Institute of Legal and Management Studies

The Supreme Court today (Aug. 5) criticized the public entity-Odisha State Financial Corporation (“OSFC”) for its careless and irresponsible approach towards handling the litigation in a long-standing dispute, due to which crores of public money were at risk of illegal disbursement in the form of execution of a decades-old decree.

The Court ruled in OSFC's favor while setting aside the decades-old excessive execution demands against it, but did not spare OSFC from criticism. The Court emphasized that public institutions have a heightened duty to act diligently when engaged in litigation involving public funds.

The bench comprising Justices JB Pardiwala and R Mahadevan heard the dispute which stemmed from a 1985 supply transaction, where a money decree of just ₹90,400 passed in 2001 had inflated to an astronomical ₹8.89 crore by 2025, due to erroneous interest calculations and prolonged delay on the Appellant's part for not ensuring effective representation before the Trial Court. Further, the Court also rebuked the Trial Court for passing the orders without a proper appreciation of the factual matrix or applicable legal principles.

“Before parting, we deem it necessary to record our strong disapproval of the manner in which the present litigation has been conducted by the appellant Corporation and its counsel before the lower courts. Public Institutions – particularly those entrusted with the stewardship of public funds – are expected to conduct themselves in legal proceedings with the highest standards of diligence, responsibility, and accountability. The failure to raise appropriate legal objections at the appropriate stages, coupled with the absence of timely and effective representation, has not only burdened the judicial system but has also exposed the corporation to unwarranted and protracted liability. The present case is a stark example of how a State-owned corporation has been unjustly and unsustainably saddled with financial liability. The Courts below – without a proper appreciation of the factual matrix or applicable legal principles – have passed orders culminating in execution proceedings that contravene foundational tenets of law and disregard essential procedural safeguards. Such outcomes not only lead to manifest injustice but also set a deleterious precedent.”, the Court observed.

The Court also highlighted the importance of the State Counsel's role to protect state interests and to assist the court in achieving outcomes that are just, lawful, and equitable. Further, it urged the State to establish and maintain robust internal mechanisms for regular monitoring and effective follow-up of pending litigation, ensuring it is pursued to its logical conclusion.

The judgment authored by Justice Mahadevan stated :

“Government counsel, as officers of the Court, bear a dual responsibility: to protect the interest of the State, and to assist the Court in achieving outcomes that are just, lawful and equitable. It is also imperative for the State to establish and maintain robust internal mechanisms for regular monitoring and effective follow-up of pending litigation, ensuring it is pursued to its logical conclusion. As has been repeatedly emphasized, while the State and its instrumentalities enjoy all rights available to any litigant, they must exercise these rights in a manner consistent with public interest and the ends of justice. Accordingly, in order to uphold the rule of law and safeguard the primacy of fairness and justice, this Court is compelled to intervene, even at the stage of execution, to scrutinize the decree and rectify the legal infirmities that undermine its very foundation.”

Accordingly, the appeal was allowed.

Cause Title: ODISHA STATE FINANCIAL CORPORATION VERSUS VIGYAN CHEMICAL INDUSTRIES AND OTHERS

Citation : 2025 LiveLaw (SC) 772

Click here to read/download the judgment

Appearance:

For Petitioner(s) : Mr. Ravi Prakash Mehrotra, Sr. Adv. Mr. Jogy Scaria, AOR Ms. Aparna Mehrotra, Adv. Mr. Apoorv Srivastava, Adv.

For Respondent(s) : Mr. Gopal Sankaranarayanan, Sr. Adv. Mr. Jasbir Singh Malik, Adv. Ms. Rhythm Bharadwaj, Adv. Mr. Shourya Das Gupta, Adv. Ms. Aditi Gupta, Adv. Mr. Varun Punia, AOR Mr. Shubhranshu Padhi, AOR Mr. Jay Nirupama, Adv. Mr. D.grish Kumar, Adv. Mr. Pranav Giri, Adv. Mr. Ekansh Sisodia, Adv.