BIHAR STATE FINANCIAL CORPORATION versus M/S. CHHOTANAGPUR MINERALS AND ORS.

Citation: [2008] 17 S.C.R. 548 · Decided: 12-12-2008 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Dismissed

Judgment (excerpt)

[2008] 17 S.C.R. 548 
A 
BIHAR STATE FINANCIAL CORPORATION 
B 
v. 
MIS. CHHOTANAGPUR MINERALS AND ORS. 
(Civil Appeal No. 7253 of 2008) 
DECEMBER 12, 2008 
[S.B. SINHA AND CYRIAC JOSEPH, JJ.] 
State Financial Corporations Act, 1951 -- ss.29 and 30 
- Power under - Scope of - Held: The power to be exercised 
c only in respect of the properties which were mortgaged -
Selling of the property, not forming part of mortgage, is illegal 
and without jurisdiction - Financial Corporation liable to pay 
damages for the loss caused by such action. 
Respondent No.1 took loan from appellant-
D Corporation for setting up a factory. Respondent No.1 
mortgaged lease hold right over a piece of land of the 
factory with the Corporation. Factory was set up. 
Corporation initiated proceedings in terms of ss. 29 and 
30 of State Financial Corporations Act, 1951. Corporation 
sold the factory premises to respondent No.2. 
E Respondent No.1 filed a suit for damages against the 
Corporation stating that the Corporation sold also other 
properties which were not subject matter of mortgage, 
and various properties were hypothecated with 
respondent No.3-Bank against a loan taken from it. 
F Respondent No.1 had claimed damages for Schedule-A 
property. By way of amen_dment of the suit, also claimed 
damages in respect of Schedule B, C and D properties. 
Trial Court decreed the suit. Order of trial court was 
confirmed by Single Judge of High Court as well as 
G Division Bench of High Court. Hence the present appeal. 
Dismissing the appeal, the Court 
HELD: 1. The statutory power vested in the 
Corporation u/ss.29 and 30 of Financial Corporations Act, 
1961 must be exercised only in respect of the properties 
·H 
548 
.. 
-
BIHAR STATE FINANCIAL CORPORATION v. MIS. 
549 
CHHOTANAGPUR MINERALS AND ORS. 
which were mortgaged. The appellant did not have any 
A 
right to sell any property which was not the subject 
matter of the deed of mortgage. Any action taken in that 
behalf must be held to be wholly illegal and without 
jurisdiction. Appellant, therefore, was liable for payment 
of damages as had been opined by the courts below. 
8 
[Paras 17 and 18] [558-G; 559-C-D] 
Ormi Textiles and Anr. v. State of Uttar Pradesh and Ors. 
2008 (5) sec 194, relied on. 
2. The appellant has not placed before this Court the 
amended plaint. The Court has not been informed as to 
C 
what the B, C and D Schedules to the plaint were about. 
It is accepted at the Bar that the movable properties 
mentioned in Schedule A to the plaint stood mortgaged· 
in favour of respondent No. 3. It has furthermore not been 
denied or disputed that respondent No. 3 - Bank had not 0 
initiated any action for realisation of its dues. The movable 
properties hypothecated to the Bank having not been 
realized and as it was permissible for it to remove the 
same, the decretal amount in regard to prayer for payment 
of sum of Rs. 1,87,635.24 by way of damages, should be 
held to be payable to respondent No. 3. The decretal 
E 
. amount may be paid by the appellant to respondent No. 
3, together with interest as directed by the courts below. 
[Paras 19, 20 and 21] [559-E; 560-C-E] 
Case Law Reference: 
(2008) 5 SCC 194 
relied on 
Para 17 
F 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 
7253 of 2008. . 
From the Judgment and final Order dated 7.3.2006 of the 
High Court of Jharkhand at Ranchi in LP.A. No. 113 of 2005. 
G 
M.P. Jha, Ram Ekbal Roy and Harshvardhan Jha for the 
Appellant. 
Ashwarya Singh, Aabhas Parimal, Amboj Kumar Sinha, 
Ramesh N. Keswani, Ramlal Roy, Sumeera Raheja (for Mis. 
Keswani & Co.) and Ejaz Maqbool for the Respondents. 
H 
550 
A 
-
SUPREME COURT REPORTS 
[2008] 17 S.C.R. 
The Judgment of the Court was delivered by 
S.B. SINHA, J. 1. Leave granted. 
2. Appellant is a Corporation constituted under the State 
Financial Corporations Act, 1951 (for short "the Act"). 
Respondent No. 1 intended to set up a factory in the Industrial 
B Area, Kakar in the town of Ranchi. It, on or about 5.11.1976, 
for the aforementioned purpose, sought for and was granted 
loan by the appellant for a sum of Rs. 3.36 lakhs. 
3. An agreement was entered into by and between the 
parties, in terms whereof, the respondent no. 1 mortgaged the 
C properties described in Schedules 'A', 'B' and 'C' thereof in 
favour of the appellant- Corporation, viz., the lease hold right 
over a piece of land admeasuring 0.56 acres at Village Kakar. 
4. In terms of the said deed of mortgage, the plain

Excerpt shown. Read the full judgment & AI analysis in Lexace.