Allahabad High Court
M/S Garg Oil Industries And Another vs State Of U.P. And Others on 14 January, 2020
Equivalent citations: AIRONLINE 2020 ALL 612
Bench: Sudhir Agarwal, Rajeev Misra
HIGH COURT OF JUDICATURE AT ALLAHABAD AFR Reserved on 19.07.2019 Delivered on 14.01.2020 Court No. - 34 Case :- WRIT - C No. - 37453 of 2001 Petitioner :- M/S Garg Oil Industries And Another Respondent :- State Of U.P. And Others Counsel for Petitioner :- Manoj Kumar Rajvanshi,N.C.Rajvanshi Counsel for Respondent :- C.S.C.,A. Khan,A. Khare,Ateeq Ahmad Khan,Dinesh Tewari,V. Singh,V.S. Singh Hon'ble Sudhir Agarwal,J.
Hon'ble Rajeev Misra,J.
(Delivered by Hon'ble Sudhir Agarwal,J.)
1. Sri N.C.Rajvanshi, Senior Advocate, assisted by Sri Prakash Chandra Shukla, for petitioners and learned Standing Counsel for respondents 1, 2 and 5. None has appeared on behalf of respondent 3, U.P. Financial Corporation, and respondent 6-Taj Singh Tyagi, though this petition has been called in revise, hence we proceed to hear and decide the same after hearing counsel for petitioners and learned Standing Counsel.
2. This writ petition under Article 226 of Constitution has been filed with a prayer for issue of writ of certiorari to quash sale deed dated 03.9.2001 and supplementary sale deed dated 26.9.2001 executed by U.P. Financial Corporation (hereinafter referred to as "UPFC") in favour of Tej Singh Tyagi respondent-6. Further a mandamus has been sought commanding respondents to hand over possession of land, building, plant and machinery etc. to petitioners and not to proceed with any recovery.
3. By way of amendment, two prayers have been inserted; one is to issue a writ of certiorari to quash notice dated 13.6.1997 and further a writ of mandamus not to charge interest over loan amount after 10.6.1997, when physical possession of Unit was taken over by UPFC.
4. Facts in brief, as stated in writ petition are that petitioner-1 M/s Garg Oil Industries, Village Ladu Khera, Agra (hereinafter referred to as "M/s GOI") is a Proprietorship Firm, engaged in the business of producing Oil and Oil Cakes. Petitioner 2, Vinod Kumar Garg is Sole Proprietor of M/s GOI. Industry was established in 1990 with financial assistance from UPFC, who sanctioned a term loan of Rs.1,69,600/- and Rs.1,81,000/-, for plant and machinery, with working capital, respectively. Production was started and instalments were also paid as and when the same fell due, as alleged in para 5 of writ petition.
5. In 1995, petitioners applied for Working Capital Term Loan of Rs.9 lakhs, which was also sanctioned and disbursed. In 1997, however, UPFC started proceedings under Section 29 of State Financial Corporation Act, 1951 (hereinafter referred to as "Act, 1951") and locked the Unit. Petitioners made various representations but same remained unheeded. There was a Government Order dated 13.11.1995 providing for rehabilitation of Sick Industrial Establishments, hence, petitioners made representation dated 04.03.2000 to General Manager, District Industries Centre, Agra (hereinafter referred to as "GMDIC") to declare petitioner's Unit sick and proceed for rehabilitation and revival of Unit by recomputation of financial liability of Financial Institutions. As nothing was done on the said representation, petitioners, M/s GOI came to this Court in Writ Petition No.39334 of 2000, which was disposed of vide judgment dated 05.9.2000, which reads as under :
"Heard learned counsel for petitioner and Sri H.N.Misra for U.P.Finance Corporation.
The petitioner claims that his unit has become sick and it has applied for rehabilitation vide Annexure-3 and 5 to the petition. This petition is disposed of with the direction to the authority concerned Corporation to decide petitioner's application for rehabilitation preferably within six weeks in accordance with law. If the petitioner files certified copy of this order before the said authority within two weeks from today the impugned recovery shall remain stayed, till disposal of the said application, unless the petitioner's application for rehabilitation has already been decided."
