Case Note & Summary
This case involved an appeal by the Punjab Financial Corporation against a decision of the Punjab and Haryana High Court that quashed the Corporation's action under Section 29 of the State Financial Corporations Act, 1951, for recovery of dues from M/s. Surya Auto Industries. The Corporation had sanctioned a loan of Rs.24.25 lacs to the respondent for setting up an industrial unit, secured by a mortgage of immovable properties. The respondent defaulted on repayments, depositing only Rs.2.70 lacs by 2002, prompting the Corporation to take possession of the unit. The respondent challenged this action, claiming it was contrary to the Act and natural justice principles. The High Court ruled that the Corporation had not acted within a reasonable time and could not charge penal interest. The Supreme Court found that the High Court erred in its assessment, emphasizing that the Corporation had acted reasonably and that the respondent had failed to comply with the loan agreement. The Court reinstated the Corporation's right to recover dues under the original terms of the loan agreement, dismissing the writ petition and setting aside the High Court's order.
Headnote
A) Financial Corporations - Recovery of Dues - Fairness in Action - State Financial Corporations Act, 1951, Section 29 - The court held that the Financial Corporation must act fairly and reasonably in recovering dues, but is not obliged to revive every sick industrial unit. The High Court's direction to review pending cases where penal interest was compounded was found to be legally unsustainable (Paras 6-19).
Issue of Consideration
Whether the action taken by the appellant-Corporation under Section 29 of the State Financial Corporations Act was fair and reasonable.
Final Decision
The Supreme Court allowed the appeal, set aside the High Court's order, and dismissed the writ petition filed by the respondent.
Law Points
- State Financial Corporations Act
- 1951
- Section 29
- natural justice
- fair procedure
- penal interest
- contractual obligations
- judicial review
