PRADEEP KUMAR SHARMAversusU.P.F.C. RAJPUR ROAD, DEHRADUN & ORS.

                     [2012] 9 S.C.R. 863


                PRADEEP KUMAR SHARMA                                 A
                                v.
       U.P.F.C. RAJPUR ROAD, DEHRADUN & ORS
            (Civil Appeal No. 7597 of 2012 etc.)

                     OCTOBER 19, 2012.
                                                                     B
       [P SATHASIVAM AND RANJAN GOGOi, JJ.]

     STATE FINANCIAL CORPORATION ACT, 1951:

     s. 29 - Default in repayment of loan -Property mortgaged        c
by borrower, sold by State Financial Corporation - Held: By
virtue of sub-s. (2) of s. 29 of the Act such transfer of property
by the Corporation will vest in the transferee all rights in the
property as if the transfer had been made by the owner thereof.

     CONSTITUTION OF IND/A, 1950:                                    D

     Art. 226 - Writ petition - Maintainability of - Held: In the
instant case, essence of the dispute between the parties
denuded the tis of a public law character - The issues raised
by the writ petitioner before the High Court really pertained to E
the claim of better title of the writ petitioner to the property in
question on the basis of the sale deed which was executed
in favour of the writ petitioner by his vendors during the
subsistence of the mortgage in favour of the Corporation and
the rights of the appellant to the said property on the basis of F
the sale made in his favour by the Corporation - The writ
petition did not involve any issue arising out of public law
functions of the State or its authorities - lri such a situation
resort to the public law remedy should not have entertained
by High Court - Order of High Court set aside.                      G

    The subject property was mortgaged by the
borrower, by deposit of title deed, with respondent no. 1,
U.P. Financial Corporation (Corporation), in security of
                               863                                   H
   864      SUPREME COURT REPORTS             [2012] 9 S.C.R.

A the loan obtained by the borrower from the Corporation.
  When the borrower defaulted in payment, the Corporation
  invoked its powers u/s 29 of the State Financial
  Corporation Act, 1951 and issued an advertisement on
  22.9.1996 for sale of the mortgaged property. As no
B suitable offer was received, the Corporation again issued
  another advertisement on 20.10.2002. Meanwhile, the
  borrower executed a sale deed in favour of two persons,,
  who in turn sold the property to one 'VOS' by sale deed
  dated 29.8.2001. Pursuant to the advertisement dated
c 20.10.2002, the appellant in C.A. No. 7597 of 2012 (the
  appellant) submitted his offer, which was ultimately
  approved and the appellant deposited the entire amount
  with the Corporation. 'VOS' filed a writ petition before the
  High Court for quashing of the sale made in favour of the
  appellant. The High Court by an interim order directed the
0
  writ petitioner to deposit Rs. 5 lacs and by the final order
  while disposing of the writ petition directed the
  Corporation to withdraw the said amount of Rs. 5 lacs
  and out of it to repay the appellant the amount paid by
E him to the Corporation. The High Court held that the sale
  made in favour of the appellant stood cancelled.

         Allowing the appeals, the Court

      HELD: 1.1 Under the provisions of s. 29 of the State
F Financial Corporation Act, 1951, the default in re-payment
  of any loan by an industrial undertaking vests in the
  Financial Corporation the right to take over the
  management or possession or both of the industrial
  concern along with the right to transfer the property
G pledged, mortgaged, hypothecated or assigned to the
  Financial Corporation. By virtue of sub-s. (2) of s. 29 of
  the Act, such transfer of property by the Corporation will
  vest in the transferee all rights in the property as if the
  transfer had been made by the owner: thereof. In the
H instant case, the property in questiorl' was duly
  PRADEEP KUMAR SHARMA v. U.P.F.C. RAJPUR               865
          ROAD, DEHRADUN & ORS.
advertised for sale. The appellant had offered the highest      A
amount. The entire amount was paid and the sale was
confirmed by the Corporation, though no sale deed was
executed. The sale made by the Corporation in favour of
the appellant was in exercise of the statutory powers
vested in it. [para 12-13) [869-H; 870-A-B, E-G]                B

     1.2 The issues raised by the writ petitioner. before the
High Court really pertained to the claim of better title of
the writ petitioner to the property in question on the basis
of the sale deed dated 29.08.2001 executed in his 'favour       c
by his vendors during the subsistence of the mortgage
in favour of the Corporation and the rights of the
appellant to the said property on the basis of the sale
made in his favour by the Corporation pursuant to the
advertisement dated 20.10.2002. The essence of the              0
dispute between the parties denuded the lis of a public
law character. Nor was any issue arising out of public law
functions of the State or its authorities involved. Neither
the exercise of the statutory power under the Act by the
Corporation in the matter of the sale of the property nor       E
the process of the sale transaction was questioned in the
writ petition either on account of lack of jurisdiction or
abuse of authority. In such a situation resort to the public
law remedy should not have entertained by the High
Court and, instead, it ought to have required the               F
aggrieved parties to seek their remedies in an appropriate
manner and before the competent civil forum. The order
dated 05.12.2006 passed by the High Court is set aside.
[para 15, 16-17) [871-C-E-G; 872-B-D]

