Fair sale process under section 29 requires best price, valuation, and real consideration before transfer of secured assets.

A State Financial Corporation exercising sale powers under section 29 of the State Financial Corporation Act, 1951 must act fairly and reasonably, secure the best possible price, and apply the realised proceeds in the statutory order. The Supreme Court noted that this requires valuation, adequate publicity, meaningful bidder participation, and a genuine sale process. On the facts, the corporation transferred the mortgaged assets before the auction process was completed, did not disclose or ascertain valuation, failed to invite matching offers, and did not insist on full consideration. The sale arrangement was therefore held to be in breach of section 29 and was set aside.

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Issues: Whether the financial corporation acted reasonably and in accordance with section 29 of the State Financial Corporation Act, 1951 in transferring the mortgaged assets and entering into the sale agreement, and whether the arrangement violated the statutory duty to realise the best possible price and protect the rights of the second charge holder and the mortgagor.

Analysis: Section 29 empowers the financial corporation to take possession and transfer the secured assets, but the money realised must be applied in the statutory order under sub-section (4), which makes the corporation a trustee of the surplus for persons entitled thereto. The dominant consideration in such a sale is to secure the best possible price, which requires valuation, adequate publicity, meaningful participation of bidders, and a fair sale process. On the facts, the corporation transferred the assets to the third-party purchaser before the auction process was completed, accepted only the corporation's dues while substituting the purchaser's promise to pay the second charge holder, did not ascertain or disclose valuation, did not call for matching offers, and did not insist on outright payment of the full consideration reflected by the proposed transaction. The surrounding circumstances, including the premature handover and the treatment of the earnest money, showed that the corporation had not acted fairly or in the interests protected by the statute.

Conclusion: The sale arrangement and transfer of assets were held to be in breach of section 29 of the State Financial Corporation Act, 1951 and were set aside in favour of the appellant.

Final Conclusion: The statutory power under section 29 had to be exercised to secure the best possible price through a fair sale process and to preserve the rights attached to the secured property, and the impugned transaction failed that test.

Ratio Decidendi: A State Financial Corporation exercising power of sale under section 29 must act fairly and reasonably, obtain the best possible price through a genuine sale process, and apply the realised proceeds in the order mandated by the statute; a transfer made without proper valuation, adequate participation, and realisation of the sale consideration is liable to be invalidated.

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