LexKARNATAKA STATE INDUSTRIAL INVESTMENT & DEVELOPMENT CORPORATION LTD. versus S.K.K. KULKARNI & ORS.
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[2008] 17 S.C.R. 339 KARNATAKA STATE INDUSTRIAL INVESTMENT & A DEVELOPMENT CORPORATION LTD. v. S.K.K. KULKARNI & ORS. (Civil Appeal No. 7288 of 2008) DECEMBER 11, 2008 [S.H. KAPADIA AND AFTAB ALAM, JJ.] STATE FINANCIAL CORPORATION ACT, 1951: B ss. 31 (1 )(aa) and 32 - Special provisions for enforcement C of claims of Financial Corporation - Territorial jurisdiction - Industrial concern located within jurisdiction of District Judge, Belgaum - Property of the concern sold in exercise of power uls 29 - Sale proceeds being less than the amount due, Corporation filing application u/s 31(1) before Civil Judge, o Bangalore for enforcement of surety- High Court holding that Bangalore Court had no territorial jurisdiction to entertain the application - HELD: Right of a State Financial Corporation uls 29 is different from the right which it can enforce uls 31 - Application uls 31(1) can be filed even before exercise of E power uls 29 of the Act or s.69 of Transfer of Property Act- The Act is a special statute and its provisions have to be strictly construed - Once SFC invokes s.31(1), it has to proceed in accordance with the procedure prescribed in s.32 - Section 31(1) is a special provision - It mandates that all applications thereunder shall be made to the District Judge F . within the limit of whose jurisdiction the industrial concern carries on its business - High Court was right in holding that Bangalore Court had flO territorial jurisdiction to hear the application and the Corporation ought to have instituted the case before District Judge, Belgaum within whose jurisdiction G the .industrial concern was located - Jurisdiction. CIVIL APPELLATE JURISDICTION : Civil Appeal No. 7288 of 2008. 339 H 340 SUPREME COURT REPORTS (2008] 17 S.C.R. A From the final Judgment and Ord,er dated 5.8.2006 of the High Court of Karnataka at Bangalore, in Misc.First Appeal No. 1441 of 2001 (SFC). . Parag P.Tripathi, A.S.G., Moh 1ini Bhatt, Varun Sarin, Naveen R. Nath and Hetu Arora for the Appellant. B S.K. Kulkarni, M. Gireesh Kumar and Vijay Kumar for the Respondents. The following Order of the Court was delivered: - ORDER ~- c 1. Leave granted. 2. The short question which aris~s for determination in this Civil Appeal is: Whether the High Court erred in law in holding, by the impugned judgment, that the Bangalore court has no territorial jurisdiction to hear the matter in view of the provisions D of Section 31 ( 1) of the State Finandal Corporation Act, 1951? 3. M/s. Mullur Cylinders Pvt. L:.td., defendant No.6, is a company registered under the Companies Act. Defendants No.1 to 5 are its Promoters/Directors. For the manufacture of gas cylinders, defendant No.6 approached appellant- E Corporation for loan of Rs.37 .50 lakhs. The loan was sanctioned vide letter dated 1st September, 1984. Defendants also executed a Deed of Hypothecation whereby the assets of defendant No.6 Company stood mortgaged in favour of the appellant-Corporation. The loan amount was released. It was F fully utilized by the borrowers. However, when it came to the question of repayment, defaults occurred. Ultimately, a legal notice came to be is~ued on 8th August, 1988 calling upon defendants to pay the entire lo,an with interest. Dispute consequently resulted. 4. Appellant exercised its power under Section 29 of the G State Financial Corporations Act, ,1951 (for short "1951 Act"). Consequently, the unit was sold for Rs.33 lakhs. However, the full outstanding' amount could not be recovered and, in the circumstances, for enforcement of surety, Misc. Case No.109/ 1993 came to be filed in the court of VI Additional City Civil H Judge, Bangalore City. The Suit was ultimately decreed in j .... y ) , ... KARNATAKA STATE INDUSTRIAL INVESTMENT & 341 DEVELOPMENT CORPN. LTD. v. S.K.K. KULKARNI & ORS. favour of the Corporation. Aggrieved by the said decision, the A '- matter was carried in Agpeal (Misc. Appeal No.1441/2001) in ... 1' the Karnataka High Court. - 5. We are not concerned with the merits of the claim. Suffice it to state that the question which arose for determination, as reproduced hereinabove, requires us to B interpret the provisions of Section 31(1) of the 1951 Act. 6. We quote hereinbelow Section 31(1) as also Section .,., ).. 32 and Section 468 of the 1951 Act. "31. Special provisions for enforcement of claims c by Financial Corporation.---(1) Where an industrial co
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