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Mortgage – deposit of title deeds – default – sale underthe State Financial Corporation Act, 1951 – in meanwhile private sale – not valid – High court cannot set aside the corporation sale as it was done underthe State Financial Corporation Act, 1951= the property in question was duly advertised for sale pursuant whereto the fifth respondent had offered the highest amount. On acceptance of the said offer by the UPFC, the entire amount was paid and the sale was confirmed by the Corporation. No sale deed was however executed by the Corporation in favour of the fifth respondent. It also appears that before the property was put up for sale by the Corporation, the original owner, Smt. Nisha Devi Jaiswal had sold the same to the third and fourth respondents, who, in turn, had sold the same to the writ petitioner by sale deed dated 29.08.2001. The aforesaid sale by the original owners to the vendors of the writ petitioner and, thereafter, by said vendors to the petitioner himself was made when the property stood mortgaged in favour of the UPFC. It is in the above circumstances, that the writ petitioner had approached the High court seeking interference with the sale of the property made in favour of the fifth respondent pursuant to the advertisement dated 20.10.2002 issued by the UPFC and further for transfer of the property in favour of the writ petitioner besides restoration of possession thereof which was taken over by the Corporation. 13. The sale made by the UPFC in favour of the fifth respondent was in exercise of the statutory powers vested in the Corporation by Section 29 of the State Financial Corporation Act, 1951. Under the aforesaid provisions of the Act default in re-payment of any loan by an industrial undertaking vests in the Financial Corporation the right to take over the management or possession or both of the industrial concern along with the right to transfer the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation. By virtue of sub-section (2) of Section 29 of the Act such transfer of property by the Corporation will vest in the transferee all rights in the property as if the transfer had been made by the owner thereof. 14. No serious issue either with regard to the validity of the exercise of the power under the Act or the manner of sale of the property by the Corporation pursuant to the advertisement dated 20.10.2002 had been raised in the Writ Petition. What was contended before the High Court is that the Writ Petitioner, Vishnu Dutt Sharma, had purchased the property by sale deed dated 29.08.2001 without any knowledge or information of the mortgage created by the original owner, Smt. Nisha Devi Jaiswal in favour of the Corporation and that the sale pursuant to the advertisement was also without notice to him. A right to the property based on certain equitable principles was also claimed to strengthen which, the offer covered by the interim order of the High Court dated 28.05.2003 was made by the writ petitioner. 15. The issues raised by the writ petitioner before the High court really pertained to the claim of better title of the writ petitioner to the property in question on the basis of the sale deed dated 29.08.2001. The validity of the sale deed dated 29.08.2001 executed in favour of the writ petitioner by his vendors during the subsistence of the mortgage in favour of the Corporation and the rights of the fifth respondent to the said property on the basis of the sale made in his favour by the Corporation pursuant to the advertisement dated 20.10.2002 are the issues that arose in the Writ Petition. Broad and expansive though the powers of the High Court under Article 226 may be, adjudication of the aforesaid questions, some of which also required proof of certain basic facts, in our view, was not appropriate in the domain of public law. Though the High Court in its order dated 05.12.2006 did not expressly say so, the affect of the several directions issued by it, in fact, amounts to an adjudication of the issues outlined above. 16. The essence of the dispute between the parties denuded the lis a public law character. Nor was any issue arising out of public law functions of the State or its authorities involved. In such a situation resort to the public law remedy should not have entertained by the High Court. (Vide Godavari Sugar Mills Ltd. vs. State of Maharashtra[1]). Even if the vindication of the writ petitioner’s rights under the sale deed dated 29.08.2001 is ignored and we are to proceed on the basis that the writ petitioner questioned the sale made by the Corporation, the writ petitioner would not be entitled to an adjudication of the rights of the parties inter se but at best to a judicial review of the administrative action of the Corporation with regard to the sale made (Vide Kisan Sahkari Chini Mills Ltd. and ors. vs. Vardan Linkers and others[2] ) But as already noticed neither the exercise of the statutory power under the Act by the Corporation in the matter of the sale of the property nor the process of the sale transaction was questioned in the Writ Petition either on account of lack of jurisdiction or abuse of authority. In the above facts, the High Court should have refused an adjudication of the Writ Petition and, instead, ought to have required the aggrieved parties to seek their remedies in an appropriate manner and before the competent civil forum. 17. In view of the above discussions, we allow both the appeals and set aside the order dated 05.12.2006 passed by the High Court of Uttarakhand at Nainital.

