Punjab-Haryana High Court
Subhari Papers (P.) Ltd. vs Haryana Financial Corporation And Ors. on 6 October, 1997
Equivalent citations: [1998]93COMPCAS161(P&H), (1998)118PLR77
Author: M.L. Singhal
Bench: M.L. Singhal
JUDGMENT G.S. Singhvi, J.
1. This petition has been filed to quash the notice annexure P-3, dated July 9, 1996, issued by the General Manager, Haryana Financial Corporation (hereinafter described as "the HFC") to take over the possession of the factory belonging to the petitioner and other consequential actions taken by the official respondents. The petitioner has also prayed for directing the respondents to return the possession of the factory to it.
2. From the pleadings of the parties, it appears that there is a serious dispute between Shri Ramesh Chander Jhamba, who has filed the present petition as director of Subhari Papers (P.) Ltd. and respondents Nos. 4 and 5 who also claim to be the directors of the company. However, that dispute and the litigation between the parties on the issue as to who should control the company is not very much relevant for the purpose of deciding this petition. Suffice it to say that the HFC had given a loan to the petitioner-company and some dispute has been going on the question of repayment of the loan. On October 18, 1995, the HFC agreed to reschedule the instalments payable by the petitioner up to June 4, 1995, and directed it to make the payment in accordance with the conditions incorporated in paragraph 2 of the letter dated October 18, 1995.
3. On July 9, 1996, the General Manager of the HFC is said to have issued notice to the petitioner for taking over the possession of the factory and to sell it off by auction or by private negotiations for recovery of the amount due from the petitioner. According to the petitioner, this notice was not served upon it or any of its directors but a copy thereof was handed over on July 10, 1996, to one of the directors of the company, namely, Shri Rajat Gupta, at the time of taking over of possession. The petitioner has questioned the legality of the action taken by respondents Nos. 1 to 3 to take over the possession of the factory on the ground of violation of the principles of natural justice. The petitioner has asserted that before dispossessing it of the factory premises, the official respondents were duty bound to give notice and opportunity of hearing to it and as no such notice and hearing was given, the impugned action is liable to be declared as void. Respondents Nos. 1 to 3 have pleaded that possession of the factory was taken in view of the communication, annexure R-1, written by some of the directors of the petitioner-company to the managing director of the HFC,
4. Although learned counsel for the parties have addressed us at considerable length on various issues raised in the pleadings, in our opinion it is not necessary to deal with the questions whether respondents Nos. 1 to 3 can take action against the petitioner for the failure of its directors to get the change in the constitution approved by the HFC or due to their failure to repay the outstanding dues. We are also not required to adjudicate the dispute between the directors of the company because the same is already the subject-matter of other litigation. For the purpose of this order, it is sufficient to observe that learned counsel appearing for the respondents could not place any material before the court to show that the notice, annexure P-3, allegedly issued on July 9, 1996, had been served upon the petitioner before the actual take over of the factory was accomplished on July 10, 1996. Shri Sehgal tried to justify the action of the official respondents by making reference to the letter which is said to have been written by some of the erstwhile directors of the company that they were unable to repay the loan taken from the HFC. Shri Sehgal also referred to the letter written by the guarantors who wanted to be relieved from the liability of repayment of loan. However, we are not convinced with the submission of Shri Sehgal that on the strength of annexure R-1, the official respondents could take over the factory premises without affording opportunity of hearing to the petitioner. Undoubtedly, the action taken by the official respondents gravely affected the rights of the petitioner to run its factory and, therefore, the drastic action of taking over the possession of the factory premises, equipment and machinery could not have been taken by the official respondents without giving action-oriented notice and affording opportunity of hearing to the affected party. Issuance of notice on July 9, 1996, and taking over of possession on July 10, 1996, even before the notice was served upon the concerned person can appropriately be described as a clear abuse of the power vesting in the competent authorities of the corporation. As employees of the public authority, the officers of the corporation were expected to act in an impartial and fair manner without taking sides of the directors/erstwhile directors of the company.
5. Unfortunately, the officers of the corporation have acted in a manner which is clearly suggestive of the undue interest taken by them to support a particular group of directors and in their enthusiasm to support a particular group, the concerned officers completely ignored the basics of natural justice which forms an integral part of Section 29 of the State Financial Corporations Act, 1951. In our opinion, such action cannot but be castigated as void ab initio.
6. In the result, we allow the writ petition and quash the notice, annexure P-3, as well as the action of the official respondents to dispossess the petitioner of its factory premises and direct respondents Nos. 1 to 3 to restore the possession of the factory to the petitioner forthwith. However, we give liberty to the official respondents to take fresh proceedings against the petitioner on the ground of alleged non-payment of the dues and/or any other violation of the provisions of the 1951 Act or the terms and conditions on which the loan was given to the petitioner. At the same time, we make it clear that the respondent-corporation shall not be entitled to charge interest from the petitioner on the amount due in respect of the period during which the possession of the factory remained with the officials of the corporation.