Maharashtra State Financial Corporation Vs. Ashok K. Agarwal & Ors 
Insc 163 (30 March 2006)
Arun Kumar & R.V. Raveendran Arun Kumar, J.
appellant Maharashtra State Financial Corporation
(hereinafter referred to as 'the Corporation') had sanctioned a loan of Rupees
Five lakhs in favour of
M/s. Crystal Marketing Private Limited on 14th November,
respondents in the present appeal were Directors of the said borrower and stood
sureties for the loan. The amounts under the said loan were disbursed to M/s.
Crystal Marketing Private Limited from time to time in the year 1979. The
company however failed to repay the loan amounts.
Corporation issued various letters calling upon the borrower to clear its dues.
Ultimately, the Corporation got a legal notice dated 8.3.1983 issued calling
upon the borrower to repay the entire amounts due. On 25th
the Corporation moved an application under Sections 31 and 32 of the State
financial Corporation Act, 1951in the Court of the District Judge, North Goa, Panaji. The appellant Corporation prayed for an order
of sale of the hypothecated property of the borrower company so that the sale
proceeds could be appropriated towards meeting the outstanding liability of the
borrower towards the appellant. On 11th June, 1990 the attached properties of the
borrower company were put to sale. Because there was a shortfall in the amount
realized on sale of the hypothecated property, the appellant- Corporation sent
notices on 27th December, 1991 to the sureties, that is, the
respondents in this appeal. An amount of Rs.16,79,033/-
was claimed as due from the sureties together with interest at the rate of
14.5% per annum. On 2nd January, 1992, the appellant-Corporation filed an
application under Section 31 (1) (aa)
of the State Financial Corporation Act against the respondents for steps for
recovery of the amount due. The respondents took various objections against the
application and the reliefs prayed therein including
that the application was barred by limitation. The learned Additional District
Judge vide his order dated 16th April, 1994 upheld the objection regarding the
application being barred by limitation. The application was accordingly
to the respondents Article 137 of the Limitation Act was applicable and as per
that provision such an application could be made within a period of three
years. Article 137 applies in cases where no period of limitation is
specifically prescribed. It was submitted that as no period of limitation is prescribed
for an application under Sections 31 and 32 of the Act, Article 137 would
apply. The Addl. District Judge upheld the contention of the respondents and
the application of the Corporation was dismissed as barred by limitation. The
appellant Corporation filed an appeal against the said order in the High Court
of Judicature at Bombay, Bench at Panaji.
The appeal was dismissed by the High Court by the impugned order dated 22nd
The High court upheld the reasoning of the Additional District Judge.
learned counsel for the appellant placing reliance on Article 136 of the
Limitation Act argued that the said Article prescribes a limitation period of
twelve years in cases of execution of decrees and orders passed by civil courts
and therefore, the courts below erred in rejecting the application as barred by
limitation. Article 136 is reproduced below:
of application Period of limitation Time from which period begins to run 136.
For the execution of any decree Twelve years When the decree or order (other
than a decree granting a becomes enforceable or
mandatory injunction) or order where the decree or any of any civil court. subsequent order directs any payment of money or the
delivery of any property to be made at a certain date or at recurring periods,
when default in making the payment or delivery in respect of which execution is
sought, takes place:
Provided that an application for the enforcement or
execution of a decree granting a perpetual injunction shall not be subject to
any period of limitation." The argument is that an application under section 31 is in
the nature of execution proceedings, therefore, Article 136 applies which
allows a period of twelve years for execution of decrees and orders and the
application was thus within time. It was submitted that the courts have upheld
the legal fiction that applications under Section 31 of the State Financial
Corporation Act are treated in the nature of execution proceedings. In support
of this submission the learned counsel referred to Gujarat State Financial
Corporation v. M/s. Natson Manufacturing Co.(P) Ltd. & Ors. 1979 (1) SCR 372.
It was observed by this Court in this case that "the substantive relief in
an application under Section 31 (1) is something akin to an application for
attachment of property in execution of a decree at a stage posterior to the
passing of the decree." Sections 31 of the Act contains
special provisions for enforcement of claims by State Financial Corporations.
It is by way of a legal fiction that the procedure akin to execution of decrees
under the Code of Civil Procedure has been permitted to be invoked. But one
cannot lose sight of the fact that there is no decree or order of a civil court
when we are dealing with applications under Section 31 of the Act. The legal
fiction at best refers to a procedure to be followed. It does not mean that a
decree or order of a civil court is being executed, which is a sine qua non for
invoking Article 136. The proposition set out in the case of Gujarat State
Financial Corporation (supra) found support in M/s. Everest Industrial
Corporation and Others v. Gujarat State Financial Corporation 1987 (3) SCC 597.
in Maganlal etc. vs. Jaiswal
Industries Neemach & Ors. 1989 (3) SCR 696 this
court noticed that an order under Section 32 is not a decree stricto sensu as defined in
Section 2(2) of the Code of Civil Procedure, the financial Corporation could
not be said to be a decree holder. This makes it clear that while dealing with
an application under Sections 31 and 32 of the Act there is no decree or order
of a civil court being executed. It was only on the basis of a legal fiction
that the proceedings under Section 31 are treated as akin to execution
proceedings. In fact this Court has observed that there is no decree to be
executed nor there is any decree holder or judgment debtor and therefore in a
strict sense it cannot be said to be a case of execution of a decree. Article
136 of the Limitation Act has no application in the facts of the present case.
Article 136 specifically uses the words "decree or order of any civil
court". The application under Sections 31 and 32 of the State Financial
Corporation Act is not by way of execution of a decree or order of any civil
137 of the Limitation Act applies in the facts of the present case. When
Article 137 is applied, the application moved by the appellant- Corporation on 2nd
for proceeding against the sureties i.e. the
respondents herein, was clearly barred by time and the courts below were correct
in holding so. To recall the facts of the present case, the notice demanding
repayment of the amount of loan was issued against the borrower, that is, M/s.
Crystal Marketing Private Limited on 8th March, 1983 and the application under Sections
31 and 32 of the State Financial Corporation was filed against the said
borrower on 25th October, 1983. The liability of sureties had crystalised then.
amendment under Section 31 of the State Financial Corporation Act which authorises the State Financial Corporations to take action
under Section 31 of the Act for enforcing the liability against the sureties, was brought about in the year 1985 by introduction
of sub-section (aa) in Section 31 (1) of the Act.
Even after this amendment the appellant did not wake up to take any step
against the sureties in the present case. Notice was issued to the sureties
only on 7th December, 1991 and the application for enforcement
of liability against them was filed on 2nd January, 1992. The application, therefore, was
clearly barred by time and the decisions of the courts below cannot be faulted.
The courts below rightly dismissed the application on the ground that it was
barred by limitation. The appeal has no merit. It is dismissed with no order as
parting with the judgment we would like to place on record that since the
respondents were not represented in the case, we requesterd