KARNATAKA STATE INDUSTRIAL INVESTMENT AND DEVELOPMENT CORPORATION LTD. versus M/S. CAVALET INDIA LTD. AND ORS.

Citation: [2005] 2 S.C.R. 1183 · Decided: 30-03-2005 · Supreme Court of India · Bench: Y.K. SABHARWAL · Disposal: Appeal(s) allowed
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Judgment (excerpt)

KARNA T AKA ST A TE INDUSTRIAL INVESTMENT AND 
DEVELOPMENT CORPORATION LTD. 
v. 
MIS CA VALET INDIA LTD. AND ORS. 
MARCH 30, 2005 
[Y.K. SABHARWAL AND TARUN CHATTERJEE, JJ.] 
State Financial Corporation Act, 1951 : 
Object and purpose of-Discussed 
Section 29-Borrower-Default in repayment-Right of Corporation to 
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sell property of the borrower-Held: If inspite of giving an opportunity to pay 
debts, the borrower fails, then Corporation can exercise the right to sell its 
property to third party since the object of the Act is to obtain the best price D 
by maximum public participation-On facts, Borrower was given fair chance 
to either bring better offer or a one time settlement, but borrower failed to so, 
hence sale to third party not void, illegal and contrary to Section 29. 
Administrative law : 
Judicial review-Adjudication by Financial Corporation-Interference 
with-Scope and ambit of-Held: High Court while exercising writ jurisdiction 
cannot sit as an appellate authority over the acts and deeds of- the 
Corporation-Action of Financial Corporation not to be intetfered with unless 
same is unfair or malajide-Constitution of India-Article 226. 
Respondent-borrower defaulted in repaying the loan amount. 
Appellant-Corporation (KSIIDC) passed an order under Section 29 of the 
State Financial Corporation Act, 1951 for taking over the unit of borrower 
for recovery of its due and issued advertisement, inviting offers for sale 
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of the unit. Sale was finalized in favour of one Vin pack Ltd. The borrower 
filed Writ Petition before the High Court challenging the sale as void, G 
illegal and contrary to Section 29 of the Act. Thereafter, borrower sought 
to bring prospective purchasers but failed to bring any concrete 'better 
offer. Borrower then offered to purchase the unit on the same terms on 
which KSIIDC had agreed to sell the unit to Vinpack Ltd. 
1183 
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1184 
SUPREME COURT REPORTS 
[2005] 2 S.C.R. 
A 
Single Judge issued directions that the sale effected by KSIIDC to 
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the Vinpack Ltd. would be set aside if the borrower deposits the same 
amount in instalments. Borrower failed to avail the opportunity and 
•. 
KSIIDC sold the unit to the Vinpack Ltd. On appeal, Division Bench 
directed KSIIDC to undertake the entire process of selling of the unit again 
B by giving an opportunity to borrower. to bring better offer. Hence the 
present appeal by the KSIIDC and the Vinpack Ltd. 
Allowing the appeal, the Court 
HELD : 1. Since the borrower faile~ to comply with the directions 
C of the Single Judge, the action of KSIIDC to sell the unit in favour of · 
Vinpack was valid and legal. (1196-B] 
2.1. The High Court while exercising its jurisdiction under Article 
226 of the Constitution does not sit as an appellate authority over the acts 
and deeds of the financial corporation and seek to correct them. The 
D Doctrine of fairness does not convert the writ courts into appellate 
authorities over administrative authorities. (1193-D-El 
2.2. In a matter between the corporation and its debtor, a writ court 
has no say except when there is a statutory violation on the part of the 
Corporation or where the Corporation acts unfairly i.e., unreasonably. 
E Unless the action of the Financial Corporation is ma/a fide, even a wrong 
decision taken by it is not open to challenge .. [1193-E-F] 
2.3. In a sale of public property, the dominant consideration is to 
secure the best price for the property to be sold and this could be achieved 
only when there is maximum public participation in the process of sale 
F and everybody has an opportunity of making an offer. The Financial 
Corporation is always expected to try and realize the maximum sale price 
by selling the assets by following a procedure which is transparent and 
acceptable, after due publicity, wherever possible and if any reason is 
indicated or cause shown for the default, the same has to be considered 
G in its proper perspective and a conscious decision has to be taken as to 
whether action under Section 29 of the Act is called for. [1194-A-B-CJ 
2.4. Fairness cannot be a one-way street. The fairness required of 
the Financial Corporations cannot be carried to the extent of disabling 
them from recovering what is due to them. While not insisting upon the 
H borrower to honour the commitments undertaken by him, the Financial 
·. 
KARNATAKA STATE !NOUS. INVEST. AND DEV. CORPN. LTD. v. CAVALET !NOIA LTD. 
) J 85 
Corporation alone cannot be shackled hand and
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