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1 - 10 of 40 (0.86 seconds)The Securitisation And Reconstruction Of Financial Assets And Enforcement Of Security Interest Act, 2002
Article 226 in Constitution of India [Constitution]
Article 142 in Constitution of India [Constitution]
Section 31 in The Securitisation And Reconstruction Of Financial Assets And Enforcement Of Security Interest Act, 2002 [Entire Act]
Section 29 in The State Financial Corporations Act, 1951 [Entire Act]
Gajraj Jain vs State Of Bihar & Ors on 7 May, 2004
5 1977 AC 1014 = (1976) 3 All ER 665
6 (1947) 2 All ER 680 = (1948) 1 KB 223 (CA)
7
(1995) 2 SCC 754
11
Sri Bankatlal Mandani, Learned Counsel for the petitioner,
would submit that the APSFC could not have proceeded with the
sale without calling upon the petitioners to submit a matching
offer, in the light of the law declared by the Supreme Court, in
S.J.S. Business Enterprises (P) Ltd. v. State of Bihar8; and
Gajraj Jain v. State of Bihar9.
Mahesh Chandra vs Regional Manager, U.P. Financial ... on 12 February, 1992
It is in this context that the Supreme Court observed that
the sale effected in favour of respondent No.6 could not be
sustained; it was axiomatic that the statutory powers, vested in
14
State Financial Corporation, under the State Financial
Corporations Act, must be exercised bona-fide; the presumption
that public officials discharge their duties honestly, and in
accordance with law, may be rebutted by establishing
circumstances which reasonably probabilise the abuse of that
power; in such an event, it was for the officer concerned to explain
the circumstances which were set up against him; if there was no
credible explanation forthcoming, the Court could assume that the
impugned action was improper; some of the restrictions placed on
State financial corporations, exercising their powers under Section
29 of the State Financial Corporations Act, as prescribed in
Mahesh Chandra v. Regional Manager, U.P. Financial Corpn.10
were no longer in place in view of the subsequent decision in
Haryana Financial Corpn.1; however, in overruling the decision in
Mahesh Chandra10, the Supreme Court had affirmed the view
taken in Chairman and Managing Director, SIPCOT v.
Contromix (P) Ltd.11, and had held that, in the matter of sale
under Section 29, the State financial corporations must act in
accordance with the statute, and must not act unfairly i.e.
unreasonably; if they do, their action could be called in question
under Article 226; reasonableness was to be tested against the
dominant consideration to secure the best price for the property to
be sold; this could be achieved only when there was maximum
public participation in the process of sale, and everybody had an
opportunity of making an offer; and public auction, after adequate
publicity, ensured participation of every person who was interested
in purchasing the property, and generally secured the best price.
10 (1993) 2 SCC 279
11 (1995) 4 SCC 595
15
In Gajraj Jain9, tenders were invited, under the public notice
dated 22-2-2002, whereby bids were to be submitted by 21-3-
2002, and were to be opened on 22-3-2002. The assets of the
borrower were taken over on 18.03.2002. On 19-3-2002, the
Corporation handed over the assets to the fourth respondent
against down payment of Rs 28.85 lakhs plus a promise to the
Corporation that the purchaser undertook to pay the dues of
Central Bank of India. A part of Rs 28.85 lakhs was paid by
demand drafts dated 09.03.2002.
The Chairman And Managing ... vs Contromix Pvt.Ltd. By Its ... on 12 May, 1995
It is in this context that the Supreme Court observed that
the sale effected in favour of respondent No.6 could not be
sustained; it was axiomatic that the statutory powers, vested in
14
State Financial Corporation, under the State Financial
Corporations Act, must be exercised bona-fide; the presumption
that public officials discharge their duties honestly, and in
accordance with law, may be rebutted by establishing
circumstances which reasonably probabilise the abuse of that
power; in such an event, it was for the officer concerned to explain
the circumstances which were set up against him; if there was no
credible explanation forthcoming, the Court could assume that the
impugned action was improper; some of the restrictions placed on
State financial corporations, exercising their powers under Section
29 of the State Financial Corporations Act, as prescribed in
Mahesh Chandra v. Regional Manager, U.P. Financial Corpn.10
were no longer in place in view of the subsequent decision in
Haryana Financial Corpn.1; however, in overruling the decision in
Mahesh Chandra10, the Supreme Court had affirmed the view
taken in Chairman and Managing Director, SIPCOT v.
