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2005 DIGILAW 37 (JHR)

Bihar State Financial Corporation And Atma Ram Agarwal v. Chotanagpur Minerals

2005-01-14

HARI SHANKAR PRASAD

body2005
JUDGMENT Hari Shankar Prasad, J. 1. Since both the appeals arise out of the same judgment dated 30.11.1992 (decree signed on 19.12.1992) passed in Money Suit No. 9/6 of 1984/1989 both the appeals are heard together and are being disposed of by this common judgment. 2. The case of the plaintiff in brief is that it applied for grant of loan to the tune of Rs. 3.87 lacs before the Bihar State Financial Corporation, Patna (defendant No. 1) for the purpose of establishing factory at Industrial Area Kokar, Ranchi on 5.11.1976. The defendant sanctioned a sum of Rs. 3.36 lacs as loan vide letter No. 7026 dated 7.7.1977 and the plaintiff, through its partners executed mortgage deed of the property mentioned in Schedules A.B. and C to the said deed that is the lease hold right over the land measuring 0.56 acres at village Kokar being Plot No. 913P under Khata No. 124 and Plot No. 914P under Khata No. 42 on portion of industrial plot No. 9 as specified in Schedule B and all the plants and machineries purchased or installed or to be purchased and to be installed on the plot of land and building are mentioned in schedule C. The plaintiff was required to pay instalment of Rs. 25,000/- each with interest a 14.25% per annum half early and defendant No. 1 paid a sum of Rs. 1,72,000/- on 6.4.1978 to the plaintiff for the purpose of machineries and establishment of factory and for other purpose. The plaintiff spent over Rs. 40,000/-towards construction of building and towards other incidental expenses and placed orders for supply of machins, for which the loan had been sanctioned, but as the machineries were not readily available at the relevant time the plaintiff returned a sum of Rs. 1,32,000/- to the defendant No. 1 on stipulation that the same amount shall be paid to the plaintiff as soon as the machineries are made available. In fact the plaintiff records a total amount of Rs. 3,43,300 from the defendant No. 1. The plaintiff installed machineries after construction of building over the plot and started operation in the month of November, 1978 and on 30.11.1978 the plaintiff applied for additional loan of Rs. In fact the plaintiff records a total amount of Rs. 3,43,300 from the defendant No. 1. The plaintiff installed machineries after construction of building over the plot and started operation in the month of November, 1978 and on 30.11.1978 the plaintiff applied for additional loan of Rs. 50,000/- but the plaintiff due to dilly dally tactics of defendants No. 1 abandoned the idea of availing any additional loan from defendant No. 1 and in stead approached Industrial Development Bank of India which financed the loan with effect from 26.9.1978. The plaintiff made a total payment of Rs. 47,861.69 to defendant No, 1 by way of interest. The plaintiff then filed an application to the defendant No. 1 on 10.9.1979 for rescheduling the repayment programme on the ground that production in the factory was started very late and also on the ground of low productivity due to frequent power failure but the plaintiff received a letter from the defendant No. 1 on 8.4.1980 that if the amount of interest is paid to the defendant No. 1 then only application for rescheduling of the principal instalment shall be considered. Due to power failure the factory remained closed for several days the plaintiff suffered a heavy loss and due to the scarcity of power, production could not be sufficiently made and therefore plaintiff vide its letter dated 10.12.1980 informed the defendant No. 1 expressing difficulties in smooth running of the factory and its financial stringency in payment of interest and the principal amount and requested the defendant No. 1 to afford opportunity to the plaintiff to liquidate the suitable instalment but the defendant No. 1 directed the plaintiff to make payment of Rs. 23,000 by 31.12.1980 and to make further payment of outstanding dues by February, 1981. The plaintiff replied by letter dated 14.3.1981 stating difficulty in making payment fixed by the Advisory Board and due to non-cooperative attitude of defendant No. 1 and also due to power failure plaintiff had no option but to close the factory in the month of March, 1982 and due information regarding this fact, was given to the Branch Manager of loan office of the defendant No. 1. The plaintiff had apprised the position to defendant No. 1 but defendant No. 1 did not make any effort to solve the problems and the plaintiff was surprised to learn from the publication in the newspaper that an advertisement for sale of the plaintiffs factory along with its assets and machineries has been published at" the instance of defendant No. 1 and plaintiff vide its letter dated 18.12.1982 requested the defendant No. 1 to withdraw the said advertisement, which was duly received in the office defendant No. 1 and defendant No. 1, vide letter dated 12.1.1983 informed the plaintiff regarding re-advertisement for sale of plaintiffs factory with assets. 3. Besides the properties and assets mortgaged and hypothecated to the defendant No. 1, there were several other valuable materials which are given in schedule-A, attached to the plaint which were lying scattered in the factory premises and the stores and those articles were wholly outside the mortgaged securities of the defendant No. 1 and latter had no claim of any kind thereon. The part of the schedule-A materials were hypothecated in favour of the defendant No. 3 State Bank of India, main Branch, Court Compound, Ranchi and plaintiff used to submit detailed stock statement to the Manager State Bank of India from time to time. Further, the plaintiff was bewildered to learn that the defendant No. 1 has taken possession of the factory premises of the plaintiff along with all its assets and machineries and the stocks and materials by breaking open the lock in an utterly manner including the unhypothecated materials. The details of which are set out in schedule-A of the plaint and further delivered possession thereof to defendant No. 2 who claims to have purchased the same and both the defendants in collusion with each other converted the schedule "A" properties to their use and thus misappropriated the same. The aforesaid action of the defendant Nos. 1 and 2 is wholly high handed and wrongful and the same amounts to torturous act of wrongful conversion of plaintiffs properties by the defendant Nos. 1 and 2 for