Kharavela Industries v Orissa State Financial Corporation (1985) | Section 29 SFC Act Explained

Banking Law Case 25 of 29 by Law Easy, for LL.B., CLAT PG, UGC NET Law and Judiciary exams. Case: Kharavela Industries Pvt Ltd v Orissa State Financial Corporation (1985), Orissa High Court (Division Bench), decided February 1985 (Justice G. B. Patnaik). FACTS: When the company defaulted on its loan, the corporation passed a takeover order but did not act on it. The company then paid some money. Ignoring this, the corporation suddenly took possession of the unit, issued a sale notice the next day and sold it within days. LEGAL ISSUE: Must a State Financial Corporation exercising its power under Section 29 consider payments already made and give the borrower a fair chance to respond? JUDGMENT: The High Court quashed the takeover and the sale. Section 29 of the State Financial Corporations Act, 1951 is an extraordinary power that lets a corporation take over the management or possession of a defaulting industrial concern and sell it without going to court. It must be used in good faith, after considering all relevant facts, including payments made by the borrower. Because a takeover has grave civil consequences and there is no appeal, the borrower must get notice and a minimum opportunity to be heard, and a sale made in such haste, without adequate publicity and time, breaks the duty to obtain the best price. PRINCIPLE TO REMEMBER: The power to recover a factory does not remove the duty to act fairly. Effective recovery law still demands fairness, relevant facts, notice and a proper sale. PROVISIONS: Section 29 of the State Financial Corporations Act, 1951. EXAM NOTE: The decision concerns a state financial corporation under its specific Act. Do not present it as the exact procedural rule for every modern bank under a different recovery statute such as SARFAESI (see Cases 26 and 27). The judgment does not say borrowers may ignore their instalments. PLAYLIST (all 29 cases in order): https://www.youtube.com/playlist?list=PLbhYsrMKgACA COMPLETE LECTURE (all 29 cases with timestamps): https://youtu.be/ayAN7RLlfPM PREVIOUS CASE (24, Dayawati v Yogesh Kumar Gosain): https://youtu.be/GO3t3XMg41E More law notes: https://www.thelaweasy.com If this helps your exam preparation, please subscribe to Law Easy. This video is for education and is not legal advice. #BankingLaw #SFCAct #LoanRecovery #CLATPG #Judiciary #LLB #LawEasy