BIHAR STATE FINANCIAL CORPORATION AND ANOTHER
Vs.
BHUSHAN SINGH AND OTHERS
( Before : Sanjay Karol and Nongmeikapam Kotiswar Singh, JJ. )
Civil Appeal Nos. .........of 2026 (Arising out of SLP (C) Nos. 16552-53 of 2025) with Civil Appeal No. ...................of 2026 (Arising out of SLP (C) No. 24073 of 2025)
Decided on : 09-07-2026
A. State Financial Corporations Act, 1951 — Sections 29 & 30 — Auction sale of mortgaged property by Financial Corporation for recovery of dues — Judicial review of, scope — Borrowers persistently defaulting over eight years despite multiple opportunities, repayment schedules fixed by High Court, and statutory notices — Financial Corporation auctioning mortgaged property after affording repeated chances including a final 21-day matching offer, which borrowers ignored — Held, fairness required of a Financial Corporation cannot be carried to the extent of disabling it from recovering what is due to it; fairness is not a one-way street — Courts have no say in matters between the Corporation and its debtor except where there is (a) statutory violation, or (b) the Corporation has acted unfairly/unreasonably — Writ court/civil court does not sit as an appellate authority over commercial decisions of the Corporation — Absence of prior valuation report, by itself, held insufficient to vitiate auction where borrowers never objected to the basis of sale (BOS — balance outstanding as on date of possession/sale deed) and themselves sought to retain the property on the very same terms — Concurrent findings of Trial Court and High Court setting aside auction sale, reversed.
B. State Financial Corporations Act, 1951 — Section 29 — Fairness and reasonableness of Corporation's action — Test — Reasonableness to be tested against the dominant consideration of securing the best price through maximum public participation — Corporation permitting auction purchaser to pay consideration in instalments while denying similar accommodation to defaulting borrowers, held not arbitrary or mala fide but a commercial decision taken in ordinary course of business — Borrowers, being recalcitrant defaulters, cannot claim parity with a bona fide auction purchaser who had deposited the entire sale consideration.
C. Auction sale — Setting aside of, post-confirmation — Once an auction is confirmed and possession/sale consideration has passed, courts must ordinarily refrain from setting it aside unless vitiated by material irregularity, fraud or collusion — Mere prior correspondence between Corporation and eventual auction purchaser expressing interest in the property, without more, held insufficient to establish collusion — Auction purchaser having remained in possession for nearly three decades — Rights crystallized pursuant to a statutory sale not to be lightly unsettled after such long lapse of time.
D. Partnership Act, 1932 — Section 69(2) — Bar under — Applicability — Bar applies only to suits for enforcement of a right arising from a contract entered into by an unregistered firm with a third party in the course of its business — Suit filed against statutory action of Financial Corporation under Ss. 29 & 30, SFC Act, not being one for enforcement of a contractual right against a third party, held, not barred by S. 69(2) — Concurrent findings of courts below on this issue, affirmed.