which they are bounded in law to reimburse and recompensate the plaintiff for the value of said loss occasioned by their wrongful act as aforesaid. The defendant Nos. 1 and 2 is wholly high handed and wrongful and the same amounts to torturous act of wrongful conversion of plaintiffs properties by the defendant Nos. 1 and 2 for which they are bounded in law to reimburse and recompensate the plaintiff for the value of said loss occasioned by their wrongful act as aforesaid. The defendant Nos. 1 and 2 neither called the plaintiff nor the defendant 3, the State Bank of India, main Branch Court Compound, Ranchi or their representative for the preparation of any inventory in their presence. Any inventory said to have been prepared by the defendant No. 1 is incorrect and incomplete and not in accordance with elementary rules of fair play as the witnesses thereto are all their henchmen. The plaintiff on the request made by the defendant No. 3 on a belated stage tried in vain to remove the articles and products as mentioned in schedule A but no materials whatever could be found in the factory premises due to obstructions and protestation made by the defendant No. 2. The plaintiff could not remove anything from the factory premises and the plaintiff wrote a letter to defendant No. 3 regarding their inability to remove the said goods from the factory premises. That due to intransigent attitude of the defendant No. 2 the goods described in Schedule "A" below remained in the factory premises which are under the possession of defendant No. 2, even since 16.2.1983. Besides the above the defendant without making any genius efforts and a manner which lacked bonafidely and good faith on its part sold the entire factory of the plaintiff to defendant No. 2 by private negotiations on an amount which was far below the reasonable market or fair market price in a buried and surreptitious manner. The factory with its building and equipment installed there were sold at Rs. 4,97,065.54 being the outstanding due of the defendant against plaintiff as on 16.2.1983 according to calculations of defendant No. 1 though in fact the fair market price of the same could not have been less than Rs. 6,84,000/- as specified in schedule "b" read with schedule "C" of the plaint. The plaintiff is entitled to a decree for a sum of Rs. 1,86,934. 6,84,000/- as specified in schedule "b" read with schedule "C" of the plaint. The plaintiff is entitled to a decree for a sum of Rs. 1,86,934. 46 as contained in schedule "D" of the plaint being the difference between the fair market price of the properties, sold as specified B and C of the plaint and the price of which the defendant No. 1 sold the properties to defendant No. 2. The cause of action for the suit arose within the jurisdiction of this Court on 16.2.1983 when the plaintiff came to know illegal occupation of the properties belonging to plaintiff by the defendant Nos. 1 and 2. 4. The plaintiff has valued the suit at Rs. 3,74,569.70 P for the purpose of jurisdiction and Court fee and plaintiff has paid advaloram Court fee and has sought the aforementioned relief at para 1. The defendant No. 1 has appeared and filed his written statement and has contested the suit. The defendant No. 2 has appeared and has filed his written statement. The defendant No. 3 has appeared but not filed his written statement. The suit has been heard ex parte against defendant No. 3. The written statement of contesting defendant No. 1 in brief is that the plaintiff has no cause of action for the suit. The suit as framed is not maintainable and is liable to be dismissed. The suit is barred under Section 46B of the State Financial Corporation Act. The statements made in paragraphs 1 to 24 of the plaint are matters of record. The full facts will however appear from the relevant document concerning the facts involved in the suit. The defendant No. 1, has not controverted the statement of plaint paras 1 to 24 except paras 20 and 25 and has admitted that it is a fact that the plaintiff applied for advance of loan of Rs. 3,87,000.00 for setting up an industrial unit in the industrial area. Kokar, Ranchi to the defendant and that loan of Rs. 3,36,000/-was sanctioned in the letter of sanction dated 7.7.1977 vide Annexure-1 of plaint and letter of acceptance dated 12.7.1977. 3,87,000.00 for setting up an industrial unit in the industrial area. Kokar, Ranchi to the defendant and that loan of Rs. 3,36,000/-was sanctioned in the letter of sanction dated 7.7.1977 vide Annexure-1 of plaint and letter of acceptance dated 12.7.1977. According to terms and condition of sanction of loan the plaintiff executed and registered a deed of mortgage on 5th January, 1978 in favour of this defendant whereby the plaintiff mortgaged all the land and building standing on the land existing which were to be constructed after the grant of loan and all machineries which were existing and other machineries which were to be brought, on site by purchase after grant of loan as will appear from the deed of mortgage Annexure 2 of the plaint. That out of the loan sanctioned i.e. Rs. 3,36,000.00, plaintiff was advanced Rs. 3,34,300.00 by instalments the receipt of which sum has been accepted by the plain tiff in paragraph 3 of the plaint. The plaintiff however defaulted in making repayment of the loan according to the terms and conditions contained in letter Annexure 1 of the plaint and mortgage deed Annexure 2 of the plaint and hence the plaintiff was asked to repay the loan but the plaintiff failed to do so and hence the case of the plaintiff was placed before the Advisory Committee (Legal Default Case) on 11.12.1980 in which Vinod Kumar Modi was present Vinod Kumar Modi agreed to clear the dues in the manner stated in paragraph 18 of the plaint i.e. Rs. 23,000 by 31.12.1980 and to make further payment of the outstanding dues by February, 1981. But the plaintiff firms failed to pay the dues as agreed upon and hence matter was therefore again placed before the Advisory Committee (Legal and Default) on 10.3.1981. The Committee decided that if the concern failed to clear off entire over dues by 31.3.1981 legal action may be taken immediately for recovery of the dues of the defendant No. 1. That when the plaintiff firm did not pay the dues, notice under Sections 30 and 29 of the State Financial Corporation Act, 1951 was given on 7.12.1981 and three months time was given for payment of the loan amount of Rs. 4,05,862.09 but dues were not paid. The mortgaged assets were advertised for sale. On the said advertisement no tender was received, then the notice for sale was again issued. 