     Godavari $ugar Mills Ltd. vs. State of Maharashtra 2011    G
             =
(2) SCR 180 2011 (2) SCC 439; and Kisan Sahkari Chini
Mills Ltd. and ors. vs. Vardan Linkers and others 2008 (6 )
SCR 528   =2008 (12) SCC 500 - relied on.
                                                                H
    866      SUPREME COURT REPORTS                  . [2012) 9 S.C.R.


A                          Case Law Reference:
          2011 (2) SCR 180          relied on              para 16
          2008 (6) SCR 528          relied on              para 16
B       CIVIL APPELLATE JURISDICTION : Civil Appeal No.
    7597 of 2012.

       ·From the Judgment & Order dated 05.12.2006 of the High
    Court of Uttaranchal at Na in ital in Writ Petition No. 196 of 2003
    (M/B).
c
                                  WITH
    C.A. No. 7598 of 2012.

       Madhu Tewatia, Chander Shekhar Ashri, Shrish Kumar
D Misra, Naresh Kaushik, Sanjeev Kumar Bhardwaj, Rishi Jain,
  Lalita Kaushik, Akshay Verma, Sushma Verma, Prashant
  Chaudhary, for the Appearing parties.

          The Judgment of the Courtwas delivered by
E         RANJAN GOGOi, J. 1. Leave granted.

         2. Both the appeals are directed against the judgment and
    final order dated 05.12.2006 passed by the High Court of
    Uttaranchal in Crl. Misc. Writ Petition No. 196 of 2003 (M/B).
F
         3. A recital of the facts stated by the appellant Uttar
    Pradesh Finance Corporation (UPFC) in the appeal filed by it
    would suffice for the purpose of the adjudication that is required
    to be made in the present appeals.                 ··

G      4. A term loan of Rs. 4.55 lacs was sanctioned by the
  UPFC to one M/s. Sangam ·ice Cream (hereinafter shall be
  referred. to as the borrower), a proprietorship concern owned
  by one, Smt. Nisha Devi Jaiswal. To secure the repayment of
  the aforesaid loan together with the interest due thereon, the
H borrower had created an equitable mortgage, by deposit of title ·
  PRADEEP KUMAR SHARMA v. U.P.F.C. RAJPUR                    867
  ROAD, DEHRADUN & ORS. [RANJAN GOGOi, J.]

deeds, of land measuring 192.34 sq. meter or 0.048 acres             A
bearing Khasra No. 496 along with the constructions standing
thereon located at Mauza Niranjanpur, Pargana Kendriya Doon
Tehsil and District Dehradun.

     5. After sanction of the aforesaid loan, the borrower availed
                                                                     B
a part thereof but defaulted in payment of the installments due.
As such default became chronic and persistent, the UPFC
invoking its power under Section 29 of the State Financial
Corporation Act, issued notice dated 20.12.1994, calling upon
the borrower to clear all the dues failing which recovery of
proceedings including sale of mortgaged property was                 C
contemplated. As despite the said Notice the dues of the
Corporation remained unpaid an advertisement was issued in
the newspaper "Doon Darpan" on 22.09.1996 for sale of the
mortgaged property. The Corporation, however, did not receive
any suitable offer pursuant to the advertisement issued. The         D
fresh second advertisement, nevertheless, came to be issued
only in the edition of "Amar Ujala" on 20.10.2002. It appears
that, in the meantime, the sole proprietor of the borrower firm,
Smt. Nisha Devi Jaiswal, executed a sale deed in respect of
the land in favour of two other persons, i.e. Deepak Kumar           E
Bishnoi and Smt. Sarita Rani, who, in turn, sold the said
property to one Vishnu Dutt Sharma by sale deed dated
29.08.2001.

     6. Pursuant to the second advertisement dated 20.10.2002        F
published in the edition of Amal Ujala, one Pradeep Kumar
Sharma submitted his offer of Rs. 4.50 lacs along with a bank
draft of Rs. 50,000/- as earnest money. The UPFC issued
another advertisement in the edition of "Dainik Jagaran" dated
01.11.2002 indicating a price offered by Pradeep Kumar               G
Sharma for the property in question and calling upon the
borrower I members of the public to submit their better offer, if
any. Evidently, there was no response to the aforesaid
advertisement dated 01.11.2002 published in the "Dainik
Jagaran". Therefore on 31.12.2002, the Corporation accorded
                                                                     H
    868      SUPREME COURT REPORTS                   (2012] 9 S.C.R.

