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2005 Supreme(MP) 870
2006(2) JLJ 381
P.K. Jaiswal, J.
Morena Re-rolling and Industrial Development Co. Pvt. Ltd. (M/s.)
v. M.P. Financial Corporation and others .
Writ Petition No. 1338 of 1999;
Decided on 23.8.2005
R.D. Jain with D.P.S. Bhadoriya for petitioner;
J.D. Suryavanshi for respondents No.1 to 3;
Vivek Jain for respondent No.4.
Headnote:(1) State Financial Corporations Act, 1951 -- Ss. 29 and 31 -conjoint reading -- provides two remedies to Corporation in case of default of repayment of loan, etc. -- Corporation has a choice to proceed under either of the provisions -- it can also abandon the proceedings under S. 31 at any stage and initiate proceedings under S. 29.
The question arising consideration in this case is whether the Financial Corporation set up under section 3 of the State Financial Corporation Act (hereinafter referred as "the Act") is entitled to take recourse to the remedy available to it under section 29 of the Act even after having obtained an order or a decree after invoking the provisions of section 31 of the Act, during the pendency of appeal filed by the petitioner against the order passed under section 31 of the Act, but without executing that decree or order? [Para 1
Held: On a conjoint reading of sections 29 and 31, it appears that in case of default in repayment of loan or any instalment or any advance or breach of an agreement, the Corporation has two remedies available to it against the defaulting industrial concern, one under section 29 and another under section 31... Corporation has a right to make the choice whether to proceed under section 29 of the Act or section 31 of the Act, but its rights under section 29 are not extinguished, if it decides to take recourse to the provisions of section 31 of the Act. It can abandon the proceedings under section 31 of the Act at any stage, including the stage of execution, if it finds it more practical, and may initiate proceedings under section 29 of the Act. (1994)2 SCC 647 followed. [Para 9
(2) State Financial Corporations Act, 1951 -- S. 29 -- provides both rights and remedies as also procedure for enforcement of rights -- is a complete Code in itself -- it is open to Corporation to act under it to realise the dues by following procedure prescribed there under. [Para 9
(3) State Financial Corporations Act, 1951 -- Ss. 31 and 29 -- object is to aid Corporation to recover its legitimate dues from defaulting party -- saving clause under S. 31 preserving right under S. 29 is available to the Corporation. [Para 9
(4) State Financial Corporations Act, 1951 -- S. 29 -- possession of unit taken after service of demand notice as per resolution of Board -- is proper compliance. [Para 12
(5) State Financial Corporation Act, 1951 -- S. 29 -- matter of sale -- Corporation must act in accordance with statute-- must secure the best price. (2004)7 SCC 151 and (2004)7 SCC 166 followed. [Para 16
(6) State Financial Corporations Act, 1951 -- S. 29 -- unwarranted opportunities to defaulting industries cannot be given. (2002)3 SCC 496 followed. 1998(1) MPWN 27 and 2003(1) MPU 171 relied on. (1993)2 SCC 279 held overruled. [Para 17
(7) State Financial Corporations Act, 1951 -- S. 29 n sale of defaulting unit by Corporation -- no offer by borrower n consideration not possible n action of Corporation should not be interfered with if it is according to the provisions of S. 29 -- judicial review is confined to statutory violation or unfairness. (1995) 1 SCC 161 and (1996)5 SCC 65 distinguished. (2005)4 SCC 456, (1993)2 SCC 279 and (1993)2 SCC 299 followed. [Paras 15 and 19
