State Financial Corporations Act, 1951

The Himachal Pradesh State Financial Corporation granted a loan of Rs.20.5 lakh to Prem Nath Nanda and others for a hotel project. After the borrowers defaulted, the corporation took possession of the hotel under Section 29 of the State Financial Corporations Act, 1951 and sold it, generating an excess amount over the …

The plaintiff, Mis. Shiv Cotex, sued the Punjab Financial Corporation for allegedly illegal takeover of its mortgaged assets under the State Financial Corporations Act, 1951. The trial court dismissed the suit after the plaintiff failed to produce evidence on three scheduled dates, invoking Order XVII Rule 3(a) of the …

Maharashtra State Financial Corporation (MSFC) had sanctioned a loan to Crystal Marketing Pvt Ltd, whose directors stood as sureties. After default, MSFC invoked Sections 31 and 32 of the State Financial Corporations Act, 1951 to sell hypothecated property, and later, after a shortfall, issued notice to the sureties an…

The Supreme Court examined whether a Company Court or an Official Liquidator can control the sale of secured assets by a secured creditor under the SARFAESI Act when the borrower is a company under winding up. Pegasus Assets Reconstruction Ltd, the secured creditor, sought to enforce its security over the land of Harya…

M/S Ormi Textiles, a partnership, obtained loans from the State Financial Corporation (SFC) secured by a mortgage on 800 sq. yards of its 1100 sq. yards industrial land. After the industrial unit became sick and defaulted, the SFC issued a notice under Section 29 of the State Financial Corporations Act, 1951, seeking t…

Deepak Bhandari, a director and guarantor of a defaulting industrial company, challenged a suit filed by Himachal Pradesh State Industrial Development Corporation Ltd. for recovery of a loan balance. The corporation had taken possession of the company's mortgaged assets under Section 29 of the State Financial Corporati…

Maharashtra Tubes Ltd., a steel pipe manufacturer, ceased operations in 1986 and sought financial assistance from the Board for Industrial and Financial Reconstruction (BIFR) in 1988. The BIFR, after hearings, held that the company was not a "sick industrial company" under the Sick Industrial Companies (Special Provisi…

M/s Coromandal Sacks supplied HDPE bags to Fertilizer Corporation of India Ltd (FCIL) and sued for recovery of unpaid amounts, alleging price differences, liquidated damages, penalties and loss of unsold bags. FCIL contended it was a sick industrial company under the Sick Industrial Companies (Special Provisions) Act, …

The Bihar State Financial Corporation, a statutory body under the State Financial Corporations Act, 1951, approved a loan to a small‑scale industrial unit and later agreed to an additional term loan of Rs 15 lakhs conditioned on the submission of a DGTD registration certificate. The loan agreement was registered withou…

The appellants, a sick industrial company and its guarantor, sought to enforce a personal guarantee for a loan after the company defaulted. The respondent invoked Section 31(1)(aa) of the State Financial Corporations Act, 1951, while the guarantor claimed protection under Section 22(1) of the Sick Industrial Companies …

Everest Industrial Corporation borrowed Rs 6 lakhs from Gujarat State Financial Corporation under a hypothecation agreement that stipulated repayment in half‑yearly instalments and interest at 8.5% per annum. After defaulting, the corporation invoked section 31 of the State Financial Corporations Act, 1951, and a compr…

U.P. Financial Corporation initiated recovery proceedings against Unique Butyle Tube Industries Pvt. Ltd. under the Uttar Pradesh Public Monies (Recovery of Dues) Act, 1972 for default on a loan. The appellant contended that, after the enactment of the Recovery of Debts due to Bank and Financial Institutions Act, 1993,…

M.L.L.C. Steels, a consumer of electricity, defaulted on dues and had its supply disconnected. The undertaking was taken over by the Haryana Financial Corporation and sold "as is where is" to Paramount Polymers. After the sale, the electricity board (Dakshin Haryana Bijli Vitran Nigam Ltd.) introduced clause 21A in its…

