DEEPAK BHANDARI versus HIMACHAL PRADESH STATE INDUSTRIAL DEVELOPMENT CORPORATION LIMITED

Citation: [2014] 2 S.C.R. 138 · Decided: 29-01-2014 · Supreme Court of India · Bench: K.S. RADHAKRISHNAN · Disposal: Dismissed

Judgment (excerpt)

A 
~s 
[2014] 2 S.C.R. 138 
DEEPAK BHANDARI 
v. 
HIMACHAL PRADESH STATE INDUSTRIAL 
DEVELOPMENT CORPORATION LIMITED 
(Civil Appeal No. 1019 of 2014) 
JANUARY, 29, 2014 
[K.S. RADHAKRISHNAN AND A.K. SIKRI, JJ.] 
State Financial Corporations Act, 1951: s.29 - Right to 
C sue under contract of indemnity - Limitation period - Held: 
When the Corporation takes steps for recovery of the amount 
5y resorting to provisions of s.29 of the Act, the limitation 
period for recovery of the balance amount would start only 
after adjusting the proceeds from the sale of assets of the 
D industrial concern as the Corporation would be in a position 
to know if there is a shortfall or there is excess amount 
realised, only after the sale of the mortgage! hypothecated 
assets - The instant case would fall under Article 55 of the 
Limitation Act, 1963 which corresponds to old Articles 115 and 
1 E 116 of the old Limitation Act, 1908 - The right to sue on a 
contract of indemnity/ guarantee arise when the contract is 
broken - Therefore, the period of limitation is to be counted 
from the date when the assets of the Company were sold and 
not when the recall notice was given - Limitation Act, 1963 -
F Article 55. 
Respondent no.2-company, an industrial concern 
defaulted in repayment of loan disbursed by respondent 
no.1-corporation constituted under State Development 
Corporation Act. The respondent no.2, thereafter, went 
G under liquidation. The appellant who was the director of 
the company was a Guarantor for the payment of loans 
taken by the company from the Corporation. The 
Corporation issued a recall notice dated 21.5.1990. The 
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138 
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DEEPAK BHANDARI v. H.P. STATE INDUST. DEV. 
139 
CORP. LTD. 
company failed to make the repayment and the 
A 
Corporation proceeded under Section 29 of the State 
Financial Corporations Act, 1951 to take over the 
mortgaged/hypothecated assets of the company. The 
assets of the company were taken over by the 
Corporation and sold on 31.3.1994. Still certain amount 
B 
remained outstanding against the company so the 
Corporation filed a suit for recovery of remaining amount 
on 26.12.1994. The High Court dismissed the plea of the 
appellant that the suit was time barred and decreed the 
suit 
c 
The question for consideration in the instant appeal 
was whether the limitation for filing the suit would start 
on 21.5.1990, when the notice of recall was issued or the 
starting point would be 31.3.1994, when the assets of the 
Company were sold and the balance amount payable. 
D 
Dismissing the appeal, the Court 
HELD: 1. When the Corporation takes steps for 
recovery of the amount by resorting to the provisions of E 
Section 29 of State Financial Corporations Act, 1951, the 
limitation period for recovery of the balance amount 
would start only after adjusting the proceeds from the 
sale of assets of the industrial concern as the 
Corporation would be in a position to know as to whether 
F 
there is a shortfall or there is excess amount realised, 
only after the sale of the mortgage/ hypothecated assets. 
This is clear from the language of sub-Section (1) of 
Section 29. It is thus clear that merely because the 
Corporation acted under Section 29 of the State Financial 
Corporation Act did not mean that the contract of G 
indemnity came to an end. Section 29 merely enabled the 
Corporation to take possession and sell the assets for 
recovery of the dues under the main contract. It may be 
that only the Corporation taking action under Section 29 
and on their taking possession they became deemed 
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140 
SUPREME COURT REPORTS 
[2014] 2 S.C.R. 
A owners. The mortgage may have come to an end, but the 
contract of indemnity, which was an independent 
contract, did not. The right to claim for the balance arose, 
under the contract of indemnity, only when the sale 
proceeds were found to be insufficient. The right to sue 
B on the contract of indemnity arose after the assets were 
sold. The instant case would fall under Article 55 of the 
Limitation Act, 1963 which corresponds to old Articles 115 
and 116 of the old Limitation Act, 1908. The right to sue 
on a contract of indemnity/ guarantee would arise when 
c the contract is broken. Therefore, the period of limitation 
is to be counted from the date when the assets of the 
Company were sold and not when the recall notice was 
given. [Paras 21-23] [153-C-D; 153-G-H; 154-A-D] 
' HP Financial Corporation v. Pawana & Ors. C.A. No. 
D 1971 of 1998 dated 1

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