THE CHAIRMAN AND MANAGING DIRECTOR, SIPCOT, A MADRAS - 8 AND ORS. versus CONTROMIX PVT. LTD. BY ITS DIRECTOR (FINANCE) SEETHARAMAN, MADRAS AND ANR

Citation: [1995] SUPP. 1 S.C.R. 415 · Decided: 12-05-1995 · Supreme Court of India · Bench: S.C. AGRAWAL · Disposal: Appeal(s) allowed
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Judgment (excerpt)

, 
THE CHAIRMAN AND MANAGING DIRECTOR, SIPCOT, 
A 
MADRAS - 8 AND ORS. 
v. 
CONTROMIX PVT. LTD. BY ITS DIRECTOR (FINANCE) 
SEETHARAMAN, MADRAS AND ANR. 
MAY 12, 1995 
[S.C. AGRAWAL ANDS. SAGHIR AHMAD, JJ.] 
State Financial Corporations Act, 1950 : 
Section 29-Loan sanctioned by State Financial Corporation-Default 
in repayment despite repeated rescheduling-Foreclosure of loan-Mortgaged 
prope1ties taken possession of by C01poration-Sale thereof-Procedure fol-
lowed-Validity of-Sale price-Reasonableness of 
B 
c 
Respondent No. 1 applied for a term loa'n for setting up a project D 
for manufacture of certain electronic items and Appellant-Corporation 
(SIPCOT) sanctioned a term loan of Rs. 38 lakhs. Subsequently IDBI soft 
loan of Rs. 6.8 lakhs was also sanctioned. Respondent No. 1 executed a 
registered mortgage and created equitable mortgage and executed other 
security documents. Respondent No. 1 did not adhere to the payment E 
schedule, even after it was rescheduled, and committed default in payment. 
SIPCOT issued a show cause notice to Respondent No. 1 whereupon, 
it paid Rs. 1,00,000 and promised to repay the entire dues within 2/3 
months. The matter was reviewed by SIPCOTand Respondent-I was asked 
to pay 50% of the interest overdoes amounting to about Rs. 3.23 Iakhs by F 
December 31, 1991 to enable it ·to consider rescheduling of the payment of 
the loan but Respondent No. 1 did not make the said payment. 
Due to defaults on the part of the Respondent no. 1 the loan was 
foreclosed first in October, 1991 and for the second time in June, 1992 and G 
Respondent 1 was informed that SIPCOT wonld take possession of the 
nnit. Respondent No. 1 thereupon paid a sum of Rs. 4,00,000. 
Thereafter a writ petition was filed and as directed by the High 
Court, Respondent No. 1 paid of Rs. 3,00,000. The High Court gave 
directions fixing the amonnt of the instalments and the period for payment H 
415 
416 
SUPREME COURT REPORTS [1995] SUPP. 1 S.C.R. 
A of the same. It also directed that if there was default in any one of the · 
instalments, it would be open to the SIPCOT to take proceedings under 
the State Financial Corporations Act, 1951. Respondent No. 1 failed to say 
even the first instalment and SIPCOT took possession of th~ mortgaged 
assets, valuing them at Rs. 36.44 lakhs. 
B 
In response to the SIPCOT's advertisement for selling the 
mortgaged assets, Respondent no. 2 made an offer for Rs. 14.26 lakhs. 
After negotiations, the offer was revised to Rs. 38 lakhs and respondent 
no. 2 paid the entire amount by September 15, 1993. 
C 
On September, 19, 1993 Respondent No. 1 filed a writ petition before 
the High· Court challenging the action of SIPCOT in selling the assets to 
Respondent No. 2 on the ground that the market value of the assets would 
be Rs. 72.60 lakhs and that the sale of the same to Respondent no. 2 was 
invalid in view of the law laid down by this Collrt in Mahesh Chandra v. 
Regional Manager UP. Financial Corporation and Ors., [1993] 2 SCC 279. 
D The Single Judge before whom the matter was listed, quashed the sale of 
the mortgaged assets and directed Respondent No. 1 to deposit the amount 
of Rs. 38 lakhs in two instalments by January 20, 1994 and also directed 
that on such payment being made, the unit should be redelivered to it by 
SIPCOT. 
E 
The directions were not complied with by Respondent No. 1. It filed 
an appeal before the Division Bench, which set aside the sale and granted 
time till April 30, 1994 for paying the amount failing which sale by auction 
or tender was permitted. 
F 
Aggrieved by this direction of the Division Bench SIPCOT filed the 
present appeal. 
Allowing the appeal, this Court 
J:IELD : 1. Sufficient latitude was given by SIPCOT to respondent 
G No. 1 to honour its commitments in regard to the payment of loan, but 
respondent No. 1 was making continuous defaults in discharging its 
obligations in that regard. The single Judge has also found that SIPCOT 
bad been very considerate in giving time to respondent No. 1 for making 
payments and it cannot be said that SIPCOT has acted in an arbitrary or 
H unreasonable manner. So also the Division Bench found that no grievance 
SIPCOTv. CONTROMIXPVT. LTD. 
417 
had been made that there was anything illegal in SIPCOT taking posses- A 
sion of the unit because inspite of the fact that several opportunities were 
given to respondent No. 1 for repaying the amount as per the instalments, 
it failed to repay. [ 423-G-H, 424-A
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