{"id":100095,"date":"1989-01-16T00:00:00","date_gmt":"1989-01-15T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/k-b-daddarajjiappa-ors-vs-state-of-karnataka-ors-on-16-january-1989-2"},"modified":"2018-03-12T08:17:50","modified_gmt":"2018-03-12T02:47:50","slug":"k-b-daddarajjiappa-ors-vs-state-of-karnataka-ors-on-16-january-1989-2","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/k-b-daddarajjiappa-ors-vs-state-of-karnataka-ors-on-16-january-1989-2","title":{"rendered":"K.B. Daddarajjiappa & Ors vs State Of Karnataka & Ors on 16 January, 1989"},"content":{"rendered":"
Supreme Court of India<\/div>\n
K.B. Daddarajjiappa & Ors vs State Of Karnataka & Ors on 16 January, 1989<\/div>\n
Equivalent citations: 1989 AIR 751, \t\t 1989 SCR (1) 108<\/div>\n
Author: G Oza<\/div>\n
Bench: Oza, G.L. (J)<\/div>\n
           PETITIONER:\nK.B. DADDARAJJIAPPA & ORS.\n\n\tVs.\n\nRESPONDENT:\nSTATE OF KARNATAKA & ORS.\n\nDATE OF JUDGMENT16\/01\/1989\n\nBENCH:\nOZA, G.L. (J)\nBENCH:\nOZA, G.L. (J)\nPANDIAN, S.R. (J)\n\nCITATION:\n 1989 AIR  751\t\t  1989 SCR  (1) 108\n 1989 SCC  (2) 390\t  JT 1989 (1)\t 73\n 1989 SCALE  (1)70\n\n\nACT:\n    Mysore  State Aid to Industries Act 1951 Sections 7\t and\n19---Loan secured by Industries--Recovery of--State  Govern-\nment standing as surety and guarantor to  repayment--Default\nin repayment of loan-State Government entitled to recover as\narrears\t of  land revenue--'All moneys\tpayable\t under\tthis\nAct'--Interpretation of.\n\n\n\nHEADNOTE:\n    The\t appellants owned an industrial concern\t and  sought\naid from the State Government under the Mysore State Aid  to\nIndustries Act, 1951 with a view to improve the industry and\ndevelop\t it further. An application for aid was made to\t the\nconcerned  authorities and the competent  authority  granted\nthe  financial\tassistance by way of  loan.  This  financial\nassistance was secured from the Bank of Mysore and the State\nGovernment  agreed to stand as surety and also to  guarantee\nthe  repayment\tof the loan with interest to the  Bank.\t The\nappellants  who received the aid executed a deed  of  simple\nmortgage in favour of the State Government of their  proper-\nties  in  consideration of their promise  to  guarantee\t the\nrepayment of the loan. The State Government in turn executed\na deed of guarantee in favour of the Bank. The appellants in\naddition  also\texecuted  a promote in favour  of  the\tBank\nagreeing to repay the said sum with interest.\n    The\t appellants were not in a position to pay  the\tloan\nwithin\tthe  stipulated\t period as the\tconcern\t had  become\nfinancially unsound. The State Government started compelling\nthe appellants to pay off the loan to the Bank and as it was\nnot  paid  the State Government got the\t properties  of\t the\nappellant  sold under the proceedings for recovery  of\tland\nrevenue and got the money recovered.\n    The appellants filed a civil suit and contended that the\nsale of the properties was without the authority of law, and\nthat the money could only be recovered from the appellant if\nthe State Government had paid the loan of the Bank first and\neven thereafter the only course open to the State Government\nwas  to\t file a suit for reimbursement on the basis  of\t the\nmortgage.\n109\n    The suit was dismissed by the trial court and the  order\nwas confirmed by the High Court in appeal.\n    The\t Trial Court and the High Court came to the  conclu-\nsion that the Government of Karnataka was entitled to recov-\ner  the amount which they secured as an aid to the  respond-\nents  under the scheme of the Act and for that purpose\tlaw-\nfully  resorted to the sale of the properties  by  following\nthe  procedure\tof recovery of arrears of  land\t revenue  as\nprovided for in Section 19 of the Act.\n    In the appeal to this Court, it was contended on  behalf\nof the appellants that the view taken by the High Court that\nif  any sum was payable under the Act, the State  Government\ncould take steps under Section 19 of the Act was not  justi-\nfied.\nDismissing the Appeal,\n    HELD:  1. The scheme of the Mysore State Aid  to  Indus-\ntries  Act,  1951  indicate that whether the  aid  has\tbeen\nprovided  for by the State or has been secured by the  State\nfrom other financial agencies, it was contemplated that\t the\nState would secure the repayment of the loan or recovery  of\nwhatever  aid  was given, and with a view  to  secure  those\nrepayments Section 19 was specifically enacted. [113D-E]\n    2.