(8) Constitution of India -- Art. 226 -- matter between Financial Corporation and its debtor -- Court has no say except on statutory violation and unfairness -- it cannot act as appellate authority. (2005)4 SCC 456, (1993)2 SCC 279 and (1993)2 SCC 299 followed. (1996)5 SCC 65 and (1995)1 SCC 161 distinguished. [Paras 19 & 15
¼1½ jkT; foÙkh; fuxe vf/kfu;e] 1951 && /kkjk 29 rFkk 31 && la;qDr ikB && _.k vkfn ds izfrlank; esa O;fRkØe ds ekeys ds fuxe dks nks mipkj miyC/k gSa og fdlh Hkh izØe ij /kkjk 31 ds v/khu dk;Zokgh dk ifjR;kx Hkh dj ldrk gS rFkk /kkjk 29 ds v/khu dk;Zokgh vkjaHk dj ldrk gSA
bl ekeys esa fopkjkFkZ mn~Hkwr iz‘u ;g gS fd D;k jkT; foÙkh; fuxe vf/kfu;e ¼,rfLeu~i‘pkr~ **vf/kfu;e** ds :i esa fufnZ"V½ dh /kkjk 3 ds v/khu LFkkfir foÙkh; fuxe] vf/kfu;e dh /kkjk 31 ds v/khu ikfjr vkns‘k ds fo#) ;kph }kjk Qkby dh xbZ vihy ds yacu ds nkSjku vf/kfu;e dh /kkjk 31 ds mica/kksa dk vkJ; ysus ds i‘pkr~ vkns‘k ;k fMØh vfHkizkIr djus ds mijkar Hkh] ijarq ml fMØh ;k vkns‘k ds fu"iknu ds fcuk] vf/kfu;e dh /kkjk 29 ds v/khu mls miyC/k mipkj dk vkJ; ysus dk gdnkj gS \ ¿ iSjk 1À
vfHkfu/kkZfjr % /kkjk 29 vkSj 31 ds la;qDr ikB ls izrhr gksrk gS fd _.k ;k fdlh fdLr ;k fdlh vfxze /ku ds izfrnk; esa O;frØe vFkok djkj ds miyC/k gSa] ,d /kkjk 29 ds v/khu rFkk nwljk /kkjk 31 ds v/khuA -----fuxe dks ;g pquus dk vf/kdkj gS fd vf/kfu;e dh /kkjk 29 ds v/khu dk;Zokgh djs ;k /kkjk 31 ds v/khu] ijarq ;fn og vf/kfu;e dh /kkjk 31 ds mica/kks dk fuokZfir ugha gksrsA ;fn mlds fu"d"kZ esa ,slk djuk vf/kd O;kogkfjd gS rks og fu"iknu ds izØe lfgr fdlh Hkh izØe ij vf/kfu;e dh /kkjk 31 ds v/khu dk;Zokgh dk ifjR;kx dj ldrk gS rFkk vf/kfu;e dh /kkjk 29 ds v/khu dk;Zokgh vkjaHk dj ldrk gSA ¼1994½2 ,l lh lh 647 vuqlfjrA ¿ iSjk 9À
¼2½ jkT; foÙkh; fuxe vf/kfu;e] 1951 && /kkjk 29 vf/kdkjksa vkSj mipkjks ds lkFk vf/kdkjksa ds izorZu ds fy, izfØ;k Hkh micaf/kr gS && Lo;aiw.kZ lafgrk gS && fuxe rn/khu fofgr izfØ;k dk vuqlj.k dj ‘kks/; dh olwyh dh dkjZokbZ dj ldrk gSA ¿ iSjk 9À
¼3½ jkT; foÙkh; fuxe vf/kfu;e] 1951 && /kkjk 31 rFkk 29 mn~ns‘; gS O;frdkjh i{k esa vius fof/klEer ‘kks/; olwy djus esa fuxe dh lgk;rk djuk && /kkjk 29 ds v/khu vf/kdkj lajf{kr djus dk /kkjk 31 ds v/khu O;ko`fÙk [kaM fuxe dks miyC/k gSA ¿ iSjk 9À
¼4½ jkT; foÙkh; fuxe vf/kfu;e] 1951 && /kkjk 29 && bdkbZ dk dCtk ek¡x lwpuk dh rkehy ds i‘pkr~ cksMZ ds ladYi ds vuqlkj fy;k x;k && mfpr vuqikyu gSA ¿ iSjk 12À
¼5½ jkT; foÙkh; fuxe vf/kfu;e] 1951 && /kkjk 29 && foØ; dk ekeyk && fuxe dks dkuwu ds vuqlkj dk;Z djuk gksrk gS && vf/kdre dher izkIr djuk gksrh gSA ¼2004½7 ,l lh lh 151 rFkk ¼2004½ 7 ,l lh lh 166 vuqlfjrA ¿ iSjk 16À
¼6½ jkT; foÙkh; fuxe vf/kfu;e] 1951 && /kkjk 29 && O;frdkjh m|ksxksa dks vuko‘;d volj ugha fn, tk ldrsA ¼2002½3 ,l lh lh 496 vuqlfjrA 1998 ¼1½ e-iz ohDyh uksV~l 27 rFkk ¼2003½ 1 ,e ih ,y ts 171 voyafcrA ¼1993½ 2 ,l lh lh 279 myVk x;k vfHkfu/kkZfjr A ¿ iSjk 17À
¼7½ jkT; foÙkh; fuxe vf/kfu;e] 1951 && /kkjk 29 && fuxe }kjk O;frdkjh bdkbZ dk foØ; && m/kkj ysus okys dk dksbZ izLrko ugha && fopkj djuk laHko ugha && fuxe dh dkjZokbZ esa gLr{ksi ugha fd;k tkuk pkfg, ;fn og /kkjk 29 ds mica/kksa ds vuqlkj gS && U;kf;d iqufoZyksdu dkuwuh vfrØe.k ;k v_tqrk rd lhfer gksrk gSA ¼1995½ 1 ,l lh lh 161 rFkk ¼1996½ 5 ,l lh lh 65 izHksfnrA ¼2005½ 4 ,l lh lh 456] ¼1993½ 2 ,l lh lh 279 rFkk ¼1993½2 ,l lh lh 299 vuqlfjrA ¿iSjk 15 ,oa 19À
¼8½ Hkkjr dk lafo/kku && vuq- 226 && ekeyk foÙkh; fuxe vkSj mlds _.kh ds chp && U;k;ky; dkuwuh vfrØe.k vkSj v_tqrk ds vfrfjDr fdlh vU; fcanq ij jk; ugha ns ldrk && vihy izkf/kdkjh ds :i esa dk;Z ugh dj ldrkA ¼2005½4 ,l lh lh 456] ¼1993½ 2 ,l lh lh 279 rFkk ¼1993½2 ,l lh lh 299 vuqlfjrA ¼1996½ 5 ,l lh lh 65 rFkk ¼1995½ 1 ,l lh lh 161 izHksfnrA ¿ iSjk 19 ,oa 15À
