TMI Blog2003 (1) TMI 607X X X X Extracts X X X X X X X X Extracts X X X X ..... ent herein have filed I.P. No. 2 of 1999 to adjudicate them as insolvents wherein the petitioner herein has been arrayed as 7th respondent and the respondent is the 297th respondent. The respondent herein has sanctioned term loan of Rs. 20 lakhs on 11-1-1996 to M/s. S.K. Borewell Services, a partnership concern represented by Kaliannan, Sankar, Gopal and Saravanan. The said persons committed default in paying the loan amount. The respondent herein has taken possession of the hypothecated property of the said persons under section 29 of the State Financial Corporation Act, 1951. Ultimately, the properties were brought into auction sale on 8-9-1999. The petitioner herein has filed I.A. No. 41 of 1999 to stop the auction. Based on the undertak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of Rs. 13 lakhs, which is untenable in law, that the trial Court misconstrued the decision of the Honourable Supreme Court reported in AIR 2001 SC 5 and prayed for setting aside the impugned order. 5. Mr. Dolia, learned counsel appearing for the respondent submitted that the respondent is sponsored by the State of Tamil Nadu and established with the object of extending financial assistance to various entrepreneurs and for development of industries in the State; that the Central Government, by its notification issued from time to time under section 46 of the State Financial Corporation Act, 1951 has made certain provisions in the Act namely sections 29, 30, 31 and 32 applicable to the Corporation for the purposes of speedy recove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the respondents even made an offer that there was a buyer to purchase the hotel for a sum of Rs. 60 lakhs. The negotiations with the prospective buyer could not mature on account of application filed by the earlier purchaser. The High Court instead of deciding the application of the earlier purchase disposed of the writ petition vide the order impugned. As noticed earlier, the High Court has not assigned any reason much less a cogent one for the payment of interest. In the absence of an agreement and the statutory provision, interest could not be claimed by the respondents as a right. The Court did not refer to any circumstance on the basis of which the interest could have been granted as an equitable relief." 7. Section 29 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applied firstly in payment of such costs, charges and expenses and in discharge of the debt due to the financial corporation and the residue shall be paid to the person entitled to. Such rights also can be enforced by taking recourse to the ordinary law contained in the Transfer of Property Act and the Code of Civil Procedure. 9. Section 29 of the State Financial Corporation Act, 1951 is more or less equivalent to section 69 of the Transfer of Property Act. Under section 69, a mortgage, or any person acting on his behalf, shall subject to the provisions of this section, have power to sell or concur in selling the mortgaged property or any part thereof, in default of payment of the mortgage money, without the intervention of the Court. U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount into the Court for disposal. In view of the said undertaking given by the respondent, the application was dismissed. The above facts are not disputed by the respondent herein. Contrary to the said undertaking, the respondent failed to deposit the amount. The respondent herein has advanced argument that there is no privity of contract between them and the petitioner, however, the undertaking given by the respondent is not denied. The said undertaking amounts to concluded contract. Besides that, as contemplated under section 29, it is the bounden duty of the respondent herein to keep the surplus money as trust money and to get it invested to improve the same. In other words, it shall not allow assets to remain outstanding on personal s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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