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Judgment
S.K. Dubey, J.
The appellants have filed this appeal u/s 32(9) of the State Financial Corporations Act, 1951 (for short ''the Act'') against the judgment and decree, dated 8-12-1988 passed in M.J.C. No. 2/86 by IIIrd Additional Judge to the Court of District Judge, Chhatarpur.
The appellant No. 1 is the industrial concern of which appellant No. 2 is the sole proprietor, who applied for grant of loan of Rs. 2,30.000/- which was granted to the appellant on 31-7-1975 on the terms and conditions agreed, by executing the necessary documents. A mortgage deed mortgaging the properties as shown in Schedules 1 and 2 was registered on 12-11-1975. The appellants agreed to pay interest on the loan so advanced at the rate of 13% per annum which was payable on 1st of April and October of each year. The loan was payable in 11 equal instalments by October of each year. The appellants failed to pay the amount of interest and instalments due in spite of repeated notices in writing, therefore, a notice was issued on 2-5-1985 to the appellants to pay Rs. 4,11,964.31 Paise, but, the appellants failed to pay the same hence an application u/s 31 of the Act was filed before the District Judge, Chhatarpur which was made over to Third Additional Judge to the Court of District Judge, Chhatarpur. In that an order of attachment was passed on 10-9-1986, The notice was issued to the appellants to show cause, but the appellants did not file any reply to the notice, on the other hand filed an application under Order 6, Rule 5 of the Code of Civil Procedure, an application was also filed for supply of copy of mortgage deed. The learned trial Court dismissed the application under Order 6, Rule 5, C.P.C. vide order dated 8-12-1988 and also passed a preliminary decree, hence, this appeal.
Shri R. P. Tiwari, counsel for the appellants contended that no preliminary decree in terms of Order 34, Rule 2, C.P.C. could have been passed in the manner set out in Form No. 9 of Appendix-D under Order 34, Rules 2 and 4, C. P.C. It was also submitted that when the application under Order 6, Rule 5 was dismissed the trial Court ought to have afforded an opportunity to file reply but without giving any opportunity of hearing and investigation straightway the decree was passed which is illegal.
Shri A. K. Khaskalam, learned counsel for the respondent, submitted that application under Order 6, Rule 5 was frivolous one inasmuch as the statement of account was already filed with a copy of mortgage deed, but the appellants did not file any reply to notice issued even after number of opportunities, and filed the application under Order 6, Rule 5, C.P.C. In the absence of reply the trial Court had no option but to pass the decree. By the decree the trial Court has afforded an opportunity to make the payment of out-standings but no payment has been made under the decree.
Having heard counsel for the parties, we arc of the opinion that the matter should go back to trial Court for deciding the application in accordance with Sections 31 and 32 of the Act.
The respondent by the application u/s 31 instead of resorting to remedy u/s 29 of the Act, claimed relief of attachment and sale of the mortgage properties for satisfaction of the loan. Section 29 of the Act deals with the right of the Financial Corporation set up u/s 3 of the Act, in case of default in payment of loans or advances or instalments thereof by an industrial concern. Section 30, then empowers the Corporation to require any industrial concern to discharge forthwith, in full, its liability to the Corporation of claims by the Financial Corporation. Section 31 contains special provisions for enforcement of claims by the Financial Corporation. Section 32 of the Act deals with the procedure and the powers of the District Judge while dealing with application u/s 31 of the Act.
In case of Andhra Pradesh State Financial Corporation Vs. M/s. GAR Re-Rolling Mills and another, , the Supreme Court considered the scope of the two remedies as provided under Sections 29 and 31 of the Act, in para 14 thus :
"14. While dealing with the provisions of Sections 31 and 32 of the Act, this Court in Gujarat State Financial Corporation Vs. Natson Manufacturing Co. Pvt. Ltd. and Others, , after noticing the scope of Section 31 of the Act observed (SCC p. 198, para 9) :
"Section 31(1) prescribes a special procedure for enforcement of claims by the Financial Corporation. The Corporation is to make an application for the reliefs set out in S. 31(1). The reliefs that a Court can grant u/s 31(1) are the sale of the property mortgaged, etc. to a Financial Corporation as security for the loan or advance; transfer of the management of the industrial concern to the Financial Corporation or restraining the industrial concern from transferring or removing its machinery or plant or equipment from the premises of the industrial concern without the permission of the Board of the Financial Corporation. An application for such a relief is certainly not a plaint in a suit for recovery of mortgage money by sale of mortgaged property. On a breach of an agreement by an industrial concern the Corporation can seek one or more of the three reliefs set out in Section 31(1)."
