Case Note & Summary
The petitioner, SICOM Limited, a deemed State Financial Corporation under Section 46 of the State Financial Corporation Act, 1951, filed a petition under Section 31(1)(aa) of the Act for recovery of a loan of Rs. 142 lacs advanced to the first respondent, Zenith Steel Tubes and Industries Ltd., for setting up a factory for manufacturing galvanised pipes. The loan was sanctioned in November 1992 and disbursed on 20.11.1992. A loan agreement was executed on 30.3.1993, and the respondent company created security by hypothecating plant and machinery and creating an equitable mortgage of the factory premises. The second respondent executed a personal guarantee on the same date. The respondent company committed defaults in repayment. The court considered the facts and submissions, and held that the petitioner is entitled to recover the outstanding amount with interest from the respondent company and the guarantor. The court directed that the hypothecated and mortgaged properties may be sold for recovery. The petition was allowed.
Headnote
A) State Financial Corporation Act - Recovery of Loan - Section 31(1)(aa) - Default - The petitioner, a deemed State Financial Corporation, advanced a loan of Rs. 142 lacs to the respondent company for setting up a factory. The respondent company defaulted in repayment. The court held that the petitioner is entitled to recover the outstanding amount with interest from the respondent company and the guarantor, and the property hypothecated and mortgaged can be sold for recovery. (Paras 1-3)
Issue of Consideration
Whether the petitioner, a deemed State Financial Corporation, is entitled to recovery of the loan amount with interest from the respondent company and the guarantor under Section 31(1)(aa) of the State Financial Corporation Act, 1951.
Final Decision
Petition allowed. The petitioner is entitled to recover the outstanding amount with interest from the respondent company and the guarantor. The hypothecated and mortgaged properties may be sold for recovery.
Law Points
- State Financial Corporation Act
- 1951
- Section 31(1)(aa)
- Section 46
- Recovery of loan
- Default
- Guarantor liability
- Hypothecation
- Equitable mortgage
