M/s Paras Home Products Pvt. Ltd. vs Rajasthan State Industrial Development And Investment Corporation Limited

Appellants have filed this appeal, challenging the order dated 19.01.2006, whereby, application moved by respondent no.1 under Section 31 & 32 of

the State Financial Corporations Act, 1951 (hereinafter referred to as the ‘Act’) for recovery of Rs.48,59,703/-, was allowed.

Learned counsel for the appellants has submitted that appellants had taken loan from respondent no.1 but had failed to pay the entire loan amount.

Property belonging to the appellants was auctioned in the year 1997. Thus, at the most, cause of action could be said to have arisen to respondent no.1

in the year 1997 to file claim under Section 31 & 32 of the Act, claiming the balance amount. Limitation for filing the application under Section 31 &

32 of the Act was three years. However, the claim was filed by respondent no.1 in the year 2003 under Section 31 & 32 of the Act, i.e., beyond the

period of limitation. Learned District Judge has held that Article 137 of the Limitation Act, 1963, was not applicable to the facts of the present case

and the case was governed under Article 136 of the Limitation Act, 1963, as the application moved by respondent no.1 could be treated as execution

application. The said view of the learned District Judge is contrary to the decision of the Hon’ble Supreme Court in AIR 2006 Supreme Court

1584 in case of Maharashtra State Financial Corporation Vs. Ashok K. Agarwal & Ors., decided on 30.03.2006, wherein, it was held as under:-

“Section 31 of the Act contains special provisions for enforcement of claims by State Financial Corporations. It is by way of a legal fiction that the

procedure akin to execution of decrees under the Code of Civil Procedure has been permitted to be invoked. But one cannot lose sight of the fact that

there is no decree or order of a civil court when we are dealing with applications under Section 31 of the Act. The legal fiction at best refers to a

procedure to be followed. It does not mean that a decree or order of a civil court is being executed, which is a sine qua non for invoking Article 136.

The proposition set out in the case of Gujarat State Financial Corporation (supra) found support in M/s. Everest Industrial Corporation and Others v.

Gujarat State Financial Corporation 1987 (3) SCC 597. Again in Maganlal etc. vs. Jaiswal Industries Neemach & Ors. 1989 (3) SCR 696 this court

noticed that an order under Section 32 is not a decree stricto sensu as defined in Section 2(2) of the Code of Civil Procedure, the financial Corporation

could not be said to be a decree holder. This makes it clear that while dealing with an application under Sections 31 and 32 of the Act there is no

decree or order of a civil court being executed. It was only on the basis of a legal fiction that the proceedings under Section 31 are treated as akin to

execution proceedings. In fact this Court has observed that there is no decree to be executed nor there is any decree holder or judgment debtor and

therefore in a strict sense it cannot be said to be a case of execution of a decree. Article 136 of the Limitation Act has no application in the facts of

the present case. Article 136 specifically uses the words ""decree or order of any civil court"". The application under Sections 31 and 32 of the State

Financial Corporation Act is not by way of execution of a decree or order of any civil court.

Article 137 of the Limitation Act applies in the facts of the present case. When Article 137 is applied, the application moved by the appellant-

Corporation on 2nd January, 1992 for proceeding against the sureties i.e. the respondents herein, was clearly barred by time and the courts below

were correct in holding so. To recall the facts of the present case, the notice demanding repayment of the amount of loan was issued against the

borrower, that is, M/s. Crystal Marketing Private Limited on 8th March, 1983 and the application under Sections 31 and 32 of the State Financial

Corporation was filed against the said borrower on 25th October, 1983. The liability of sureties had crystalised then.â€​

None has appeared on behalf of respondent no.1. Appellants had applied for loan to the tune of Rs.36.90 lacs on 30.09.1992. However, loan to the

tune of Rs.28.88 lacs was sanctioned in favour of the appellants. Necessary documents were executed by the appellants with regard to the repayment

of loan. As per respondent no.1 on 30.01.1997, a sum of Rs.67,85,019/- was due against the appellants. Out of the said amount Rs.21,50,000/- was

received by respondent no.1 through auction and Rs.80,000/-were deposited by the company. After adjustment of the said amount Rs.48,59,703/- was

due against the appellants.

A perusal of the impugned order reveals that the property belonging to the appellants was attached on 30.01.1997 and was auction on 11.12.1997.

After collecting the auction amount, Rs.48,59,703/- was still outstanding against the appellants. Thus, it is evident that the property of the appellants

was auctioned on 11.12.1997. Hence, cause of action arose to respondent no.1 to file application under Section 31 & 32 of the Act with regard to the

remaining amount, as the entire amount due had not been satisfied after auctioning the land belonging to the appellants. However, the application under

Section 31 & 32 of the Act was filed on 21.12.2002.

In view of the decision of the Hon’ble Supreme Court reproduced above, application moved by respondent no.1 under Section 31 & 32 of the Act

was, thus, clearly time barred. Learned District Judge erred in holding that the application moved by respondent no.1 was within the period of

limitation by basing reliance on Article 136 of the Limitation Act, 1963, whereas, limitation was to be commuted in terms of Article 137 of the

Limitation Act, 1963.

Accordingly, this appeal is allowed. Impugned order dated 19.01.2006, is set aside.