English: The supreme court of india. Taken abo...

English: The supreme court of india. Taken about 170 m from the main building outside the perimeter wall (Photo credit: Wikipedia)

|REPORTABLE |
IN THE SUPREME COURT OF INDIA

CIVIL APPELATE JURISDICTION

CIVIL APPEAL No. 7597 of 2012
(Arising out of SLP (Civil) 6521/2007)
PRADEEP KUMAR SHARMA … Appellant

Versus
U.P.F.C. RAJPUR ROAD, DEHRADUN & ORS … Respondents

WITH

CIVIL APPEAL No. 7598 of 2012
(Arising out of SLP (Civil) 11835/2007)
J U D G M E N T
RANJAN GOGOI, J
Leave granted.
2. Both the appeals are directed against the judgment and final order
dated 05.12.2006 passed by the High Court of Uttaranchal in Crl. Misc.
Writ Petition No. 196 of 2003 (M/B).
3. A recital of the facts stated by the appellant Uttar Pradesh Finance
Corporation (UPFC) in the appeal filed by it would suffice for the purpose
of the adjudication that is required to be made in the present appeals.
4. A term loan of Rs. 4.55 lacs was sanctioned by the UPFC to one M/s.
Sangam Ice Cream (hereinafter shall be referred to as the borrower), a
proprietorship concern owned by one, Smt. Nisha Devi Jaiswal. To secure
the repayment of the aforesaid loan together with the interest due
thereon, the borrower had created an equitable mortgage, by deposit of
title deeds, of land measuring 192.34 sq. meter or 0.048 acres bearing
Khasra No. 496 along with the constructions standing thereon located at
Mauza Niranjanpur, Pargana Kendriya Doon Tehsil and District Dehradun.
5. After sanction of the aforesaid loan, the borrower availed a part
thereof but defaulted in payment of the installments due. As such default
became chronic and persistent, the UPFC invoking its power under Section
29 of the State Financial Corporation Act, issued notice dated 20.12.1994,
calling upon the borrower to clear all the dues failing which recovery of
proceedings including sale of mortgaged property was contemplated. As
despite the said Notice the dues of the Corporation remained unpaid an
advertisement was issued in the newspaper “Doon Darpan” on 22.09.1996 for
sale of the mortgaged property. The Corporation, however, did not receive
any suitable offer pursuant to the advertisement issued. The fresh second
advertisement, nevertheless, came to be issued only in the edition of
Amar Ujala” on 20.10.2002. It appears that, in the meantime, the sole
proprietor of the borrower firm, Smt. Nisha Devi Jaiswal, executed a sale
deed in respect of the land in favour of two other persons, i.e. Deepak
Kumar Bishnoi and Smt. Sarita Rani, who, in turn, sold the said property
to one Vishnu Dutt Sharma by sale deed dated 29.08.2001.
6. Pursuant to the second advertisement dated 20.10.2002 published in
the edition of Amal Ujala, one Pradeep Kumar Sharma submitted his offer of
Rs. 4.50 lacs along with a bank draft of Rs. 50,000/- as earnest money.
The UPFC issued another advertisement in the edition of “Dainik Jagaran
dated 01.11.2002 indicating a price offered by Pradeep Kumar Sharma for
the property in question and calling upon the borrower / members of the
public to submit their better offer, if any. Evidently, there was no
response to the aforesaid advertisement dated 01.11.2002 published in the
“Dainik Jagaran”. Therefore on 31.12.2002, the Corporation accorded its
approval for the sale of the land in favour of Shri Pradeep Kumar Sharma
and on 14.01.2003, a deposit of another sum of Rs. 1.75 lacs was made by
the aforesaid Pradeep Kumar Sharma. On 27.02.2003, the balance amount of
the offered price i.e. Rs.2.25 lacs was tendered to the Corporation.

