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2008 DIGILAW 2192 (RAJ)

Madan Kanwar v. Rajasthan Financial Corporation

2008-09-17

H.R.PANWAR

body2008
Honble PANWAR, J.—By the instant writ petition under Article 226 of the Constitution of India, the petitioners seek quashing of sale certificate and sale deed dated 31.12.2007 Annex. 4 and 5 in favour of M/s. Jai Vijay Industries. (2). The facts and circumstances giving rise to the instant writ petition are that the petitioners were granted the loan by the respondent Rajasthan Financial Corporation (for short `the RFC hereinafter) and as on 1.4.2002 a sum of Rs. 37,32,451/- was outstanding. A loan agreement was also executed and the property was pleaded by way of mortgage in favour of respondent RFC. As per the terms and conditions of the loan agreement, the petitioners were to repay the loan amount in installments, however, they failed to repay the loan amount and therefore, the respondent RFC initiated proceeding under Section 29 of the State Financial Corporation Act, 1951 (for short `the Act hereinafter) and took over the possession of the assets which were mortgaged as a security against the said loan. The possession of the assets of the petitioners was taken over by the respondent RFC and part of the property/assets has been sold i.e. the agriculture land bearing Khasra No. 634/1, 635/1 and 636/1 to Shri Ghanshyam Rathi on 21.8.2006. The petitioners earlier filed a writ petition before this Court being SBCW No. 926/2005 which came to be disposed of by order dated 20th November, 2007. In the earlier writ petition, this Court noticed that admittedly, the possession of the assets of the petitioner unit is with the respondent RFC and they have even sold part of the assets in the form of agricultural land to Sh. Ghanshyam Rathi on 21.8.2006 and this Court disposed of the writ petition in the following terms:- "Accordingly, this writ petition is disposed of with the direction to the petitioners who may appear before the Branch Manager, RFC, Jodhpur on 5.12.2007 in the first instance and the Branch Manager shall prepare a proper proposal for settlement of dues for approval by higher Management/ competent authority in the head office of respondent RFC. The said authority/ Committee is expected to take a decision in the matter after providing a reasonable opportunity of hearing to the petitioners. The said authority/ Committee is expected to take a decision in the matter after providing a reasonable opportunity of hearing to the petitioners. Once such net amount is determined and communicated to the petitioners in writing by the said competent authority/committee, the petitioner may be allowed a period of three months to clear off such dues. If such dues are not cleared by the petitioner, the respondent RFC would be free to proceed to realize the remaining security of the petitioner firm for realizing such dues." (3). According to the petitioner even after the order of this Court dated 20.11.2007, the respondent RFC proceeded to confirm the sale in favour of private respondent in respect of the assets/security by sale deed dated 31.12.2007 Annex. 4 and 5. Hence this writ petition. (4). I have heard learned counsel for the parties. Carefully gone through the material available on record. (5). Learned counsel for the petitioner submits that the property of the petitioner has been sold by the respondent RFC for Rs. 7,37,000/-, whereas according to counsel for the petitioner, market value of the said property is Rs. 25 lacs and presently the petitioners have a prospective buyer for such amount and therefore, the sale may be quashed and the property may be put to reauction. Learned counsel has relied on a decision of Honble Supreme Court in Gajraj Jain vs. State of Bihar and Others 2004 AIR SCW 3263. (6). Learned counsel appearing for the respondent RFC as also the private respondent submits that the instant writ petition is barred by constructive resjudicata to the extent that the sale deed dated 21.8.2006 has not been challenged by the petitioners in the earlier writ petition though it was within the knowledge of the petitioners as is evident from the order of this Court dated 20.11.2007 and even this Court while disposing of the writ petition made it clear that if such dues are not cleared by the petitioner, the respondent RFC would be free to proceed to realize the remaining security of the petitioner firm for realizing such dues and according to the learned counsel for the respondent RFC even in the earlier writ petition there had not been any restraint order against the RFC for confirmation of the sale and execution of the sale deed in pursuance thereof. Learned