The Court declined to interfere in a disputed question of fact regarding property ownership and emphasized the importance of the representations made by the partnership firm and the legal heirs regarding the property in question.

JUDGMENT :

1. The present writ petition has been filed for a direction to the respondent Corporation to proceed against the mortgaged properties of the petitioner no. 1 firm and not against the properties of the sureties mortgaged to the Corporation to the extent of their shares; and for connected reliefs.

2. The relevant facts of the case in brief according to the petitioners are that the petitioner no. 1 is a partnership firm and was constituted on 14.01.1995 in terms of an agreement among Smt. Raj Kishori Jaiswal (petitioner no. 2), Sri Kailash C. Bhatt and Sri Muneshwar Sharma (since deceased) on 21.06.1995. The respondent-Bihar State Financial Corporation (for short, “the Corporation”) sanctioned a term loan of Rs. 18.30 lakhs to the petitioner no. 1 for setting up an industrial unit for manufacturing of refractories, bricks, etc. The petitioner no. 2 mortgaged her share of property which she inherited upon death of her husband, Subhash Prasad Jaiswal, on 03.12.1989, in order to secure the debt. The said property also devolved upon the other heirs of late Subhash Prasad Jaiswal aforesaid who are not the partners of the petitioner-firm.

3. Mr. Arbind Kumar Jha, learned counsel appearing on behalf of the petitioners, submits that the respondent-Corporation is acting illegally in invoking the property which has been mortgaged by the legal heirs of the said Late Subhash Prasad Jaiswal and not by the partnership firm, petitioner no. 1. It is submitted that a property can be mortgaged only by the title holder and in the instant case, an equitable mortgage dated 07.01.1998 has been made by the legal heirs aforesaid (Annexure-E to the counter affidavit) after they inherited the property upon the death of its owner, late Subhash Prasad Jaiswal, as evident from the recitals therein. The partnership firm was not the title holder of the property and was incapable of creating the mortgage. It is therefore submitted that the respondent-Corporation is illegally proceeding against the property of the legal heirs under Section 29 of the State Financial Corporation Act which can be resorted only in respect of property mortgaged by an industrial concern.

4. Mr. Nikhil Kumar Agrawal, learned counsel for the respondent-Corporation, on the other hand, vehemently resists the writ petition, submitting that the equitable mortgage by the legal heirs had been entered into out of abundant caution so that objection may not be raised in future against the mortgage made by the partnership firm. The said document also narrates that after the death of late Subhash Prasad Jaiswal, the property was mutated in the name of Smt. Raj Kishori Jaiswal, petitioner no. 2. It is pointed out that the present writ petition has been filed by the partnership firm and the said Smt. Raj Kishori Jaiswal, rather than by the other legal heirs who have not raised any objection against the action of the respondents.

5. Attention is invited to the agreement dated 07.01.1998 between the partnership firm (petitioner no. 1) and the respondent- Corporation to submit that the transaction between the firm and the Corporation was clearly one of mortgage as evident from Clause 15 of the agreement and other recitals contained therein. More significantly, reliance is placed on Annexure-D/1 of the counter affidavit which is a letter written by the firm as well as the legal heirs of late Subhash Prasad Jaiswal, confirming the deposit of title deeds to the property and specifically stating as follows -

“We further undertake that the aforesaid assets mortgaged to you are free from all mortgage, charges, encumbrances, all types of liens or any sort whatsoever charges or any distress and are the absolute properties of the concern with all right, title and interest therein which we can and do hereby give you as security in respect of the loan of Rs.18.30 lacs (Rupees Eighteen lacs thirty thousand) only to be lent and advanced to the concern by you and shall remain as such securities till the entire