WA/267/2009 of A.P.S.F.C. AND ANOTHER Vs P. HANUMANTH REDDY AND 4 OTHERS on 30 December 2021

1. A. P. State Financial [corporation, Branch Adilabad, beside ][District ][& ][sessions]Court, Adilabad, [[rep. ][by ][its Branch ][Managlr.]][[by ][its Branch ][Managlr.]][[its Branch ][Managlr.]][[Managlr.]]Court, Adilabad, [[rep. ][by ][its Branch ][Managlr.]][[by ][its Branch ][Managlr.]][[its Branch ][Managlr.]][[Managlr.]]

Court, Adilabad, [[rep. ][by ][its Branch ][Managlr.]][[by ][its Branch ][Managlr.]][[its Branch ][Managlr.]][[Managlr.]]2. i# M;;;sing [birecto'r, ][irre ][A.p. ][state-Financial ][Corporation,, ][5-9-194' chirag]Ali Lane, Hyderabad-1" ...AppELLANTs/REspoNDENTsAli Lane, Hyderabad-1" ...AppELLANTs/REspoNDENTs

AND

1 . P. Hanumanth [Reddy, ][S/o. Late ][P. ][Ram ][Reddy- ][Surveyor ][in ][the Office,of ][SPecial]' otficei a competent Authority Urban Land ceiling., chandra vihar tsurlorngs,il;fi;iiy, i;;-";a6i'0,'n.lo.z-'s-6 [irtotzq, ][Jaiswalbarden, ]ABB"-tESlrHrdr:+?3,t9-' otficei a competent Authority Urban Land ceiling., chandra vihar tsurlorngs,il;fi;iiy, i;;-";a6i'0,'n.lo.z-'s-6 [irtotzq, ][Jaiswalbarden, ]ABB"-tESlrHrdr:+?3,t9-

2. A. Hanumanta [Reddy' S/o. Ramreddy Ex-servicemen ][R/o ][H'No'B 33' ][APHB]Colonv. Hvderabad.- -Colonv. Hvderabad.- -in"i"ii'tijiiiiJ"Jlor [default vide court ][order ][dated ][04'11'2011l. ]3. i;.-P;;r;;;'ii;;nt, [ausin;;'Hb ][H.No ][o-i-72 ][chintakuntawada'old ][Bus stand]Road, Nirmal, Nirmal, [[Adilabad]]Road, Nirmal, Nirmal, [[Adilabad]]

Road, Nirmal, Nirmal, [[Adilabad]]a ir,iFiboeepHedty [R/b ][H.No.6-1-72, Chintakuntawada, ][old ][Bus ][stand ][Road,]Nirmal, Adilabad.Nirmal, Adilabad.

Nirmal, Adilabad.5. i.'D;;; n"oiv, [Slo ][O. ][Raja ][ReddyAgriculture ][R/o ][PonnariVillage' ][Mandal]Thamsi, Adilabad [District.]iRd [i;iilpl;;e;aii ][gei ][court ][order ][dated ][27 ]['07 ]['2004 ][in ][wPMP ][No' ]['15887]of 2004) Thamsi, Adilabad [District.]iRd [i;iilpl;;e;aii ][gei ][court ][order ][dated ][27 ]['07 ]['2004 ][in ][wPMP ][No' ]['15887]of 2004)

...RESpoNoENrs

IA NO : [1 ]OF [2019:]

Between:

1. Smt. Chintalapallv [Meenavathi ][W/o ][Late ][C, ][Deva Reddy ][R ][i' ][Ponnari Village']l\rlandal Thamsi, Thamsi, [[Adilabad ]][[District.]]l\rlandal Thamsi, Thamsi, [[Adilabad ]][[District.]]

