Case Note & Summary
The appellant, Maharashtra State Finance Corporation, a corporation constituted under the State Financial Corporation Act, 1951, sanctioned a term loan of Rs.40,00,000 in 1991 and an additional loan of Rs.7,25,000 in 1992 to the first respondent company, along with seed capital incentive. The respondents, including the company and its directors, filed a suit claiming that the repayment schedule was rescheduled by the appellant's letter dated 24.5.1994 and that the entire loan of Rs.47,25,000 had been repaid with interest. The appellant initiated action under Section 29 of the SFC Act and took possession of the respondent's assets. The respondents sought a temporary injunction to restrain the appellant from taking possession, which the trial court granted by directing status quo until the final decision of the suit. The appellant challenged this order. The High Court considered the submissions and held that the trial court had no jurisdiction to grant the injunction as the civil court's jurisdiction is barred under Section 34 of the SFC Act when the Corporation acts under Section 29. The court noted that the dispute regarding repayment does not give the civil court jurisdiction to interfere with the statutory power of the Corporation. The proper remedy for the respondents is to approach the High Court under Article 226 or 227 of the Constitution. The appeal was allowed, the impugned order was set aside, and the respondents were directed to approach the appropriate forum for relief.
Headnote
A) Civil Procedure - Temporary Injunction - Jurisdiction of Civil Court - State Financial Corporation Act, 1951, Section 29 - The trial court granted status quo order restraining the appellant from taking possession of assets under Section 29 of the SFC Act. The High Court held that the civil court's jurisdiction is ousted when the Corporation acts under Section 29, and the trial court erred in granting injunction without considering the bar under Section 34 of the SFC Act. The appeal was allowed and the status quo order was set aside. (Paras 1-10) B) State Financial Corporation Act - Section 29 - Possession of Assets - Repayment of Loan - The respondents claimed full repayment of the loan as per rescheduled terms, but the appellant disputed this. The High Court noted that the dispute regarding repayment does not give the civil court jurisdiction to interfere with the Corporation's statutory power under Section 29. The proper remedy is to approach the High Court under Article 226 or 227. (Paras 2-10)
Issue of Consideration
Whether the trial court had jurisdiction to grant temporary injunction restraining the appellant from taking possession of assets under Section 29 of the State Financial Corporation Act, 1951, when the respondents claimed full repayment of the loan.
Final Decision
Appeal allowed. Impugned judgment and order dated 17.4.2002 passed by the learned 3rd Joint Civil Judge, Sr.Division, Thane is set aside. The respondents are at liberty to approach the appropriate forum for relief.
Law Points
- State Financial Corporation Act
- 1951
- Section 29
- temporary injunction
- jurisdiction of civil court
- maintainability of suit
- rescheduling of loan
- repayment
- possession of assets
