The doctrine of election is a fundamental principle in law that typically prevents a party from pursuing two inconsistent remedies for the same relief. However, its applicability becomes nuanced when statutory provisions explicitly provide for multiple remedies with differing scopes and objectives. The case of A.P. State Financial Corporation v. Gar Re-Rolling Mills & Another [(1994) 2 SCC 647] is a landmark judgment by the Supreme Court of India that addresses the interplay between the doctrine of election and the remedies available under Sections 29 and 31 of the State Financial Corporations Act, 1951 (the Act).

The Court examined whether a State Financial Corporation (SFC), after initiating proceedings under Section 31 and obtaining an order, could abandon those proceedings and invoke Section 29 to recover its dues without being barred by the doctrine of election. This case study explores the factual and procedural background, the issues involved, the submissions of the parties, the judicial reasoning, and the law settled, with a specific focus on the doctrine of election.

Detailed Factual Background:
The case involves two consolidated civil appeals: Civil Appeal No. 3689 of 1987 (A.P. State Financial Corporation v. Kota Subba Reddy and Others) and Civil Appeal No. 3216 of 1988 (A.P. State Financial Corporation v. Gar Re-Rolling Mills and Another). Both appeals arose from disputes between the Andhra Pradesh State Financial Corporation (the Corporation) and defaulting industrial concerns that had borrowed loans and failed to repay them.

In Civil Appeal No. 3689 of 1987, the respondent, Kota Subba Reddy, borrowed Rs 99,500 from the Corporation on December 27, 1966, to manufacture agricultural implements, securing the loan with a mortgage deed. The respondent defaulted on repayments, prompting the Corporation to file an application (O.P. No. 211 of 1969) under Section 31 of the Act before the District Judge, Guntur, seeking recovery of Rs 1,09,020.19 with interest. On September 7, 1971, the District Judge allowed the petition but reduced the future interest rate from 8.5% to 6%. The respondent appealed to the Andhra Pradesh High Court, which stayed execution on March 1, 1973, contingent on the respondent depositing one-fourth of the amount due and furnishing security.

The respondent failed to comply, and on March 5, 1975, the High Court dismissed the appeal and allowed the Corporation's cross-objections, restoring the 8.5% interest rate. The Corporation also filed a suit (O.S. No. 13 of 1974) to enforce the personal liability of the respondent and his guarantor, which was decreed. However, the respondent evaded enforcement by relocating the business, rendering it untraceable. Consequently, the Corporation invoked Section 29, issuing a newspaper advertisement for the sale of the respondent's concern and accepting a tender of Rs 2,05,000. The respondent challenged this action through Writ Petition No. 235 of 1982, alleging that the Corporation, having pursued Section 31, could not invoke Section 29.

In Civil Appeal No. 3216 of 1988, M/s Gar Re-Rolling Mills borrowed Rs 2,94,000 on November 10, 1970, for its re-rolling mills business, executing a mortgage deed. The respondent defaulted on repayments, leading the Corporation to issue a sale advertisement under Section 29. The respondent filed Writ Petition No. 4187 of 1980, challenging the Section 29 action, and obtained a stay.

The High Court dismissed the petition on December 14, 1981, upholding the Corporation's action. The Corporation accepted a tender from M/s Bhagchandka Brothers, who took possession of the property. The respondent appealed to a Division Bench, which, relying on the Full Bench decision in the Kota Subba Reddy case, held that the Corporation could not invoke Section 29 after pursuing Section 31.