1. The question arising consideration in this case is whether the Financial Corporation set up under section 3 of the State Financial Corporation Act (hereinafter referred as "the Act") is entitled to take recourse to the remedy available to it under section 29 of the Act even after having obtained an order or a decree after invoking the provisions of section 31 of the Act, during the pendency of appeal filed by the petitioner against the order passed under section 31 of the Act, but without executing that decree or order? and whether Madhya Pradesh Financial Corporation Limited (hereinafter "MPFC") acted in a bona fide manner in sale of the properties of the petitioner in exercising its right under section 29 of the State Financial Corporations Act, 1951.
2. Petitioner Mis. Morena Re-rolling and Industrial Development Co. Pvt. Ltd. (hereinafter "borrower") borrowed a sum of Rs. 9.42 Lacs out of total sanctioned term loan of Rs. 9.52 Lacs as per sanction letter dated 30.1.1973. The loan amount was disbursed from time to time between 28.2.1973 to 24.10.1981. The borrower accepted all the terms and conditions of the sanctioned letter vide its letter dated 16.2.1973 and had executed a mortgage deed in favour of MPFC on 26.2.1973. As per agreement the loan was payable in twenty half-yearly instalments commencing from 1.9.1975 to 1.3.1985 along with the interest at the rate of 9.25% per annum. The borrower committed defaults in payment of the instalments and up to 1.11.1984 only a sum of Rs. 4,91,195/- was paid. At the request of borrower repayment of instalments was extended. The MPFC extended the period of repayment of loan from time to time. But, the said loan amount was not paid. On 18.6.1984 MPFC issued a notice to the borrower and call upon to pay outstanding amount of Rs. 15,81.502.93. No payment was made, ultimately MPFC filed an application under section 31 of the Act before the District Judge, Morena on 23.4.1985 for recovery of total outstanding loan of Rs. 16,87,608.53. During pendency of the proceedings before the District Judge Morena the borrower deposited a sum of Rs. 9.42 Lacs in the loan account in order to arrive at a compromise as per special condition No. 37. Thereafter negotiations were held for payment of balance amount and interest. But, no final settlement could be arrived which is evident from the extract of recovery committee meeting dated 25.6.1990 (Annexure R-15). The MPFC decided to continue with the case. Final order was passed on 12.9.1997 in an application under section 31 of the Act, by which the borrower was directed to pay the balance amount of Rs. 7,45,306/- (Rs. 16,87,306.00 - Rs. 9,42,000.00) to the MPFC with the interest at the rate of. 15% per annum in terms of the order dated 12.9.1997 (Annexure P-3).
3. Borrower challenged the order dated 12.9.1997 by filing Misc. Appeal No. 499/1997 in which this Court by interim order dated 28.11.1997 directed that the sale in pursuance of auction if held, shall not be confirmed. The borrower also did not clear the dues and, therefore, on 30.3.1999 MPFC took a decision to abandon the proceedings of section 31 of the Act and filed an application for dismissal of MA No. 499/1997 as having been rendered in fructuous. On the same date i.e. on 30.3.1999 the MPFC had taken a decision for taking over the unit of the borrower under section 29 of the Act and the possession of the unit was taken over and intimated the same to the borrower by letter dated 30.3.1999 (Annexure P-4). The MPFC after publishing a notice in the daily newspaper for sale of unit, disposed of the unit for a sum of Rs. 36 Lacs to the respondent No.4 (hereinafter 'purchaser') on 13.8.1999 (Ex.P-1). On 14.8.1999 an agreement was executed between the purchaser and MPFC subject to final decision in Misc. Appeal No. 499/1987. By the said agreement purchaser agreed for transfer of lease deed in their favour from MPAKVN/DIC at their 'own cost and expenses The possession of the unit was handed ov