This Court went on to consider the question as to whether in an application u/s 31(1) of the Act, the Corporation can pray for a decree for its outstanding dues and opined in the negative. In the words of the Court (SCC p. 198, para 9) :
"At any rate, in an application u/s 31(1) the Corporation does not and cannot pray for a decree for its outstanding dues. It, can make an application for one of the three reliefs, none of which, if granted, results in a money decree, or decree for recovery of outstanding loan or advance. Section 31(1) of the Act, in the circumstances therein set out, permits the Corporation to seek one or more of the three reliefs therein stated."
The Court then considering the conspectus of the provisions of Sections 31 and 32 of the Act, went on to say that on an application u/s 31 (1) being made it is obligatory upon the Court to make an interim order attaching the security with or without interim injunction restraining the industrial concern from transferring or removing its plant, machinery or equipment without the permission of the Board of the Corporation. If the relief claimed in the application u/s 31 is transfer of the management of the industrial concern to the Corporation, the District Judge is also obliged to grant an interim injunction and at the same time issue a notice calling upon the defaulting industrial concern to show cause why the interim injunction should not be made absolute. The claim of the Corporation in an application u/s 31 is not the monetary claim of its dues to be investigated, though it may become necessary to specify the amount for the purpose of determining how much of security should be attached or sold but the investigation of the claim does not involve the raising of all such contentions as are permissible in a money suit. The claim is not a money claim at all. Sub-section (7) of Section 32 prescribes the relief which can be granted after investigation under Sub-section (6) is made and gives a clue to the nature of the contest between the parties. Sub-section (8) of Section 32 prescribes the mode and method for executing the order of attachment or sale of property as provided in the Code of Civil Procedure. Indeed, when Sub-sections (6), (7) and (8) of Section 32 are read together in the context of the provisions of Section 31(1) of the Act, in the ultimate analysis, the result may be that the property will be sold for repayment of the loan or advance taken by the industrial concern from the Corporation but even then it cannot be said that it is a substantive monetary relief claimed by the Corporation which can be valued in terms of money in proceedings u/s 31 of the Act. The substantive relief u/s 31(1) is something in the nature of an application for attachment of property in execution of a decree before the judgment."
In the case in hand, from a bare look to the judgment and decree impugned, it is clear that the procedure prescribed u/s 32 of the Act for granting the relief u/s 31 of the Act was not followed. On the other hand straightway in the absence of reply of the appellants a preliminary decree under Order 34, Rules 2 and 4 was passed in the manner and form set forth in Form No. 9 of Appendix-D of the CPC with variations according to the circumstances of the case, which is illegal. Therefore, we set aside the decree and remit the case to the trial Court for passing orders afresh on application u/s 31 of the Act after following the procedure prescribed u/s 32 of the Act. Let the record be sent back post-haste so as to reach on or before 18-8-1996 on which date the parties shall appear before the trial Court, for which no fresh notice shall be issued to the parties by the trial Court as the parties have been noticed here. The appellants, if advised, may file their reply to the notice issued, which shall be taken on record. If appellants fail to file the reply on 18-8-1996 the trial Court shall proceed with the case and pass orders in accordance with law. The trial Court shall see that the case is decided within a period of two months from the date of the appearance of the parties, i.e., 18th of August, 1996, if necessary the trial shall proceed de die in diem, i.e., from day to day.
In the circumstances of the case, the parties shall bear their own costs. Paper-book costs deposited by the appellants be returned to the appellants as paper-book has not been prepared by the Registry. C. C. as per rules by 5--8-1996.