6. Pursuant thereto, Additional Director, Industry, vide letter dated 06.01.2001, communicated petitioners a decision of Divisional Level Committee informing that petitioner's claim for rehabilitation was already rejected in April, 2000 but this fact was concealed in the above writ petition. Further, One Time Settlement was sanctioned by UPFC in 1998 but that was not adhered to and complied with by M/s GOI. Only Rs.96,000/- was deposited by M/s GOI in April, 1997. The Committee therefore, proposed that, if petitioners deposit Rs.1.40 lakhs, towards earnest money within three weeks with UPFC, it may be allowed an year's time to pay rest amount, which was total Rs.14 lakhs. Petitioners did not comply with the said demand claiming that it was arbitrary. Petitioners filed appeal before State Level Standing Committee vide memo of appeal dated 02.02.2001 which remanded the matter to Regional Level Committee but it reiterates earlier order vide decision dated 27.03.2001. Again an appeal was filed by petitioners on 24.4.2001 before State Level Standing Committee. When the same was pending, UPFC advertised, in daily newspaper Amar Ujala dated 10.05.2001, petitioner's Unit for sale with a reserve price of Rs.5 lakhs. Petitioners were also informed vide letter dated 28.6.2001 sent by Regional Manager, UPFC that pursuant to High Court's judgment dated 05.7.2001, his representation was rejected. Petitioners protested against said decision vide letter dated 12.7.2001 but UPFC reiterated the above decision vide letter dated 11.7.2001. Petitioners then filed an application before State Level Standing Committee on 05.9.2001 requesting for stay of sale of Unit by UPFC. The Committee, vide letter dated 13.9.2001, requested UPFC to defer sale of Unit till a decision is taken by State Level Standing Committee. Petitioners, vide letter dated 15.9.2001 made similar request to UPFC. UPFC sent a letter dated 4.10.2001 to petitioners stating that Unit has been sold for Rs.5 lakhs in the proceedings under Section 29 of Act, 1951 and after adjusting aforesaid amount of Rs.5 lakhs, the balance amount, if petitioners are ready, may be allowed to clear in instalments and if petitioners are ready for One Time Settlement, it may apply alongwith earnest money by 25.10.2001.
7. However, UPFC executed sale deed on 25.9.2001 (Annexure 14 to writ petition) and informed petitioners that rest amount shall be recovered by issuing a recovery certificate under U.P Public Moneys (Recovery of Dues) Act, 1972 (hereinafter referred to as "Act, 1972"). Hence present writ petition has been filed seeking relief, as described above.
8. Respondent 3 i.e. UPFC has filed a counter affidavit sworn by N.K.Dixit, Deputy Senior Manager (Law) sworn on 10.12.2001 stating that Term Loan of Rs.1.72 lakhs and Rs.1.80 lakhs were sanctioned to Mr. Vinod Kumar Garg in 1991 for setting up an Industrial Unit for manufacturing Mustard Oil at Village Ladu Khera Kheragarh, Agra. Subsequently, Working Capital Term Loan of Rs.9 lakhs was sanctioned and disbursed in September, 1995. Therefore, a total loan of Rs.12.52 lakhs was disbursed to petitioners by UPFC. Petitioners committed default in repayment of instalments of principal sum as well as interest. Despite repeated request and reminders, it did not clear its outstanding dues. Consequently, a notice under Section 29 of Act, 1951 was issued on 13.6.1997. Physical possession of Unit was also taken over by UPFC. Electric connection was already disconnected on 25.11.1995 due to default in payment of electricity dues to U.P. State Electricity Board (hereinafter referred to as "UPSEB"). An undated proposal for rehabilitation submitted by petitioners were received in the office of UPFC on 07.3.2000 but it was not found viable hence rejected vide order dated 11.04.2000, which was communicated to petitioners. Then petitioners, vide letter dated 26.9.2000, informed about the steps taken before Regional Level Rehabilitation Committee. Additional Director (Industries) vide letter dated 6.1.2001 required petitioners to deposit Rs.1.40 lakhs within three weeks whereafter it would be given a year's time to make payment of balance One Time Settlement amount but even this direction was not complied with by petitioners. Consequently, UPFC proceeded for sale of Unit by publishing notice in daily newspaper 'Amar Ujala' on 10.5.2001, following guidelines laid down by Supreme Court in Mahesh Chandra vs. Regional Manager, U.P. Financial Corporation and others (1993) 2 SCC 279. Information was also given to petitioners vide letter dated 23.5.2001 sent by Regional Manager, UPFC. Here also petitioners did not respond. A registered letter was also sent to petitioners on 11.7.2001. Ultimately, auction was held and Unit of M/s GOI was sold by UPFC vide sale deed dated 03.09.2001 for a sum of Rs.5 lakhs. Thereafter, outstanding dues, after adjusting Rs.5 lakhs, were demanded from petitioners vide notice dated 04.10.2001. A similar notice was also given to Kailash Chandra Mittal, Guarantor to petitioner's loan.
