The main legal point established in the judgment is the authority conferred by Sections 29 and 30 of the State Financial Corporation Act, 1951, and the implications of default in loan repayment on the validity of an e-auction sale notice.

JUDGMENT

Sabyasachi Bhattacharyya, J. - Petitioner No. 1-company is engaged in rice mill business. Petitioner No.2 is a promoter director and petitioner no. 3 an incoming director and shareholder of the company. The respondent, a statutory financial corporation, granted a term loan of Rs. 300 lakh and working capital term loan of Rs. 245.10 lakh to the petitioner no. 1-company on certain conditions, as per a sanction letter dated April 22, 2015.

2. Petitioner no. 1 set up a rice mill, but subsequently failed to repay periodical instalments of the loan, prompting the respondent to issue a notice under Section 29(1), read with Section 30, of the State Financial Corporation Act, 1951 (hereinafter referred to as "the 1951 Act") for recovery of the loan. As evinced from the minutes of a meeting held at the factory premises on February 12, 2020 (Annexure P-8 at page 51 of the writ petition), officials of the respondentcorporation, upon taking an inventory, took over possession of the fixed assets of the unit of petitioner no.1 on as-is-where-is basis, without management and liabilities. Since the unit was found in running condition, physical possession was not taken by affixing padlocks. Officials of petitioner no. 1 were appointed as custodians of the mortgaged/hypothecated assets till any alternative arrangement was made.

3. Meanwhile, petitioner no. 1, by a letter dated February 7, 2020, agreed to pay Rs. 25 lakh within February 10, 2020, a further sum of Rs. 25 lakh within March 15, 2020 and another Rs. 25 lakh within March 31, 2020, totalling Rs. 75 lakh. It was also indicated that petitioner no. 3 would come in as a director of the petitioner no.1- company and will hold 60 per cent share, while the other existing directors will hold the rest 40 per cent shares. Acceptance by the respondent of such induction of petitioner no. 3 was also sought in the letter.

4. However, the payment schedule, as per the letter dated February 7, 2020, could not be adhered to by petitioner no. 1, which paid only Rs. 60 lakh out of the promised Rs. 75 lakh, in the following staggered manner: Rs. 20 lakh on February 11, 2020, Rs. 10 lakh on February 29, 2020 and Rs. 30 lakh on March 31, 2020.

5. On January 7, 2021, e-auction sale notice was published, in respect of various units including the petitioners', by the respondent in newspapers, out of which a Bengali daily having circulation in Kolkata and West Bengal caught the notice of the petitioners. The auction was to be held from January 27, 2021 till January 29, 2021. The specific auction for the unit of petitioner no. 1, which appeared as Lot No. 33 in the list of units to be sold, was to be held on January 29, 2021 (11 am to 3 pm).

6. Being thus aggrieved, the petitioners have challenged the e-auction sale notice by way of the instant writ petition.

7. Learned senior counsel for the petitioners contends that the 1951 Act is a beneficial piece of legislation and ought to be construed leniently in favour of the borrower. Placing reliance on Kerala Financial Corporation v. Vincent Paul and Another, (2011) 4 SCC 171 , counsel submits that, in the said case, the Supreme Court issued certain guidelines for sale of properties in the absence of executive instructions of the State in that regard. Those guidelines, it is argued, ought to be adhered to by the present respondent too, in the absence of similar guidelines being issued by the State of West Bengal.

8. Particular reliance is placed on directions (ii), (iii) and (viii), as appearing in paragraph no. 20 of the report. Those are as follows:

(ii) Before conducting sale of immovable property, the authority concerned shall obtain valuation of the property from an approved valuer and in consultation with the secured creditor, fix the reserve price of the property and may sell the whole or any part of such immovable secured asset by any of the following methods:

(a) by obtaining quotations from the persons dealing with similar secured assets or otherwise