l\rlandal Thamsi, Thamsi, [[Adilabad ]][[District.]]2 C;'i;i;;;;llv rrrrionrsuOin [Reddv S/o. ][Late ][c' ][Deva ][Reddv][[Reddv]][[Reddv]]

rrrrionrsuOin e. 6i;i;i;i;6;iii 6i;i;i;i;6;iii [[Minenoar ]][[Reddv ][sio' ][Late ][c' ][Deva ]][[sio' ][Late ][c' ][Deva ]][[Late ][c' ][Deva ]][[c' ][Deva ]][[Deva ]][[Reddv]]

e. 6i;i;i;i;6;iii 6i;i;i;i;6;iii [[Minenoar ]][[Reddv ][sio' ][Late ][c' ][Deva ]][[sio' ][Late ][c' ][Deva ]][[Late ][c' ][Deva ]][[c' ][Deva ]][[Deva ]];: 6iii;i;i;F;ii! [Suienoerneodv sro' ][tate ][c ][Deva ][Reddv];: 6iii;i;i;F;ii! [Suienoerneodv sro' ][tate ][c ][Deva ][Reddv]

(All are Rl/o. Ponnari Village [Mandal ][Thamsi, ][AdilabadDistrtctJr*a,*raroroarr"]

AND

l.A.P.StateFinancialCorporation,.BranchAdilabad,besideDistrlct&SessionsCourt, Adilabad, [[rep. ][by ][its Branch ]][[by ][its Branch ]][[its Branch ]][[Manaq-qr']]Court, Adilabad, [[rep. ][by ][its Branch ]][[by ][its Branch ]][[its Branch ]][[Manaq-qr']]

Court, Adilabad, [[rep. ][by ][its Branch ]][[by ][its Branch ]][[its Branch ]][[Manaq-qr']]2. The Managing [oirec6i,'iti"A ][P ][siite"nnanciat ][Corporation" 5-9-194' ][Chirag]Ali Lane, Hyderabad-1. _..A''ELLANTS/RE''.NDENTSAli Lane, Hyderabad-1. _..A''ELLANTS/RE''.NDENTS3. P. Hanumanth [Reddy, ][S/o ][Late ][P ][Ram ][Reddy- ][SurvJvor ][in ][the ][Office ][of ][Special]Officer & Competent'Arinlr:iti'[rinun [LrnO ][Ceiiino ][Crr'andra ][Vihar ][Buildings,]Nampaily, nyoeranajl"Fiio")'i:ait|oi4.Jaiswittarden. [Amberpet, ][Hyderabad]Officer & Competent'Arinlr:iti'[rinun [LrnO ][Ceiiino ][Crr'andra ][Vihar ][Buildings,]Nampaily, nyoeranajl"Fiio")'i:ait|oi4.Jaiswittarden. [Amberpet, ][Hyderabad]4 A Hanumantu [n"ooi. ][U; ][h;;';;;E'x-Seruiiemen ][RJo H ][No B ][33' ][APHB]Colonv, Hvderabad.Hvderabad.[[old ][Bus ][Stand]][[Bus ][Stand]][[Stand]]Colonv, Hvderabad.Hvderabad.[[old ][Bus ][Stand]][[Bus ][Stand]][[Stand]]

Colonv, Hvderabad.Hvderabad.5 ti#,"b;i"ri;ii]brdin"r, [Fl/o. ][H.No.6-1-72, chintakuntawada, ][[old ][Bus ][Stand]][[Bus ][Stand]][[Stand]]Road. Nirmal, Nirmal, [[Adilabad.]][[Bus Stand ][Road']][[Road']]Road. Nirmal, Nirmal, [[Adilabad.]][[Bus Stand ][Road']][[Road']]

Road. Nirmal, Nirmal, [[Adilabad.]]6 il:H;;,;;;"i;;;; [{[ ][H ][No ][6-1-72, ][chintakuntawada' ][old ][[Bus Stand ][Road']][[Road']]Nirmal, Adilabad.Nirmal, Adilabad.

7C,. Deva Ee-94V, 9lq C- Raja Reddy Agricutture R/o. Ponnari Village, lvlandalThamsi. Adilabad District.Thamsi. Adilabad District.