9. To the amendment sought by petitioners, UPFC has also filed counter affidavit stating that initially notice under Section 29 of Act, 1951 was issued on 14.3.1995 and 06.5.1995 but the same remained unheeded. Thereafter, on the request of petitioners, for the interest of Unit and in the hope that it will function, Working Capital Term Loan of Rs.9 lakhs was sanctioned on 11.09.1995 and disbursed. Thereafter again petitioners committed default. He made part payments through various cheques, details whereof are given in para 4(d) of counter affidavit and all these cheques were dishonored. Details of said cheques, mentioned in para 4(d) of counter affidavit to the amendment application are as under :
Sl.
Cheque Date Amount 1 17.01.1996 Rs.34,000/-2
15.07.1996 Rs.56,000/-3
23.10.1996 Rs.44,000/-4
10.12.1996 Rs.44,000/-
530.09.1996 Rs.56,000/-
629.10.1996 Rs.12,000/-
710.12.1996 Rs.16,000/-
831.03.1997 Rs.79,000/-
10. On 15.5.1997 there were overdues of Rs.2 lakhs in Working Capital Term Loan Account and Rs.2,40,183.92 in the main loan account. When UPFC was contemplating to issue notice under Section 29 of Act, 1951, it came to knowledge, through its Recovery Officer on 12.9.1996, that petitioners had abandoned the Unit. Consequently, for the safety of assets of Unit, UPFC recommended for posting of its Guard. Thereafter notice under Section 29 of Act, 1951 was issued and actual physical possession of assets was taken over on 13.6.1997. Information to this effect was also given at Police Chauki Ladukhera, Agra. Thereafter, several letters were issued to petitioners but the same remained unheeded. On 13.6.1997, when UPFC Officers visited the Unit, they did not find either petitioners, his family members or any other employees or representatives present at the Unit. This shows that information given by Recovery Officer that petitioners had abandoned the Unit was correct. Possession of Unit was taken almost after one and half years of disconnection of electric connection showing that Unit was not functional.
11. Respondent 6 has also filed counter affidavit, who is purchaser of Unit in question and he has taken a stand, similar to UPFC. Respondent 6 has also pleaded that he is a bona fide purchaser of Unit for valid consideration.
12. Learned Senior Counsel for petitioners has submitted written arguments and reiterated the contents of said arguments orally before this Court. However, he could not submit any reply to the contents of para 4(d) of counter affidavit, submitted to amended paragraph of writ petition, that several cheques submitted by petitioners towards payment of outstanding dues were dishonored. On this aspect nothing has been said either orally before us nor mentioned in the written arguments. However, relying on para 9 of writ petition, it is urged that there was no outstanding dues. This aspect stood contradicted by specific details of dishonored cheques given in para 4(d) of counter affidavit sworn on 27.6.2003 by R.K.Srivastava, Senior Manager (Law) in the office of Regional Manager, UPFC, Allahabad, hence cannot be accepted.
13. Learned Senior Counsel for petitioners however contended that notice under Section 29 of Act, 1951 was issued on 13.6.1997 (i.e. Annexure 4 to the counter affidavit) and on the same date physical possession was taken therefore no time was given to petitioners to clear the outstanding dues. Hence notice is in violation of principles of natural justice and reliance is placed on Supreme Court's Judgment in Maharashtra Sate Financial Corporation vs. M/s Suvarna Board Mills and another (1994) 5 SCC 566 and a Division Bench judgment of Orissa High Court in M/s Kharavela Industries Pvt. Ltd. vs. Orissa State Financial Corporation and others, AIR 1985 Orissa 153. It is also contended that as per valuation chart, filed as Annexure 5 to supplementary affidavit, prepared by officials of UPFC on 25.7.2000, value of Unit was Rs.22.80 lakhs but it has been sold for a petty sum of Rs.5 lakhs, showing sale of Unit by UPFC on throw away prices and this is nothing but a malicious act on its part.
14. Counter affidavit of UPFC shows that first notice under Section 29 of Act, 1951 was issued on 14.3.1995 stating that a sum of Rs.61,662.72 was overdue till 20.12.1994, and petitioners were informed earlier vide letter dated 2.2.1995 but it remained unheeded. The entire outstanding dues including overdues of instalments of Principal and Interest, which came to Rs.3,34,262.72 as on 20.12.1994, was required to be paid within seven days. Further, a notice was sent by Assistant General Manager, UPFC on 6.5.1995 informing petitioners that upto 20.3.1995 principal amount of Rs.55,000/- and interest of Rs.27,796.54 was outstanding and the same must be cleared by 25.5.1995.