\tLegislature in its wisdom therefore did not use\t the\nwords  'payable to the State' but used 'all  moneys  payable\nunder  this  Act' in the Section, it appears  with  a  clear\nintention  that\t whenever money becomes\t payable  which\t was\nsecured to the industry under the scheme of the Act, it will\nbe open to the State Government to follow the procedure\t for\nrecovery  as has been provided for in clause (1) of  Section\n19. [113E-F]\n    3. It is only in respect of the moneys payable under the\nscheme\tof this Act that section 19(1) comes into  operation\nand it appears that it was in accordance with the scheme  of\nthe Act that the Legislature in its wisdom chose not to\t use\nthe  further phrase payable to the Government under  Section\n19(1). [114B]\n    S. Peer Mohammed v. B. Mohan Lal Sowcer, [1988] 2 S.C.C.\n513, referred to.\n\n\n\nJUDGMENT:\n<\/pre>\n
    CIVIL APPELLATE JURISDICTION: Civil appeal No. 239240 of
\n1975.\n<\/p>\n
110<\/span><\/p>\n
    From  the  Judgment and Decree dated  13.3.1974  of\t the
\nKarnataka  High\t Court in R.F. Appeal No. 103, 111,  120  of
\n1970  and 11 & 12 of 1971 and 142 of 1972 with\tCross-objec-
\ntions in R.F.A. No. 111 of 1970.\n<\/p>\n
    K.N.  Bhatt,  G. Vishvanatha lyer,\tT.S.  Krishnamurthy,
\nM.K.  Pandit, P.H. Parekh, K.R. Nagaraja, M. Veerappa,\tP.R.
\nRamasesh,  Vineet Kumar, S.S. Javalai, R.B. Datar, and\tR.S.
\nHegde, for the appearing parties.\n<\/p>\n
The Judgment of the Court was delivered by
\n    OZA,  J:  These two appeals have been filed by  the\t two
\nappellants against the judgment of the High Court of  Karna-
\ntaka, Bangalore dated 30.3.1974. This appeal has been  filed
\nin  this  Court after getting a certificate  from  the\tHigh
\nCourt  of Karnataka under Article 133(1)(a) and (b)  of\t the
\nConstitution.\n<\/p>\n
    The\t brief facts giving rise to the present\t appeal\t are
\nthat the appellants owned an Industrial concern by the\tname
\nof Bangalore Fancy Fire Works and with a view to improve the
\nindustry  and  develop it further they sought aid  from\t the
\nGoVernment  of\tMysore, one of the  respondents,  under\t the
\nMysore\tState Aid to Industries Act, 1951  (hereinafter\t re-
\nferred to as the Act) and application for this aid was\tmade
\nto  the\t concerned  authorities of the\tState  on  23.1.1953
\nwherein an aid in the nature of financial assistance to\t the
\ntune of Rs. one lac was sought. By the orders of the  compe-
\ntent  authority dated 3.9.1953 the financial  assistance  of
\nRs.60,000  by  way of loan was\tsanctioned.  This  financial
\nassistance  by\tway  of loan was secured from  the  Bank  of
\nMysore\tLtd.  and the State Government agreed  to  stand  as
\nsurety\tand  also to guarantee the repayment  of  loan\twith
\ninterest to the Bank of Mysore Ltd. It was also agreed\tthat
\nthe  appellants who receive the aid will execute a  deed  of
\nmortgage  in  favour of the Government of  Mysore  of  their
\nproperties  in consideration of their promise  to  guarantee
\nthe repayment of sums to be advanced to them by the Bank  of
\nMysore. Pursuant to these arrangements the appellant execut-
\ned a deed of simple mortgage in favour of the Government  of
\nMysore\tdated 14.11.1953. The Government of Mysore in  their
\nturn executed a deed of guarantee dated 20.2.1954 in  favour
\nof  the Bank of Mysore Ltd. The appellants in addition\talso
\nexecuted  a  pronote in favour of the Bank of  Mysore  dated
\n8.12..\t1953  for a sum of Rs.60,000 agreeing to  repay\t the
\nsaid  sum together with interest @ 2 1\/2 per cent per  annum
\nover  and  above the rate of Reserve Bank of  India  with  a
\nminimum 6 per cent per annum.\n<\/p>\n
111<\/span><\/p>\n
This amount of Rs.60,000 was given to the appellants as loan
\nby Bank of Mysore according to the directions issued by\t the
\nGovernment of Mysore.\n<\/p>\n
    It is not disputed that at that time the banks ordinari-
\nly  would  not have advanced the loan for industry  for\t its
\nfurther\t development and would not have advanced on  conces-
\nsional\trate of interest as was done in the present case  as
\nadmittedly  this  was an aid arranged by the  Government  of
\nMysore\tunder  the  Act and it was in  accordance  with\t the
\nscheme\tof  the Act that the Government of  Mysore  arranged
\nthis  loan  at a concessional rate from the Bank as  an\t aid
\nunder the Act. This loan was to be repaid in two instalments
\nand it is not in dispute that the appellants did not pay the
\nloan  on the due dates of the instalments. According to\t the
\nappellants  as alleged by them before the Trial\t Court\tthey
\nwere not in a position to pay the loan within the stipulated
