K.B. DADDARAJJIAPPA & ORS. versus STATE OF KARNATAKA & ORS.

Citation: [1989] 1 S.C.R. 108 · Decided: 16-01-1989 · Supreme Court of India · Bench: G.L. OZA · Disposal: Dismissed

Judgment (excerpt)

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K.B. DADDARAJJIAPPA & ORS. 
v. 
STATE OF KARNATAKA & ORS. 
JANUARY 16, 1989 
[G.L. OZA AND S. RATNAVEL PANDIAN, JJ.] 
Mysore State Aid to Industries Act 1951 Sections 7 and 19-Loan 
secured by Industries-Recovery of-State Government standing as 
surety and guarantor to repayment-Default in repayment of loan-
State Government entitled to recover as arrears of land revenue-'All 
moneys payable under this Ad-Interpretation of. 
The appellants owned an industrial concern and sought aid from 
the· State Government under the Mysore State Aid to Industries Act, 
1951 with a view to improve the industry and develop it further. An 
application for aid was made to the concerned authorities and the com· 
petent authority granted the financial assistance by way of loan. This 
'financial assitance was secured from the Bank of Mysore and the State 
Government agreed to stand as surety and also to guarantee the repay-
ment of the loan with interest to the Bank. The appellants who received 
the aid executed a deed of simple mortgage in favour of the State 
Government of their properties in consideration of their promise to 
guarantee the repayment of the loan. The State Government in turn 
executed a deed of guarantee in favour of the Bank. The appellants in 
addition also executed a pronote in favour of the Bank agreeing to 
repay the said sum with interest. 
The appellants were not in a position to pay the loan within the 
stipulated period as the concern bad become financially unsound. The 
State Government started compelling the appellants to pay off the loan 
to the Bank and as it was not paid the State Government got the proper-
ties of the appellant sold under the proceedings for recovery of land 
revenue and got the money recovered. 
The appellants tiled a civil suit and contended that the sale of the 
properties was without the authority oflaw, and that the money could 
only be recovered from the appellant if the State Government had paid 
the loan of the Bank first and even thereafter the only course open to the 
State Government was to file a suit for reimbursement on the basis of 
H the mortgage. 
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K.B. DADDARAJJIAPPA v. STATE OF KARNATAKA 
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The suit was dismissed hy the trial court and the order was con-
firmed by the High Court in appeal. 
The Trial Court and the High Court came to the conclusion that 
the Government of Karnataka was entitled to recover the amount which 
they secured as an aid to the respondents under the scheme of the Act 
and for that purpose lawfully resorted to the sale of the properties by 
following the procedure of recovery of arrears of land revenue as pro-
vided for in Section 19 of the Act. 
In the appeal to this Court, it was contended on behalf of the 
appellants that the view taken by the High Court that if any sum was 
payable under the Act, the State Government could take steps under 
Section 19 of the Act was not justified. 
Dismissing the Appeal, 
HELD: 1. The scheme of the Mysore State Aid to Industries Act, 
1951 indicate that whether the aid has been provided for by the State or 
has been secured by the State from other financial agencies, it was 
contemplated that the State would secure the repayment of the loan or 
recovery of whatever aid was given, and with a view to secure those 
repayments Section 19 was specifically enacted. [1130-E] 
2. Legislature in its wisdom therefore did not use the words 'pay-
able to the State' but used 'all moneys payable under this Act' in 
the Section, it appears with a clear intention that whenever money 
becomes payable which was secured .to the industry under the scheme 
of the Act, it will be open to the State Government to follow the 
procedure for recovery as has been provided for in clause .(1) of Sec-
tion 19. [113E-F] 
3. It is only in respect of the moneys payable under the scheme of 
this Act that section 19(1) comes Into operation and it appears that it 
was in accordance with the scheme of the Act that the Legislature in its 
wisdom chose not to use the further phrase payable to the Government 
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under Section 19(1). [114B] 
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S. Peer Mohammed v. B. Mohan Lal Sowcer, [1988] 2 S.C.C. 
513, referred to. 
CIVIL APPELLATE JURISDICTION: Civil appeal No. 239-
240 of 1975. 
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SUPREME COURT REPORTS 
[1989) 1 S.C.R. 
From the Judgment and Decree dated 13.3.1974 of the Karna-
taka High Court in R.F. Appeal No. 103, 111, 120 of 1970 and 11 & 12 
of 1971 and 142 of 1972 with Cross-

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