• Detailed Procedural Background:
  • In Civil Appeal No. 3689 of 1987, the Corporation's application under Section 31 resulted in an order on September 7, 1971, which the respondent challenged in the High Court.
  • The High Court's dismissal of the appeal and the respondent's failure to comply with conditional stay orders led the Corporation to pursue alternative recovery measures.
  • After failing to enforce the decree against the respondent's personal liability due to the respondent's relocation, the Corporation invoked Section 29.
  • The respondent's writ petition (No. 235 of 1982) was referred to a Full Bench of the Andhra Pradesh High Court due to conflicting bench decisions on Section 29's vires.
  • The Full Bench, without addressing the vires, held that the Corporation could not invoke Section 29 after obtaining relief under Section 31, allowing the writ petition.
  • In Civil Appeal No. 3216 of 1988, the Corporation's attempt to sell the respondent's property under Section 29 was challenged in Writ Petition No. 4187 of 1980.
  • The Single Judge dismissed the petition, affirming the Corporation's right to proceed under Section 29.
  • The Division Bench, following the Full Bench decision in the Kota Subba Reddy case, reversed the Single Judge's order, prompting the Corporation to appeal to the Supreme Court.
  • The Supreme Court granted special leave in both cases to resolve the common legal question: whether the Corporation could invoke Section 29 after obtaining an order under Section 31 without executing it, particularly in the context of the doctrine of election.
• Issues Involved in the Case:
  • Whether the doctrine of election barred the Corporation from invoking Section 29 of the Act to recover dues after initiating proceedings and obtaining an order under Section 31, which it subsequently abandoned.
• Appellant (A.P. State Financial Corporation):
  • The Corporation argued that Sections 29 and 31 offer distinct remedies and the doctrine of election does not apply when remedies differ in scope.
  • Section 29 provides a self-contained mechanism for takeover and sale without court intervention, making it broader and faster.
  • Section 31 involves court-supervised actions like property attachment or management transfer.
  • The phrase "without prejudice to the provisions of Section 29" in Section 31 preserves the Corporation's right to resort to Section 29 even after using Section 31.
  • The Corporation may abandon Section 31 at any stage and proceed under Section 29 if recovery seems impractical.
  • Simultaneous pursuit of both remedies is not allowed, but sequential pursuit is lawful.
  • Cited: Gujarat State Financial Corporation v. Natson Mfg. Co. (P) Ltd., (1979) 1 SCC 193.
• Respondents' Submission:
  • The respondents argued that the doctrine of election applied and barred the Corporation from invoking Section 29 after proceeding under Section 31.
  • They contended both sections are alternative remedies for the same relief and election binds the Corporation to its initial choice.
  • They cited the Full Bench decision in the Kota Subba Reddy case to argue that pursuing Section 31 exhausts the Corporation's right to invoke Section 29.
  • Claimed the Corporation's abandonment of Section 31 was arbitrary and deprived them of judicial recourse.
• Detailed Discussion on Judgments and Citations:
  • Gujarat State Financial Corporation v. Natson Mfg. Co. (P) Ltd. (1979) 1 SCC 193; AIR 1978 SC 1765:
    • Held that Section 31 is not a monetary claim but akin to attachment in execution proceedings.
    • Supported the Corporation's right to use Section 29 even after Section 31, reinforcing their distinct nature.
  • Eastern Book Company v. D.B. Modak (2008) 1 SCC 1:
    • Cited in metadata to affirm copyright in SCC publications; not substantively discussed.
• Detailed Reasoning and Analysis of Judge:
  • Distinct Scope of Sections 29 and 31: Section 29 is a broader, self-executing remedy, while Section 31 involves court intervention and is akin to execution proceedings.
  • Interpretation of "Without Prejudice" Clause: Section 31's "without prejudice" clause preserves the right to use Section 29, allowing abandonment of Section 31.
  • Inapplicability of Doctrine of Election: The Court held the doctrine doesn't apply when remedies differ in scope and purpose.
  • Equitable Jurisdiction under Article 226: Courts should not assist defaulters who evade recovery efforts; equity lies with enforcing legitimate claims.
  • Limits on Simultaneous Pursuit: Simultaneous use of both Sections for the same relief is not permitted; sequential use is acceptable if the earlier is abandoned.
• Application to Facts:
  • In Civil Appeal No. 3689 of 1987, the respondent's relocation frustrated enforcement of Section 31, justifying the shift to Section 29.
  • In Civil Appeal No. 3216 of 1988, the respondent's delaying tactics and non-compliance justified the Corporation's use of Section 29.
• Final Decision:
  • The Supreme Court allowed both appeals, overturning the High Court's judgments.
  • It upheld the Corporation's right to invoke Section 29 after abandoning Section 31.
  • Costs of Rs 5,000 were awarded in each appeal due to the respondents' dilatory conduct.
• Law Settled in the Case:
  • Non-Applicability of Doctrine of Election: Remedies under Sections 29 and 31 differ in scope; election does not bar switching remedies.
  • Preservation of Section 29 Rights: Section 31's language ensures Section 29 remains available even after initiating Section 31 proceedings.

Case Title: A.P. State Financial Corporation Vs. Gar Re-Rolling Mills and Another: Date of Order: February 10, 1994:Case No.: Civil Appeal No. 3216 of 1988:Citation: (1994) 2 SCC 647:Name of Court: Supreme Court of India:Name of Hon'ble Judges: Kuldip Singh and Dr. A.S. Anand, JJ.

Disclaimer: The information shared here is intended to serve the public interest by offering insights and perspectives. However, readers are advised to exercise their own discretion when interpreting and applying this information. The content herein is subjective and may contain errors in perception, interpretation, and presentation.

Written By: Advocate Ajay Amitabh Suman, IP Adjutor - Patent and Trademark Attorney
Email: ajayamitabhsuman@gmail.com, Ph no: 9990389539