A its approval for the sale of the land in favour of Shri Pradeep
   Kumar Sharma and on 14.01.2003, a deposit of another sum
   of Rs. 1. 75 lacs was made by the aforesaid Pradeep Kumar
   Sharma. On 27.02.2003, the balance amount of the offered
   price i.e. Rs.2.25 lacs was tendered to the Corporation.
B
         7. While the matter was so situated, Vishnu Dutt Sharma
  who had purcha·sed the property by the sale deed dated
  29.08.2001 instituted a suit, i.e. O.S. 75/2003 contending that
  on 06.02.2003, while he and his family members were away,
C possession of the property in question was taken over by the
  Corporation. Restoration of possession was the principal relief
  prayed for in the aforesaid suit. Thereafter, stating that from the
  written statement filed in the suit by the Corporation it transpired
  that the property purchased by him (Vishnu Dutt Sharma) stood
  mortgaged in favour of the Corporation on account of a loan
D taken by the original owner thereof and that pursuant to the said
  Notice published in the newspaper "Dainik Jagaran" dated
  20.10.2002, the property had been purchased by one Pradeep
  Kumar Sharma, a Writ Petition was filed impleading the UPFC
  and its Managing Director as the first and second respondents,
E Deepak Kumar Bisnoi and Sarita Rani as the third and fourth
  respondents and the purchaser Pradeep Kumar Sharma as the
  fifth respondent.

        8. In the said Writ Petition, the prayer made was for
F quashing of the sale made in favour of the fifth respondent and
  for transfer of the property to the writ petitioner and further for
  restoration of possession of the same. The High Court while
  entertaining the Writ Petition passed an interim order dated
  28.05.2003 permitting the writ petitioner Vishnu Dutt sharma
G to make a deposit of Rs. 5 lacs in which event it was directed
  that the "accommodation in question shall be handed over to
  the petitioner subject to further orders of this court." By the said
  order, the High Court also directed that the sale deed will not
  be executed in favour of the fifth respondent Pradeep Kumar
H Sharma.
  PRADEEP KUMAR SHARMA v. U.P.F.C. RAJPUR                  869
  ROAD, DEHRADUN & ORS. [RANJAN GOGOi, J.]
      9. The writ proceeding before the High Court of Uttaranchal A
was contested by the UPFC as well as by the purchaser i.e.
the fifth respondent, Pradeep Kumar Sharma. The Corporation
had taken a specific stand before the High Court that the sale
in favour of fifth respondent was finalized by the Corporation
and the entire offered price was tendered by the fifth B
respondent. The Corporation had also contended that the
property being subject to an equitable mortgage by deposit of
title deeds could not have been validly transferred by the
mortgager/ original owner i.e. Nisha Devi Jaiswal to the third
and fourth respondents in the Writ Petition and in turn the said   c
respondents could not have transferred the property in favour
of the fifth respondent so long as the mortgage subsisted.

     10. Thereafter, by the impugned final order of the High
Court dated 05.12.2006, the Writ Petition was disposed of by D
directing the UPFC to withdraw the amount of Rs. 5 lacs
deposited in the High Court by the writ petitioner, Vishnu Dutt
Sharma, and out of the said amount to repay the fifth
respondent, Pradeep Kumar Sharma, the amount of Rs.4.50
paid by him to the Corporation along with 9% interest thereon.
Specifically, the High Court in its order dated 05.12.2006 had E
ordered that the sale made in favour of fifth respondent, which
had not been confirmed, stood cancelled. Aggrieved by the
aforesaid order, two separate appeals have been filed by the
UPFC and the fifth respondent in the Writ Petition i.e. Pradeep
Kumar Sharma. The writ petitioner, Vishnu Dutt Sharma, is the F
principal respondent in both the appeals.

      11. We have heard Ms. Madhu Tewatia, learned counsel
for the appellant - fifth respondent and Mr. Shrish Kumar Misra,
learned counsel for the appellant Corporation. We have also G
heard Shri Naresh Kaushik and Shri Akshay Verma, learned
counsel for the respondents.

     12. The detailed recital made hereinabove clearly indicates
that the property in question was duly advertised for sale
pursuant whereto the fifth respondent had offered the highest      H
     870     SUPREME COURT REPORTS                   [2012] 9 S.C.R.


