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M/S Ravindra Foam Products Pvt. Ltd. v. Managing Director U.P.F.C. & Others - WRIT - C No. 56450 of 2005 [2006] RD-AH 6298 (22 March 2006)


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Court No. 34

Civil Misc. Writ Petition No. 56450 of 2005

M/s. Ravindra Foam Products Pvt. Ltd. Vs. Managing Director, U.P.F.C., Kanpur and others


Civil Misc. Writ Petition No. 14927 of 2006

Shri Ravindra Pal and another Vs. State of U.P. and others


Hon. Dr. B.S. Chauhan, J.

Hon. Dilip Gupta, J.

Writ Petition No. 56450 of 2005 has been filed by M/s. Ravindra Foam Products Pvt. Ltd. (hereinafter referred to as the ''Company') for quashing the auction sale and for a direction upon the Uttar Pradesh State Financial Corporation (hereinafter referred to as the ''UPFC') to negotiate the One Time Settlement proposal submitted by the petitioner. Writ Petition No. 14927 of 2006 has been filed by the Directors of the Company for quashing the recovery citation dated 1.2.2006.

The Company applied for loan before the UPFC, which sanctioned the term loan of Rs. 7,00, 000/-. However, the Company failed to deposit the instalments in time inspite of repeated notices dated 17.9.1993, 6.6.2002 and 4.9.2003 issued by the UPFC under the provisions of the State Financial Corporation Act, 1951 (hereinafter referred to as the ''Act'). This compelled the UPFC to issue advertisements for sale of the petitioner Unit. The advertisement was also published in the newspaper ''Amar Ujala' on 1.6.2002, 15.11.2003, 13.2.2004 and 4.8.2004. It was also issued in the newspaper ''Dainik Jagran' on 17.1.2003 and 21.1.2003 and in Pioneer on 12.12.2004 and in ''Dainik Aaj' on 12.12.2004. After giving wide publicity through those advertisements the offer of Smt. Neeru Jain was accepted for sale consideration of Rs. 4, 65,000/- and after the payment of the sale consideration physical possession of the property was also handed over to her on 5.7.2005.

In the counter-affidavit filed on behalf of the UPFC it has been disclosed that earlier also, the petitioner had filed a number of writ petitions. Writ Petition No. 44237 of 1999 filed by the petitioners was disposed of on 25.10.1999 while Writ Petition Nos. 12164 of 2000 and 24312 of 2002 were also decided by a common judgment on 5.11.2003. It has further been stated that the Special Leave Petition filed against the judgment and order dated 5.11.2003 was also dismissed on 29.3.2004.

A perusal of the present writ petitions clearly shows that the petitioner has concealed the filing of the earlier petitions. This is a material concealment and in our opinion, this conduct of the petitioners clearly disentitles them to any relief from this Court in the exercise of its discretionary jurisdiction under Article 226 of the Constitution.

This apart, as the petitioner had defaulted in the payment of loan, the UPFC had to take resort to the provisions of Section 29 of the Act. The sole ground that has been urged before us in these petitions is that the petitioner Unit had been sold for an inadequate consideration in order to give some benefit to Smt. Neeru Jain who is related to an employee of UPFC. Such an averment is absolutely vague and even the name of the relative, who is said to have been working in the UPFC, has not been indicated. In the absence of any specific pleadings, it is not possible for us to examine this issue.

The Supreme Court, recently in Karnataka State Industrial Investment & Development Corporation Ltd. Vs. Cavalet India Ltd. & Ors., (2005) 4 SCC 456 considered the scope of interference by the Courts in the decision taken by UPFC under Section 29 of the Act and it was observed:-

(i) The High Court while exercising its jurisdiction under Article 226 of the Constitution does not sit as an appellate authority over the acts and deeds of the Financial Corporation and seek to correct them. The doctrine of fairness does not convert the writ courts into appellate authorities over administrative authorities.

(ii) In a matter between the Corporation and its debtor, a writ court has no say except in two situations:

(a) there is a statutory violation on the part of the Corporation, or

(b) where the Corporation acts unfairly i.e. unreasonably.

(iii) In commercial matters, the courts should not risk their judgments for the judgments of the bodies to which that task is assigned.

(iv) Unless the action of the Financial Corporation is mala fide, even a wrong decision taken by it is not open to challenge. It is not for the courts or a third party to substitute its decision, however, more prudent, commercial or businesslike it may be, for the decision of the Financial Corporation. Hence, whatever the wisdom (or the lack of it) of the conduct of the Corporation, the same cannot be assailed for making the Corporation liable.

(v) In the matter of sale of public property, the dominant consideration is to secure the best price for the property to be sold and this could be achieved only when there is maximum public participation in the process of sale and everybody has an opportunity of making an offer.

(vi) Public auction is not the only mode to secure the best price by inviting maximum public participation, tender and negotiation could also be adopted.

(vii) The Financial Corporation is always expected to try and realize the maximum sale price by selling the assets by following a procedure which is transparent and acceptable, after due publicity, wherever possible and if any reason is indicated or cause shown for the default, the same has to be considered in its proper perspective and a conscious decision has to be taken as to whether action under Section 29 of the Act is called for. Thereafter, the modalities for disposal of the seized unit have to be worked out.  

(viii) Fairness cannot be a one-way street. The fairness required of the Financial Corporations cannot be carried to the extent of disabling them from recovering what is due to them. While not insisting upon the borrower to honour the commitments undertaken by him, the Financial Corporation alone cannot be shackled hand and foot in the name of fairness.

(ix) Reasonableness is to be tested against the dominant consideration to secure the best price.

Learned counsel for the petitioner has failed to substantiate as to how UPFC acted in fairly or unreasonably in the present case. As pointed out by the Supreme Court, the High Court under Article 226 of the Constitution does not sit an Appellate Authority over the acts and deeds of the Corporation and it is not for the Courts to substitute its own decision for that of the Authority. The facts reveal that the advertisement for sale of the Unit had been published in a number of newspapers on various dates and, therefore, it cannot be said that wide publicity had not been given.

We, therefore, see no reason to interfere with the decision taken by the UPFC. The writ petitions are, accordingly, dismissed.

Dt/- 22.3.2006



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