- (1.) Special leave granted,
(2.) The short but interesting question which arises for determination in this appeal is whether in a case where an industrial concern makes any default in repayment of any loan or advance or any instalment thereof or otherwise fails to meet its obligations under the terms of any agreement with the Financial Corporation, such as the respondent herein, can the latter take recourse to S. 29 and/or 31 of the State Financial Corporations Act, 1951 (hereinafter called the 1951 Act') notwithstanding the bar of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter called the ' 1985 Act') In order to answer the aforesaid question it is necessary to bear in mind the provisions of the aforesaid two statutes.
(3.) The 1951 Act was enacted to provide for the establishment of State Financial Corporations. Section 3 empowers the State government to establish a State Financial Corporation as a body corporate with an authorised capital of such sum as may be fixed by the State government in this behalf. Section 9 provides that the general superintendence, direction and management of the affairs and business of the Financial Corporation shall vest in a Board of Directors which may exercise all the powers and discharge all the functions which may be exercised and discharged by the Financial Corporation. Under Section 15 one of the Directors may be nominated by the State government to be the Chairman of the Board of Directors. Section 25 enumerates the business which the Financial Corporation may transact. These include among others, guaranteeing, on such terms and conditions as may be agreed upon, loans raised by industrial concerns which are repayable within twenty years and are floated in the public market, loans raised by industrial concerns from scheduled banks or State cooperative banks or other financial institutions and granting loans and advances to an industrial concern repayable within a period not exceeding twenty years from the date onwhich they are granted. Section 29, insofar as relevant for our purpose, then provides as under: 29. (1 "Where any industrial concern, which is under a liability to the Financial Corporation under an agreement, makes any default in repayment of any loan or advance or any instalment thereof or in meeting its obligations in relation to any guarantee given by the corporation or otherwise fails to comply with the terms of its agreement with the Financial Corporation, the Financial Corporation shall have the right to take over the management or possession or both of the industrial concern, as well as the right to transfer by way of lease or sale and realise the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation. "where the Financial Corporation, in exercise of the aforesaid rights, transfers any property, Ss. (2 provides that the same shall vest in the transferee all rights in or to the transferred property as if the transfer had been made by the owner of the property. Section 31 next provides as under: 31. "Where an industrial concern, in breach of any agreement, makes any default in repayment of any loan or advance or any instalment thereof or in meeting its obligations in relation to any guarantee given by the Corporation or otherwise fails to comply with the terms of the agreement with the Financial Corporation or where the Financial Corporation requires an industrial concern to make immediate repayment of any loan or advance under Section 30 and the industrial concern fails to make such repayment, then, without prejudice to the provisions of Section 29 of this Act and of Section 69 of the Transfer of Property Act, 1882 any officer of the Financial Corporation, generally or specially authorised by the Board in this behalf, may apply to the District Judge within the limits of whose jurisdiction the industrial concern carries on the whole or a substantial part of its business for one or more of the following reliefs: (a) for an order for the sale of the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation as security for the loan or advance; or (aa) for enforcing the liability of any surety; or (b) for transferring the management of the industrial concern to the Financial Corporation; or (c) for an ad interim injunction restraining the industrial concern from transferring or removing its machinery or plant or equipment from the premises of the industrial concern without the permission of the Board, where such removal is apprehended. "section 32 outlines the procedure which the District Judge must follow in respect of an application made under Section 31. Section 32-A empowers the Financial Corporation to appoint Directors or Administrators of an industrial concern, the management whereof is taken over by the Financial Corporation. Section 32-E lays down that where the management of an industrial concern, being a company as defined in the Companies Act, 1956 is taken over by the Financial Corporation, then, notwithstanding anything contained in the said Act or in the Memorandum or Articles of Association of such concern, it shall not be lawful for the shareholders of such concern or any other person to nominate or appoint any person to be a Director of the said concern nor shall any resolution passed at the meeting of the shareholders of such concern be given effect to unless approved by the Financial Corporation. It also precludes the filing of a winding up proceeding or for the appointment of a Receiver in respect of such concern in any court unless consented to by the Financial Corporation. So also Section 32-F places a restriction on the filing of suits for dissolution, etc. , of an industrial concern other than a company whose management is taken over. Section 32-G provides for recovery of amounts due to the Financial Corporation as an arrear of land revenue. And Section 46-B says that the provisions of the said Act and any rule or order made thereunder shall have effect notwithstanding anything inconsistent therewith in any other law for the time being in force. It further says that the provisions of the Act shall be in addition to, and not in derogation of, any such law applicable to an industrial concern. It will thus be seen that the consequences of a take over of the industrial concern are quite drastic and virtually denudes the management of such industrial concern of its power to administer the properties and assets of such concern.;