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2006 Supreme(MP) 1217
IN THE HIGH COURT OF MADHYA PRADESH
N. K. MODY, J.
Kirit Patel
Versus
M. P. Financial Corporation, Indore and Ors.
W.P. No. 658 of 2006
Decided On : 11-11-2006.
Anwar Khan, for Petitioner; R. S. Laad (for No. 1) and Umesh Gajankush, G. A. (for No. 2), for Respondents.
The main legal point established in the judgment is that the State Financial Corporation has the right to proceed against all properties mortgaged or hypothecated by the borrower and guarantor in favor of the Corporation for the recovery of outstanding loan amounts.
Headnote:
Section 29 - State Financial Corporation Act, 1951 - Summary of Acts and Sections: Section 29 of the State Financial Corporation Act, 1951 was discussed in the judgment. The court analyzed the rights of the Financial Corporation to take over the management of the industrial concern or realize the mortgage property by way of lease or sale. The court also considered the provisions of Section 31 of the Act, which provides for a speedy and summary remedy.
Fact of the Case:
The petitioner's property was being proceeded for sale under Section 29 of the State Financial Corporation Act, 1951. The petitioner contested, claiming that the property was not under a legal mortgage and therefore could not be taken over under Section 29 of the Act.
Finding of the Court:
The court found that the petitioner had executed a deed of guarantee and English mortgage without possession, mortgaging the property in question. The court also noted that the Corporation had the right to take over the management or possession of the property pledged, mortgaged, hypothecated, or assigned to the Financial Corporation under Section 29 of the Act.
Issues: The main issue was whether the property of the petitioner, not under a legal mortgage, could be proceeded under Section 29 of the State Financial Corporation Act, 1951.
Ratio Decidendi: The court relied on the provisions of Section 29 of the Act and previous case law to determine that the Corporation had the right to proceed against all properties mortgaged or hypothecated by the borrower and guarantor in favor of the Corporation for the recovery of outstanding loan amounts.
Final Decision: The petition was dismissed by the court, concluding that no illegality had been committed by the respondents in taking steps against the petitioner under Section 29 of the Act.
2. Short facts of the case are that respondent No. 1 has published a public notice for sale of plot No. 50-B, Amrat Palace Colony, Opposite Bombay Hospital, Indore in "Dainik Bhaskar" newspaper on 5-1-2005. It is alleged that since the plot belongs to the petitioner, therefore, objections were filed wherein it was specifically mentioned that petitioner has never given any guarantee on behalf of M/s. Sonu Ice Factory and never mortgaged the said plot with respondent No. 1. It was alleged that no demand was made from the petitioner. Petitioner also prayed for supply of guarantee/mortgage-deed, if any. Further case of the petitioner is that vide reply dated 8-2-2005 petitioner was informed by the respondent No. 1 that an equitable mortgage-deed for the security of Rs. 6,00,000/- financed to respondent No. 3 was executed by the petitioner on 30-1-1997 but the copies of the same was not supplied to the petitioner. It was alleged that again public notice was issued in "Nai-Duniya" newspaper on 21-1-2005 for sale of the said plot of petitioner along with other properties. Again objections were submitted by petitioner on 24-10-2005 but of no avail. It is alleged that vide letter dated 25-11-2005 respondent No. 1 informed that a sum of Rs. 3,27,000/- is outstanding against respondent No. 3. It was also informed that offer of purchase has been received in the office of respondent No. 1 for the said property for Rs. 2,22,221/-. Petitioner alleged that valuation of property is of Rs. 4,00,000/-. It is alleged that since petitioner has neither executed guarantee-deed nor mortgaged the property, therefore, the property which belongs to the petitioner cannot be taken over under Section 29 of the Act.
3. Reply has been filed by the respondent No. 1 wherein the allegation made in the petition has been denied. It is alleged that the respondent No. 3 M/s. Sonu Ice Factory was granted term loan amounting to Rs. 5,00,000/- and soft loan amounting to Rs. 1,00,000/- which was disbursed in the year 1996. On 30-1-1997 petitioner executed a deed of guarantee as well as English mortgage without possession, inter alia mortgaging plot No. 50-B, Amrat Palace Colony, Indore. Copies of the deed of guarantee and English mortgage are annexed as R/1 and R/2. It is further alleged that deed of guarantee was duly attested by Notary Public. Similarly, the English mortgage without possession was also registered with the Sub-Registrar, Indore which bears Registration No. A-1/3215KA. It is alleged that respondent No. 3 failed to repay the said loan in accordance with the agreed repayment schedule, as such on 20-11-2002 a legal notice was issued to the respondent No. 3 as well as to the petitioner. In spite of receipt of said notice principal borrower and guarantor did not chose to liquidate their liability, therefore, in exercise of powers conferred under section 29 of the Act, the respondent No. 1 took over the mortgage assets from the principal borrower on 15-4-2004. It is submitted that in view of the lesser realizable value of the main security on 21-12-2004 the respondent No. 1 also took over the plot No. 50-B, Amrat Palace Colony, Indore. It is alleged that after taking over the main security, the same was sold on 29-9-2005 for a sale consideration of Rs. 3,25,000/- in favour of Anil Khandelwal. Further case of the respondent No. 1 is that the tenders were invited from the prospective purchasers for co-lateral security. It is alleged that respondents received 5 offers, out of which highest offer was of Rs. 2,22,221/-. It is alleged that the petitioner was informed vide letter dated 25-11-2005 and was requested to submit a better offer, if any. Since better offer was not received, therefore
