Court is co-terminus. That it is so is clear from Section 3 of the Bombay City Civil Court Act and the definition of the term "presidency town" contained in Section 3(44) of the General Clauses Act, 1897 according to which "presidency town" shall mean the local limits for the time being of the ordinary original civil jurisdiction of the High Court of Judicature at Calcutta, Madras or Bombay, as the case may be16. It is a settled rule of interpretation of statutes that if the language and words used are plain and unambiguous, full effect must be given to them as they stand and in the grab of finding out the intention of the legislature no words should be added thereto or substracted therefrom. Likewise, it is again a settled rule of interpretation that statutory provisions should be construed in a manner which subserves the purpose of the enactment and does not defeat it and that no part thereof is rendered surplus or otiose. The aforesaid interpretation of sub-section (11) of Section 32 of the Act is not only in conformity with the rule of interpretation referred to above, it also does not militate in any way with the concept of an application under Section 31(1) of the Act, not being a plaint in a suit for recovery ofIn the instant case the extent of the liability of the surety being more than Rs. 50, 000, the application could only have been filed and was rightly filed in the High Court and the finding in the judgment under appeal to the contrary for holding that the High Court had no jurisdiction to entertain the application cannot beAnd it is in view of this decision that we are of the opinion that the provisions of the Code would have, even in the absence of Section 46-B of the Act, been attracted in the matter of enforcing the liability of a surety. In view of the foregoing discussion, the finding of the High Court even on this point cannot be sustained. Since, however, the High court has not made a determination of the liability of the sureties as contemplated by sub-section (6) of Section 32 of the Act, the matter has to be sent back to it for doing so and thereafter to pass an order as contemplated by clause (da) of sub-section (7) of Section 32 of the Act and to proceed to enforce the liability so determined against the sureties