Indian Kanoon - Search engine for Indian Law

On 24.10.1977, a loan of Rs.50 lakhs was sanctioned by the KFC to a firm called Cable India (hereinafter referred to as "the Firm") on hypothecation of land and machinery. In view of consistent failure of the firm to repay the loan, on 11.09.1987, the KFC took over the firm under Section 29 of the State Financial Corporations Act, 1951 (in short "the Act"). On the same day, the Firm filed O.S. No. 2194 of 1987 with I.A. No. 1776 of 1987 for temporary injunction restraining the KFC from taking over the firm.

(b) On 07.10.1988, a notice was published by the KFC in Mathrubhumi Malayalam Daily inviting tenders from intending buyers for purchase of the property. The last date for submission of tender was 31.10.1988. Pursuant to the same, only one bidder, i.e. one Vincent Paul, submitted the tender quoting an amount of Rs. 7.5 lakhs as bid amount and also deposited the earnest money of Rs. 10,000/- as stipulated in the tender notice. On the same day, after discussion and  negotiation between the KFC and Vincent Paul, the KFC issued a letter to the said Vincent Paul expressing its willingness to sell the property for Rs. 8.25 lakhs subject to certain conditions.

6) Though these details have been furnished by the counsel for the KFC during the course of hearing, the fact remains that  the State Government has not framed rules or guidelines for sale of public properties by way of tender or auction. KFC is incorporated under Section 3 of the Act. Section 29 of the Act empowers the KFC to attach and sell the security in discharge of debts. It gives KFC the right to take over possession of the security offered while taking the loan and the right to transfer/sale the same as if KFC is the owner. The money acquired after such transfer/sale of the secured property shall be used in discharge of debts due to KFC including all expenses incurred by it. The residue amount, if any, is to be paid to the person entitled. Section 31 of the Act also provides the same remedy but the procedure goes through the District Judge. In terms of this Section, KFC has to apply to the District Judge in whose jurisdiction the property may lie for an order of sale. However, Section 29 provides for speedy recovery.

10) According to the plaintiff-Vincent Paul, it was agreed to by him as to the offer of Rs. 8.25 lakhs by the KFC and in view of the fact that he has remitted a sum of Rs.10,000/- on 31.10.1988 as Earnest Money Deposit, he was ready to pay the balance amount but the sale was not completed due to failure on the part of the KFC. Learned senior counsel for Vincent Paul submitted that communication dated 31.10.1988 is a concluded contract and no further confirmation is required in this regard and the plaintiff has to pay the balance amount and the KFC has to execute the sale deed and transfer the possession to him. The stand taken by the learned senior counsel for Vincent Paul was totally denied by the KFC by submitting that the communication dated 31.10.1988 is not absolute but subject to confirmation by Vincent Paul within a week. Admittedly on receipt of the communication dated 31.10.1988 from the KFC, the plaintiff had not sent any reply  in the form of confirmation of the said transaction as provided in clause (1) of Ex. A2. In such circumstance, it cannot be contended that there is a concluded contract between the KFC and Vincent Paul. After 31.10.1988, KFC sent another letter on 05.11.1988 intimating the plaintiff that further proceedings can be finalized only after vacating the temporary injunction ordered by the Munsif Court, Thrissur. The said letter has not been disputed by Vincent Paul. Inasmuch as the KFC has agreed to sell the property in question for Rs.8.25 lakhs subject to compliance of three conditions mentioned in Ex. A2, unless the other party to the contract, namely, Vincent Paul conveys his willingness within a week with regard to the terms stipulated therein, he cannot take advantage of mere remittance of a sum of Rs.10,000/- towards Earnest Money Deposit as stipulated in Ex. B1. These aspects have been correctly appreciated by the trial Court and it rightly dismissed the suit filed by Vincent Paul. On the other hand, the High Court, on an erroneous assumption as to the communication dated 31.10.1988 concluded that there was a valid contract and granted a decree for specific performance.