.RESPONDENTS

IPetition under order 22 Rule 3 and Section 1s1 cpc praying that in thecircumstances stated in the affidavit filed in support of the petition, the High courtmay be pleased to its therefore prayed that it is absolutely necessary in the interestof justice that this Hon'ble court may be pleased to permit the petitioners namely AsRespondent 6 to 9 in writ Appeal No. 267 / 2009 as legal heirs of the deceased 5thRespondent Namely Sri C. Deva Reddy in the interest of justice and passCounsel for the Appetlants: SRI M. HAMSA RAJ (SC FOR ApSFC)Counsel for Respondent No. 1: SRt SADU RAJESWARA REDDyCounsel for Respondent No. 5: SRt p. RAJA SRIPATH| RAO

The Court made the following: JUDGMENT

THE HON'BLECIIIEF

CIIIEFSATISH CHAIVD RAANDTHE HN[,BLE ]SRI JUSTICE N.

T APPEALNo.267 of 2OO9

JUDGMENTLe the Chief,lustice Satish Chandra StTcrma)

The presentit appeal is arising out of order dated21.11.2008 passedW.P.No.22950 of 2OO2 by the learned SingleJudge21.11.2008 passedW.P.No.22950 of 2OO2 by the learned SingleJudge

Conclusion

The facts of thcase reveal that a writ petition was preferredby one P. Hanumth Reddy, S/o. P. Ram Reddy stating that A.Hanumanth Reddy, S/o. Ram Reddy took a financial assistancefrom Andhra Prad sh State Financial Corporation and as theamount was not paiin time, the Financial Corporation took stepsto recover the arnot. The vehicle in question was seized and itu.as so1d. Ho',veveras the entire amount was not recovered, theproperty ol the writ petitioner was sold on 04.08.200 1, who was asurety. Variousounds u,ere raised before the learned SingleJudge and the lear ed Single Judge has allowed the writ [petition]based upon the [jud]ent delivered by the Hon'ble Suprerne Courtin the case of Ka nataka State Financial Corporation vs. NNarasimhaiah & o hers1. The operative paragraphs of the orderpassed by the learn d Single Judge read as under:

"Sri VedSrinivas, learned counsel for the petitioner,submits thaton 29 of the Act confers extraoldinar5r powerson the 1 st resdent, ald it can be used only vis-A-vis primaryassets, or the pperties possessed by the "Industrial Concern". Hesubmits that the properties, as held by sureties, can be dealt with,only under SeC on 31 of the Act. He places reliance upon a.,submits thaton 29 of the Act confers extraoldinar5r powerson the 1 st resdent, ald it can be used only vis-A-vis primaryassets, or the pperties possessed by the "Industrial Concern". Hesubmits that the properties, as held by sureties, can be dealt with,only under SeC on 31 of the Act. He places reliance upon a.,judgment ofe Supreme Court in [- ]KARNATAXA STAtd FINANoIAL CORPORATION [v. ][N. ][NARASIMIIAIAH ][& ][OTHERS][2008 [(4) ][SCALE 473].]

Sri. Durga Reddy, learned [courtsel ][for respondent ][No.1, ][and]Sri B. Adinarayana Rao, learned counsel [for ][6 ][th ][respondent, ][on]the other hand, submit that the security offered [for ][repayment of]the loan is comprehensive in nature, and it t.ikes [in its ][fold, ][the]pnmary assets, as well as those, which are pledged or mortgagedby the sureties. He contends that the petitioner ald respondents 3to 5 were given ample opportunity, to pay the balance of theamount, and they were al.so extended the facility of One TimeSettlement, and sti11 the same was not availed of. They submitthat the [judgment ]of the Supreme Court in Karnataka StateFlnanclal Corporatlon's case has to be vierved, in the context ofthe facts of the case.

The short question tJ:at arises for consideration in this writpetition is as to whether the sale conducted by the 1"t respondent,by invoking its power under Section 29 of the Act vis-i-vis theproperties of the petitioner is valid. It is not in dispute that thepetitioner stood as a surety for repa5.,rnent of the loart raised by 3.arespondent and that the loan account was not completely settled.