7. While the matter was so situated, Vishnu Dutt Sharma who had
purchased the property by the sale deed dated 29.08.2001 instituted a
suit, i.e. O.S. 75/2003 contending that on 06.02.2003, while he and his
family members were away, possession of the property in question was taken
over by the Corporation. Restoration of possession was the principal
relief prayed for in the aforesaid suit. Thereafter, stating that from the
written statement filed in the suit by the Corporation it transpired that
the property purchased by him (Vishnu Dutt Sharma) stood mortgaged in
favour of the Corporation on account of a loan taken by the original owner
thereof and that pursuant to the said Notice published in the newspaper
“Dainik Jagaran” dated 20.10.2002, the property had been purchased by one
Pradeep Kumar Sharma, a Writ Petition was filed impleading the UPFC and
its Managing Director as the first and second respondents, Deepak Kumar
Bisnoi and Sarita Rani as the third and fourth respondents and the
purchaser Pradeep Kumar Sharma as the fifth respondent.
8. In the said Writ Petition, the prayer made was for quashing of the
sale made in favour of the fifth respondent and for transfer of the
property to the writ petitioner and further for restoration of possession
of the same. The High Court while entertaining the Writ Petition passed
an interim order dated 28.05.2003 permitting the writ petitioner Vishnu
Dutt sharma to make a deposit of Rs. 5 lacs in which event it was directed
that the “accommodation in question shall be handed over to the petitioner
subject to further orders of this court.” By the said order, the High
Court also directed that the sale deed will not be executed in favour of
the fifth respondent Pradeep Kumar Sharma.
9. The writ proceeding before the High Court of Uttaranchal was contested
by the UPFC as well as by the purchaser i.e. the fifth respondent, Pradeep
Kumar Sharma. The Corporation had taken a specific stand before the High
Court that the sale in favour of fifth respondent was finalized by the
Corporation and the entire offered price was tendered by the fifth
respondent. The Corporation had also contended that the property being
subject to an equitable mortgage by deposit of title deeds could not have
been validly transferred by the mortgager/ original owner i.e. Nisha Devi
Jaiswal to the third and fourth respondents in the Writ Petition and in
turn the said respondents could not have transferred the property in
favour of the fifth respondent so long as the mortgage subsisted.
10. Thereafter, by the impugned final order of the High Court dated
05.12.2006, the Writ Petition was disposed of by directing the UPFC to
withdraw the amount of Rs. 5 lacs deposited in the High Court by the writ
petitioner, Vishnu Dutt Sharma, and out of the said amount to repay the
fifth respondent, Pradeep Kumar Sharma, the amount of Rs.4.50 paid by him
to the Corporation along with 9% interest thereon. Specifically, the
High Court in its order dated 05.12.2006 had ordered that the sale made
in favour of fifth respondent, which had not been confirmed, stood
cancelled. Aggrieved by the aforesaid order, two separate appeals have
been filed by the UPFC and the fifth respondent in the Writ Petition i.e.
Pradeep Kumar Sharma. The writ petitioner, Vishnu Dutt Sharma, is the
principal respondent in both the appeals.
11. We have heard Ms. Madhu Tewatia, learned counsel for the appellant –
fifth respondent and Mr. Shrish Kumar Misra, learned counsel for the
appellant Corporation. We have also heard Shri Naresh Kaushik and Shri
Akshay Verma, learned counsel for the respondents.
12. The detailed recital made hereinabove clearly indicates that the
property in question was duly advertised for sale pursuant whereto the
fifth respondent had offered the highest amount. On acceptance of the
said offer by the UPFC, the entire amount was paid and the sale was
confirmed by the Corporation. No sale deed was however executed by the
Corporation in favour of the fifth respondent. It also appears that
before the property was put up for sale by the Corporation, the original
owner, Smt. Nisha Devi Jaiswal had sold the same to the third and fourth
respondents, who, in turn, had sold the same to the writ petitioner by
sale deed dated 29.08.2001. The aforesaid sale by the original owners to
the vendors of the writ petitioner and, thereafter, by said vendors to the
petitioner himself was made when the property stood mortgaged in favour of
the UPFC. It is in the above circumstances, that the writ petitioner had
approached the High court seeking interference with the sale of the