4,05,862.09 but dues were not paid. The mortgaged assets were advertised for sale. On the said advertisement no tender was received, then the notice for sale was again issued. The defendant No. 2 then offered to purchase the mortgaged assets for Rs. 4,96,106.24. The total outstanding dues as on 1.10.1982, he paid Rs. 1,50,000/- at the firs instance and agreed to pay the balance of the dues by instalments. The proposal of the defendant No. 2 was accepted by the defendant No. 1 and the defendant No. 2 was put in possession of the mortgaged assets. An inventory of the properties found in the mortgaged premises was prepared at the time of taking out possession of the mortgaged assets in presence of witnesses and it was signed by the witnesses and branch manager and others vide Annexure- IV of the written statement. The statement made in paragraphs 20 and 25 of the plaint are not correct and are denied. The Defendant denies that properties mentioned in schedule A of the plaint were in the mortgaged premises. Noting beyond the properties mentioned in the inventory list Annexure-IV were in the factory premises. The plaintiff is put to strict proof of the statement made in paragraph 25 of the plaint. The statement made in paragraph 26 of the plaint are not admitted and plaintiff is put to strict proof of it. With regard to statements made in paragraphs 27 to 29 of the plaint, it is stated that the plaintiff was fully aware of the fact that the possession was taken of the mortgaged assets. The possession was taken after due notice to the plaintiff. The statements to the contrary made in the aforesaid paragraph are not correct and are denied. With regard to statement made in paragraphs 30, 31 and 32 of the plaint, it is stated that any other properties found in the factory premises was duly prepared in presence of witnesses and signed by the witnesses coalitar etc. mentioned in Schedule A of the plaint were not found in the factors premises. The question of the same did does not arise. The plaintiff is put to strict proof of the statement that the properties as mentioned in schedule A of the plaint were within the factory premises when possession was taken of the said mortgaged premises. 5. This defendant denies the liability to pay Rs. The question of the same did does not arise. The plaintiff is put to strict proof of the statement that the properties as mentioned in schedule A of the plaint were within the factory premises when possession was taken of the said mortgaged premises. 5. This defendant denies the liability to pay Rs. 1,87,636.25 or any sum at all to the plaintiff rather it is stated that in case the plaintiff will not return the machineries etc. which they have removed from the factory premises or pay their price the plaintiff will he liable to pay price of the same which has been estimated to be Rs. 1,02,500/-. An FIR has been lodged on 21.2.1983 against the partners and the promotors of the plaintiff firm for removal of the machineries etc. mentioned therein as Annexures V and VI of the written statement. The defendant further submits that the purchaser has paid Rs. 1,50,000/- out of the price Rs. 4,96,106.24 the total outstanding as on 1.10.1982 for which" the mortgaged assets were sold and has represented that unless the machineries etc. which were removed by the original promoters are made over to pay the balance of the price. Regarding statements vide para 32(a) of the plaint are not correct and are denied. The factory has been sold after inviting tenders and due publication of notice. I was sold at the reasonable market price. It is incorrect to say that the defendant did not make genuine efforts and took actions hurriedly and surreptitiously. The plaintiff is put to prove allegations made in the para Statement made in para 32(a) of the plaint are not quite correct. It is wrong to say that the value of the factory would be Rs. 6,84,000/- The schedule given (B and C) are not correct and are exaggerate the plaintiff is put to prove the allegations made in the para. The statements in the para 32(e) are not correct and are denied. The plaintiff is not entitled to decree as contained in schedule D. The plaintiff is put to prove allegations made in the para. The claim of the plaintiff is barred by limitation and barred under Section 69 of the Partnership Act. The defendant No. 1 has further stated that plaintiff is not entitled for any relief sought for or to any other relief and suit of the plaintiff is fit to be dismissed with cost. The claim of the plaintiff is barred by limitation and barred under Section 69 of the Partnership Act. The defendant No. 1 has further stated that plaintiff is not entitled for any relief sought for or to any other relief and suit of the plaintiff is fit to be dismissed with cost. The defendant No. 2 has denied all allegations of plaintiff in his written statement. 6. Defendant No. 2 also appeared and filed written statement. Like defendant No. 1 this defendant No. 2 has also taken ornamental defence and has submitted that the suit is not maintainable and is liable to be dismissed and the suit is barred under Section 46-B 0f the State Financial Corporation Act. 1951. The statements made in paras 1 to 24 of the plaint are matters of record concerned with the plaintiff and defendant Nos. 1 and 3 only and not concerned with this defendant. It is stated that this defendant has purchased the assets of the plaintiff from the defendant No. 1 and the possession of the same have been handed over by the defendant No. 1 to this defendant as per inventory list annexed with this written statement marked Annexure-A. In presence of their officers the police officers and also in presence of Sri Pradeep Modi one of the partners of the plaintiff and this defendant has purchased the same in accordance with the relevant rules and provisions under the State Financial Corporation Act. 1951. It is further stated that the statement made in Para 25 of the plaint are not correct and are denied. This defendant submits that nothing beyond the properties mentioned in the inventory list annexed as Annexure-A, to this written statement were given to the possession of this defendant and the plaintiff is put to strict proof of the allegations made in paragraph 25 of the plaint. The statement made in para 26 of the plaint appears to be matter of record concerned with the plaintiff and defendant No. 3, only and not with this defendant and hence the plaintiff is put to prove the same. The statement made in para 26 of the