ORDER
N.K. Mody, J.
1. The prayer in this petition is to hold that the proceedings for sale of the petitioner’s property which is not under a legal mortgage cannot be proceeded under Section 29 of the State Financial Corporation Act, 1951 (which shall be referred hereinafter as “Act, 1951”).
2. Short facts of the case are that respondent No. 1 has published a public notice for sale of plot No. 50-B, Amrat Palace Colony, Opposite Bombay Hospital, Indore in “Dainik Bhaskar” newspaper on 5-1-2005. It is alleged that since the plot belongs to the petitioner, therefore, objections were filed wherein it was specifically mentioned that petitioner has never given any guarantee on behalf of M/s. Sonu Ice Factory and never mortgaged the said plot with respondent No. 1. It was alleged that no demand was made from the petitioner. Petitioner also prayed for supply of guarantee/ mortgage-deed, if any. Further case of the petitioner is that vide reply dated 8-2-2005 petitioner was informed by the respondent No. 1 that an equitable mortgage-deed for the security of Rs. 6,00,000/- financed to respondent No. 3 was executed by the petitioner on 30-1-1997 but the copies of the same was not supplied to the petitioner. It was alleged that again public notice was issued in “Nai-Duniya” newspaper on 21-1-2005 for sale of the said plot of petitioner along with other properties. Again objections were submitted by petitioner on 24-10-2005 but of no avail. It is alleged that vide letter dated 25-11-2005 respondent No. 1 informed that a sum of Rs. 3,27,000/- is outstanding against respondent No. 3. It was also informed that offer of purchase has been received in the office of respondent No. 1 for the said property for Rs. 2,22,221/-. Petitioner alleged that valuation of property is of Rs. 4,00,000/-. It is alleged that since petitioner has neither executed guarantee-deed nor mortgaged the property, therefore, the property which belongs to the petitioner cannot be taken over under Section 29 of the Act.
3. Reply has been filed by the respondent No. 1 wherein the allegation made in the petition has been denied. It is alleged that the respondent No. 3 M/s. Sonu Ice Factory was granted term loan amounting to Rs. 5,00,000/- and soft loan amounting to Rs. 1,00,000/- which was disbursed in the year 1996. On 30-1-1997 petitioner executed a deed of guarantee as well as English mortgage without possession, inter alia mortgaging plot No. 50-B, Amrat Palace Colony, Indore. Copies of the deed of guarantee and English mortgage are annexed as R/1 and R/2. It is further alleged that deed of guarantee was duly attested by Notary Public. Similarly, the English mortgage without possession was also registered with the Sub-Registrar, Indore which bears Registration No. A-1/3215KA. It is alleged that respondent No. 3 failed to repay the said loan in accordance with the agreed repayment schedule, as such on 20-11-2002 a legal notice was issued to the respondent No. 3 as well as to the petitioner. In spite of receipt of ‘said notice principal borrower and guarantor did not chose to liquidate their liability, therefore, in exercise of powers conferred under Section 29 of the Act, the respondent No. 1 took over the mortgage assets from the principal borrower on 15-4-2004. It is submitted that in view of the lesser realizable value of the main security on 21-12-2004 the respondent No. 1 also took over the plot No. 50-B, Amrat Palace Colony, Indore. It is alleged that after taking over the main security, the same was sold on 29-9-2005 for a sale consideration of Rs. 3,25,000/- in favour of Anil Khandelwal. Further case of the respondent No. 1 is that the tenders were invited from the prospective purchasers for co-lateral security. It is alleged that respondents received 5 offers, out of which highest offer was of Rs. 2,22,221/-. It is alleged that the petitioner was informed vide letter dated 25-11-2005 and was requested to submit a better offer, if any. Since better offer was not received, therefore, after negotiation the sale of the said plot was confirmed at Rs. 3,35,000/- in favour of Manish Patni.
4. Shri Anwar Khan learned Counsel for the petitioner placed reliance on a decision of Full Bench of Allahabad in the matter of Munnalal v. U. P. Financial Corporation wherein Full Bench of Allahabad High Court has held that Section 29, no doubt, defines the rights of the Financial Corporation to take over the management of the Industrial concern or realize the mortgage property by way of lease or sale. The right given to the Corporation under Section 29 will extend to the property of the surety also. But such a right can be enforced by taking recourse to the ordinary law contained in the Transfer of Property Act and the Code of Civil Procedure. The special and speedy remedy contained in Section 31 of the Act cannot be availed of by the Corporation. There is no conflict between the two provisions. Section 29 defines the general right of the Corporation in cases of default and Section 31 provides for a speedy and summary remedy. From the scheme of the Act, it is clear that the speedy remedy contained in Section 31 is available not against the surety but against the borrower only.”
5. It is submitted that in view of the aforesaid position of law the action of respondents relating to the property of the petitioner who was undoubtedly not a borrower deserves to be quashed.
6. Learned Counsel for the respondents placed reliance on a decision of this Court in the matter of K. T. Sulochana Nair v. Managing Director, Orissa State Financial Corporation wherein a Division Bench after taking into consideration the law laid down by Full Bench of Allahabad in the matter of Munnalal v. U. P. Financial Corporation has held that under Section 29(1), the Corporation has the right to take over the management or possession of both of the industrial concern as well as the right to transfer by way of lease or sale and realize the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation. There is nothing in the provision to indicate that the right under Section 29 of the Act is only in respect of the property of the loanee mortgaged with the Corporation. On the other hand, all properties mortgaged with the Corporation would come within the purview of Section 29 of the Act. Hence Corporation can take possession of the property mortgaged by the Guarantor. Further reliance was placed in the matter of Kalyanmal v. M. P. F.C. 2003 (3) MPLJ 329 wherein this Court has taken into consideration the law laid-down by Full Bench of Allahabad in the matter of Munnalal v. U. P. Financial Corporation and also Divisional Bench of Orissa High Court in K. T. Sulochana Nair v. Managing Director, Orissa State Financial Corporation and has held that State Financial Corbaration has every right to proceed against all properties which are mortgaged or hypothecated by the borrower and guarantor in favour of Corporation for recovery of their outstanding loan amount. It is further held that it is the choice of the Corporation as to against which property they intend to proceed.
7. In the circumstances, no illegality has been committed by the respondents in taking the steps against the petitioner under Section 29 of the Act. In view of this, petition deserves to be dismissed and is hereby dismissed.