Case Note & Summary
The petitioner, SICOM Limited, a financial institution under the State Financial Corporation Act, 1951, filed a petition under Section 31(1)(aa) of the Act against the respondents, who were guarantors of a loan advanced to Sanjivani Agro Industries. The loan of over Rs.110 lacs was sanctioned in February 1993 and secured by a mortgage deed dated 16.8.1993. The company defaulted, and the petitioner sought to enforce the guarantee against the respondents. The respondents raised objections, including that the petition was not maintainable against guarantors and that the claim was barred by limitation. The court analyzed the provisions of Section 31(1)(aa) and held that it expressly allows proceedings against guarantors. On limitation, the court applied Article 137 of the Limitation Act, 1963, and found that the right to apply accrued when the loan became due and the company defaulted, and the petition was filed within three years. The court allowed the petition and directed the respondents to pay the outstanding amount.
Headnote
A) State Financial Corporation Act, 1951 - Section 31(1)(aa) - Enforcement of security against guarantors - The petitioner, a financial corporation, advanced a loan to a company which defaulted. The guarantors executed personal guarantees. The court held that the petition under Section 31(1)(aa) is maintainable against the guarantors as they are jointly and severally liable. The court also held that the claim is not barred by limitation as the cause of action arose within three years of filing. (Paras 1-10) B) Limitation Act, 1963 - Article 137 - Applicability to proceedings under SFC Act - The court held that the period of limitation for filing a petition under Section 31(1)(aa) is three years from the date when the right to apply accrues. In this case, the right accrued when the loan became due and the company defaulted, and the petition was filed within time. (Paras 5-8)
Issue of Consideration
Whether the petition under Section 31(1)(aa) of the State Financial Corporation Act, 1951 is maintainable against the guarantors and whether the claim is within limitation.
Final Decision
The court allowed the petition and directed the respondents (guarantors) to pay the outstanding loan amount to the petitioner.
Law Points
- Section 31(1)(aa) of the State Financial Corporation Act
- 1951
- Joint and several liability of guarantors
- Enforcement of security interest against guarantors
- Limitation for proceedings under SFC Act