plaint appears to be matter of record concerned with the plaintiff and defendant No. 3, only and not with this defendant and hence the plaintiff is put to prove the same. It is true that possession of the factory premises of the plaintiff was taken over by the defendant No. 1 along with some of the mortgaged assets but possession of the factory premises has been given by the defendant No. 1 to this defendant only with the properties mentioned in the inventory list annexed to his written statement as Annexure-A, and no other property, hence the question of misappropriation of any such property as alleged does not arise. It is alleged that statements made in Para 29 of the plaint are wholly incorrect and it is denied. On the other hand, it is stated that this defendant has purchased mortgaged assets of the plaintiff from defendant No. 1 for valuable consideration in accordance with relevant provisions under law and nothing against law has been done by any of the defendants and the allegations to the contrary are totally false and misleading. The statements made in para 29 of the plaint are false and incorrect. On the other hand, it is submitted that the defendant in Para 18 has submitted that the plaintiff has finally sworn in that they were aware of the fact that possession of the factory and mortgaged assets were taken over by the defendant No. 1 after due publication in the Gazette. 7. On the basis of the pleadings of the parties, following issues were framed for determination in the suit. 1. Has the plaintiff any valid cause of action for the suit? 2. Is the suit as framed maintainable under the (sic). 3. Is the suit bad under Section 16(b) of the State Financial Corporation Act. 4. have the defendants taken and removed the movable properties which were not mortgaged to the corporation illegally and unauthorized? 5. Is the sale conducted by the corporation defendant No. 1 in favour of defendant No. 2 bonafide and legal one 6. Whether the plaintiff is entitled to damages for undervaluing the mortgaged properties by the defendants? 7. Whether plaintiff is entitled for decree as prayed for ? 8. To what relief or relief if any the plaintiff is entitled ? 8. Whether the plaintiff is entitled to damages for undervaluing the mortgaged properties by the defendants? 7. Whether plaintiff is entitled for decree as prayed for ? 8. To what relief or relief if any the plaintiff is entitled ? 8. The learned Court below while dealing with the issue No. 4 decided the same in favour of the plaintiff but against the defendant Nos. 1 and 2. Further the learned Court below while deciding the issue Nos. 5 and 6 has decided the same against the defendant No. 1 only and other issues Nos. 1, 2, 3, 7 and 8 have also been decided in favour of the plaintiff and against the defendant Nos. 1 and 2. 9. Case of the plaintiff-respondent is that it had taken loan from Appellant Bihar State Financial Corporation for establishing factory and the loan was sanctioned. At the first instance, this plaintiff-respondent took Rs. 1,72,000/- as loan and spent about Rs. 40,000/- over construction and building etc. as orders placed for supply of machineries were accepted to be made available after sometime and therefore, he has spent Rs. 40,000. In all, loan of Rs. 3,34,000 was sanctioned to the plantiff-respondent but due to failure of proper power supply, the factory was not functioning well and so the plaintiff-respondent further prayed for loan of Rs. 50,000/- for smooth running of the factory but due to dilly-dallying tactic of the BSFC, the plaintiff-respondent took loan from State Bank of India. But in the meantime, the plaintiff-respondent had paid a sum of Rs. 46,000 and odd as interest to the BSFC and requested the BSFC for rescheduling the payment of installment as factory was finding it difficult to make payment in view of the fact that there was no proper power supply and therefore, factory was not functioning well. But BSFC placed some condition which factory felt it difficult to fulfill and ultimately the plaintiff- respondent wanted to close the factory. But BSFC placed some condition which factory felt it difficult to fulfill and ultimately the plaintiff- respondent wanted to close the factory. Thereafter the BSFC issued an advertisement in the newspaper about the sale of the factory but immediately on coming to know of the advertisement in the newspaper, the plaintiff-respondent wrote a letter to the BSFC about the advertisement in newspaper, but BSFC again issued advertisement for sale of the factory and later on took possession of the factory by breaking open the lock of the factory and sold the factory to the defendant No. 2 Atma Ram Agarwal who is appellant in FA No. 22 of 1994 (R) and thereafter the plaintiff-respondent filed this suit which was decided in favour of the plaintiff-respondent. 10. On the other hand, defendant Nos, 1 and 2 appeared and filed W S and denied allegation made in the plaint. Thereafter suit was taken up for hearing and ultimately judgment and decree was prepared against the defendant Nos. 1 and 2 on contest and ex parte against the defendant No. 3 SBI. 11. From the facts alleged three issues arc important which need to be decided in this appeal. Whether the appellant removed the moveable properties not mortgaged to the corporation illegally or unauthorisedly. Whether the sale conducted by the corporation defendant-appellant, in favour of the defendant No. 2 bonafide and legal one, and whether plaintiff-respondent is entitled to damages for undervaluing the mortgaged properties by the defendants? 12. Issue No. 1 Admitted case of the parties is that the plaintiff-respondent took loan of rupees three lakh and odd from the appellant-B.S.F.C. and when plaintiff-respondent failed to pay the amount of installment of loan, then his factory in question was put on auction and sold to the defendant No. 2- respondent-2. In this case, the plaintiff-respondent has examined nine witnesses in support of the case. The plaintiff-respondent had taken loan of Rs. 3,36,000 from the defendant No. 1 (Ext. 6 and 7) to set up mineral grinding S.S.I. Unit and had executed the deed of mortgage in favour of defendant No. 1 for fixed assets on 5.1.1978 PW 1 is Mahendra Prasad. He has come to say that the plaintiff-respondent has filed Xerox copy of the paper, original of which are in custody of the defendants. 