\nperiod\tas the concern became financially unsound  and\tthat
\nthe  respondent, the State Government of  Karnataka  started
\ncompelling  the appellants to pay off the loan to  the\tbank
\nand  as\t it was not paid the Government\t of  Karnataka,\t the
\nrespondent got the plaint schedule properties sold under the
\nproceedings  for recovery of land revenue and got the  money
\nrecovered.  It\twas  contended by the  appellants  that\t the
\nrespondent defendant State could not got the properties sold
\nby public auction in accordance with the procedure of recov-
\nery for arrears of land revenue. As they had only a mortgage
\ndeed  of  the property in their favour and  that  the  money
\ncould only be recovered from the appellants if the  respond-
\nent  State  had\t paid the loan of the Bank  first  and\teven
\nthereafter the only course open to the respondent State\t was
\nto  file a suit for reimbursement on the basis of the  mort-
\ngage  and  it was therefore contended that the sale  of\t the
\nproperties  was\t without the authority of law.\tThe  learned
\ntrial  court and also the High Court came to the  conclusion
\nthat the Government of Karnataka was entitled to recover the
\namount which they secured as an aid to the respondents under
\nthe scheme of the Act and for that purpose lawfully resorted
\nto the sale of the properties by following the procedure  of
\nthe recovery of arrears of land revenue as was provided\t for
\nin Section 19 of the State Act and dismissed the suit  filed
\nby the plaintiff respondent.\n<\/p>\n
    Learned  counsel  appearing for  the  appellant  frankly
\nconceded that the facts in the case are not in dispute.\t The
\nHigh  Court of Karnataka has taken a view that as this\tloan
\nwas  given to the appellant by the State Bank of Mysore\t but
\nit  was\t secured as an aid under the Act referred  to  above
\ntherefore  proceedings under Sec. 19 could be taken  but  it
\nwas contended by learned counsel that the State was only a
\n112<\/span>
\nguarantor and the creditor was the State Bank of Mysore\t and
\nso long as the loan was not recovered from the guarantor  it
\ncould  not  be said that there was anything payable  to\t the
\nState  Govt. and in view of the language of Sec. 19  it\t was
\ncontended  that so long as there was nothing payable to\t the
\nState  Govt.  the action under Sec. 19 could not  have\tbeen
\ntaken.\tLearned counsel frankly conceded that  although\t the
\nlanguage  in Sec. 19 do not refer to the moneys\t payable  to
\nthe State but it only refers to moneys payable under the Act
\nbut  it was contended that in the scheme of the Act and\t the
\ntransactions  between  the parties, State Govt.\t could\ttake
\naction to recover the money only if the State Government has
\npaid  the loan in favour of the State Bank of Mysore on\t the
\nterms of the guarantee which was executed by the State\tGov-
\nernment.  Learned counsel therefore contended that the\tview
\ntaken  by the High Court that if any sum was  payable  under
\nthe  Act State Government could take steps under Section  19
\nis not justified.\n<\/p>\n
    The\t learned  counsel for the respondent State  and\t the
\nother  respondents  who are purchasers of  the\tproperty  in
\nauction contended that the scheme of the Act indicates\tthat
\nin  order  to industrialise the State this Act\twas  enacted
\nwherein\t the  State took upon itself the  responsibility  of
\nproviding  aids in various kinds to the industries and\tsuch
\naids were provided for under the Statutes. One of the  modes
\nof providing this aid was to secure a loan from the bank  in
\nfavour\tof the industry which ordinarily was  not  available
\nand  it\t has  been brought to our notice that  even  in\t the
\napplication  which the respondent made for this aid  to\t the
\nState  Government  clearly admitted that no loan  from\tbank
\ncould  be available unless the State secured aid under\tthis
\nAct.  It was therefore contended that the aid may have\tbeen
\nsecured\t from the bank but it was an aid which\twas  secured
\nunder the provisions of this Act and in this view Section 19
\nclearly\t comes\tinto  operation and hence  the\tmoneys\twere
\npayable under this Act and if it was so the State Government
\nwas entitled to realise the amount as arrears of land  reve-
\nnue as contemplated in Section 19. The scheme of the Act was
\nto  provide  aid to industries. Preamble of the\t Act  itself
\nstates:\n<\/p>\n
Preamble–Whereas it is expedient to regulate the giving  of
\naid by the Government to industries in the State of Mysore.
