2002 (11) TMI 685 - HC - Companies Law

Issues Involved:
1. Legality of the seizure of the leasehold premises under Section 29 of the State Finance Corporation Act, 1951.
2. Conflict between the State Finance Corporation Act, 1951, and the A.P. Protection of Depositors of Financial Establishments Act, 1999.
3. Petitioner's possession and business operations in the seized premises.
4. Petitioner's right to participate in the sale of the seized property.

Issue-wise Detailed Analysis:

1. Legality of the Seizure:
The writ petition was filed to declare the seizure of the leasehold premises by the 1st respondent under Section 29 of the State Finance Corporation Act, 1951 (SFC Act) as illegal, arbitrary, and contrary to the provisions of the A.P. Protection of Depositors of Financial Establishments Act, 1999. The petitioner claimed to have leased the premises and deposited Rs. 20,00,000 with the property owner. The property was attached by the Government of Andhra Pradesh due to alleged fraud by the property owner. Despite an interim order allowing the petitioner to continue business, the 1st respondent seized the property due to a mortgage default by the owner.

2. Conflict Between State and Central Legislation:
The petitioner argued that the attachment under the A.P. Protection of Depositors of Financial Establishments Act barred the 1st respondent from seizing the property. The court rejected this argument, stating that the SFC Act, enacted by Parliament under Article 246(1) of the Constitution, overrides state legislation due to its supremacy in the legislative field. The court cited Article 254, which ensures that parliamentary law prevails over state law in case of conflict, unless the state law is saved by specific provisions.

3. Petitioner's Possession and Business Operations:
The petitioner was in possession of the property and running a business there. The court acknowledged this and directed that the petitioner be allowed to continue in possession until the property was sold by the 1st respondent. The petitioner was required to pay Rs. 1,00,000 per month as lease amount and deposit an additional Rs. 5,00,000 within five weeks. Failure to comply would allow the 1st respondent to take legal action.

4. Petitioner's Right to Participate in the Sale:
The petitioner expressed a desire to participate in the sale of the property. The court permitted this and directed that if the petitioner was not the highest bidder, he must vacate the premises within 25 days of the successful bidder being called to deposit the sale consideration. The court emphasized that the premises needed to be free from encumbrances for a successful sale.

Conclusion:
The writ petition was dismissed as meritless. The court upheld the 1st respondent's statutory power under the SFC Act to seize the property, overriding the state legislation. The petitioner was allowed to remain in possession under specific conditions and given the opportunity to participate in the property's sale.

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