Case Note & Summary
The petitioner, SICOM Limited, a financial institution, filed a petition under Section 31(1)(aa) of the State Financial Corporations Act, 1951, seeking enforcement of a mortgage executed by the respondent company Sanjivani Agro Industries and its guarantors. The loan of over Rs.110 lacs was sanctioned in February 1993 and secured by an indenture of mortgage dated 16.8.1993. The respondents, including guarantors, defaulted on repayment. The court examined whether the petition was maintainable against the guarantors and whether it was barred by limitation. The court held that Section 31(1)(aa) permits enforcement of the mortgage against the mortgagor, which includes guarantors who have mortgaged their properties. On limitation, the court applied Article 137 of the Limitation Act, 1963, holding that the right to apply accrues on default, and the petition was filed within three years from the date of default. The court allowed the petition and directed enforcement of the mortgage.
Headnote
A) State Financial Corporations Act, 1951 - Section 31(1)(aa) - Enforcement of Mortgage - Petition under Section 31(1)(aa) is maintainable against guarantors who have mortgaged their properties to secure the loan of the principal debtor. The court held that the provision allows the financial corporation to enforce the mortgage against the mortgagor, who may be the borrower or a guarantor. (Paras 1-10) B) Limitation Act, 1963 - Article 137 - Limitation for Petition under Section 31(1)(aa) - The period of limitation for filing a petition under Section 31(1)(aa) of the SFC Act is governed by Article 137 of the Limitation Act, 1963, which provides a period of three years from the date when the right to apply accrues. The court held that the right to apply accrues when the loan becomes due and the borrower defaults. (Paras 11-15)
Issue of Consideration
Whether the petition under Section 31(1)(aa) of the State Financial Corporations Act, 1951 is maintainable against the guarantors and whether it is barred by limitation.
Final Decision
The court allowed the petitions and directed enforcement of the mortgage against the respondents.
Law Points
- Enforcement of mortgage under Section 31(1)(aa) of State Financial Corporations Act
- 1951
- Liability of guarantors
- Limitation for filing petition under SFC Act
