The main legal point established in the judgment is the unfairness and mala fide nature of the sale of mortgaged assets to a family member of the defaulter, highlighting the need for the Corporation to act in accordance with the law and proceed against the responsible party for mismanagement.

1. In this writ petition, the petitioner is aggrieved by the sale order dated 5.10.2001 (Annexure 4) of mortgaged/hypothecated assets of M/s Shree Ram Ultra Modern Rice Mills, Konar, Rohtas to son of one of its partners, who, according to the petitioner, by force had taken over the management of the firm at a throw away price in collusion with the managing partner and the officials of the respondent-Bihar State Financial Corporation (hereinafter referred to as the Corporation for the sake of brevity) and, further, has sought for direction that the mortgaged assets be advertised for sale so that the same could be sold at a proper price.

2. It seems that initially writ petition was filed by the original partner, namely, Nand Kishore Pandey, who died during the pendency of this writ petition and later on filing of petition for substitution bearing I.A.No. 2002 of 2004, this Court, vide order dated 9.4.2004 allowed his widow to be substituted after deleting the name of the original petitioner.

3. According to the petitioner, the mortgaged assets has been sold at a throw away price to the son of the managing partner of the firm. It is contended that the mortgaged assets is of substantial value and if property is properly advertised and sold, it may fetch substantial higher amount than even Rs. 35 lacs, which will meet the entire dues of the Corporation. It is alleged that mnaging partner purposely put the unit into huge loss which resulted in default in repayment of the loan of the Corporation and then initially purchased the same herself and later in the name of her son (respondent no.3) at a throw away price, which has not even satisfied the entire dues of the Corporation uptill now in collusion with the authorities of the Corporation and created problem for them by getting the notice issued by the Corporation under section 32G of the Act. It is contended that for revival of the sick unit, a rehabilitation project was submitted for consideration before respondent-Corporation, but the same was arbitrarily rejected even though the firm was eligible for rehabilitation assistance as per the guidelines of the Industrial Bank of India and the Reserve Bank of India.

4. A counter affidavit and a supplementary counter affidavit have been filed on behalf of the respondent-Corporation and its Managing Director (respondents no. 1 and 2) and a separate counter affidavit has been filed on behalf of the purchaser (respondent no. 3).

5. According to the case of the respondents, the original petitioner had obtained a loan of Rs.10.70 lacs from the respondent-Corporation between the period 1980 to 1982. It is alleged that since the promoters completely failed to repay the loan amount, they became defaulter and as such after legal notice was served on them on 6.10.1993, the unit was advertised for sale on 26.6.1995 under continuous sale policy of the Corporation. However, it is admitted that one of the partners Smt. Indira Pandey gave offer to purchase the mortgaged assets on a consideration of Rs. 20 lacs, which was forwarded to the Head Office on 27.11.1999 along with valuation of assets estimated by the Branch Level Valuation Team. However, the Central Valuation Team of the Corporation revised the valuation of the assets from 18.11 lacs assessed by the Branch Office to Rs.23.38 lacs. Later, the sale was finalised at the cost of Rs. 23.40 lacs with the said Smt. Indira Pandey and sale order was also issued in her favour, but, subsequently after having learnt that Smt. Indira Pandey was, in fact, one of the promoters of the Mill, the sale order dated 2.5.2000 (Annexure 2) was kept in abeyance. Sri Prashant Kishore son of Smt. Indira Pandey submitted a tender in the Branch Office on 22.8.2000 and offered price of Rs.23.51 lacs, which was forwarded to the Head Office on 22.8.2000. Since the said Prashant Kishore was son of Smt. Indira Pandey, the Corporation after taking legal opinion re-advertised the mortgaged assets on 19.11.2000 in the E