2003 (2) TMI 400 - HC - Companies Law

Summary

Issues Involved:
1. Legality of the seizure and sale of the petitioner's property by the respondent-corporation.
2. Compliance with the principles of natural justice and statutory provisions under Section 29 of the State Financial Corporation Act.
3. Applicability of the Supreme Court's guidelines in Mahesh Chandra's case.
4. Retrospective effect of the Supreme Court's judgment in Jagadamba Oil Mills' case.

Issue-wise Detailed Analysis:

1. Legality of the Seizure and Sale:
The petitioner challenged the respondent-corporation's action of seizing and selling its property without due regard to the principles laid down by the Supreme Court in Mahesh Chandra v. Regional Manager, U.P. Financial Corpn. The petitioner defaulted on loan repayments, leading to the issuance of a recall-cum-sale notice on 31-8-1993. Despite the notice, the petitioner failed to pay the arrears by the specified date, resulting in the seizure on 5-3-1994 and subsequent sale through a newspaper advertisement on 1-6-1994. The tenders were finalized, and possession was given to the successful bidders.

2. Compliance with Principles of Natural Justice and Statutory Provisions:
The petitioner contended that no notice under Section 30 of the Act was given and that the entire process was conducted behind its back. The respondent-corporation argued that the petitioner was a chronic defaulter and had been given multiple opportunities to repay the loan. The corporation followed the procedure under Section 29 of the Act, issuing a recall-cum-sale notice and publishing an advertisement in widely circulated newspapers. The court found that the respondent-corporation had substantially followed the principles of natural justice and complied with statutory provisions, as the petitioner was duly notified and failed to respond.

3. Applicability of the Supreme Court's Guidelines in Mahesh Chandra's Case:
The petitioner argued that the guidelines issued in Mahesh Chandra's case were not followed, which required the corporation to inform the petitioner of the highest bid to enable objections. The respondent-corporation countered that the Supreme Court's judgment in Mahesh Chandra's case had been overruled by a subsequent judgment in Jagadamba Oil Mills' case. The court agreed with the respondent-corporation, noting that the guidelines in Mahesh Chandra's case were no longer applicable and that the corporation's actions were reasonable and transparent.

4. Retrospective Effect of the Supreme Court's Judgment in Jagadamba Oil Mills' Case:
The petitioner contended that the judgment in Jagadamba Oil Mills' case should not apply retrospectively to its case. The court rejected this argument, citing Article 141 of the Constitution, which mandates that the Supreme Court's judgments are binding on all courts. The court emphasized that when a judgment is overruled, the new law laid down in the overruling judgment applies retrospectively to all pending and future matters unless specified otherwise. The court referred to the Supreme Court's observations in Maj. Genl. A.S. Gauraya v. S.N. Thakur, which stated that the law laid down by the Supreme Court applies to all pending proceedings.

Conclusion:
The court dismissed the writ petition, finding no merit in the petitioner's claims. It held that the respondent-corporation had acted within its rights under Section 29 of the Act, followed the principles of natural justice, and conducted a transparent and reasonable sale process. The court also affirmed the retrospective application of the Supreme Court's judgment in Jagadamba Oil Mills' case, thereby rejecting the petitioner's alternative argument.