The Supreme Court examined a batch of appeals concerning whether electricity arrears of a previous owner can be recovered from a subsequent owner who acquired the premises through auction or other transfers. It held that the duty of a distribution licensee to supply electricity under Section 43 of the Electricity Act, …

Maharashtra State Financial Corporation (the appellant) had sanctioned a Rs.30 lakh loan to Jaycee Drugs Ltd. (the respondent company) which was secured by a mortgage and a personal guarantee from the company's directors. After the company defaulted, the corporation sought recovery of Rs.15,87,391.20 from the directors…

The Industrial Investment Bank of India Ltd. (the bank) granted two short‑term working capital loans to Modern Maileables Ltd., with the company's director, Bishwanath Jhunjhunwala, executing a personal guarantee. After the borrower defaulted, the bank initiated attachment proceedings against the company under s.40 of …

The Orissa State Financial Corporation (OSFC) had advanced a loan of Rs. 14.68 lakh to M/s Hotel Jogendra for hotel construction, with a scheduled repayment over 18 years. The hotel defaulted, leading to a re‑phasing order under the State Financial Corporations Act, 1951, which the hotel failed to comply with, promptin…

The appellant, S.J.S. Business Enterprises Ltd., had obtained a loan from Bihar State Credit and Investment Corporation Ltd. (BICICO) for a hotel project but defaulted, prompting BICICO to invoke Section 29 of the State Financial Corporations Act, 1951 to sell the hotel. After a series of valuations, BICICO issued a se…

Bakemans Industries Pvt. Ltd. (the appellant) defaulted on a loan from SICOM Ltd. under the State Financial Corporations Act, 1951. SICOM invoked Section 29 of that Act to take possession of the appellant's factory and sought sale of the assets, while the appellant and other creditors filed winding‑up applications befo…

Swadeshi Polytex Ltd., a sick company unable to pay employee wages, was subjected to attachment and auction of its property under the Uttar Pradesh Zamindari Abolition and Land Reforms Act, 1950. The company challenged the sale, arguing that the sale proclamation and auction notice were not served on the actual default…

The respondents, who purchased urban properties at auction under Section 29 of the State Financial Corporations Act, 1951 and under the Official Liquidator in winding‑up proceedings under the Companies Act, 1956, sought fresh electricity connections for those premises. The appellant, Gujarat Electricity Board, demanded…

The Haryana Financial Corporation (HFC) advertised an auction of a defaulting unit’s land and accepted a Rs.2.5 lakh earnest deposit from Rajesh Gupta, the highest bidder. Gupta discovered that the plot lacked an independent access road and repeatedly requested clarification and plans, but HFC failed to respond and lat…

The Kerala Financial Corporation (KFC) took over a defaulting borrower under Section 29 of the State Financial Corporations Act, 1951 and invited tenders for the sale of the borrower’s assets. Vincent Paul submitted the sole tender, paid earnest money and was later offered a price of Rs. 8.25 lakh subject to conditions…

The Karnataka State Financial Corporation (KSFC) had granted a loan to an industrial concern and obtained personal guarantees and hypothecated properties from its directors. When the industrial concern defaulted, KSFC invoked Section 29 of the State Financial Corporations Act, 1951 to take possession of the guarantors'…

The Bihar State Financial Corporation (BSFC) granted a loan to Mis. Chhotanagpur Minerals, which mortgaged lease‑hold rights over a factory site. After the borrower defaulted, BSFC invoked Sections 29 and 30 of the State Financial Corporations Act, 1951 and sold the factory premises to a third party, also removing othe…

Mahesh Chandra, the managing partner of a rice mill, hypothecated his mill and adjoining plots to the Uttar Pradesh Financial Corporation (UPFC) for a loan. After defaulting on repayments, UPFC exercised its power under Section 29 of the State Financial Corporations Act, 1951, took possession of the hypothecated proper…

The Karnataka State Industrial Investment & Development Corporation Ltd. (the appellant) sought enforcement of a surety under Section 31(1) of the State Financial Corporations Act, 1951, filing the application before the VI Additional City Civil Judge, Bangalore. The industrial concern whose assets were pledged was loc…

