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Supreme Court Of India

(From : 2003 (1) BLJ 132)

Hon'ble Judge(s): Ruma Pal, S. H. Kapadia , JJ

(A) State Financial Corporations Act (63 of 1951) , S.29— Recovery of loan - First charge-holder, a Financial Corporation - Is bound to obtain best possible price for mortgaged assets and best possible price mean fair market value - Sale of mortgaged property, not for market price but against re-payment of dues of Corporation plus promise to discharge liability of second charge holder i.e. Bank - Illegal. 2003 (1) BLJ 132 (Pat), Reversed. A charge consists in the right of a creditor to receive the payment out of the proceeds of the realization of property or fund charged with the debt. A bare reading of sub-secs. (1) and (4) of S. 29 shows that it is similar to S. 69 of T. P. Act under which it is stipulated that a mortgagee exercising the power of sale is a trustee of the surplus sale proceeds and after satisfying his own charge he holds the surplus for the subsequent encumbrancers and ultimately for the mortgagor. Section 29(1) contemplates, therefore, a sale for distribution of sale proceeds and not a sale for distribution of property charged with the debt. It also implies that the first charge holder must act in a manner which protects not only its own interest but also the interest of the subsequent charge holder and the mortgagor. This in turn implies that the first charge holder is bound to obtain the best possible price for the mortgag....