The court clarified the rights of the Financial Corporation in case of default under Section 29 of the State Financial Corporation Act 1951 and upheld the auction based on the property being the industrial concern's.

(Prayer: Writ Petition filed under Article 226 of the Constitution of India for issuance of a Writ of Certiorari, to call for the records pertaining to the impugned Auction Notice in TIIC:MDU:SRB:LAO: (F-244):2008-09 dated 01.09.200 on the file of the respondent No.1 and Serial No.13 in Advertisement No.MDU/RO/2008-2009/07 dated 01.09.2008 and consequently quash the notice and the Sale Deed dated 13.04.2009 executed by the respondent No.2 illegal.)

1. The instant writ petition has been filed challenging the auction notice dated 01.09.2008 issued by the first respondent and consequently to quash the same as well as the sale deed dated 13.04.2009 executed by the second respondent.

2. According to the petitioner, he is the proprietor of Shri Vinayaga Industries, Paramakudi and one of the partners of S.B. Industries, Paramakudi. According to him, he was granted two loan facilities. One a term loan for a sum of Rs.10,00,000/- in favour of Shri Vinayaga Industries, Paramakudi and another loan for a sum of Rs.19.90 lakhs in favour of S.B. Industries, Paramakudi. According to the petitioner, as collateral security towards the repayment of the aforesaid loans, the property belonging to the petitioner's father Athilingampillai was given. Since the petitioner committed default in the repayment of the loan, the first respondent brought the mortgaged property for sale exercising the power available to them under Section 29 of the State Financial Corporation Act 1951. The auction notice dated 01.09.2008 was issued by the first respondent under Section 29 of the State Financial Corporation Act 1951. The petitioner has challenged the auction notice in this writ petition on the ground that only the property of the industry concerned can be brought for sale by the first respondent under Section 29 of the State Financial Corporation Act 1951 and not the property which has been given as a collateral security.

3. A counter affidavit has been filed by the first and second respondents before this Court wherein, they have stated that the petitioner is a chronic defaulter in the repayment of the loans availed by S.B.Industries and Shri Vinayaga Industries, in which he is the Partner and Proprietor respectively. According to them, in view of the default, exercising the power available to them under Section 29 of the State Financial Corporations Act 1951, the property mortgaged by late Athilingampillai, the father of the petitioner was taken possession on 02.11.2004. Even after taking possession of the property, they offered interest concessions to the petitioner on various occasions but the petitioner did not come forward to settle the loan. They have stated that in the auction conducted on 19. 09.2008, in respect of the subject property, the third respondent submitted a bid for a sum of Rs.14,50,000/-. It is also stated in the counter affidavit that the third respondent had remitted the bid amount and took delivery of the property from the first respondent on 17.03.2009. Thereafter, according to the first and second respondents, a Deed of Conveyance was also executed by them in favour of the third respondent on 13.04.2009. The amount realised in auction has been credited to the loan accounts and even after adjustment of the sale proceeds, according to the first respondent there is still a balance of Rs.1,75,31,000/- payable by the petitioner to the first respondent as on 15.06.2009.

4. It is also stated in the counter that the petitioner is bent upon causing obstruction to the recovery of loan. According to them, in the year 1997, the petitioner obtained a power of attorney from his father late Athilingampillai and obtained the loan from corporation Bank, Paramakudi suppressing the earlier mortgage in favour of first respondent. According to the first and second respondents, the petitioner illegally induced the Commercial Tax Officials to initiate recovery proceedings against the same property for obstructing the loan recovery. According to the