The Andhra Pradesh State Financial Corporation (the appellant) had advanced loans to Gar Re‑rolling Mills (the respondent) which defaulted, leading the corporation to first obtain an order under Section 31 of the State Financial Corporations Act and later to invoke Section 29 to sell the mortgaged concern. The High Cou…

Mis. Amar Alcohol Ltd. obtained a Rs.90‑lakh loan from SI Com Ltd., a State Financial Corporation (SFC) originally 100% owned by the Maharashtra Government. After the government reduced its share to 49%, the borrower defaulted and SI Com invoked Section 29 of the State Financial Corporations Act, 1951 to take possessio…

The Supreme Court examined whether sugar bags pledged by two cooperative sugar mills to Maharashtra State Co‑operative Bank Ltd. could be attached and sold to satisfy the employer's liabilities under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. The Court held that Section 11(2) of the Act crea…

Maganlal mortgaged his property to M.P. State Financial Corporation. When the loan defaulted, the corporation invoked Sections 31 and 32 of the State Financial Corporations Act, 1951 to attach and sell the property. The first purchaser (Jaiswal Industries) obtained the sale, which was set aside, re‑sold to a second pur…

The Bank of Maharashtra obtained a recovery certificate against Paper and Pulp Conversions Ltd. and, through the Debt Recovery Tribunal (DRT), sold the company's movable assets, retaining a portion of the proceeds. The company was subsequently ordered to be wound up and an official liquidator was appointed. The workmen…

The Rajasthan Financial Corporation and the Rajasthan State Industrial Development and Investment Corporation, as secured creditors of Vikas Woolen Mills Ltd., sought to sell the company's assets outside the winding‑up proceeding under Section 29 of the State Financial Corporations Act and to distribute the net proceed…

The Karnataka State Financial Corporation (KSFC) had extended loans to a rubber manufacturing company (Respondent No.1) which defaulted, leading KSFC to take over the unit under Section 29 of the State Financial Corporations Act, 1951 and initiate its sale. After several advertisements, offers were received: the highes…

The Karnataka State Financial Corporation (KSFC) sold the lease‑hold rights of the closed industrial concern Mysore Panel and Boards Pvt Ltd, whose 83 workmen had earlier been awarded statutory dues of Rs 29,17,062 by courts under Section 33‑C of the Industrial Disputes Act and the Payment of Gratuity Act. The workmen’…

Muthoot Leasing and Finance Ltd and another, classified as credit institutions, challenged the levy of interest tax on the interest component embedded in hire‑purchase instalments under the Interest‑Tax Act, 1974. The Income Tax Appellate Tribunal (ITAT) held that hire‑purchase agreements are composite transactions wit…

Canara Bank paid interest on fixed deposits to the New Okhla Industrial Development Authority (NOIDA) without deducting tax at source under Section 194A of the Income Tax Act, 1961. The Assessing Officer treated the bank as a defaulter and issued a demand notice, which the bank appealed, relying on Notification dated 2…

U.P. Financial Corporation (U.P.F.C.) granted a loan of Rs. 29.70 lakhs to Gem Cap (India) Pvt. Ltd., which soon became a sick unit and defaulted on repayments. U.P.F.C. issued a notice under Section 29 of the State Financial Corporations Act, 1951 to take over the unit for recovery of Rs. 38.57 lakhs, prompting the co…

The Maharashtra State Financial Corporation (MSFC) adopted the Fifth Pay Commission recommendations but limited the benefit to employees who were on its payroll on 29 March 2010, fixing a retrospective cut‑off date of 1 January 2006. Retired employees and legal heirs of those who died between 1 January 2006 and the imp…

Punjab Financial Corporation (PFC) had granted a term loan of Rs 24.25 lakh to M/s Surya Auto Industries, secured by mortgage of immovable property. The borrower defaulted, paying only Rs 2.70 lakh, ignored several statutory notices and refused concessions offered by PFC. PFC invoked Section 29 of the State Financial C…