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Bihar State Financial Corporation v. Bhushan Singh

Civil Appeal · 2026 INSC 673Decided 9 Jul 2026
Civil Appeal Nos. arising out of SLP(C) Nos. 16552-53 of 2025 and SLP(C) No. 24073 of 2025
Justice Sanjay Karol · Justice Nongmeikapam Kotiswar Singh · Justice K. Vinod Chandran

Background

Borrowers who had taken loans from the Bihar State Financial Corporation (BSFC) to set up an industrial unit defaulted repeatedly over roughly eight years, despite multiple repayment schedules and settlement opportunities offered by BSFC and even by court orders. BSFC eventually auctioned the mortgaged property under Section 29 of the SFC Act to recover its dues. The borrowers filed a civil suit challenging the auction, and both the trial court and the Patna High Court set the sale aside, mainly because the property had not been formally valued before auction.

Decision Breakdown

The Supreme Court allowed BSFC's appeal and restored the auction sale. It found that the borrowers had persistently defaulted and used successive rounds of litigation to delay recovery without any genuine effort to repay, and that the absence of a formal valuation report did not by itself make the auction unfair since the borrowers never objected to the valuation basis at the time and even tried to match the auction terms themselves. There was no proof of fraud or collusion between BSFC and the auction purchaser, and the sale had stood undisturbed for nearly three decades.

Lesson Learnt

Courts will not undo a lawfully conducted statutory auction, especially one settled for decades, merely on a technical objection like a missing valuation report, where the borrower's own long history of default and delay shows no genuine intent to pay and there is no evidence of fraud.

Official source (sci.gov.in)View Judgment (PDF)

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