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Gajraj Jain vs State Of Bihar & Ors on 7 May, 2004 cites

M/S S.J.S. Business Enterprises (P) Ltd vs State Of Bihar And Ors on 17 March, 2004

In the case of M/s S.J.S. Business Enterprises (P) Ltd. (supra), it has been held that the financial corporation, in the matter of sale under section 29, must act in accordance with the statute and must not act unreasonably. In this case, the corporation fails on both the counts. It has neither complied with the provisions of sub- sections (1) and (4) of section 29, nor has it acted fairly. The test of reasonableness has been laid down in the above judgment in which it is held that reasonableness is to be tested against the dominant consideration to secure the best price. Value or price is fixed by the market. In the case of going concern, one has to value the assets shown in the balance sheet (Valuation of Real Property by S. Datta page 198). In our view, if the object of section 29 of the Act is to obtain the best possible price then the corporation ought to have called for the valuation report. This has not been done. There is no inventory of assets produced before us. The mortgaged assets of the company could be sold on itemized basis or as a whole whichever is found on valuation to be more profitable. No particulars in that regard have been produced before us. If publicity and maximum participation is to be attained then the bidders should know the details of the assets (or itemized value). In the absence of the proper mechanism the auction sale becomes only a pretence. Further, in this case, the corporation advanced Rs.90 lacs to the company. At that time, it must have valued the assets. No such report has been produced. Lastly, in this case, the price of the assets is pegged to the dues of the corporation and the Central Bank of India. The assets are agreed to be sold to respondent no.4 not for the market price but against repayment of dues of the corporation plus a promise to discharge the liability of Central Bank of India. Therefore, the corporation, respondent no.2, has not acted reasonably. It has not taken any steps to secure the best price. In fact it has failed to protect the interest of Central Bank of India, which is having the second charge on the assets transferred to respondent no.4 as well as the mortgagor which would be entitled to the balance of the sale proceeds, if any. It was contended that as the bids were withdrawn, the offer of respondent no.4 was accepted. Even assuming for the sake of argument, that there were no offers except the offer of respondent no.4, it shows that value of the assets was Rs.198.85 lacs [i.e. Rs.28.85 lacs + Rs.170 lacs). No reason has been given why respondent no.2 did not insist of downright payment of Rs.198.85 lacs.
Supreme Court of India Cites 9 - Cited by 326 - R Pal - Full Document

Mahesh Chandra vs Regional Manager, U.P. Financial ... on 12 February, 1992

Doubtless some of the restrictions placed on State Financial Corporations exercising their powers under Section 29 of the State Financial Corporation Act, as prescribed in Mahesh Chandra v. Regional Manager, U.P. Financial Corpn. 1993 (2) SCC 279, are no longer in place in view of the subsequent decision in Haryana Financial State Corporation v. Jagdamba Oils Mills.
Supreme Court of India Cites 17 - Cited by 278 - K Ramaswamy - Full Document

Haryana Financial Corporation & Anr vs M/S Jagdamba Oil Mills & Anr on 28 January, 2002

Doubtless some of the restrictions placed on State Financial Corporations exercising their powers under Section 29 of the State Financial Corporation Act, as prescribed in Mahesh Chandra v. Regional Manager, U.P. Financial Corpn. 1993 (2) SCC 279, are no longer in place in view of the subsequent decision in Haryana Financial State Corporation v. Jagdamba Oils Mills.
Supreme Court of India Cites 11 - Cited by 526 - A Pasayat - Full Document

Sri Rajah Row Venkata Mahipaty ... vs Sri Rajah Venkata Kumara Mahipaty Surya ... on 19 March, 1915

Under section 29(1) of the 1951 Act, where any industrial concern under a liability to the financial corporation makes any default in repayment of loan, the corporation is empowered to take over possession of the industrial concern and realize the property pledged, mortgaged, hypothecated or assigned to the corporation. Under section 29(4), all costs, charges and expenses incurred by the corporation as incidental to such realization of the property pledged, hypothecated or mortgaged shall be recovered firstly from the industrial concern and the balance shall be paid to the person entitled thereto. As stated above, a charge consists in the right of a creditor to receive the payment out of the proceeds of the realization of property or fund charged with the debt. A bare reading of sub- sections (1) & (4) of section 29 shows that it is similar to section 69 of T.P. Act under which it is stipulated that a mortgagee exercising the power of sale is a trustee of the surplus sale proceeds and after satisfying his own charge he holds the surplus for the subsequent encumbrancers and ultimately for the mortgagor [See: Rajah Kishendatt Ram v. Rajah Mumtaz Ali Khan reported in [Vol. VI Indian Appeals 145 (PC)]. Section 29(1) contemplates, therefore, a sale for distribution of sale proceeds and not a sale for distribution of property charged with the debt. It also implies that the first charge holder must act in a manner which protects not only its own interest but also the interest of the subsequent charge holder and the mortgagor. This in turn implies that the first charge holder is bound to obtain the best possible price for the mortgaged assets and the best possible price must, in the context, mean the fair market value.
Madras High Court Cites 2 - Cited by 20 - Full Document