Contromix (P) Ltd.11, and had held that, in the matter of sale
under Section 29, the State financial corporations must act in
accordance with the statute, and must not act unfairly i.e.
unreasonably; if they do, their action could be called in question
under Article 226; reasonableness was to be tested against the
dominant consideration to secure the best price for the property to
be sold; this could be achieved only when there was maximum
public participation in the process of sale, and everybody had an
opportunity of making an offer; and public auction, after adequate
publicity, ensured participation of every person who was interested
in purchasing the property, and generally secured the best price.
10 (1993) 2 SCC 279
11 (1995) 4 SCC 595
15
In Gajraj Jain9, tenders were invited, under the public notice
dated 22-2-2002, whereby bids were to be submitted by 21-3-
2002, and were to be opened on 22-3-2002. The assets of the
borrower were taken over on 18.03.2002. On 19-3-2002, the
Corporation handed over the assets to the fourth respondent
against down payment of Rs 28.85 lakhs plus a promise to the
Corporation that the purchaser undertook to pay the dues of
Central Bank of India. A part of Rs 28.85 lakhs was paid by
demand drafts dated 09.03.2002.
Narandas Karsondas vs S.A. Kamtam & Anr on 7 December, 1976
The Supreme Court held that
these circumstances indicated collusion between the respondent-
Corporation, and respondents 3 and 4; the takeover of assets was
ordered on 18.03.2002 and, on 19.03.2002, the assets were
handed over to the 4th respondent against a down payment of Rs
28.85 lakhs in demand drafts dated 9-3-2002; under Section 29(1)
of the Act, the Corporation is entitled to sell or lease the assets, in
order to realise the pledged/ hypothecated or mortgaged property;
it was not known as to under what colour of title the assets were
handed over to respondent No.4 on 19-3-2002, whether under
sale, lease or repayment of loan; there was no explanation as to
how respondent No.4 could have drawn demand drafts in favour of
the Corporation on 09.03.2002, when their offer to purchase was
made only on 17.03.2002; the allegation that respondent No.4 was
given the assets with the specific understanding that the property
should be returned, if a higher offer was received in the auction,
was not supported by the recitals in the minutes of the Tender
Committee, nor in the recitals in the impugned agreement dated
26-4-2002; there was no resolution/minutes of the Board of
Directors of the Corporation in that regard; in the agreement dated
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26-4-2002, it had been recited that Rs 90 lakhs were advanced as
a loan in 1988 by the Corporation to the Company against
equitable mortgage of land and assets; under Section 60 of the
Transfer of Property Act, equity of redemption existed in favour of
the Company; a mere agreement, for sale of the assets, could not
extinguish the equity of redemption; it was only on execution of the
conveyance that the mortgagor's right of redemption would be
extinguished; till date there was no conveyance and, therefore, on
21-3-2002 when the appellant paid Rs 28.85 lakhs to the
Corporation representing its full dues, there was complete
liquidation of the dues of the Corporation, and yet the Corporation
did not return the assets to the Company; it had arbitrarily, and
for extraneous reasons, adjusted the said amount to the account of
M/s Aditya Flour Mills; the reason was because the Corporation
intended to sell the assets only to respondent No.4 for a paltry sum
of Rs 28.85 lakhs; even if respondent No.4 was right in its
submission that the assets in question were not worth Rs 10
crores as alleged by the appellant, even then, in terms of the offer
of respondent No.4, the property was worth Rs 198 lakhs; the
Corporation had, however, handed over the assets, and had agreed
to sell them against down payment of Rs 28.85 lakhs; no reasons
were given by the Corporation as to why it did not insist on the full
payment of Rs 198.85 lakhs; the appellant had cleared the dues of
the Corporation on 21-3-2002, before opening of the 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 them, so that it could be
argued by the Corporation that the appellant had withdrawn from
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the auction, and therefore the offer of respondent No.4 was
accepted; the documents showed that the appellant had refused to
collect the earnest money and, therefore, the amount was kept by
the Corporation in a separate account; as held in Narandas
Karsondas v. S.A. Kamtam12, putting the property to auction does
not extinguish the right of redemption; therefore, on 21-3-2002,
the Company had a right to redeem the assets; there was no merit
in the argument that the appellant intended to buy the assets in
his own name; the record showed that the appellant, as the
Director of the Company, had offered to clear the dues of the
Corporation for which he insisted on the return of the title deeds of
M/s Katihar Flour Mills; the Corporation was required to act in
accordance with Section 29 of the Act, and not unreasonably;
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; the impugned agreement
dated 26-4-2002 was entered into without any consideration in
favour of Central Bank of India; and the respondent-Corporation
had misused its authority and power in breach of the law, taking
into account extraneous matters, and ignoring relevant matters,
which had rendered its action ultra vires.