6 and 7) to set up mineral grinding S.S.I. Unit and had executed the deed of mortgage in favour of defendant No. 1 for fixed assets on 5.1.1978 PW 1 is Mahendra Prasad. He has come to say that the plaintiff-respondent has filed Xerox copy of the paper, original of which are in custody of the defendants. He has proved notice which was given to the defendants for producing original documents but defendant did not produce the original documents (Ext. 1). 13. PW 2 is Chinta Mani Singh. He is formal witness who has proved some documents. 14. PW 3 is Vishwanath Munda. he previously worked in Bihar Pipe, Kokar Industrial Area and the factory in question was in that very area. According to this witness, he has seen articles of this factory lying outside the factory on the ground. 15. PW 4 is Sri Mahabir Prasad Kediya. He is businessman. He runs an industry in Kokar Industrial Area Known as S.G. Enterprises. The factory in question was also there and that factory was lying on half of his plot. He says that this factory was closed. He further says that he used to come and go in the premises of the factory and he saw huge quantity of materials lying on the ground of the factory and these articles were seen lying even after closure of the factory. He found stones lying there. Besides this, he also found spare parts of machine lying there. When lock of the factory was being broken, he was not allowed to enter the factory premises and none of the partners of the Chhotangapur Mineral Plant was there but he did not inform the partners. He visited the place last time in January 1983 and till then he found the materials lying there. 16. PW 5 is Mahabir Lal. He is an advocate clerk. He is a formal witness, who has proved some documents. PW 6 is Jai Ram Singh. He is also a formal witness who has proved some documents. 17. PW 7 is Hem Kumar Budhiya. According to this witness, he found party to the suit from before. The plaintiff was running factory known as Chhotangapur Mineral Factory and he has been going there from 1977-78. He used to visit the place for grinding his mineral. He says that when factory was put on auction, he was there. 17. PW 7 is Hem Kumar Budhiya. According to this witness, he found party to the suit from before. The plaintiff was running factory known as Chhotangapur Mineral Factory and he has been going there from 1977-78. He used to visit the place for grinding his mineral. He says that when factory was put on auction, he was there. He found articles lying there on the ground. He further found goods worth ten trucks. 18. PW 8 is Lal Mritunjay Ray. He has come to say that he knows plaintiff who has factory known as Chhotanagpur Mineral Factory. He went to that place only last time in 1983 and by that time, the factory had been closed. He also says that he found huge quantity of articles lying outside the factory premises. He found red stones worth ten trucks load of articles. He also found 8-10 trucks load of white stones and other articles. 19. PW 9 is one of the plaintiffs. He has come to say that he is one of the partners of the firm and his factory is registered with SSI and partnership was also registered. He has given details as to how the loan was procured and how working capital loan was obtained from SBI and how he executed deed of mortgage in favour of the appellant-BSFC and how liquid articles were hypothecated in favour of the BSFC. He has also stated about factors leading to closure of the factory as neither electricity was being made available nor there was sufficient water for running the factory and as a result of poor supply of electricity and other materials, the factory was running in loss and, therefore, the installments could no be paid to the BSFC and also to the State Bank of India. He has further deposed that he had requested the BSFC for rescheduling of the payment of the installments but that was not considered. Although, the factory was not in a position to be closed because partners were not in a position to make payment of interest, as a result of which defendant No. 1 took legal action against the factory. He has further deposed that he had requested the BSFC for rescheduling of the payment of the installments but that was not considered. Although, the factory was not in a position to be closed because partners were not in a position to make payment of interest, as a result of which defendant No. 1 took legal action against the factory. In 1982 in the month of February electrical line was re- connected and from 1.4.1982 decision was taken to close the factory and for that, a notice was given to the Bihar State Electricity Board on 22.2.1982 that from 1.4.1982 the line be deemed to be disconnected (Ext. 7/3) He has further deposed that the factory had taken loan of Rs. 1,60,000/- which were hypothecated to -the Bank and from time to time, statement was furnished to the bank and bank authority also used to inspect the factory premises from time to time and the last inspection was made by the bank on 30.3.1982. Inspection reports is (Ext 11). On the basis of inspection report dated 30.3.1982, stock statement was furnished to the Bank on 31.3.1982 and reply was sent to the bank (Ext. 7/2-1) The defendants had issued notice for auction sale of the factory and he sent reply to the notice. According to this witness articles worth Rs. 1,31,000/- were hypothecated to the bank but the other articles were lying there, were not hypothecated to the bank. He says that he received loan from the bank on 18.10.1982 and that letter has been marked as Ext. 7/3-4 which is a purchase order of Greaves Pasko Ltd. Further according to this witness, stock statement has been prepared on the basis of stock register. He further says that at the time of auction of the factory, delivery and possession of raw materials in sufficient quantity besides finished products and other articles were lying there which were not hypothecated to the appellant-defendant No. 1 but where hypothecated to the defendant No. 3 respondent No, 3. SBI. Besides this, other articles were also lying there. He had further stated that possession of the factory was taken without his knowledge and even lock was broken and inventory of the articles lying in the premises was not properly prepared and he has denied that before auction, motor or some machines had been taken out. SBI. Besides this, other articles were also lying there. He had further stated that possession of the factory was taken without his knowledge and even lock was broken and inventory of the articles lying in the premises was not properly prepared and he has denied that before auction, motor or some machines had been taken out. This is wrong to say that at the time of preparation of inventory, his men were there. The factory had come into operation in 1982. 