\n    Under  Section  7 of this Act it was provided  that\t the
\nGovernment could give aid to the industries in the following
\nways  and sub-clause (b) provided for cash credit  facility,
\noverdraft or fix advance with the bank.\n<\/p>\n
113<\/span><\/p>\n
Section 7.–Subject to the provisions of this Act and of the
\nrules framed thereunder, the Government shall have power  to
\ngive  aid to an industrial business or enterprise in one  or
\nmore of the following ways:\n<\/p>\n
(a) by granting loan;\n<\/p>\n
      (b) by guaranteeing a cash credit, overdraft or  fixed
\nadvance with a bank;\n<\/p>\n
    It is not in dispute that this loan which was secured to
\nthe  appellants from the bank was an aid falling under\tSub-
\nclause (b) of Section 7. The provisions of the Act  indicate
\nthe  manner in which the loans could be secured, the  manner
\nin  which it was to be paid and in view of all this  it\t was
\nnot  disputed  that  although this loan\t became\t payable  in
\nfavour\tof the State Bank of Mysore but it may\tfall  within
\nthe  ambit  of the definition of moneys payable\t under\tthis
\nAct.  The only controversy raised before us that Section  19
\ncould be so interpreted that the Govt. could use the author-
\nity  under Section 19 for recovery only if moneys were\tpay-
\nable to the Government.\n<\/p>\n
    As discussed earlier the scheme of the Act indicate that
\nwhether\t the aid has been provided for by the State  or\t has
\nbeen secured by the State from other financial agencies.  It
\nwas  contemplated that the State would secure the  repayment
\nof the loan or recovery of whatever aid was given and with a
\nview to secure those repayments Section 19 was\tspecifically
\nenacted. Legislature in its wisdom therefore did not use the
\nwords  payable\tto the State but used  ‘all  moneys  payable
\nunder  the  Act’  in the Section, it appears  with  a  clear
\nintention that whenever any money becomes payable which\t was
\nsecured\t to  the industry under the scheme of this  Act.  It
\nwill be open to the State Govt. to follow the procedure\t for
\nrecovery as has been provided for in clause (1) Section 19.
\n    Section  19\t sub-clause (1).–All moneys  payable  under
\nthis  Act,  including any interest  chargeable\tthereon\t and
\ncosts, if any, incurred, if not paid when due, may be recov-
\nered from the person aided and his surety if any, under\t the
\nlaw for the time being in force, as if they were arrears  of
\nland revenue.\n<\/p>\n
    It\twas contended that ordinarily if the State  was\t the
\nguarantor and the creditor was the Bank of Mysore  guarantor
\nState  could only recover from the appellants if the  amount
\nhad been paid to the credi-\n<\/p>\n
114<\/span><\/p>\n
tors so far as the normal legal procedures is concerned.  It
\nmay depend upon the terms and the conditions of the  guaran-
\ntee.  But in the present case we are dealing with aids\tpro-
\nvided  for  under the scheme of this Act and it is  only  in
\nrespect\t of the moneys payable under the scheme of this\t Act
\nthat Section 19(1) comes into operation and it appears\tthat
\nit was in accordance with the scheme of the Act that  Legis-
\nlature\tin  its wisdom chose not to use the  further  phrase
\npayable to the Government under Section 19(1).
\n    Learned  counsel  placed reliance on a decision  in\t the
\ncase  of S. Peer Mohammed v. B. Mohan Lal Sowcar,  [1988]  2
\nS.C.C.\t513.  This  decision in our opinion is\tnot  at\t all
\nrelevant  as  in the present case we are  dealing  with\t the
\nenactment  where a special procedure has been  provided\t for
\nrecovery  of moneys payable under this Act. In this view  of
\nthe matter therefore in our opinion the High Court was fight
\nin  not accepting the contention of the appellant and  main-
\ntaining\t the  dismissal\t of the suit.  Appeal  is  therefore
\ndismissed.  In the circumstances of the case no order as  to
\ncosts.\n<\/p>\n
N.V.K.\t\t\t\t       Appeal dismissed.\n115<\/span>\n\n\n\n<\/pre>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India K.B. Daddarajjiappa & Ors vs State Of Karnataka & Ors on 16 January, 1989 Equivalent citations: 1989 AIR 751, 1989 SCR (1) 108 Author: G Oza Bench: Oza, G.L. (J) PETITIONER: K.B. DADDARAJJIAPPA & ORS. Vs. RESPONDENT: STATE OF KARNATAKA & ORS. DATE OF JUDGMENT16\/01\/1989 BENCH: OZA, G.L. (J) BENCH: OZA, […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-100095","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nK.B. 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