Case Note & Summary
The case involves an appeal by the Bihar State Financial Corporation (BSFC) against a judgment of the Patna High Court which affirmed a trial court decree setting aside an auction sale of mortgaged property conducted under Section 29 of the State Financial Corporations Act, 1951. The borrowers, Ranjeet Motel and others, had taken loans from BSFC totaling Rs. 11.65 lakhs (initially Rs. 8.50 lakhs sanctioned on 29.05.1982 and an additional Rs. 3.15 lakhs on 12.07.1984) and created an equitable mortgage over their land and building. Upon default, BSFC issued a notice under Section 29 on 24.11.1988 and subsequently auctioned the property. The borrowers filed a civil suit (Title Suit No. 39/96) challenging the auction sale, which was decreed by the 5th Subordinate Judge, Begusarai on 19.05.1999. BSFC's first appeals (FA No. 268/1999 and FA No. 272/1999) were dismissed by the Patna High Court on 18.03.2025. The Supreme Court granted leave and allowed the appeals, holding that the concurrent findings setting aside the auction sale were unsustainable. The Court observed that the borrowers had persistently defaulted and failed to discharge their liabilities despite multiple opportunities, and that the civil suit challenging the statutory sale under Section 29 of the SFC Act was not maintainable. The Supreme Court set aside the impugned judgment and decree, restoring the auction sale.
Headnote
A) State Financial Corporations Act, 1951 - Section 29 - Auction Sale - Challenge by Civil Suit - Maintainability - The borrower persistently defaulted in repayment despite multiple opportunities, leading the Financial Corporation to exercise its statutory power under Section 29 of the SFC Act and auction the mortgaged property. The civil suit challenging the auction sale was held to be not maintainable as the statutory remedy under the SFC Act and the principle that civil courts should not interfere with statutory sales conducted in accordance with law. Held that the concurrent findings setting aside the auction sale were unsustainable. (Paras 1-3) B) Civil Procedure Code, 1908 - Section 9 - Jurisdiction of Civil Court - Bar - Where a statute provides a remedy, the civil court's jurisdiction is ousted. The borrower's challenge to the auction sale under Section 29 of the SFC Act by way of a civil suit was not maintainable as the SFC Act provides a complete mechanism for recovery and sale. Held that the trial court and High Court erred in entertaining the suit and setting aside the sale. (Paras 2-3)
Issue of Consideration
Whether the concurrent findings of the courts below setting aside the auction sale conducted under Section 29 of the State Financial Corporations Act, 1951 can be sustained in law, given the borrower's persistent default and failure to discharge liabilities.
Final Decision
The Supreme Court allowed the appeals, set aside the impugned judgment and decree of the Patna High Court and the trial court, and restored the auction sale conducted under Section 29 of the SFC Act.
Law Points
- Section 29 of State Financial Corporations Act
- 1951
- Civil suit challenging auction sale
- Maintainability of civil suit against statutory sale
- Interference by civil court with statutory powers of financial corporation
- Borrower's persistent default
- Equitable mortgage
- Limitation for challenging auction sale
