LexMAHARASHTRA STATE FINANCIAL CORPORATION versus JAYCEE DRUGS AND PHARMACEUTICALS PVT. LTD. AND ORS.
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A MAHARASHTRA STATE FINANCIAL CORPORATION v. -14. JAYCEE DRUGS AND PHARMACEUTICALS PVT. LTD. AND ORS. FEBRUARY 19, l991 B [S. RANGANATHAN, S.C. AGRAWALANDN.D. OJHA,JJ.] State Financial Corporation Act, 1951: Sections 31 and 32- .:>. Scope of-Presidency town-Jurisdiction to entertain-Whether a peti- tion under sections 31 and 32 is to be made before a City Civil Court or the c Hi1:h Court. Liability of a surety-Enforcement of-Whether in such a peti- \.J_, tion a money decree for repayment of loan can be passed against a party who stood surety personally without any security. Held if the claim is up to Rs.50,000 the application would lie to City Civil Court and if it is more than to the High Court-Amending Act 43 of 1985. By majority y held that after the amendment introduced by Act 43 of 1985 such an D application shall lie for enforcing the liability of a surety who ha~ given only personal guarantee. Respondent No. 1 a Private Limited Company, was sanctioned a loan of Rs.30 iakhs by the Appellant-Corporation for the setting up of a factory. To secure this loan a mortgage deed of certain properties was E executed by the Company and Respondents 2 to 4 as its directors bad executed a personal Surety Bond without any security for its repay- >--- ment. After obtaining a part of the sanctioned loan, which was to be given in phases, the Company became <iisinterested in availing of the balance amount. Consequently the Corporation demanded back tb.e amount already taken together with interest and 03 thlf. company's F failure to do so, it took over the Industrial Concern under section 29 of the Act and initiated steps to realise its dues by putting tile property to ~ sale. Having failed to recover the amount as no adequate offer was forthcoming despite repeated advertisements, it moo a petitian before the Bombay High Court under sections 31 and 32 of th~ Act both against the Company as well as its directors-sureties praying for a decree in the G sum of Rs.15,87 ,391.20 to be passed against them jointly and severally. The respondents contested the petition contending (a) that a peti- tion under sections 31 and 32 of the Act could be f'tled only before the >- City Civil Court and the High Court bad no jurisdiction to entertain it, (b) that no money decree can be passed under sections 31and32 of the H Act, and (c) that the provision in the Act relating to enforcement of the 480 - MAHARASHTRA FINANCIAL CORPN. v. JAYCEE DRUGS 481 liability of surety were ultra vires of Article 14 of the Constitution. The >-- learned single judge relying on an earlier decision of the Bombay High Court reported in 1987 Mah. L.J. 243 held that the High Court had jurisdiction to entertain the petition but on merits took the view that no money decree could be passed under sections 31 and 32 even against the sureties and since in the instant case the sureties had not given any security except their personal guarantee, the same could be enforced only in the ordinary course and not under the special machinery pro- -i_ vided under the Act. In view of his f'mdings on the f'lrst two pleas no arguments were entertained on the last plea and accordingly the peti- tion was dismissed. The Division Bench while dismissing the appeal not only upheld the f'mding of the single Judge on merits but also overruled '-~/ the decision reported in 1987 Mah. L.J. 243 and held that the High Court had no jurisdiction to entertain a petition under sections 31 and 32 of the Act. The Corporation came up in appeal before this court by ¥ special leave against this decision of the High Court of Bombay. The impugned judgment was assailed by the Appellant Corpora- A B c tion both on merits and on the plea of jurisdiction. The respondents in o reply asserted that the fmdings of the High Court on both pleas were unassailable. · Allowing the appeal, by a majority decision, HELD: A. By the Full Court (i) The extent of the liability stated in the application as contemp- lated by sub 0 section (2) of section 31 of the Act would represent the value of the claim of the Corporation and if such value is upto Rupees , Fifty Thousand, the application would lie in the City City Court and if it ~s more than that amount it would lie in the High Court. This interpre- tation would give meaning and relevance to the words "having jurisdic- tion" used in sub-section (11) of section 32. A different interpretation would render superf
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