TMI Blog1995 (5) TMI 286X X X X Extracts X X X X X X X X Extracts X X X X ..... ncial Corporations Act, 1950 (hereinafter referred to as the Act). Respondent No. 1 applied for a term loan for setting up a project for manufacture of programmable logic controllers, control panels, electronic timer, temperature scanners, etc. On March 25, 1987 SIPCOT sanctioned a term loan of ₹ 38 lakhs. On June 16, 1987, IDBI soft loan of ₹ 6.8 lakhs was also sanctioned. Respondent No. 1 executed a registered mortgage on July 29, 1987 and created equitable mortgage and has executed other security documents. As per the terms of securities of the loan, respondent No. 1 was required to repay the term loan in installments from December 1, 1989 to June 1, 1994 and the soft loan was to be repaid in installments from September 18,1990 till March 18,1994. Respondent No. 1, did not adhere to the payment schedule and became a defaulter in payment of the principal amount as well as the interest. At the request of respondent No. 1, the repayment of the term loan was rescheduled to June 1, 1990 to June 1, 1994 and it was again rescheduled and respondent No. 1 was permitted to repay the loan from June 1, 1991 to June 1, 1994. Inspite of the said rescheduling of the payment respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... took possession of the mortgaged assets of respondent No. 1. The mortgaged assets were valued by SIPCOT at ₹ 36.44 lakhs. In February 1993 SIPCOT issued an advertisement inviting offers for sale of the mortgaged assets, but no offer was received in response to the said advertisement. A second advertisement issued by SIPCOT was published in the Indian Express on June 2,1993. In response to the said advertisement ETK International Ferrites Limited, respondent No. 2 herein, made an offer to ' purchase the assets for a sum of ₹ 14.26 lakhs. Since the said offer was too low, SIPCOT negotiated with respondent No. 2 and as a result of such negotiations respondent No. 2 agreed to revise the offer and to pay a sum' of ₹ 38 lakhs. The said offer of respondent no. 2 was accepted by the SIPCOT and respondent No. 2 paid the entire amount of ₹ 38 lakhs by September 15, 1993. 6. On September 19, 1993, respondent No. 1 filed the writ petition giving rise to this appeal in the Madras High Court wherein the action of SIPCOT in selling the assets to respondent No. 2 was challenged on the ground that the market value of the assets would be ₹ 72.60 lakhs and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the said directions given by the learned single Judge. Respondent No. 1 filed an appeal (W.A.NO. 97 of 1994) against the Judgment of the learned single Judge. The said appeal was disposed of by a Division Bench of the High Court by Judgment dated February 23,1994. The learned Judges were of the view that there was failure on the part of SIPCOT to follow the guidelines laid down by this Court in Mahesh Chandra case (supra) in the matter of sale of the unit by tender and by private negotiations. The learned Judges of the High Court have observed that since the financial agency had advanced in all ₹ 44.80 lakhs (Rs. 38 lakhs term loan and ₹ 6,80 lakhs soft loan) in the year 1987, it is clear that the unit was worth more than ₹ 44.80 lakhs even in the year 1987 and, therefore, it could not have been sold in the year 1993 for a sum of ₹ 38 lakhs only. The learned Judges also observed that instead of imposing conditions on respondent No. 1 for setting aside the sale by tender even though the said sale was found illegal and opposed to the judgment in Mahesh Chandra case (supra) the learned single Judge ought to have set aside the sale and directed the appellants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ]1SCR616 . 10. Feeling aggrieved by the said directions given in the said Judgment of the Division Bench of the High Court, the appellants have filed this appeal. 11. At the out set it may be stated that SIPCOT has been quite accommodating in the matter of repayment of the dues by respondent No. 1 and has rescheduled the payment of the installments a number of times and the notice of foreclosure which was given on October 24, 1991 was also withdrawn on the basis of the assurance given by respondent No. 1 regarding payment of the dues. A second notice of foreclosure had to be issued on June 17, 1992 since respondent No. 1 failed to abide by the assurances given by it. Respondent No. 1 also failed to comply with the directions that were given by the High Court in its order dated December 7, 1992 while disposing of the earlier Writ Petition No. 14479 of 1992 of by respondent No. 1. It is only thereafter that SIPCOT took possession of the unit of respondent No. 1 of January 5, 1992 and started proceedings for the sale of the unit. It would thus appear that sufficient latitude was given by SIPCOT to respondent No. 1 to honour its commitments in regard to the payment of loan, but r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ublic property have been held to be applicable to a sale of property by the State Financial Corporations under Section 29 of the Act in Mahesh Chandra case (supra). In that case this Court has held that sale by public auction is universally recognised to be the best and most fair method and is beyond reproach and, if it is not possible to adopt the said method, sale may be held by inviting tenders, but in that even every endeavour should be made to give wide publicity to get the maximum price. The said decision cannot, therefore, be construed as laying down that a sale by tender is impermissible and invalid. The learned judges, in that case, have referred to the decisions of this Court in Sachidananda Pandey v. State of West Bengal [1987]2SCR223 and Haji T.M. Hassan v. Kerala Financial Corporation [1988]1SCR1079 , wherein it has been held that one of the modes of securing the public interest, when it is considered necessary to dispose of a property, is to sell the property by public auction or by inviting tenders. It cannot, therefore, be said that a sale by inviting tenders is ipso facto invalid. The validity of such a sale will have to be considered in the light of the facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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