Content Provider | Supreme Court of India |
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e-ISSN | 30484839 |
Language | English |
Access Restriction | NDLI |
Subject Keyword | interest of justice Recovery of loan |
Content Type | Text |
Resource Type | Law Judgement |
Jurisdiction | India |
Case Type | Appeal |
Court | Supreme Court of India |
Disposal Nature | Appeal Allowed |
Headnote | U.P. State Financial Corporation Act, 1951; Ss.29 and 31/UP. Public Moneys (Recovery of Dues) Act, 1972:Recovery of loan - A company took loan from State Financial Corporation and later from another State Undertaking - Issuance of Notice to company by the Corporation to explain as to why it took loan from the State Undertaking and purchased second hand plant and machinery in breach of contract - In exercise of power u/s. 29 of 1972 Act, assets of company taken over by the Corporation and the State Undertaking invoking guarantees executed by Managing Director of Company - Challenge to - Dismissed by High Court - On appeal, Held: Statutory power to realize dues conferred on Corporation, a statutory authority/State in terms of Article 12 of the Constitution - It has to act fairly and reasonably - Taking over possession of an ongoing concern without taking over the Management would be termed as sale of the Unit - Supreme Court is not aware as to whether any steps in regard to sale of the Unit had been taken by the Corporation - Hence, in the interest of justice, matter remitted to High Court for consideration afresh - Constitution of India, 1950 - Articles 12 & 14 - Indian Contract Act, 1872 - Contract - Breach of.Corporation/State - Duty of - Contract - Terms - Breach of - Discussed.Words and Phrases:'Fairness' - Meaning of in the context of Section 29 of the U.P. State Financial Corporation Act, 1951.Appellant-Company took loan from Respondent-Corporation. The Company also applied for grant of loan to respondent No.3, the Pradeshiya Industrial and Investment of U.P. Ltd. (PICUP). A notice was issued by the Corporation on the premise that the company had purchased second-hand plants and machinery worth Rs.6.75 lacs from one of their financed units and obtained financial assistance from PICUP in breach of terms of loan. An explanation, pursuant thereto, was submitted by the company. However, entire loan was recalled by the Corporation on the premise that the company had committed defaults in paying the instalments. The Corporation, in exercise of its powers under Section 29 of the U.P. State Financial Corporation Act, has taken over possession of the assets of the company. First Information Report was also lodged in respect of the purported purchase of second-hand plant and machinery by the company. On enquiry, the allegations against the company were not found to be correct; whereafter a request was made by the company to the Corporation as also PICUP for handing over the possession of the unit to it as also for waiver of interest etc. PICUP, however, invoked the guarantees executed by the Directors of the company. A recovery proceeding was also initiated. The Company and its Managing Director filed writ petitions for directions to the Corporation to quash the personal recovery certificates for recovery of loan and also for recovery of the Unit. The petitions were dismissed by the High Court. Hence the present appeals.Appellants contended that the provisions of Section 29 of the 1951 Act have been misused in the instant case; that the action, on the part of the respondents, in recalling the loan and in taking over possession of the running unit was neither fair nor reasonable; and that taking recourse to invocation of the personal guarantees of the Directors of the Company for recovery of the loan amount was totally illegal. Respondents submitted that in terms of the provisions of the 1951 Act as also U.P. Public Moneys (Recovery of Dues) Act, they were not only entitled to take possession of the properties under Section 29 of the 1951 Act but were also entitled to invoke the guarantees furnished by the Directors of the company; that possession of the respondents in relation to the plant and machinery was that of a 'bailee' and as it has not been alleged that proper care thereof had not been taken as envisaged under Section 151 of the Indian Contract Act, 1872, the respondents are not liable to reimburse the appellants for the loss of articles; and that even for the said purpose only a suit would be maintainable and not a writ application. |
Judge | Hon'ble Mr. Justice S.B. Sinha |
Neutral Citation | 2007 INSC 1311 |
Petitioner | M/s. Everest Wools Pvt. Ltd. And Ors. |
Respondent | U.p. Financial Corporation And Ors. |
SCR | [2007] 13 S.C.R. 857 |
Judgement Date | 2007-12-14 |
Case Number | 2707 |
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