A amount. On acceptance of the said offer by the UPFC, the
  entire amount was paid and the sale was confirmed by the
   Corporation. No sale deed was however executed by the
   Corporation in favour of the fifth respondent. It also appears that
   before the property was put up for sale by the Corporation, the
B original owner, Smt. Nisha Devi Jaiswal had sold the same to
  the third and fourth respondents, who, in turn, had sold the same
  to the writ petitioner by sale deed dated 29.08.2001. The
  aforesaid sale by the original owners to the vendors of the writ
  petitioner and, thereafter, by said vendors to the petitioner
c himself was made when the property stood mortgaged in favour
  of the UPFC. It is in the above circumstances, that the writ
  petitioner had approached the High court seeking interference
  with the sale of the property made in favour of the fifth
  respondent pursuant to the advertisement dated 20.10.2002
  issued by the UPFC and further for transfer of the property in
0
  favour of the writ petitioner besides restoration of possession
  thereof which. was taken over by the Corporation.

       13. The sale made by the UPFC in favour of the fifth
  respondent was in exercise of the statutory powers vested in
E the Corporation by Section 29 of the State Financial
  Corporation Act, 1951. Under the aforesaid provisions of the
  Act default in re-payment of any loan by an industrial
  undertaking vests in the Financial Corporation the right to take
  over the management or possession or both of the industrial
F concern ~!qng with the right to transfer the property pledged,
  mortgag'ed, hypothecated or assigned to the Financial
  Corporation. By virtue of sub-section (2) of Section 29 of the
  Act such transfer of property by the Corporation will vest in the
  transferee all rights in the property as if the transfer had been
G made by the owner thereof.
          14. No serious issue either with regard to the validity of
    the exercise of the power under the Act or the manner of sale
    of the property by the Corporation pursuant to the advertisement
    dated 20.10.2002 had been raised in the Writ Petition. What
H
     PRADEEP KUMAR SHARMA v. U.P.F.C. RAJPUR                   871
     ROAD, DEHRADUN & ORS. [RANJAN GOGOi, J.]

was contended before the High Court is that the Writ Petitioner,      A
Vishnu Dutt Sharma', had purchased the property by sale deed
dated 29.08.2001 without any knowledge or information of the
mortgage created by the original owner, Smt. Nisha Devi
Jaiswal in favour of the Corporation and that the sale pursuant
to the advertisement was also without notice to him. A right to       B
the property based on certain equitable principles was also
claimed to strengthen which, the offer covered by the interim
order of the High Court dated 28.05.2003 was made by the writ
petitioner.

      15. The issues raised by the writ petitioner before the High    C
court really pertained to the claim of better title of the writ
petitioner to the property in question on the basis of the sale
deed dated 29.08.2001. The validity of the sale deed dated
29.08.2001 executed in favour of the writ petitioner by his
vendors during the subsistence of the mortgage in favour of the       D
Corporation and the rights of the fifth respondent to the said
property on the basis of the sale made in his favour by the
Corporation pursuant to the advertisement dated 20.10.2002
are the issues that arose in the Writ Petition. Broad and
expansive though the powers of the High Court under Article           E
226 may be, adjudication of the aforesaid questions, some of
which also required proof of certain basic facts, in our view,
was not appropriate in the domain of public law. Though the
High Court in its order dated 05.12.2006 did not expressly say
so, the affect of the several directions issued by it, in fact,       F
amounts to an adjudication of the issues outlined above.

     16. The essence of the dispute between the parties
denuded the lis a public law character. Nor was any issue
arising out of public law functions of the State or its authorities   G
involved. In such a situation resort to the public law remedy
should not have entertained by the High Court. (Vide Godavari
Sugar Mills Ltd. vs. State of Maharashtra 1 ). Even if the
vindication of the wr.it petitioner's rights under the sale deed
1.   (2011) 2 sec 439 [para 8(vi)]                                    H
     872      SUPREME COURT REPORTS                [2012] 9 S.C.R.


A dated 29.08.2001 is ignored and we are to proceed on the
  basis that the writ petitioner questioned the sale made by the
  Corporation, the writ petitioner would not be entitled to an
  adjudication of the rights of the parties inter se but at best to a
  judicial review of the administrative action of the Corporation
B with regard to the sale made (Vide Kisan Sahkari Chini Mills
  Ltd. and ors. vs. Vardan Linkers and others2) But as already
  noticed neither the exercise of the statutory power under the
  Act by the Corporation in the matter of the sale of the property
  nor the process of the sale transaction was questioned in the
c Writ Petition either on account of lack of jurisdiction or abuse
  of authority. In the above facts, the High Court should have
  refused an adjudication of the Writ Petition and, instead, ought
  to have required the aggrieved parties to seek their remedies
  in an appropriate manner and before the competent civil forum.

D        17. In view of the above discussions, we allow both the
    appeals and -set aside the order dated 05.12.2006 passed by
    the High Court of Uttarakhand at Nainital.

    R.P.                                          Appeals allowed._




    2.   2008 12 sec 500 - para 23.