IN THE HIGH COURT OF KERALA AT ERNAKULAM
WP(C).No. 11916 of 2009(H)
1. VALSAMMA VARGHESE
... Petitioner
Vs
1. THE KERALA STATE INDUSTRIAL DEVELOPMENT
... Respondent
For Petitioner :SRI.P.K.JOSEPH
For Respondent :SRI.M.PATHROSE MATTHAI (SR.)
The Hon'ble MR. Justice P.R.RAMACHANDRA MENON
Dated :17/06/2009
O R D E R
(C.R.)
P.R. RAMACHANDRA MENON, J.
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W.P.(C) No. 11916 OF 2009
.........................................................................
Dated this the 17th June, 2009
J U D G M E N T
Is it mandatory to proceed against the Company and its
assets first, before proceeding against the Guarantors and their
assets for realisation of the dues; forms the subject matter of
challenge in this case.
2. The petitioner has approached this Court challenging the
revenue recovery proceedings initiated at the instance of the
first respondent for realisation of the due amount from the
Company by name “Bristo Foods Pvt. Ltd.”, in which the
petitioner was one of the Directors .
2. With regard to the factual matrix, it is to be noted that
the loan was extended to the above Company by the first
respondent on the basis of the collateral security and also on
the basis of the personal guarantee given by the petitioner. The
case of the petitioner is that she had resigned from the Board of
Directors of the Company and hence the property belonging to
the petitioner could be proceeded against, only after the steps
W.P.(C) No. 11916 OF 2009
2
to be pursued and finalised against the properties of the
Company, particularly, when equitable mortgage has been
created over the latter properties. In support of the said
proposition, the learned counsel for the petitioner places reliance
on the decision in Ashok Mahajan vs. State of U.P. & others
[JT 2006 (12) SC 284].
4. The learned Counsel appearing for the first respondent,
with specific reference to the averments in the counter affidavit,
submits that the case put forth by the petitioner is quite wrong
and misconceived. The legal position actually stands covered by
a Three member Bench Decision rendered by the Apex Court in
State Bank of India vs. M/s. Indexport Registered and
others [AIR 1992 SUPREME COURT 1740], wherein it has
been specifically held that the decree holder cannot be forced to
first exhaust the remedy by way of execution of mortgage
decree alone and then to proceed against the Guarantor. The
earlier decision rendered by the Apex Court to the contrary, as
reported in AIR 1987 SC 1078 (Union Bank of India vs.
Manku Narayana) was overruled in the above decision.
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5. According to the first respondent, maximum leniency
had already been extended to the Company, in which the
petitioner was a Director, whereby, repayment of the loan was
re-scheduled ‘four’ times. The Company had also preferred a
petition seeking for the benefit of OTS, which was directed to be
considered as per Ext.P5 judgment in W.P.(C)No. 26812 of 2008.
In compliance with the above verdict, the representation
preferred by the Company was considered and the outcome was
conveyed to the party vide Ext. P6, observing that no further re-
scheduling of the loan was possible under any circumstances.
The outstanding liability, as on date, will come to more than
Rs.1.76 crores and that the first respondent is very much
entitled to proceed against the concerned Company as well as
against the Guarantors for recovery of the due amount.
6. It is brought to light that the petitioner does not have
any case that she has been singled out. The learned counsel for
the first respondent submits that the first respondent has
already proceeded with appropriate steps against the Company
and its assets as well, and also against other guarantors. In any
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4
view of the matter, this Court does not find it necessary to go
into the facts and figures with regard to the relative extent of
the rights and liabilities among the Guarantors to the loan
transaction and is rather confining to the legality of the issue as
discussed above.
7. In response to the submission made by the learned
counsel appearing for the petitioner, placing reliance on the
decision in Ashok Mahajan vs. State of U.P. & others [JT
2006 (12) SC 284], the learned counsel appearing for the first
respondent submits that the said decision was rendered by the
Supreme Court with reference to the specific provisions under
Sections 3 and 4 of the Uttar Pradesh Public Moneys (Recovery of
Dues) Act, 1972. The legal provision discussed in the basic
decision in Pawan Kumar Jain vs. Pradeshiya Industrial
and Investment Corprn. of U.P. Limited [JT 2004 (6)SC
305] has been discussed and dealt with in paragraph No.’6′ of
the above verdict. The relevant provisions as extracted therein
under Section 4(2)(b) of the U.P. Act are extracted below, for
convenience of reference:
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“4(2)(b): In every case of a mortgage, charge
or other encumbrance on immovable property,
such property or, as the case may be, the
interest of the defaulter therein, shall first be
sold in proceedings for recovery of the sum due
from that person as if it were an arrear of land
revenue, and any other proceeding may be
taken thereafter only if the Collector certifies
that there is no prospect of realisation of the
entire sum due through the first mentioned
process within a reasonable time.”
The position becomes very clear from the paragraph No.8 of the
above decision, wherein it is observed as follows:
“In our view, the above set out provisions of the
U.P.Act are very clear. Action against the
guarantor cannot be taken until the property of
the principal-debtor is first sold off. As the
appellant has not sold the property of the
principal-debtor, the action against the
appellant cannot be sustained. We, therefore,
set aside the recovery notice.”
8. From the above, it is crystal clear that the observation
made by the Apex Court in the decision in Ashok Mahajan vs.
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State of U.P. & others [JT 2006 (12) SC 284] is having
application only with reference to the specific provisions as
contained in the U.P. Act. This is more so, in view of the law
declared by a Division Bench of this Court as per judgment
dated 21.10.2008 in W.A.No.1994 of 2008 wherein almost
identical circumstances as involved in the instant case were put
to scrutiny. It was observed therein, that no provision was
brought to the notice of the Court, as to whether the provisions
of the Revenue Recovery proceedings were in pari materia with
the provisions of the U.P. Act and hence interference was
declined therein. No such provision is brought to the notice of
this Court in the present case as well.
In the above facts and circumstances, no interference is
called for. The Writ Petition fails and it is dismissed accordingly.
P.R. RAMACHANDRA MENON,
JUDGE.
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