MAHARASHTRA STATE FINANCIAL CORPORATION versus MIS. SUVARNA BOARD MILL AND ANR.

Citation: [1994] SUPP. 2 S.C.R. 754 · Decided: 18-08-1994 · Supreme Court of India · Bench: A.M. AHMADI, B.L. HANSARIA

Judgment (excerpt)

A 
\ THE MAHARASHTRA STATE FINANCIAL CORPORATION 
, .. 
MIS. SUVARNA BOARD MILL<; AND ANR. 
AUGUST 18, 1994 
B 
(A.M. AHMADI AND B.L. HANSARIA, JJ.). 
State Financial Corporation Act-Section 29-Exercise of power 
. under-Requirement of natural justice-Non payment of loan-Notice under 
Section 29 calling upon respondent to repay dues failing which possession of 
C its factory premises would be taken-Absence of a Jonna/ show cause notice 
before taking action under Section 2Hf'hether amounts to >iolation of prin-
ciples of natural justice-Held, No. 
Respondent obtained "bridge loan" from the appellant. A sum or Rs. 
3 lakhs was disbursed Iayi~g down the repayment schedule. The respon-
D dent did not repay as agreed upon. The appellant issued a notice con-
templated by Section 29 or the State Financial Corporation Act calling 
upon the respondent to pay the dues failing which it was stated that the 
possession of the factory premises of the respondents shall be taken. On 
payment not being made possession was taken. A letter was issued th.ere-
E after stating that if the respondent was interested in getting back posses-
sion, it should clear the dues within 15 days. On failure to do so, the 
respondent was informed, the Corporation would be at liberty to dispose 
or the property. 
The respondent filed a petition under Article 226 or the Constitution 
· F 
stating that the appellant took over possession or the factory without· 
considering Its representation made pursuant to notice of the appellant. 
The High Court round fault with the action taken with the aid or Section 
29 or the Act because according to it, before doing so a show cause notice 
was required to be given as to why action under Section 29 should not be · 
G taken to satisfy the requirement or natural justice. The notice was quashed 
and the appellant was directed to restore possession. This appeal was filed 
against the Impugned judgment or the High C'!urt. 
Allowing the appeal, this Court 
H 
HELD : 1.1. In the instant case, the notice issued under Section 29 
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754 
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MAHARASlITRAFINANCIAL CORPN.v. SUVARNA BOARD [HANSAR!AJ.]755 . 
of th~ State Financial Corporation Act did call upon the r:espondent to A 
• repay the dues by 21.01.92, failing which the respondent was put to notice 
that possession of its factory premises would be taken. This did meet the 
requirement of natural justice. No separate show cause notice was re· 
quired, as held by the High Court Section 29 action could not have 
therefore been set at naught because of absence of an independent show B 
cause notice. (757·A·B) 
· 
. 
' 
S.L. Kapur v. Jagmolia11, AIR (1981) SC 136, referred to. 
CIVIL APPELLATE JURISDICTION: Chil Appeal No. -1196 of 
1994 .. 
From the Judgment and Order dated 12.2.92 of the Bombay High· 
Court in W.P. No. 277 of 1992. 
· 
. Rajiv Dutta for the Appellant. 
S.V. Deshpande for the Respondents . 
. The Judgment of the Court was delivered by 
HANSARIA, J. Mis Suvama Board Mills, hereinafter, the respon· 
dent, approached the appellant seeking 'bridge loan' towards State Capital 
Incentive and for purchase of some machineries etc. A sum of Rs. 3 lakhs 
was disbursed by the appellant some time in September 1990 laying down . 
the re-payment schedule. The respondent did not repay as agreed upon. A 
small amount of Rs. 11,588 was once paid and cheques given thereafter 
bounced. In December 1990 the appellant reminded the respondent to 
clear arrears, but to no effect. Reminders of April and May 1991 also bore 
c 
D 
E 
F 
no fruit. In January 1992 the arrear on account of principal, interest and 
expenses became about Rs. 25 lakhs. The appellant, a State Financial 
Corporation, decided to invoke power conferred by section 29 of the State 
Financial Corporation Act and did so on 7.1.92 by issuing a notice con-
templated by this section stating, inter alia, that the Corporation bas G 
became entitled because of the failure and neglect of the respondent to 
clear the dues, to recover the entire outstanding Joan amount. of about Rs. 
5 lakhs and called upon the respondent to pay the same by 21.1.92 failing . 
· . which it was stated that the possession of the factory premises of the 
respondents shall be taken on 22.1.92. On payment not being made pos-
session was taken· on 22nd January. A Jetter was issued thereafter on 29th H 
. 
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756 
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SUPREME COURT REPORTS (1994] SUPP. 2 S.C.R. 
A Juanuary stating that if the respondent was interested in getting back, 
po

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