M..C. Chacko vs State Bank Of Travancore, Trivandrum on 23 July, 1969

In the case of M.C. Chacko v. The State Bank of Travancore, Trivandrum [(1969) 2 SCC 343], it has been held by this Court, that a mere undertaking to discharge an obligation or liability of the debtor may at the highest amount to indemnity, however, it is not enough to charge the property/fund with the debt. Further, according to Mulla and Pullock on Contract Act (XII Edition page 106), contracting parties may confer rights or benefits upon a third party in the form of promise to pay but the third party on whom such right or benefit is conferred by the contract cannot sue under it. Lastly, as stated above, a charge cannot be enforced against a bonafide purchaser for value (See: Law of Mortgage by Ghose page 127).
Supreme Court of India Cites 4 - Cited by 67 - J C Shah - Full Document

Tirumulu Subbu Chetti vs Arunachalam Chettiar on 13 November, 1929

In the case of Subbu Chetti v. Arunachalam Chettiar reported in [AIR 1930 Madras 382], it has been held that when a person transfers property to another and stipulates for payment by the purchaser to a third person, a suit by such person to enforce the stipulation will not lie. In the present case, there is no sale for distribution of sale proceeds in terms of section 29(1). There is no realisation of the property, charged with debt, in terms of sub-sections (1) and (4) of section 29 of the Act. The interest of Central Bank of India and the mortgagor is totally defeated by the impugned arrangement between respondents no.2 and 4. The words "realisation of the property pledged, mortgaged, hypothecated" presupposes realisation of sale proceeds and application/appropriation thereof to liquidate the dues of the paramount charge-holder and from the surplus payment to person(s) entitled thereto. It is for this reason that the best possible price has got to be tried for under section 29 of the Act. In the circumstances, we hold that the impugned agreement of sale as well as the transfer of assets in favour of respondent no.4 are in breach of section 29(1) and section 29(4) of the1951 Act.
Madras High Court Cites 21 - Cited by 39 - Full Document

Narandas Karsondas vs S.A. Kamtam & Anr on 7 December, 1976

Be that as it may, the appellant herein cleared the dues of the corporation on 21.3.2002, before opening of tenders on 22.3.2002, and yet the corporation did not return the assets to the company. Even the tender money deposited by the appellant was returned without any demand from the appellant so that it could be argued by the corporation that the appellant had withdrawn from the auction and therefore the offer of respondent no.4 was accepted. In fact, the document at page 186 shows that appellant refused to collect the earnest money and, therefore, the amount was kept by the corporation in a separate account. Lastly, in the case of Narandas Karsondas v. S. A. Kamtam & Anr. reported in [AIR 1977 SC 774], it has been held that putting of property to auction does not extinguish the right of redemption. Therefore, on 21.3.2002, the company had a right to redeem the assets. It was submitted that the appellant intended to buy the assets in his own name. We do not find merit in this argument. The record shows that the appellant as the director of the company offered to clear the dues of the corporation for which he insisted on the return of the title deeds (transfer papers) of M/s Katihar Flour Mills. In any event, in this case, we are concerned with the conduct of the corporation which was required to act in accordance with section 29 of the 1951 Act and not unreasonably. In this connection, it may further be pointed out that under the public notice inviting tenders, the corporation was obliged to call for matching offers from the directors/promoters/guarantors. The corporation did not call for such offers as its object was to keep out all counter-offers. Lastly, we are satisfied that the impugned agreement dated 26.4.2002 has been entered into without any consideration in favour of Central Bank of India. In conclusion, we may state that in the present case, respondent no.2 corporation has misused its authority and power in breach of law by taking into account extraneous matters and by ignoring relevant matters which has rendered all its acts ultra-vires.
Supreme Court of India Cites 27 - Cited by 236 - A N Ray - Full Document
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