The main legal point established in the judgment is that the Corporation's actions in the sale of the mortgaged property, including the acceptance of the balance amount after 92 days without forfeiting the earnest money, constituted statutory violations and unfair treatment of the appellant, leading to the setting aside of the sale.

K.K.SASIDHARAN, J.

1. The legality and correctness of the sale of mortgaged property made by the State Finance Corporation for an amount less than the market value indicated in the Valuation Certificate prepared by the Registered Valuer, without fixing the reserve price, rejecting the request made by the borrower to pay the amount quoted by the successful bidder even before the payment of 90% of the balance consideration and thereafter, belatedly accepting the balance amount from the successful bidder without forfeiting the earnest money in accordance with the auction condition, is the core question involved in this writ appeal.

CONSPECTUS OF FACTS :-

2. The appellant was granted financial assistance by the Tamil Nadu Industrial Investment Corporation [hereinafter referred to as the Corporation] during the year 1994. The immovable property which is the subject matter of the present litigation was given as security. The appellant was running a spinning mill and due to market recession, they sustained severe loss and as a result, the loan installments were not paid as per the agreement. The Corporation agreed to settle the account by way of one time settlement. As per the terms of settlement, the unit was expected to pay the entire amount by 1 January 2004. Since one time settlement was not honoured in its entirety, the Corporation took possession of the unit on 4 December 2006. The Corporation, through an authorized valuer, valued the property. The valuer fixed the market value at Rs.156.43 lakhs. Subsequently, the property was sold in favour of third respondent for an amount below the market value.

3. The appellant approached the Corporation to pay the bid amount quoted by the successful bidder. However, the request was turned down. The third respondent failed to pay the balance consideration less EMD within the mandatory period of thirty days as stipulated in the auction notification and the order of confirmation. Even then, the successful bidder was permitted to pay the balance of 90% after 92 days and sales certificate was issued. The value of the property was more than Rs.2.50 crores as on the date of sale. Therefore, the appellant was constrained to file the writ petition challenging the sale proceedings. The successful bidder was given possession of the property subject to the result of writ petition.

4. Before the writ court, the Corporation filed a counter wherein it was contended that ample opportunity was given to the appellant to settle the matter. The Corporation showed sufficient indulgence to the appellant by granting waiver. Even then, no action was taken to pay the agreed amount. Therefore, the Corporation was constrained to take over the unit under Section 29 of the State Financial Corporation Act. Thereafter, the property was sold in public auction. The Corporation denied the allegation regarding collusion, as according to them, only by way of a transparent procedure, the property was sold. The auction purchaser remitted the entire bid amount on 2 February 2010 and the unit was handed over to him on 13 February 2010.

5. The third respondent (auction purchaser) filed a counter wherein it was contended that he was a bona fide purchaser for value and consideration. He has also deposited the amount due to the Sales Tax Department besides incurring an expenditure of Rs.12,00,000/- for registration of sale deed. According to the third respondent, the Corporation has not committed any illegality in the matter of sale.

6. The learned single Judge negatived the contentions primarily on the ground that the appellant has not repaid the amount within the time granted by the Corporation and as such, it was not open to them to challenge the auction proceedings. The challenge regarding the failure to fix the minimum upset price was negatived on the ground that the same is not likely to be fetched in the auction, meaning thereby, it is not an essential requirement. Accordingly, the writ petition was dismissed.