M/S. AMAR ALCOHOLI LTD. versus SICOM LTD. AND ANR.

Citation: [2005] SUPP. 5 S.C.R. 31 · Decided: 08-11-2005 · Supreme Court of India · Bench: ASHOK BHAN · Disposal: Dismissed

Judgment (excerpt)

MIS. AMAR ALCOHOLI LTD. 
A 
v. 
SI COM LTD. AND ANR. 
NOVEMBER 8, 2005 
[ASHOK BHAN AND AL TAMAS KABIR, JJ.] 
B 
State Financial Corporation- Recove1y of Debts-State Financial 
Corporation Act 1951, secTions 2'9,46-Appellant taking loan from 
Respondent, a financial corporation with 100% share holding by State C 
Government-Subsequently, share of state government reducing to 49'Ycr-
Appe//ant failing to repay the ~oan-Respondent taking actual possession of 
mortgaged property for auction invoking its powers under section 29-
Appel/ant filing writ petition contending that respondent ceased to be a 
financial corporation due to reduction in state's share to 49% and hence 
could not invoke section 29-High Court dismissing the writ petition-On D 
appeal-Held, Respondent continued to be a financial corporation despite 
reduction in state's share to 49% since it has been established by State 
Government-Therefore entitled to invoke section 29 for recovery of debt. 
Appellant company took a loan ofRs.90 lakhs in 1994 from Respondent, 
a financial corporation with 100% shares owned' by the State Government. E 
Subsequently, the state holding in respondent company was reduced to 49%. 
Appellant company started defaulting in payment right from July 1996. After 
giving ~everal opportunities to the appellant to pay up the amount due and 
outstanding, Respondent took over the possession of the assets mortgaged 
with it invoking its power under section 29 of the State Financial Corporation F 
Act 1951. Assets were later sold by public auction. Appellant field a writ 
petition in the High Court challenging taking over the possession and auction 
of his assets by the respondent pleading, inter alia, that provisions of section 
29 of the Act were not applicable to the respondent as it ceases to be a financial 
corporation after the reduction of shares of the State Government to 49% 
only. The High Court dismissing the petition hold that respondent was a G 
financial corporation. Hence this appeal. 
Dismissing the appeal, the court 
HELD: I. Under Section 46 of the Act the Central (;overnment by a 
31 
II 
32 
SUPREME COURT REPORTS [2005) SUPP. 5 S.C.R. 
A notification in the official Gazette is empowered to direct that all or any of 
the provisions of the Act shall, subject to such exceptions and restrictions as 
may be specified, apply to any institution established by a State·Government 
which has for its object the financing of industrial concerns,' and on the 
issuance of such notification the institution shall be deemed to be "a Financial 
B Corporation" established by the Government within the meaning of the Act. 
.., .· 
' 
138-C-DI 
\ 
2. The first respondent was established by the State Government with 
the object of developing the industries and financing industrial concerns in 
the State. The Central Government had extended the provisions of Sections 
C 29 of the Act to the first respondent. Thus, the first respondent would be 
covered by the expression "an institution established by a State Government" 
offering range of services including the object of financing industrial concerns 
in the State of Maharashtra. It would thus be a financial corporation covered 
under the Act. Section 29 enables the first respondent to take over the assets 
of the delinquent borrowers. As the appellant had failed to discharge its 
D liability in spite of several opportunities afforded to it the first respondent 
was fully justified in taking over the assets of the appellant in exercise of its 
powers under Section 29 of the Act. 136-F; 38-B) 
3. By mere reduction in its stake to below 50%, SICOM would not cease 
to be a State Finance Corporation. The first respondent is a finance corporation 
E covered by the Act and reduction in the shareholdings of the State of 
Maharashtra below 50% shall not make any difference to the status of the 
first respondent, i.e. being a financial corporation. 139-C-D] 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5502 of2004. 
F 
From the Judgment and Order dated I 0.10.2003 of the Bombay High 
Court at Nagpur Bench in W.P. No. 153 of2003. 
Ashok A. Desai, Manish Pitale and Chandershekhar Ashri for the 
Appellant. 
G 
Dushyant Dave, Jay Savla and Ms. Reena Bagga for the Respondent 
No. I. 
Shekhar Napahade and Shivaji M. Jadhav for the Respondent No. 2. 
V.N. Raghupathy for State of Maharashtra. 
H 
The Judgment of the Court was delivered by 
,• 
AMAR ALCOHOLI LTD. v. SICOM LTD. [BHAN, J.] 
33 
BHAN, J. Th

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