K B DODDARAJJIAPPA Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) These two appeals have been filed by the two appellants against the judgment of the High Court of Karnataka, Bangalore dated 30-3-1974. This appeal has been filed in this Court after getting a certificate from the High Court of Karnataka under Art. 133(l) (a) and (b) of the Constitution.

(2.) The brief facts giving rise to the present appeal are that the appellants owned an Industrial concern by the name of Bangalore Fancy Fire Works and with a view to improve the industry and develop it further they sought aid from the Government of Mysore, one of the respondents, under the Mysore State Aid to Industries Act, 1951 (hereinafter referred to as the Act) and application for this aid was made to the concerned authorities of the State on 23-1-1953 wherein an aid in the nature of financial assistance to the tune of Rs. one lac was sought. By the orders of the competent authority dated 3-9-1953 the financial assistance of Rs. 60,000/- by way of loan was sanctioned. This financial assistance-by way of loan was secured from the Bank of Mysore Ltd. and the State Government agreed to stand as surety and also to guarantee the repayment of loan with interest to the Bank of Mysore Ltd. It was also agreed that the appellants who received the aid will execute a deed of mortgage in favour of the Government of Mysore of their properties in consideration of their promise to guarantee the repayment of sums to be advanced to them by the Bank of Mysore. Pursuant to these arrangements the appellant executed a deed of simple mortgage in favour of the Government of Mysore dated 14-11-1953. The Government of Mysore in their turn executed a deed of guarantee dated 20-2-1954 in favour of the Bank of Mysore Ltd. The appellants in addition also executed a pronote in favour of the Bank of Mysore dated 8-12-1953 for a sum of Rs. 60,000/- agreeing to repay the said sum together with interest 21/2 per cent per annum over and above the rate of Reserve Bank of India with a minimum of 6 per cent per annum. This amount of Rs. 60,000/- was given to the appellants as loan by Bank of Mysore according to the direction issued by the Government of Mysore.

(3.) It is not disputed that at that time the banks ordinarily would not have advanced the loan for industry for its further development and would not have advanced on concessional rate of interest as was done in the present case as admittedly this was an aid arranged by the Government of Mysore under the Act and it was in accordance with -the scheme of the Act that the Government of Mysore arranged this loan at a concessional rate from the Bank as an aid under the Act. This loan was to be repaid in two instalments and it is not in dispute that the appellants did not pay the loan on the due dates of the instalments. According to the appellants as alleged by them before the trial -Court they were not in a position to pay the loan within the stipulated period as the concern became financially unsound and that the respondent, the State Government of Karnataka started compelling the appellants to pay off the loan to the bank and as it was not paid the Government of Karnataka, the respondent got the plaint schedule properties sold under the proceedings for recovery of land revenue and got the money recovered. It was contended by the appellants that the respondent defendant State could not get the properties sold by public auction in accordance with the procedure of recovery for arrears of land revenue. As they had only a mortgage deed of the property in their favour and that the money could only be recovered from the appellants if the respondent State had paid the loan of the Bank first and even thereafter the only course open to the respondent State was to file a suit for reimbursement on the basis of the mortgage and it was therefore contended that the sale of the properties was without the authority of law. The learned trial court and also 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 the recovery of arrears of land revenue as was provided for in S. 19 of the State Act and dismissed the suit filed by the plaintiff respondent.