Ram Niwas Gupta Vs Raj. Financial Corporation

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HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR

S.B. Civil Writ Petition No. 4901/1989

Ram Niwas Gupta S/o Shri Girraj Prasad Gupta age about 48 years, Proprietor M/s. Laxmi Enterprises, F-246, Saloda Industrial Area, Gangapur City District Sawai Madhopur.

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----Petitioners

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Versus

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Rajasthan Financial Corporation, through Managing Director, Udhyog Bhawan, Tilak Marg, Jaipur.

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Deputy Manager, (Branch), Rajasthan Financial Corporation, 5, Indra Colony, Sawai Madhopur.

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Shri Satya Narain Girdhari Lal G/o. M/s. Mohini Sweet Product, Gangapur City, District Sawai-Madhopur.

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----Respondents

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For Petitioner(s) : Mr. Amit Kumar Dhawan for Mr. V.L. Mathur For Respondent(s) : Mr. Madhusudan Rajpurohit Mr. Yogesh Kalla

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HON'BLE MR. JUSTICE GANESH RAM MEENA

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Order

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04/02/2026

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The instant civil writ petition has been filed by the petitioner under Article 226 of the Constitution of India with the prayer to declare the transfer of his factory to respondent No.3 as null and void, to direct the respondent Nos.1 and 2 to re-deliver the factory along with entire raw material and other items to him or in the alternate, to award compensation for loss to him, and to direct the respondent No.1 to investigate into the matter and punish the defaulting officer accordingly.

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The facts of the case in nutshell are that the respondent Rajasthan Financial Corporation (hereinafter, ‘the RFC’) was established under the State Financial Corporation Act, 1951 (hereinafter, ‘the Act of 1951’) with a view to finance medium small scale industries. The petitioner took a loan of Rs. 1,33,000/- on 02.09.1981 from respondent No. 1 and respondent No. 2 to establish his industry for manufacturing Sodium Silicate at the Gangapur city and with respect thereto a certificate was issued by Vyas & Vyas Chartered Accountants on 24.09.1982. A loan amount of Rs. 22,000/- was further sanctioned to the petitioner on 02.02.1984. On 06.01.1986, the petitioner was informed that a total amount of Rs. 62,380/- is outstanding against him which has to be deposited by him within 15 days.

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Upon receiving the said notice, the petitioner deposited Rs. 10,000/- on 08.01.1986. The petitioner requested for time citing non-production by unit due to nonavailability of the raw material and further deposited Rs. 5,000/- on 27.03.1986. The petitioner was again served with a legal notice on 16.12.1986 under Section 30 of the Act of 1951 requiring him to deposit Rs. 1,05,658/- up to 30.12.1986, failing which possession of the factory would be taken by the respondents and a further liability of Rs. 1,38,527/- would be imposed on him as costs. Following this, the petitioner deposited Rs. 5000/- on 30.12.1986.

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The respondents took possession of the petitioner’s industrial unit on 07.02.1987. A tender notice was published on 20.03.1987 by the respondents in the daily newspaper

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Rajasthan Patrika for sale of the Industrial Unit. The petitioner’s factory was auctioned on 20.01.1989 and transferred to respondent No. 3, Shri Satya Narain Girdharilal, for Rs. 1,00,000/-. The petitioner was informed about the same vide letter dated 18.02.1989 and he was again informed on 30.08.1989 to pay the outstanding amount of Rs. 1,01,988/- within 15 days.

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The learned counsel for the petitioner submits that the raw material worth Rs. 1,10,932/- which was hypothecated to the Bank of Baroda, was lying inside the factory when it’s possession was taken over by the respondents by breaking the locks of the factory and no inventory of the movable or immovable property belonging to petitioner was prepared. The counsel submits that the property worth Rs. 4 Lakhs/- was sold for just Rs. 1 Lakh/on easy instalments without informing the petitioner and a further demand of Rs. 1,01,988/- was raised without furnishing any details as to how this figure was arrived at.

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The counsel further submits that the respondents, instead of exercising wide powers under Section 29 of the Act of 1951 taking over the possession of the only source of livelihood of the petitioner, could have proceeded as per Section 31 of the Act of 1951 by applying to the District Judge for other reliefs and the petitioner then would have had an opportunity to rebut the allegations.

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The learned counsel for the respondents submits that the petitioner’s factory was taken over after duly serving a legal notice dated 16.12.1986 which mentioned that in case

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of failure to repay, possession of the factory would be taken over and a further liability as charges and expenses would be imposed on the petitioner. The possession of the factory was taken over in presence of the Notary Public. There was no raw material present in the factory at that time and the same was brought to the notice of the Bank of Baroda, Gangapur city vide letter dated 09.03.1989.

