JUDGMENT
Thomas, Actg. C.J.
1. The sole question involved in this writ appeal is whether the Kerala State Financial Corporation (for short ‘the Corporation’) can resort to the remedy envisaged in Section 29 of the State Financial Corporation Act, 1951 (for short ‘the Act’) in respect of a property transferred by the Corporation to another private individual.
2. The above question cropped up from the following facts : A certain land together with a factory building and machineries therein originally belonged to a private limited company by name M/s. Victor Jose Sam & Co. When the said company defaulted repayment of loan taken from the Corporation, proceedings were initiated against the said company under Section 31 of the Act. A decree was passed by the District Court before which the application was filed under Section 31 of the Act for sale of the land and factory buildings. In execution of the said decree, the Corporation purchased the land and factory building together with the machineries on 28-7-1984. Corporation then sold the land together with the factory buildings and the machineries thereto in favour of another company called M/s. Kaveri Meat Export Company Limited, Kochin. Ext. P3 is the deed of sale dated 28-7-1987 by which the said company got the entire rights transferred. But the transferee had to pay a balance amount of Rupees 3,80,000/- towards sale consideration for which a period of three months has been stipulated in the deed of sale. The said balance of sale consideration was to be paid with interest at the rate of 15% per annum. The said liability has swelled up to more than Rs. 5 lakhs with the accrual of interest. As the transferec-Company failed to pay the balance of sale consideration the Corporation issued Ext. P11 notice to the transferee-Company. Original petition under Article 226 of the Constitution was filed by the transferee-Company for quashing Ext. P11 on the main ground that Corporation is disabled from resorting to Section 29 of the Act for enforcement of the vendors’ lien for unpaid purchase money.
3. Learned single Judge dismissed the original petition on the premise that Section 29 of the Act covers such a contingency also. Petitioner has, therefore, filed this appeal under Sections of the Kerala High Court Act.
4. Shri P.N.K. Achan, senior counsel, who is instructed for the appellant contended that the language in Section 29 is clear that the same can be confined to the properties pledged or mortgaged or hypothecated or assigned to the Corporation. According to the learned senior counsel Section 29 will stand at bay so far as a property assigned by the Corporation to its transferee is concerned. Shri Unniraj, learned standing counsel for the Corporation contended that the language in Section 29 particularly the residuary word “otherwise” therein are wide enough to embrace any property over which the Corporation has a right to enforce repayment of any liability due to them.
5. In order to appreciate the rival contentions we have to look into Section 29(1) of the Act (both sides agreed that other sub-sections are not of any use in this context). We, therefore, extract Section 29(1) of the Act,
“Where any industrial concern, which is under a liability to the Financial Corporation under an agreement, makes any default in re-payment of any loan or advance or any instalment thereof or in meeting its obligation, in relation to any guarantee given by the Corporation or otherwise fails to comply with the terms of its agreement with the Financial Corporation, the Financial Corporation shall have the right to take over the management or possession or both of the industrial concern as well as the right to transfer by way of lease or sale and realise the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation”.
6. Emphasis has been laid on the words “otherwise fails to comply with the terms of its agreement with the Financial Corporation” and Shri Unniraj contended that as the appellant has failed to comply with the terms of Ext. P3 agreement, it is open to the Corporation to resort to the remedy envisaged in the Section. True the expression, “otherwise fails to comply with the terms of its’ agreement with the Financial Corporation” are seemingly wide enough. But there is clear inherent indication in the Section that the remedy is restricted only to those properties which have either been pledged or mortgaged or hypothecated or assigned to the Corporation. Section 29 confers two distinct type of powers on the Corporation in respect of the properties to which the Section applies. First is that Corporation can take over possession or management or both of the industrial concern which makes the default. The second is the power to transfer the property by way of lease or sale to any other person to realise the amount due to the Corporation. If the property cannot be transferred by way of lease on sale, what would the Corporation do to realise the amount due to it. In respect of a property which Corporation has sold to another the same can be taken over back only if it has subsequently been pledged or hypothecated or mortgaged to the Corporation. Otherwise, the Corporation has to retain the property only for managing or administering it. Apparently that is not the purport of the remedy envisaged in Section 29 of the Act.
7. We, therefore, take the view that Section 29 will apply only to the industrial concern which has pledged, mortgaged or hypothecated or assigned any of its right in a property to the Corporation. It does not apply to any property transferred by the Corporation to a third party. Of course, it is open to the Corporation to resort to the civil remedy for enforcing its unpaid vendors lien.
8. Shri Unniraj advanced an alternative contention that since the machineries of the factory have been hypothecated with the Corporation, it is well within the powers of the Corporation to resort to Section 29 of the Act. He invited our attention to Ext. R1(a) which is the deed of hypothecation of the machineries of the factory. But a perusal of Ext. P11 shows that the action proposed is not directed against the machineries and consequently the aforesaid contention of the learned counsel need not be countenanced by us now. We, therefore, quash Ext. P11. We make it clear that this action is without prejudice to any other remedy which Corporation can legally resort to for realisation of the amount due to it.
9. Writ appeal is disposed of in the above terms.