Rajasthan Financial Corporation vs Banwari Lal and Others

Shiv Kumar Sharma, J.—The crucial legal questions which arise for consideration in this appeal is as to whether the application filed u/s 31(1) of the State Financial Corporation Act, 1951 (for short the Act) is a plaint and whether the provisions of Limitation Act are applicable to it?

This question has emerged in the following circumstances -

(i) Respondent No. 1 after availing loan facility from the appellant (for short RFC) purchased a jeep. Respondents Nos. 2 and 3 executed a deed of guarantee and had mortgaged their houses. The liability of the guarantors is co-extensive with the principal debtor.

(ii) Loan amounting to Rs. 91,000/- was to be repaid in 58 monthly instalments of Rs. 2200/-each. When the principal debtor did not make the payment the RFC took the vehicle into possession after serving notice u/s 29 of the Act and realised Rs. 47.100 from the auction of the said vehicle. For enforcing the liability of the sureties an application u/s 31(1) of the Act was filed by the RFC. The court below dismissed the said application observing that it was barred by limitation and without jurisdiction. Against the said order, present action for filing this appeal has been resorted to.

Section 31(1) of the Act gives power to the Financial Corporation to enforce its claims by simply moving the District Judge by means of the petition and Section 32 of the Act lays down the prompt procedure to be followed by the said Judge. Section 32 has been enacted by way of speedy remedy.

In Abdul Mobin Ansari v. Maharashtra SFC, AIR 1993 Bombay 48, it has been held that Section 32 of the Act is nothing but an execution proceedings.

Full Bench of the Himachal Pradesh High Court headed by Hon''ble N. M. Kasliwal, C. J. (as he then was) in H.P.F.C. v. Tourist Hotel 1989 (2) CLR 199 : (AIR 1990 HP 27) has observed that the substantive relief sought in an application u/s 31(1) of the Act is something akin to an application for attachment of property in execution of a decree at a stage posterior to the passing of the decree.

Hon''ble Apex Court in Gujarat State Financial Corporation Vs. Natson Manufacturing Co. Pvt. Ltd. and Others, and in Maganlal Vs. Jaiswal Industries, Neemach and Others, has observed that application u/s 31(1) of the Act cannot be treated as a plaint for the purposes of payment of court-fee.

The application was filed before the District Judge, Jaipur District as the application for loan was submitted at Jaipur, documents were executed at Jaipur and the loan was also sanctioned at Jaipur and the principal debtor and sureties were carrying their business within the limits of jurisdiction of District Judge, Jaipur District as such the court below, when the application was transferred by the District Judge, Jaipur District had jurisdiction to adjudicate the application in view of the provisions contained in Section 31(1) of the Act.

The observation of the court below that the application was barred by the limitation in view of Article 137 of the Limitation Act, is also perverse and bad in law. The court below has not appreciated Sections 31 and 32 of the Act in right perspective. As already stated the application u/s 31(1) of the Act cannot be treated as plaint. The substantive relief sought in the application is alike the relief sought in the execution application.

The court below thus committed a jurisdictional error in dismissing the application filed by the RFC u/s 31(1) of the Act and if the order is allowed to stand it would occasion failure of justice.

Consequently, I allow this appeal and set aside the order dated Feb. 14, 1994, passed by Additional District Judge No. 3, Jaipur City. As the District Judge, Jaipur District has jurisdiction to adjudicate the application u/s 31 of the Act, I remit the said application for a fresh decision to the court of District Judge, Jaipur District. Let copies of this order be forwarded to the Court of District Judge, Jaipur District as well as the Additional District Judge No. 3, Jaipur City who shall send the record of Civil Misc. Case Ne. 6/93 (RFC v. Banwari Lal and Ors.) immediately to the court of District Judge, Jaipur District. The parties are directed to appear before the court of the District Judge, Jaipur District on, Feb. 21, 1997. The learned District Judge if think proper may provide an opportunity of hearing to the principal debtor and sureties. Costs easy.