Case Note & Summary
The petitioners, Falcon Retreat Pvt. Ltd. and its Managing Director Anthony Rosario Fernandes, filed a writ petition before the High Court of Bombay at Goa seeking a writ of mandamus directing respondent No.1, EDC Ltd., to consider and accept their proposal communicated via letter dated 18.1.2006, and to restrain EDC Ltd. from selling the property in question to respondent No.3, M/s L.K. Trust. In the alternative, they sought to quash and set aside the sale if already completed. The petitioners had taken loans from respondents No.1 and 2 (State Bank of India) but were chronic defaulters in repayment. They repeatedly failed to keep their assurances and representations regarding clearance of dues or arranging a purchaser. Consequently, respondent No.1 invoked Section 29 of the State Financial Corporation Act, 1951, attached the petitioners' hotel property, and took possession in September/October 2004. The property was put to auction seven times but was postponed either due to non-availability of purchasers or indulgence shown to the petitioners based on their representations. However, the petitioners made no concrete efforts to regularize the loan accounts or reduce liability. Ultimately, respondent No.1 proceeded to sell the property to respondent No.3. The court, after hearing arguments, dismissed the petition, holding that no writ of mandamus lies in favor of chronic defaulters who have no right to dictate terms to the financial corporation. The court found that respondent No.1 acted within its powers under Section 29 of the Act and that the petitioners had failed to demonstrate any legal right warranting interference. The rule was discharged with no order as to costs.
Headnote
A) Constitutional Law - Writ of Mandamus - Availability to Chronic Defaulters - The petitioners, being chronic defaulters who failed to repay loans and keep assurances, sought a writ of mandamus to compel the respondent financial corporation to accept their proposal and restrain sale of attached property. The court held that no writ of mandamus lies in favor of such defaulters, as they have no right to dictate terms to the financial corporation, and the corporation acted within its powers under Section 29 of the State Financial Corporation Act, 1951. (Paras 2-3) B) Financial Law - State Financial Corporation Act, 1951 - Section 29 - Sale of Attached Property - The respondent corporation attached the petitioners' hotel property in September/October 2004 after repeated defaults and failed assurances. The property was auctioned seven times but postponed due to non-availability of purchasers or indulgence shown to petitioners. The court held that the corporation was justified in proceeding with the sale to respondent No.3, and no interference was warranted. (Para 3)
Issue of Consideration
Whether a writ of mandamus can be issued directing a financial corporation to accept a proposal from a chronic defaulter and restrain the sale of attached property to a third party under Section 29 of the State Financial Corporation Act, 1951
Final Decision
The High Court dismissed the writ petition, holding that no writ of mandamus lies in favor of chronic defaulters who have no right to dictate terms to the financial corporation. The rule was discharged with no order as to costs.
Law Points
- Writ of mandamus not available to chronic defaulters
- Section 29 of State Financial Corporation Act
- 1951
- No right to dictate terms to financial corporation
- No interference with sale to third party after repeated defaults and failed assurances
