1994 (8) TMI 296 - SC - Indian Laws

Summary

Issues involved:
The judgment involves the interpretation of Section 29 of the State Financial Corporation Act and the application of principles of natural justice in a case where a financial corporation took possession of a factory premises due to non-repayment of a loan by the respondent.

1. Application of Section 29 of the State Financial Corporation Act:
The appellant, a State Financial Corporation, invoked power under Section 29 of the Act to recover outstanding loan amount from the respondent after multiple reminders and non-repayment. The respondent challenged this action in the High Court, contending that a show-cause notice should have been given before invoking Section 29. The High Court quashed the notice and directed the appellant to restore possession. The appellant appealed this decision.

2. Principles of Natural Justice:
The appellant argued that principles of natural justice were satisfied before taking action under Section 29. The Court emphasized that natural justice varies from case to case and requires giving notice of consequences if dues are not cleared. The Court found that the notice issued under Section 29, requiring repayment by a specific date, met the requirements of natural justice. It was held that a separate show-cause notice was not necessary.

3. Consideration of Respondent's Representation:
The respondent had submitted a representation outlining difficulties faced in loan repayment and proposing a plan to clear dues. The Court noted that the representation was not considered by the appellant before taking possession of the factory premises. The Court expressed the view that the appellant should have communicated its response to the representation before resorting to drastic action.

4. Decision and Conclusion:
The Court allowed the appeal, setting aside the High Court's judgment. The parties were directed to bear their own costs, and the appellant was permitted to take further action as allowed by Section 29 of the Act. The Court found the respondent's offer to clear dues insufficient and not reasonable, considering the substantial amount due and the lack of assurance regarding profitability.