HARYANA FINANCIAL CORPORATION AND ANR. versus M/S. JAGDAMBA OIL MILLS AND ANR.

Citation: [2002] 1 S.C.R. 621 · Decided: 28-01-2002 · Supreme Court of India · Bench: B.N. KIRPAL · Disposal: Appeal(s) allowed

Cited by 7 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

HARYANA FINANCIAL CORPORATION AND ANR. 
A 
v. 
MIS. JAGDAMBA OIL MILLS AND ANR. 
JANUARY 28, 2002 
[B.N. KIRPAL, K.G. BALAKRISHNAN AND ARIJIT PASAYAT, JJ.] 
B 
State Financial Corporqtion Act, 1951 
Sections 29 &30--Default in repayment of loan-Seizure of defaulting 
unit-Duty cast upon the borrower to repay the instalments in time unless C 
prevented by unsurmountable difficulties-Reg11lar payment is the rule and 
non-payment due to extenuating circumstances is the exception-Jn the event 
of default Financial Corporations empowered to take over management! 
possession or both to deal with it. 
Legislative intent of the Act-To promote industrialisation by giving 
financial assistance-Realisation of objective-Financial Corporation has to 
recover tha loan amounts so that fresh loan can be given to other industries 
so as to promote industrialisation. 
Administrative Law: 
Fairness-obligation to Act fairly-Financial Corporation being 
administrative authority has to ensure rule of law and to prevent failure of 
justice by following requisite procedure-If borrower adopts pretexts and ploy 
D 
E 
to avoid payment, he cannot take the plea that Corporation has not acted 
fairly-Administrative action-Review of-Courts not to review an administrative F 
action as an appellate Court. 
Precedents-Applicability of-Judgments of the Courts are not to be 
trued as statutes-Observations of the Courts must be read in the context 
hich they appear-Significance of factual situation for applicability of a 
partice1lar ratio-Discussed 
G 
Resporident No. 1 was granted loan by the appellant-Corporation. 
Repayment of loan with interest was to be made in instalments. 
Respondent N&. I mortgaged its land, building and machinery in favour 
of the Corporatit'n. It was mentioned categorically in the mortgage deed H 
621 
622 
SUPREME COURT REPORTS 
[2002] I S.C.R. 
A that instalments were to be disbursed on the basis ofsecurities created by 
the borrowers and as and when enough securities were created, the loan 
amount was to be disbursed. Appellant disbursed the loan. Respondent 
failed to repay the instalments by due date; instead requested for 
rescheduling the payment schedule. Despite rescheduling, the respondent 
defaulted again. Respondent again requested for rescheduling the payment 
B schedule but again failed to repay the due instalment by the due date. Since 
Respondent No. 1 was a chronic defaulter in making repayment of loan 
instalment, appellant initiated action against Respondent No. I under 
Section 29 of the State Financial Corporation Act, 1951 after recalling the 
loan under Section 30, and accordingly taken over possession of the unit 
C of the respondent. The respondent filed suit in the Civil Court seeking a 
decree for permanent injunction restraining the appellant from auctioning 
the seized unit. Trial Court decreed the suit. Unable to succeed in appellate 
Court and the High Court, appellant-Corporation preferred appeal to this 
Court. 
D 
It was contended for the appellant that Courts below erred in placing 
reliance on the decision in Mahesh Chandra's Case without noticing the 
distinguishing factual backgrounds; that they did not follow the decisions 
of this Court in Financial Corporation v. Gem Cap India (P) Ltd. which was 
squarely applicable; and that ample opportunity was granted to the 
E respondents to make repayment of loan instalments but they failed to make 
payment. It was contended for the respondent that the Financial 
Corporation as trustee was not expected to act like any other individual 
money-lender. 
F 
Partly allowing the appeal, the Court 
HELD 1.1. Financial Corporation is expected to act fairly in the 
matter of disbursement of loans. There is corresponding duty cast upon 
due to extenuating circumstances is the exception. If the repayments ar 
the borrower to repay the instalments in time, unless prevented¥by 
unsurmountable difficulties. Regular payment is the rule and non-payment 
G not received as per the scheduled frame, it will disturb the equilibriu 
of 
· 
the financial arrangements of the Corporations. Non-paymeiit of 
instalments by a defaulter may stand in the way of deservi~~ borrower 
getting financial assistance. (628-E-F) 
, 
1.2. Legislative intent in enacting the Statute in questions was to 
H promote industrialisation of the States by encouragini:; slnall and medium 
/ 
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y 
HARYANA FINANCIAL CORPN. v. JAGDAMBA OIL MILLS 
623 
industries by giving financial assistance in t

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