Heard the learned counsel for the petitioner and respondents.
2. The petitioner has purchased the property from the 2nd respondent who stood as a guarantor for the loan availed by the 3rd respondent. Thereafter, the 2nd respondent sold the property subject to the mortgage in favour of the Land Development Bank for the loan availed by the 2nd respondent. The 1st respondent has taken steps to recover the amount from the respondents No.2 and 3 and has brought the property which was given as collateral security for the loan availed by the 3rd respondent, by bringing the property into auction and that auction notice was challenged by the petitioner in this writ petition.
3. The 1st respondent filed a counter stating that the property of the 2nd respondent was given as collateral security for the loan availed by the 3rd respondent and therefore they are entitled to proceed against that property and the petitioner being a subsequent purchaser cannot be heard to say that his property cannot be brought to sale and the 1st respondent has to proceed only against the 3rd respondent and thereafter against the 2nd respondent.
4. It has been brought to my notice by the learned counsel for the petitioner that recently the Hon'ble Supreme Court has held in the case of Karnataka State Financial Corporation Vs. N. Narasimahaiah and others reported in (2008) 5 MLJ 713 (SC) that under the State Financial Corporation Act, a Financing Company can proceed against the property of the guarantor by invoking
Section 31 and they cannot bring the property of the guarantor by invoking
Section 29. It is made clear in that Judgement in para 27 which reads as follows:
"27. The legislative intent, in our opinion, is manifest. The intention of the Parliament in enacting Sections 29 and 31 of the Act was not similar. Whereas
Section 29 of the Act consists of the property of the industrial concern,
Section 31 takes within its sweep both the property of the industrial concern and as that of the surety. None of the provisions control each other. The Parliament intended to provide an additional remedy for recovery of the amount in favour of the Corporation by proceeding against a surety only in terms of
Section 31 of the Act and not under
Section 29 thereof. "
5. As the Hon'ble Supreme Court has held that the remedy of the Financial Corporation is to proceed against the guarantor only by invoking
Section 31, the action of the 1st respondent in bringing the property of the petitioner who purchased the property of the guarantor by invoking
Section 29 is illegal and set aside. The 1st respondent is at liberty to proceed against the petitioner by invoking
Section 31 of the Act and it is also open to the 1st respondent to avail other remedies available under law to recover the amount.
6. Hence, this writ petition is allowed and there is no order as to costs.
kr.
To
1. The Branch Manager, The Tamila Nadu Industrial Investement Corporation Ltd., Special Recovery Branch, Plot No.3, Vaigai Colony, Anna Nagar, Madurai- 20.
2. K. Thiruppathi, S/o Kamatchi Gounder, Melagudalur, Uthamapalayam Taluk, Theni District.
3. Nagappan, M/s. Irattai Vinayagar Tiles, Door No. 4/167, Kambar Street, EB Colony, Iyer Bungalow, Madurai.