Recovery powers under Section 29 prevail over rigid sale guidelines, with only limited judicial review for unfairness or illegality.

Section 29 of the State Financial Corporations Act, 1951 allows a Financial Corporation to take over and sell a defaulting unit to recover public funds, and judicial review cannot substitute the Court's commercial assessment unless there is statutory breach or manifest unfairness. Earlier sale guidelines that imposed rigid borrower-participation requirements were overruled as unduly restrictive and as favouring chronic defaulters. At the same time, the borrowers were granted a short final period to clear the dues, failing which the Corporation could dispose of the unit in accordance with law.

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Issues: (i) Whether the guidelines earlier laid down for exercise of power under Section 29 of the State Financial Corporations Act, 1951 correctly stated the law and could control the Corporation's action against a chronic defaulter; (ii) whether the respondents were entitled to limited time to clear the dues before the seized unit could be sold.

Issue (i): Whether the guidelines earlier laid down for exercise of power under Section 29 of the State Financial Corporations Act, 1951 correctly stated the law and could control the Corporation's action against a chronic defaulter.

Analysis: The statutory scheme permits the Financial Corporation to take over management or possession and realise its dues on default, because the Corporation functions with public funds and must recover amounts so that fresh lending remains possible. Fairness is required, but it is not a one-way obligation that disables recovery from a borrower who has repeatedly defaulted without genuine intention to repay. Judicial review under Article 226 of the Constitution of India does not authorise the Court to substitute its own commercial assessment for that of the Corporation unless there is statutory violation or unfairness so extreme that no reasonable authority would act that way. The earlier directions requiring extensive borrower participation at every stage of sale were found to impose unwarranted restrictions and to give an advantage to dishonest defaulters.

Conclusion: The earlier guidelines were held not to lay down the correct law and were overruled; the Corporation's power under Section 29 remained available, subject to lawful and fair procedure.

Issue (ii): Whether the respondents were entitled to limited time to clear the dues before the seized unit could be sold.

Analysis: Although the borrowers had consistently defaulted and had not repaid even a minimal part of the principal, they sought one further opportunity. The Court accepted that, in the peculiar circumstances, a short period could be granted to test bona fides, while preserving the Corporation's right to sell the unit if payment was not made within the time fixed. The relief was tailored to protect the Corporation's recovery while affording one last chance to the borrowers.

Conclusion: Limited time was granted to the respondents to clear the amount due, failing which the Corporation was left free to dispose of the unit in accordance with law.

Final Conclusion: The Corporation succeeded on the main legal challenge to the earlier restrictive view of Section 29, while the borrowers were given a final opportunity to pay the dues within the stipulated period before sale of the unit.

Ratio Decidendi: Under Section 29 of the State Financial Corporations Act, 1951, the Corporation's recovery powers cannot be fettered by overly rigid sale guidelines, and judicial review is confined to statutory violation or demonstrable unfairness, not commercial substitution by the Court.

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