Section 29 ol tt-e Act virtua.lly confers powers of a CivilCourt as well as an Executing Court, upon the FinancialCorporations. A person who is entitled to recovir the amount fromanother is required to institute proceedings in a civil court, arld totake.furtJler steps under Order XXI Cpa, if a d.ecree is passed.Special powers are conferred upon the Corporations, underCourt as well as an Executing Court, upon the FinancialCorporations. A person who is entitled to recovir the amount fromanother is required to institute proceedings in a civil court, arld totake.furtJler steps under Order XXI Cpa, if a d.ecree is passed.Special powers are conferred upon the Corporations, underSection 29 of tl.e Act, enabling them to straight away proceed tosell the property, wrthout the necessity of obtining any-decree, orinstituting execution proceedings. Such a pror,ision naturallydeserves to be interp.eted strictly.instituting execution proceedings. Such a pror,ision naturallydeserves to be interp.eted strictly.

. [The ]mention of -very the [opening ]Industrial [words ]Concerns [of ][the ]i.J. [provision makes ]borrower. In contrast,[specific]Section 31 of the Act prescribes procedure, whereunder theUorporatlon can proceed against the properties of the IndustrialConcerns, as well as sureti-s, by approaching the District Court.The Hon'ble Supreme Court had an occasio"n to dea_l with thescope of Sections 29 and 31 of the Act, in Karnataka StateFinancial Corporation's case. The Supreme Court observed asunder:

"14. Section 29 of tbe Act nowhere states that thecorporation can proceed against the surety even if someproperties are mortgaged or hypothecated Ly it. ,I'tre rigtrtproperties are mortgaged or hypothecated Ly it. ,I'tre rigtrtof the financial corporation in terms of Section 2S of lheAct must be exercised only on a defaulting party. Therecannot be any default as is envisaged in Siciion-29 bv aAct must be exercised only on a defaulting party. Therecannot be any default as is envisaged in Siciion-29 bv asurety or a guarantor. The liabilities of a surety or iheguarantor to repay the loarr of the principal debtor arisesonly when a default is made by the latter.,;only when a default is made by the latter.,; From this, it is clear that a financial corporation cannot exerciseits powers under Section 29 ol tl.e Act, vis-a_vis the propertiesheld by sureties. Admittedly, the lsr respondent brought theproperties of the petitioner to sale, in exercise of its powers underSection 29, and the same is contrary to the law lard down by theSupreme Court.

1

saJe of On the thisproport of ground, the petitioner,the writ 1n petition favour of is 6,1' allowed, and respondent, ttreisset aside. Resndents 1, 2 and 6 are directed to restore theproperty to the petitioner, within four weeks from today. Thepetitioner shall bentitled to take back the amount deposited withthis court,tncompliance with the interim order, dated18.11.2002. The e shall be no order as to costs.,'

The point1n olved in the present case certainly standsconcluded on acco nt of the judgment delivered by the HonbleSupreme Court ithe case of Karnataka State FinancialCorporation (supra. The Hon'ble Supreme Court has exhaustivelydealt with the sco e of Sections 29 and 31 of the A.P. StateFinancia-l Corporati ns Act (for short, "the Act") and it is evidentthat a Financialorporation calnot exercise its powers underSection 29 of theuis-d-uis the properties held by the suretiesand therefore, theearned Single Judge was certainly [justified ]inallowing the writ p tition. This Court does not find any reason [to]interfere with the oer passed by the learned Single Judge.Accordingly,e writ appeal is dismissed.Miscellaneoupetitions, if any, shall stand closed. Thereshall be no order a to costs SD/.M.RAMANA [KRISHNA]DEPUTY [REGISTRAR]\".'

//TRUE COPY'

SECTION OFFICER

To,

To,l.One CC to [Sri ][lvl ][Ha]SARai [(]SC FOR [APSF]c)Advocate tOPUCI2.One CC [to Sri ][P ][Raj]SripathiRao AdvocatetoPUC]3.One CC to [Sri ][Sadu]leswar[a ][ReddY ][Advocate][ toPUCl]4.Two CD CoPies5.One Spare [CoPY]MBCBS

DATED: [3011212021]

1[$E ][ST4][I4]eJoo14 [tEB ][2022]+ Df.,:

ORDER

WA.No.267 of 2009

DISMISSING THE [WRIT ][APPEAL]

{./

WITHOUT COSTS

D_--