Sale under State Financial Corporations Act sustained where settlement was communicated and borrower's conduct showed acceptance.

A Corporation's sale under section 29 of the State Financial Corporations Act was upheld because the record showed that the debtor-company had a further opportunity to pursue its settlement representation and that the decision on the representation was communicated through discussion and endorsement. The challenge on alleged non-communication therefore failed. The Court also held that the company's own conduct, including obtaining a bank certificate and seeking adjustment of bank liability from the sale proceeds, was consistent only with acceptance of the sale and precluded it from disputing the transaction. The Division Bench judgment was set aside and the writ petition dismissed with costs.

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Issues: (i) Whether the Corporation had given the debtor-company a fresh opportunity and communicated the decision taken on the representation dated 27.12.1993 before proceeding with sale under section 29 of the State Financial Corporations Act. (ii) Whether the debtor-company's conduct, including the bank certificate and request regarding adjustment of sale proceeds, precluded it from challenging the sale.

Issue (i): Whether the Corporation had given the debtor-company a fresh opportunity and communicated the decision taken on the representation dated 27.12.1993 before proceeding with sale under section 29 of the State Financial Corporations Act.

Analysis: The record showed that the debtor-company had repeatedly defaulted, that a representation for one-time settlement was made on 27.12.1993, and that the Corporation's affidavits in the writ appeal specifically stated that the matter was discussed in the presence of the managing director of the company and that a decision was taken to lift the seizure on stated payment conditions. The endorsement on the representation itself recorded that the matter was discussed with the party and that the arrangement was understood. The absence of any plea in the writ petition regarding non-communication, coupled with the absence of a rejoinder denying the Corporation's version, and the internal wording of the endorsement, furnished sufficient material to hold that the decision had been communicated and that the debtor-company had been given a further opportunity.

Conclusion: The finding of non-communication was erroneous, and the challenge on that ground failed.

Issue (ii): Whether the debtor-company's conduct, including the bank certificate and request regarding adjustment of sale proceeds, precluded it from challenging the sale.

Analysis: The certificate issued by the Vysya Bank, obtained at the request of the company, showed that the company sought adjustment of its bank liability from the balance remaining after satisfaction of the Corporation's dues. This conduct was consistent only with acceptance of the sale. The company did not explain why the bank would seek such adjustment unless the sale had been accepted. The Court treated this conduct, together with the subsequent steps taken by the Corporation, as showing that the company was precluded from disputing the sale.

Conclusion: The debtor-company was estopped from questioning the sale.

Final Conclusion: The appeals succeeded, the Division Bench judgment was set aside, and the writ petition was dismissed with costs.

Ratio Decidendi: Where a borrower has been afforded a further opportunity, the decision on a settlement proposal is shown to have been discussed and communicated, and the borrower's own conduct demonstrates acceptance of the sale, a later challenge to the Corporation's sale action under section 29 cannot succeed.

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