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2025 Supreme(Online)(ORI) 185
ORISSA HIGH COURT
K.R.MOHAPATRA, Sanjay Kumar Mishra, JJ
PRASANA KU.RATH – Appellant
Versus
OSFC – Respondent
WP(C) 22450 / 2017
Ms. Deepali Mahapatra, Advocate; Mr. B.N. Mohanty, Advocate
The financial corporation cannot auction property not directly linked to a defaulting industrial concern, as per Sections 29 and 31 of the SFC Act.
Headnote:(A) State Financial Corporation Act, 1951 - Sections 29 and 31 - Writ petition challenging auction proceedings initiated by OSFC under Section 29 - Petitioner claims ownership and peaceful possession of land sold to him - Court finds OSFC's action to auction land without jurisdiction as it pertains to a defaulting industrial concern - Petitioner has locus standi to challenge the auction - Action set aside. (Paras 4, 15, 18)
(B) Jurisdiction - The right of the financial corporation to auction property is contingent upon the default of the industrial concern, not the surety or third parties. (Paras 12, 14)
Facts of the case:
The petitioner purchased land from the original owners, who had mortgaged it to OSFC. The petitioner was unaware of any encumbrance and was later threatened with eviction due to an auction notice. (Paras 3, 4)
Findings of Court:
The court ruled that the OSFC's action to auction the land was without jurisdiction and set aside the auction proceedings. (Paras 15, 18)
Issues: Whether the OSFC's action to auction the land under Section 29 of the SFC Act was legal and justified. (Para 11)
Ratio Decidendi: The court held that the financial corporation can only act against the industrial concern in default, not against third parties or properties not directly linked to the default. (Paras 12, 14)
Result: Writ petition allowed, action set aside.
| Table of Content |
|---|
| 1. petitioner purchased land (Para 3) |
| 2. counsel for the petitioner (Para 5 , 6) |
| 3. counsel for the sfc (Para 7 , 8 , 9) |
| 4. court's consideration of law (Para 10 , 11 , 12 , 13 , 14 , 15 , 16 , 17) |
| 5. writ petition allowed (Para 18 , 19 , 20 , 21 , 22) |
JUDGMENT
By the Bench;
1. This matter is taken up through hybrid mode.
2. Petitioner in this writ petition seeks to assail the proceeding initiated by the Odisha State Financial Corporation (for brevity ‘OSFC’) under Section 29 of the State Financial Corporation Act, 1951 (for brevity ‘the SFC Act’).
3. Ms. Mahapatra, learned Counsel for the Petitioner submits that Plot Nos.406 and 1037 under Khata No.1596 to an extent of Ac.0.008 decimal and Ac.0.042 decimal respectively (in total Ac.0.050 decimal) of Mauza-Badabazar, Sankarpur Street, Berhampur in the district of Ganjam (for brevity ‘the case land’) originally belonged to one Snehalata Mishra. By virtue of registered gift deed dated 15th October, 1979, said Snehalata Mishra gifted 50% of the case land from the northern side to her husband namely Sarat Chandra Mishra. Both of them are dead now.
3.1 During their lifetime, both of them vide registered sale deeds dated 21st November, 1986 (Annexure-1) and 22nd November,1986 (Annexure-2) sold the case land to the Petitioner. Since then, the Petitioner is in peaceful possession over the case land exercising his right, title and interest thereon. Since the kisam of the case land was Gramakantha Parambok, it was settled in favour of the Petitioner vide order dated 30th January, 2017 in GK Lease Case No.13 of 2016. Since then, the Petitioner is paying land revenue in respect of the case land. The Petitioner has his residential house thereon, wherein he is residing with his family members. Prior to alienation of the case land in favour of the Petitioner, a part of the case land, which was gifted by late Snehalata Mishra in favour of her husband, was mortgaged with the OSFC to avail financial assistance for running an Industrial Concern namely M/s. Kishore Traders (Printing Press).
3.2 At the time of purchase, the Petitioner was given to understand that the original title deed in respect of the case land was with the OSFC. However, the loan dues have already been repaid by the borrower (Industrial Concern). The borrower namely late Sarat Chandra Mishra was awaiting clearance certificate from the OSFC at the time of sale.
3.3 The Petitioner had also applied for encumbrance certificate, in which ‘no encumbrance’ was shown in respect of the case land. Thus, in good faith, the Petitioner purchased the case land on payment of consideration amount and was delivered with possession.
3.4 When a matter stood thus, the Petitioner came across a news publication dated 17th October, 2017 in Odia daily ‘The Samaj’ (Annexure-10), wherein land measuring an area of Ac.0.050 decimal out of the case land was put to auction sale. Thus, finding no other alternative, this Writ Petition was filed.
4. It is further submitted by Ms. Mahapatra, learned Counsel for the Petitioner that if the case land, as aforesaid, is put to auction, the Petitioner will be evicted from his residential house and thereby will suffer irreparable loss. She relied upon the case of Karnataka State Financial Corporation Vs. N. Narasimahaiah and others reported in (2008) 5 SCC 176, in which it is held as under:-
“19. The heading of Section 29 of the Act states "Rights of financial corporation in case of default". The default contemplated thereby is of the industrial concern. Such default would create a liability on the industrial concern. Such a liability would arise when the Industrial Concern makes any default in repayment of any loan or advance or any installment thereof under the agreement. It may also arise when it fails to meet its obligation(s) in relation to any guarantee given by the corporation. If it otherwise fails to comply with the terms of the agreement with the financial corporation, also the same provisions would a