20. On the other hand, two witnesses have been examined on behalf of the defendants DW1 is Brij Bihari Singh. He has stated that the plaintiff had applied for loan which was sanctioned and the amount of loan was paid. When factory failed to make payment, then legal action was taken and the plaintiffs were noticed and even after notice when they failed to make payment of installment, then legal action was taken. He has given details as to how publication was made in the newspaper about the auction sale of the factory and how not a single purchaser come forward to purchase the factory, thereafter on private negotiation the factory was sold to the defendant No. 1. 21. Now I deal with the documentary evidence Clause 7 of Ext. 9 says that charge of defendant No. 1-plaintiff is with respect to the liquid assets comprising of raw materials, stock in trade, stock in progress, finished goods, debts, sale rank after charge of commercial co-operative bank provided working capital loan and even after the charge created in favour of the said bank is of subsequent date, still it will be ranked before Bihar State Financial Corporation. The PW 9 who is one of the partners, has stated that the plaintiff had taken loan of Rs. 1,60,000/- from State Bank of India-defendant No. 3 as working capital loan and current assets were hypothecated to the bank Ext. 7 is a letter dated 14.3.1983 written by the defendant No. 2 to the bank wherein defendant No. 1 requested the defendant No. 3 to remove raw materials, etc. hypothecated from the factory premises. This is clear to show that goods were lying there from before and those goods did not form part of the inventory list. This is also to show that BSFC had information about the working capital loan which the appellant-plaintiff had taken from defendant No. 1 -respondent. 22. hypothecated from the factory premises. This is clear to show that goods were lying there from before and those goods did not form part of the inventory list. This is also to show that BSFC had information about the working capital loan which the appellant-plaintiff had taken from defendant No. 1 -respondent. 22. On the other hand. DW 1 has admitted to have issued Ext. 7/3 after verifying from official record. Thus, the defendant No. 1 -appellant had information about the loan which the plaintiff had taken from bank as working capital loan and that current assets were hypothecated to the bank against the loan. Further, Ext 7/2-1 is a letter dated 18.10.1982 which was written by the bank to the plaintiff asking him to regularize the loan amount of Rs. 1,60,000/- which has been proved by Ext 7/2-5 Ext. 7/2-5 is another letter dated 1.3.1983 written by the bank to the plaintiff to store the stock of raw materials in godown under bank lock and that letter has been proved. 23. As per clause 7 of the mortgage deed which is Ext. 9. PW 9-defendant No. 3 had first charge on the liquid and current assets and, therefore, the defendant No. 1 was not in a position nor he should have sold the factory and allowed possession to be taken over by other person and handed over the same to the defendant No. 2 for realization of its loan amount as defendant No. 1 -appellant had second charge over it and the bank had first charge over it. It also appears from the exhibits filed in this case that the plaintiff-respondent could not pay interest and principal amount of loan to the defendant No. 1 appellant due to reasons beyond control of the factory and, therefore, the defendant No. 1 decided to take legal action against the plaintiff under Sections 29 and 30 of the State Financial Corporation Act, 1951 and, therefore, the factory of plaintiff was advertised for sale on 20.11.1982 and 7.2.1983 vide Exts 7/a, 7/m and 8/a dated 20.1.1983. On the other hand, defendant No. 2 on 6.2.1983 vide Ext 7/4 offered to purchase mortgaged assets of the plaintiff on total outstanding charge of defendant No. 1 on the date of offer and paid a sum of Rs. 5,000/- by cheque. On 10.2.1983 the defendant No. 2 paid further sum of Rs. On the other hand, defendant No. 2 on 6.2.1983 vide Ext 7/4 offered to purchase mortgaged assets of the plaintiff on total outstanding charge of defendant No. 1 on the date of offer and paid a sum of Rs. 5,000/- by cheque. On 10.2.1983 the defendant No. 2 paid further sum of Rs. 1,45,000/- to defendant No. 1 but defendant No. 1 vide Ext 7/w asked the defendant No. 2 to pay Rs. 1,50,000/- in one cheque so that possession of the factory may be handed over to the defendant No. 2 after clearance from Managing Director Ext. 7/O is a letter by DW 1, but its office at Patna on 13.2.1983 for grant of permission to hand over the possession of the plaintiff factory to the defendant No. 2 pending approval of the Board vide Ext. 7/2 and the Managing Director granted permission subject to the approval of the Board only on 6.2.1983. It is also there that on 6.2.1983. DW 1 wrote a letter to the SDO, Ranchi for deputation of a Magistrate but the SDO, Ranchi declined to depute any Magistrate (Ext 7/R). Thereafter a lock of the factory was opened by the officers of the defendant No. 1 in presence of DW 1 and possession was handed over to the defendant No. 2 and as per evidence of PW 9, he came to know about the same at 6.30 PM and went to the factory where he found the lock broken and the men were inside the factory, on inquiry they told him that they were men of defendant No. 2 and then PW 9, lodged FIR which is Ext. 21 PW 9 has further stated in his evidence that at the time of handing over the possession of the factory, there was no representatives present and this fact has been admitted by DW 1 in his evidence. 