counsel for the respondent RFC submits that the petitioners failed to appear before the RFC in compliance of the order of this Court dated 20.11.2007, on 5.12.2007. The property therefore, put to the public auction after due publicity and subsequently sold. The sale of the property on 21.8.2006 by auction sale in favour of Ghanshyam Rathi has not been challenged by the petitioner even in the earlier writ petition and there being no restraint order for conformation of the sale and accordingly the RFC confirmed the sale and executed the sale deed sought to be quashed by the instant writ petition. Learned counsel submits that the property which was put to public auction has fetched market value. A copy of the auction proceeding has been placed on record as Annex. R/1. Learned counsel further submits that while disposing of the earlier writ petition, this Court was conscious of the fact that the agriculture land had already been sold by the respondent RFC in favour of Ghanshyam Rathi on 21.8.2006 and therefore, the Court made a direction with regard to the remaining property even permitting the RFC to proceed to realize the remaining security of the petitioners if such dues are not cleared by the petitioners. The respondent RFC by communication Annex. R/7 addressed to the petitioner firm requested the petitioners to attend the special HOLC meeting scheduled to be held on 21.2.2008 at 11.30 AM in the Board Room (first floor) of the Corporation at Udyog Bhawan, Tilak Marg, Jaipur, copy of which was received by the petitioners on 14.2.2008 at 3.00 P.M. yet the petitioners failed to attend the meeting and again by communication Annex. R/8 dated 22.2.2008 holding of the special meeting was communicated to the petitioners stating therein that the petitioners case was placed before the special HOLC which was held on 21.2.2008 but since the petitioners did not attend the said meeting, the RFC has decided to give one more opportunity of hearing to the petitioners and therefore, advised the petitioners to attend the HOLC meeting scheduled for 7.3.2008 at 11.30 AM in the Board Room (first floor) of the Corporation at Udyog Bhawan, Tilak Marg, Jaipur. Yet the petitioners failed to attend the meeting even on second notice and therefore, by Annex. Yet the petitioners failed to attend the meeting even on second notice and therefore, by Annex. R/9 the respondent RFC finally decided the matter noticing therein that nobody turned up for attending the meeting and the case has been discussed in the light of the decision of Honble High Court. (7). In Gajraj Jain vs. State of Bihar and Others (supra) Honble Supreme Court held that a charge consists in the right of a creditor to receive the payment out of the proceeds of the realization of the property or fund charged with the debt. A bare reading of sub-secs. (1) & (4) of S. 29 shows that it is similar to S. 69 of T.P. Act under which it is stipulated that a mortgagee exercising the power of sale is a trustee of the surplus sale proceeds and after satisfying his own charge he holds the surplus for the subsequent encumbrancers and ultimately for the mortgagor. Section 29(1) contemplates, therefore, a sale for distribution of sale proceeds and not a sale for distribution of property charged with the debt. It also implies that the first charge holder must act in a manner which protects not only its own interest but also the interest of the subsequent charge holder and the mortgagor. This in turn implies that the first charge holder is bound to obtain the best possible price for the mortgaged assets and the best possible price must, in the context, mean the fair market value. (8). According to learned counsel for the petitioners, the price at which the property of the petitioners has not been sold is not a fair market value. (9). From the material available on record, there being no such material pointing out that the sale was not according to the market value and even it was open for the petitioners at the time of filing earlier writ petition either requesting the Court for permitting them to clear the dues since till then the sale was not confirmed but the petitioners have not made any such attempt even in earlier writ petition and therefore, in my view, this cannot be adjudicated and concluded that the property sold by the respondents vide Annex. 4 and5 did not fetch the fair market value and therefore, the decision relied on by learned counsel for the petitioner turns on its own facts and is of no help to the petitioners. (10). In this view of the matter, I do not find any merit in the writ petition. The writ petition is therefore, dismissed. No order as to costs. Stay petition also stands dismissed.