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Issues: (i) Whether the taking over of possession under section 29 of the State Financial Corporations Act, 1951 was discriminatory or arbitrary and offended article 14 of the Constitution of India; (ii) whether the action taken by the Corporation was in conformity with section 29 of the State Financial Corporations Act, 1951; (iii) whether the respondents were estopped from invoking section 29 because of the alleged failure to transfer the letter of intent and execute the conveyance deed.
Issue (i): Whether the taking over of possession under section 29 of the State Financial Corporations Act, 1951 was discriminatory or arbitrary and offended article 14 of the Constitution of India.
Analysis: The petitioner was not similarly situated to the other promoters, because they had made payment of the consideration while the petitioner had made no payment. The agreements and factual position were materially different. A claim of discrimination cannot succeed by relying on a supposedly illegal benefit extended to others, and the material showed repeated defaults by the petitioner despite repeated opportunities. The action was also not arbitrary, as the respondents acted after notice, hearing, and continued non-payment of public funds due under the arrangement.
Conclusion: The action was neither discriminatory nor arbitrary and was not violative of article 14.
Issue (ii): Whether the action taken by the Corporation was in conformity with section 29 of the State Financial Corporations Act, 1951.
Analysis: Section 29 empowers the Financial Corporation to take over management or possession where an industrial concern under liability defaults in repayment or otherwise fails to comply with its agreement. The petitioner defaulted under the original agreement and again under the revised repayment schedule after conversion of the consideration into a term loan. Since the petitioner failed to meet the agreed instalments and interest obligations, the statutory ingredients for exercise of the power were satisfied.
Conclusion: The impugned action was in conformity with section 29.
Issue (iii): Whether the respondents were estopped from invoking section 29 because of the alleged failure to transfer the letter of intent and execute the conveyance deed.
Analysis: The obligation to transfer assets and related rights arose against payment by the petitioner, which had not been performed. The record did not show any contractual obligation requiring prior transfer of land or letter of intent before payment or before resort to section 29. The petitioner's continuous default defeated the plea that the respondents were bound to complete the transfer first, and no basis for promissory or equitable estoppel was established.
Conclusion: The plea of estoppel was rejected.
Final Conclusion: The writ petition failed on all material grounds, and the Corporation's takeover and recovery action was upheld.
Ratio Decidendi: A Financial Corporation may validly invoke section 29 to take over possession where the borrower defaults in payment under the agreement, and a plea of discrimination or estoppel cannot succeed in the absence of factual parity or proof that the Corporation was contractually bound to perform its reciprocal obligations before enforcing recovery.
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