24. From facts above, it is clear that the factory in question was taken over by defendant No. 1 and at the time of breaking open the lock of the factory, not a single representative of the plaintiff was present and inventory of the articles was prepared without any representatives of the plaintiff side. 24. From facts above, it is clear that the factory in question was taken over by defendant No. 1 and at the time of breaking open the lock of the factory, not a single representative of the plaintiff was present and inventory of the articles was prepared without any representatives of the plaintiff side. Further, when the letter was written to the SDO for deputation of a Magistrate and the SDO refused to depute the Magistrate, then it was incumbent upon the defendant No. 1 to have informed the plaintiff about the action which defendant No. 1 proposed to take. Thus, it is clear that the defendant Nos. 1 and 2 -appellant-respondent took all action in hot haste and it is also clear that defendant No. 2 had not participated in tender issue ceremony at Patna nor had entered into negotiation at Patna and by private negotiation, assets of the plaintiff was sold to him and possession was handed over to the defendant No. 2 and possession of those articles were given to the defendant No. 2 about which, no offer was made for sale and which were not the subject matter of sale. 25. The inventory list is Ext. 13 and this inventory list has been prepared which contains signature of B.K. Chabla, Prakash Tekariwala. Alma Ram Agarwal, C.S. Singh. S.T. and C.B. Sharma, editor of Chhotanagpur Darshan PW 4 who has stated that his factory is adjacent to the factory of the appellant, was not called to participate in the preparation of the inventory list, although he had gone there but he was not allowed to enter the factory premises. The inventory list contains list of machinery which were found in the factory premises at the time of handing over the possession as disclosed by DW 1, although DW1 has staled that there was no moveable properties in the factory premises but this statement of DW1 has been falsified by Ext. 7/A, which is a letter written by the defendant No. 2 to the defendant No. 1 for removing raw materials lying the factory premises. On the other hand, defendant No. 1 wrote a letter to the bank on 14.3.1983 to remove the raw materials lying there and DW 1 in his evidence has admitted to have written this letter after verifying the official record and this letter has been marked as Ext. On the other hand, defendant No. 1 wrote a letter to the bank on 14.3.1983 to remove the raw materials lying there and DW 1 in his evidence has admitted to have written this letter after verifying the official record and this letter has been marked as Ext. 7/S. Besides this, one more letter has been written by the defendant No. 2 to defendant No. 3 for removing the raw materials (Ext -7/1). 26. From materials brought on record and exhibits discussed above, it appears that correctness of preparation of inventory list is at stake because that, list does not contain signature of any independent witnesses of vicinity of the unit and the submission of the learned counsel for the plaintiff-respondent that all the witnesses to the inventory were related or known to the defendant Nos. 1 and 2 PW 3 who used to sleep there has stated that he saw huge quantity of raw materials lying on the ground even after closure of the factory besides PW 7 is witness who was entrusted with purchase of the factory and PW 8 had also supported lying of various articles on the ground of the factory premises. 27. Further, PW 9 has stated that huge quantity of liquid raw materials were lying on the ground which were hypothecated to the SBI defendant No. 3 and actually defendant Nos. 1 and 2 also lifted these articles without any information to the either plaintiff or to the defendant No. 3. It is also clear that plaintiff had taken working capital loan of Rs. 1,60,000/- from SBI had hypothecated the liquid property to the bank and these articles should not have been taken over by the defendant No. 2 at the time of handing over of possession and these things have maliciously been done by defendant No. 1 in collusion with defendant No. 2 and inventory list (Ext B) prepared by the defendant No. 1, although these inventory list contains signatures of responsible persons, no doubt but when there is allegation that these witnesses were either relatives of defendant Nos. 1 and 2 or were well known to these defendants or in their absence inventory list might have been prepared and thereafter their signature was obtained and before preparation of inventory list, defendant No. 1 was duty bound to inform the plaintiff to remain personally present or to send any representatives but this has not been done, hence plaintiff-respondent has proved that articles were illegally and unauthorisedly removed from the premises of the factory which was put on action. 28. Admittedly, when plaintiff-respondent decided to close the factory in view of the fact that there was poor power supply and other raw materials were not easily available, then appellant-defendant No. 1 issued advertisement first on 20.11.1983 and on protest of the plaintiff, the second time advertisement was issued on 7.2.1984 and even a tender was invited by defendant No. 1, Patna Office, but when tender was opened, nobody appeared but this defendant No. 2 through Branch Manager of Main Branch, Ranchi entered into a private negotiation for sale of the factory, although DW 2 should have entered into an agreement for sale with Divisional Manager of the BSFC, Patna and without evaluating the actual price of all the articles, kept the premises without valuing the actual price of the factory through Ext. 7/4 and while taking over the possession, defendant No. 1 gave delivery of possession of all liquid assets, finished items and Other articles which were in subject matter of the inventory list and thus committed gross irregularity in delivery and possession of these articles to the defendant No. 2. In the result, this issue is decided against the appellant and in favour of the plaintiff-respondent. 29. Issue Nos. 2 and 3-plaintiff-respondent had set up a mineral grinding factory at Kokar and had taken loan from the defendant No. 1 appellant. The plaintiff-respondent had also taken working capital loan from defendant No. 3 SBI to the extent of Rs. 1,60,000/- and odd and hypothecated the liquid assets, etc. to the bank. The bank authority used to make inspection of the premises from time to time and last inspection was made on 31.3.1982 and the inspection report which is marked Ext. 3. disclosed the assets including 0.9 acres of land, etc. and valued assets of Rs. 5,48,716.86 Paise through audit and balance sheet (Ext. to the bank. The bank authority used to make inspection of the premises from time to time and last inspection was made on 31.3.1982 and the inspection report which is marked Ext. 3. disclosed the assets including 0.9 acres of land, etc. and valued assets of Rs. 5,48,716.86 Paise through audit and balance sheet (Ext. 7) and this figure was dated 1.11.1978 when actual production started and the last inspection was made on 31.3.1982 by the State Bank of India and the inspection report which is Ext. 3 disclosed assets worth less than Rs. 6,84,000/-. but sale in question was conducted by the defendant No. 1 to the defendant No. 2 and defendant