property made in favour of the fifth respondent pursuant to the
advertisement dated 20.10.2002 issued by the UPFC and further for transfer
of the property in favour of the writ petitioner besides restoration of
possession thereof which was taken over by the Corporation.
13. The sale made by the UPFC in favour of the fifth respondent was in
exercise of the statutory powers vested in the Corporation by Section 29
of the State Financial Corporation Act, 1951. Under the aforesaid
provisions of the Act default in re-payment of any loan by an industrial
undertaking vests in the Financial Corporation the right to take over the
management or possession or both of the industrial concern along with the
right to transfer the property pledged, mortgaged, hypothecated or
assigned to the Financial Corporation. By virtue of sub-section (2) of
Section 29 of the Act such transfer of property by the Corporation will
vest in the transferee all rights in the property as if the transfer had
been made by the owner thereof.
14. No serious issue either with regard to the validity of the exercise
of the power under the Act or the manner of sale of the property by
the Corporation pursuant to the advertisement dated 20.10.2002 had
been raised in the Writ Petition. What was contended before the
High Court is that the Writ Petitioner, Vishnu Dutt Sharma, had
purchased the property by sale deed dated 29.08.2001 without any
knowledge or information of the mortgage created by the original
owner, Smt. Nisha Devi Jaiswal in favour of the Corporation and
that the sale pursuant to the advertisement was also without notice
to him. A right to the property based on certain equitable
principles was also claimed to strengthen which, the offer covered
by the interim order of the High Court dated 28.05.2003 was made by
the writ petitioner.
15. The issues raised by the writ petitioner before the High court really
pertained to the claim of better title of the writ petitioner to the
property in question on the basis of the sale deed dated 29.08.2001. The
validity of the sale deed dated 29.08.2001 executed in favour of the writ
petitioner by his vendors during the subsistence of the mortgage in favour
of the Corporation and the rights of the fifth respondent to the said
property on the basis of the sale made in his favour by the Corporation
pursuant to the advertisement dated 20.10.2002 are the issues that arose
in the Writ Petition. Broad and expansive though the powers of the High
Court under Article 226 may be, adjudication of the aforesaid questions,
some of which also required proof of certain basic facts, in our view, was
not appropriate in the domain of public law. Though the High Court in its
order dated 05.12.2006 did not expressly say so, the affect of the several
directions issued by it, in fact, amounts to an adjudication of the issues
outlined above.
16. The essence of the dispute between the parties denuded the lis a
public law character. Nor was any issue arising out of public law
functions of the State or its authorities involved. In such a situation
resort to the public law remedy should not have entertained by the High
Court. (Vide Godavari Sugar Mills Ltd. vs. State of Maharashtra[1]). Even
if the vindication of the writ petitioner’s rights under the sale deed
dated 29.08.2001 is ignored and we are to proceed on the basis that the
writ petitioner questioned the sale made by the Corporation, the writ
petitioner would not be entitled to an adjudication of the rights of the
parties inter se but at best to a judicial review of the administrative
action of the Corporation with regard to the sale made (Vide Kisan
Sahkari Chini Mills Ltd. and ors. vs. Vardan Linkers and others[2] ) But
as already noticed neither the exercise of the statutory power under the
Act by the Corporation in the matter of the sale of the property nor the
process of the sale transaction was questioned in the Writ Petition either
on account of lack of jurisdiction or abuse of authority. In the above
facts, the High Court should have refused an adjudication of the Writ
Petition and, instead, ought to have required the aggrieved parties to
seek their remedies in an appropriate manner and before the competent
civil forum.
17. In view of the above discussions, we allow both the appeals and set
aside the order dated 05.12.2006 passed by the High Court of Uttarakhand
at Nainital.
………………………J.
[P SATHASIVAM]

………………………J.
[RANJAN GOGOI]

New Delhi,
October 19, 2012.
———————–
[1] (2011) 2 SCC 439 [para 8 (vi) ]
[2] 2008) 12 SCC 500 – para 23

———————–
10

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