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He further submits that the auction was conducted fairly in presence of the members of the Committee who are high officers in the RFC and thus, the factory was transferred at a fair amount of Rs. 1,00,000/-. Moreover, the respondents had all the rights to initiate proceedings under Section 29 of the Act of 1951 and are not bound to proceed under Section 31 of the Act of 1951.

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Considered the submissions advanced by both the counsels appearing for the respective parties and gone through the entire material made available to the Court.

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This petition was filed way back on 26.10.1989. The petitioner made several defaults as regards the service upon respondent No.3.

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As per the facts on record, because of default of payment of the installments of the loan amount, the possession of the factory of the petitioner, which was hypothecated with the RFC, was taken over on 07.02.1987 and when the petitioner was not able to repay the due loan amount, an auction notice dated 28.03.1987 was issued for sale of the seized factory. The auction took place on

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20.01.1989, which was confirmed on 18.02.1989 and possession was given to the respondent No.3 on 28.02.1989.

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The petitioner preferred the present writ petition on 26.10.1989. Since, after the possession of the factory being given to respondent No.3 on 28.02.1989, the respondent No.3 is running the factory, which was given to him in view of the highest bid by him in the auction proceedings. When the respondent No.3 is given possession of the factory being the highest bidder and confirmation of the auction, taking back the possession from him after such a long period, when he must have made investment in the development of the factory, it would not be justified to take back the possession of the factory.

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In the light of the submissions made at bar, the Court is to see: “Whether the petitioner is entitled to a retransfer of his factory when the respondents lawfully took over the possession under Section 29 of the Act of 1951 or not?”

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In the present case, the respondents were entitled to choose whether to proceed under Section 29 or Section 31 of the Act of 1951. The Hon’ble Supreme Court in the case of A.P. State Financial Corpn. v. Gar Re-Rolling Mills (1994) 2 SCC 647 , which has been affirmed in the case of IREO Grace Realtech (P) Ltd. v. Abhishek Khanna and Others (2021) 3 SCC 241 , observed as under:

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“ 15. The doctrine of election clearly suggests that when two remedies are available for the same relief, the party to whom the said remedies are available has the option to elect either of them but that

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doctrine would not apply to cases where the ambit and scope of the two remedies is essentially different. To hold otherwise may lead to injustice and inconsistent results.

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16. ...The Corporation which has the right to make the choice may make the choice initially whether to proceed under Section 29 of the Act or Section 31 of the Act...

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17. The relief available to the Corporation under Section 29 of the Act to realise its dues in the manner prescribed therein is wider in scope than the limited reliefs available to it under Section 31 of the Act and is not controlled by Section 31 of the Act. The Legislature clearly intended to preserve the rights of the Corporation under Section 29 of the Act, by expressly stating in Section 31 of the Act, that its recourse to action under that section is without prejudice to the provisions of Section 29 of the Act. What alone is not desirable or permitted by the Act is to pursue both the remedies simultaneously by the Corporation... ”

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Taking into consideration the overall facts of the case and the judgements referred above, the Court is of the view that the petitioner is not entitled to re-delivery of the factory which has been legally taken over by the respondents under Section 29 of the Act of 1951. From the material available on record, the Court is of the view that the respondents gave ample opportunities to the petitioner to repay the outstanding amount and only after serving a legal notice on 16.12.1986, proceedings of taking over the possession of the factory were initiated under the said provision.

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In addition to above, the Bank of Baroda, Gangapur city was also made aware of the fact that no raw material was

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present at that time inside the factory, vide respondents’ letter dated 09.03.1989. The amount of Rs. 1,00,000/- was reached at in the auction in presence of the officers of the Rajasthan Financial Corporation, which shows that the respondents have not exercised their powers arbitrarily or in a mala fide way.

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Moreover, in view of the cases cited above, the respondents had the right to choose between the remedies available under the Act and were thus, entitled to proceed under Section 29 instead of Section 31 of the Act of 1951.

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In view of the foregoing discussion, the civil writ petition filed by the petitioner has no force and is accordingly dismissed.

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Pending applications, if any, also stand dismissed.

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(GANESH RAM MEENA),J

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ARTI SHARMA /2

Ram Niwas Gupta v. Raj. Financial Corporation

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Ram Niwas Gupta v. Raj. Financial Corporation

Case brief

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