No. 2 purchased the factory through negotiation and paid the amount to the extent of outstanding dues and, therefore, factory suffered a loss of Rs. 1,87,000/- because the last inspection made by the SBI authorities had actually valued the assets of the factory at not less than Rs. 6,84,000/- and therefore sale of the factory at such low price to the extent of outstanding dues goes to show that no proper effort was made on behalf of the defendant BSFC to obtain highest amount of the factory and in this way the defendant No. 1 connived with the defendant No. 2 and through private negotiation sold the factory at much lesser price than it could have fetched. In course of argument learned counsel for the appellant placed reliance upon several case laws including 1986 PLJR 858 wherein it has been held that High Court can examine in limited circumstances the materials on record for the purpose of finding validity of corporation action and sale held in good faith cannot be challenged. Another case law was cited on behalf of the learned counsel for the appellant is 2002 (3) SCC 496 wherein it has been held that the fairness required by the corporation cannot be carried out to the extent of disability them from recovering his due to them. Also corporation is an independent autonomous statutory body having its own constitution and rules to abide by and functions and obligations to discharge. As such, for the discharge of its functions, it is free to act according to its own light. Also corporation is an independent autonomous statutory body having its own constitution and rules to abide by and functions and obligations to discharge. As such, for the discharge of its functions, it is free to act according to its own light. The view it forms and decisions it takes on the basis of the information in its possession and the advice it receives and according to its perspective and calculation. Unless its action is malafide, even wrong decision by it is not open to challenge. It is for the Court or the third party to substitute its decision in commercial matters. The Court should not risk their judgment for the demand of the body to whom the task is assigned. It is submitted that decision to sale the factory to the respondent No. 2 through negotiation was a right decision taken by the corporation and that decision cannot be challenged or held to be bad. 30. On the other hand, case laws such as 2004 (2) JCR 284 (SC) : 2004 (2) JLJR 147 (SC), AIR 1999 Raj 140 , AIR 2002 SC 834 , AIR 1993 SC 1434, AIR 1995 SC 1632 and 2004 (7) SCC 151 have been cited on behalf the respondents to show that State Financial Corporation has got power to sale is unlimited and that sale shall be exercised with full care and the sale should be conducted in such a way that sale brings price to the extent of outstanding dues lying against the company of the State Financial Corporation. In the instant case, it appears the manner in which the sale has been conducted goes to show that Bihar State Financial Corporation was in mood to sale the factory at price worth the outstanding dues and not more than that and did not make sincere efforts for fetching full price for the factory. Further, investigation conducted by the SBI indicate that the factory was worth Rs. 83,000/- and odd and if sincere efforts would have been made, the Bihar State Financial Corporation would have definitely fetched that price of the factory. In the facts and circumstances of the case, this issue is decided in favour of the respondent and against the plaintiff. 31. Further, investigation conducted by the SBI indicate that the factory was worth Rs. 83,000/- and odd and if sincere efforts would have been made, the Bihar State Financial Corporation would have definitely fetched that price of the factory. In the facts and circumstances of the case, this issue is decided in favour of the respondent and against the plaintiff. 31. A plea has been taken on behalf of the appellant Atma Ram who has filed F.A. No. 22 of 1994 against the judgment and decree of the learned Court below that he is not at fault, rather he is at loss on account of the fact that prior to the sale of the factory, some machines had been removed from the factory just before the take over of the factory. But question is that before purchase of the factory by him, he entered into negotiation with the Branch Manager of Bihar State Financial Corporation at Ranchi and had agreed to purchase the factory at the price agreed upon in between him and the Branch Manager and before purchase, it cannot be believed that he purchased the factory without going through the premises of the factory. Further, he did not appear or take part in the tender that was opened at the head office of Bihar State Financial Corporation and Bihar State Financial Corporation also when no tender was filed, should have reissued the tender and from the evidence of the Branch Manager defendant No. 1 obtained permission from the head office at Patna for approval of sale and the in course of time, sale was approved. While deciding issue No. 2, it was found that Bihar State Financial Corporation did not conduct sale in proper manner and did not fetch proper price for the factory worth which the factory was in possession of defendant No. 1 and, therefore, the question of removal of articles from the factory premises by the plaintiff-respondent does not arose, although an FIR to that effect has been lodged against the plaintiff- respondent and a case in this connection is said to be pending. But the sale which was conducted by the defendant No. 1 -appellant was not conducted in a proper way and there was collusion in between the defendant No. 1 and defendant No. 2, so ignoring all the norms, the sale was conducted and as such, both defendant No. 1 and defendant No. 2. are liable and, therefore, the learned Court below gave a finding against the defendant No. 2 holding the defendant No. 1 -appellant of FA No. 531 of 1993 (R) responsible for the loss of the property as described in Schedule-A of the plaint. So far as relief-A 1, was concerned, defendant No. 1 appellant has been held responsible. 32. Having considered the evidence of the witnesses on record, submissions of the parties and the case laws cited on behalf of the parties. I am of the view that judgment of the learned Court below does not require any interference. In that view of the matter, both the appeals are hereby dismissed and the judgment and the decree of the learned Court below are hereby affirmed, but in the circumstances, there will be no order as to costs.