KARNATAKA STATE FINANCIAL CORPORATION versus MICRO CAST RUBBER AND ALLIED PRODUCTS (P) LTD. AND ORS.

Citation: [1996] SUPP. 3 S.C.R. 40 · Decided: 03-06-1996 · Supreme Court of India · Bench: S.C. AGRAWAL · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
KARNATAKA STATE FINANCIAL CORPORATION 
t ·' 
v. 
MICRO CAST RUBBER AND ALLIED PRODUCTS 
(P) LTD. AND ORS. 
B 
JUNE 3, 1996 
[S.C. AGRAWAL AND G.T. NANAVATI, JJ.] 
State Financial Corporations Act, 1951-Section 29-Sale of unit cy 
State Financial Corporation-Wiit petition before High Court challenging the 
c sale-Wiit Petition dismissed with direction to the Corporation to comply with 
cc1tain Directions-In the facts of the case, the Directions held as con1plied 
with, hence act of the C01poration not liable to be inte1fered with. 
Constitution of India, 1950-Article 226-Judicial revie1v-Scope 
·D of-Sale by State Financial Corporations u/s 29 of State Financial Cmpora-
tion Act, 1951-No statuto1y violation or unfair action by the C01pora· 
tion-lnte1ference of High Cou~Hetd, inte1ference unjustified, since judicial 
review pennitted only when Corporation violates statutes or acts unfair--
!)~While exercising its jurisdiction U!A 226, the High Court does not sit as 
an appellate authority over the acts and deeds of the Co1poration. 
E 
.... 
Appellant, a State Financial Corporation, extended financial help to 
Respondent No. 1 (a company, registered under Companies Act) for 
setting up a unit for manufacture of rubber and lik" products. Respon-
dent-1 failed to pay the loan, due to loss incurred by it. Appellant re-
F 
scheduled the payment of loan and sanctioned further loan, and still 
further extended rehabilitation assistance under RSR Scheme of IDBI and 
sanctioned loan, treating the unit as sick unit. lnspite of all the facilities, 
respondent-1 defaulted in payment of the loans. 
On October 23, 1990, the appellant took over the unit u/s 29 of State 
G Financial Corporations Act, and took steps for its sale. The Unit was 
evaluated for Rs. 28 Iakhs. In response to the advertisement, on August 5, 
1991, oilers were received. Offer of 'C' for Rs. 24 Lakbs was the highest. 
The offer was approved by the board of appellant, but it was decided that 
the communication of the approval would be made after October 15, 1991, 
H 
so as to give opportunity to respondent-1 to bring any other higher offer. 
40 
., . 
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• 
KARNATAKASfATEFINAi~CIALCORPN. i: M!CROCASTRUBBERANDAJ.UED PDTS. (P) LTD. 
41 
Respondent-I brought no offer. It indicated that it would submit proposal A 
for revival of the unit, but it failed to come up with any concrete proposal. 
In the meantime, 'C' had also withdra\vn its oiler. Appellant issued fresh 
advertisement for sale on August 25, 1992. Pursuant thereto, three offers 
were received, i.e. by 'C' for Rs. 23 lakhs for the land, building and 
machinery, by 'P' for Rs. 18 Iakhs for land and building only and, by 'S' B 
for 6 Lakhs for plant and machinery only. In the joint meeting of offerers 
respondent-was also invited and a tentative decision to accept the offers 
of 'P' and 'S' was taken. Respondent·l was given 15 days time to make 
payment and submit proposal for revival of the unit. Respondent-1 sought 
further time of 15 days i.e. till December 15, 1992. On January 4, 1993, 
respondent-2 submitted offer of Rs. 25 Lakhs for the entire unit. 
The proposals of 'P', 'S' and respondent-2 were considered and it 
was decided to accept the proposals of 'P' and 'S' ,since it \\-'as higher than 
c 
the offer of respondent-2, because they envisaged to pay the dues to 
Electricity Board themselves; their time for payment was shorter; their D 
do"n payment was higher; and they were to deposit the earnest money 
while respondent-2 was not to pay the same. 
Agreement was made.to sell the entire unit to 'P' and 'S'. Respon-
dents-1 & 2 tiled Writ Petition before High Court challenging the sale. 
Single Judge allowed the petition, quashing all the proceedings subsequent 
to receipt of the tenders pursuant to public notice and appellant was 
directed to observe the directions 2, 3, 4 in Para 22 of the judgment in 
Mahesh Chandra's case, the directions being that the unit should be 
evaluated; the highest price on tender to be accepted and to be intimated 
E 
to the unit holder; and to provide facility to unit holder to pay sale price F 
as tenderer and to test the third party brought by unit holder. Appellant 
filed Writ Appeal which was dismissed . 
In appeal to this Court, the appellant contended that in the facts and 
circumstances of the case, the directions in Mahesh Chandra's case have G 
been substantially complied with. Respondent· 1, contended that his offer 
was much higher than the offers by 

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