Case Note & Summary
The appeal arises from a judgment and order dated 21st January 2002 passed by the learned Joint Civil Judge (S.D.), Nasik, allowing the application for temporary injunction made by the respondent-plaintiff. The appellant, Maharashtra State Financial Corporation Ltd., sanctioned a term loan of Rs.6.30 lakhs along with Rs.1.42 lakhs under their M.U.M. Scheme to the respondent on 17th December 1993 against security of land, building, plant and machinery with collateral security of a gala. The respondent committed defaults in repayment, and on 2nd May 2000, the appellant issued a notice under Section 29 of the State Financial Corporations Act, 1951 for taking possession of the secured assets. The respondent filed a suit seeking injunction against the appellant from taking possession. The trial court granted temporary injunction. The appellant challenged this order in appeal. The High Court held that Section 29 of the SFC Act confers a statutory right on the Corporation to take possession without court intervention. The Civil Court's jurisdiction to grant injunction is limited and can be exercised only if the borrower establishes a strong prima facie case of arbitrariness or mala fides. The respondent failed to make out such a case. The High Court allowed the appeal, set aside the impugned order, and dismissed the application for temporary injunction.
Headnote
A) State Financial Corporations Act, 1951 - Section 29 - Power to Take Possession - Statutory Right - The Corporation has a statutory right under Section 29 to take possession of the secured assets without intervention of the court. The Civil Court's jurisdiction to grant injunction against such action is limited and can be exercised only if the borrower establishes a strong prima facie case of arbitrariness or mala fides on the part of the Corporation. (Paras 1-2) B) Civil Procedure Code, 1908 - Order 39 Rules 1 and 2 - Temporary Injunction - Prima Facie Case - The borrower must show a strong prima facie case that the Corporation's action under Section 29 is arbitrary or mala fide. Mere default in repayment does not entitle the borrower to an injunction. The trial court erred in granting injunction without such finding. (Paras 1-2)
Issue of Consideration
Whether the Civil Court can grant a temporary injunction restraining a State Financial Corporation from taking possession of secured assets under Section 29 of the State Financial Corporations Act, 1951, without the borrower establishing a strong prima facie case of arbitrariness or mala fides.
Final Decision
Appeal allowed. Impugned order dated 21st January 2002 set aside. Application for temporary injunction dismissed. No order as to costs.
Law Points
- Section 29 of State Financial Corporations Act
- 1951 confers a statutory right on financial corporations to take possession of secured assets without court intervention
- Civil court's jurisdiction to grant injunction against such action is limited to cases of arbitrariness or mala fides
- Prima facie case for injunction must be established by borrower