15. Thereafter, since Working Capital Term Loan of Rs.9 lakhs was sanctioned, it was disbursed to petitioners between 15.2.1996 to 15.11.1999 but petitioners' payment of instalment was not found regular. In view thereof, notice under Section 29 of Act, 1951 was again issued on 13.6.1997 and on the same day actual physical possession was taken by UPFC. This was necessitated in view of the fact that Recovery Officer had informed UPFC that petitioners have abandoned the Unit. Actual possession memo (Annexure 5 to the counter affidavit) shows that petitioners or his family members were not present when physical possession was taken by UPFC. Therefore, contention of petitioners that no opportunity was given to clear dues is hyper technical objection considering facts, already discussed above, showing that repeated opportunity was given to petitioners to clear dues but it failed.
16. Annexure CA 9 to the counter affidavit sworn on 27.6.2003 filed by UPFC is a letter dated 17.12.1996 informing petitioners that cheque no.219562 drawn on Punjab National Bank, Belanganj, Agra on 30.11.1996 for Rs.60,000/- towards repayment of Term Loan was returned dishonored with the remark ''insufficient funds' and petitioners were required to pay the said amount but nothing proceeded. Thereafter, a notice dated 10.02.1997 issued by Senior Manager (Technical) UPFC, (Annexure 10 to the writ petition), further shows demand of outstanding dues from petitioners as also inviting to submit proposal, if any, for repayment as Unit's physical possession would be taken on 25.02.1997 but nothing has been placed on record to show that in response thereof petitioners made payment of dues to UPFC. On the contrary, UPFC has filed petitioner-2's letter dated 15.6.1997 addressed to Senior Superintendent of Police, Agra, (Annexure CA-11 to counter affidavit) complaining that on 08.6.1997 petitioner-2 and his family members had gone out of station locking his House and Mill but when he returned, Mill was looted and possession was taken by third party who also threatened him. Another letter of petitioners dated 21.6.1997 is Annexure 12 to counter affidavit whereby petitioner-2 has informed Regional Manager that auction proposed on 26.6.1997 shows entire Unit but only 259.2 sq.m. is liable to be auctioned and rest area has no concerned with UPFC. Here also we do not find any objection raised by petitioner-2 for auction proposed by UPFC.
17. In the entirety of the facts and circumstances of this case we find that there was no honest and serious attempt on the part of petitioners to clear outstanding dues of loan amount as well as interest which admittedly was advanced to petitioners but default was committed in repayment thereof. The objections raised before this Court are hypertechnical, bereft of facts, which demonstrate that enough opportunity was given to petitioners to clear outstanding dues but failed. Principles of natural justice are not technically legal principle which can be attracted bereft of existence of good conscience, justice and equality. A person, who himself has committed repeated default and has not dealt with affairs in a bona fide and honest manner, cannot seek indulgence on a technical plea when repeated notices, opportunities have been given and the same have all failed. Application of natural justice is founded on the facts and where it is evident that enough opportunity has been given an ultimate action cannot said to be vitiated in law only on the ground that last notice has not given any further time though repeated time was already given.
18. Even authorities of Supreme Court are against petitioners. We may first refer to three Judges' decision of Supreme Court in Haryana Financial Corporation and Another vs. Jagdamba Oil Mills and another (2002) 3 SCC 496. M/s Jagdamba Oil Mills (hereinafter referred to as "JOM") a Partnership Firm was sanctioned a Term Loan of Rs.7,48,000/- by Haryana Financial Corporation (hereinafter referred to as "HFC") vide letter dated 19.10.1992. The loan was to be repaid in 8 years, which was to commence from the date of execution of mortgage deed. Payment schedule comprised of 15 half-yearly instalments. The repayment was to be commenced within 13 months from the first disbursement of the loan. The first 13 instalments of payment were to be of Rs.50,000/- each and remaining two instalments of Rs.49,000/- each, towards principal sum. Interest fell due, was to be paid with respective instalments of principal amount. JOM mortgaged its land, building and machinery in favour of HFC. Loan instalments were to be on the basis of securities created by borrowers and as and when enough securities were created, loan amount was to be disbursed. The first instalment of loan was disbursed on 25.02.1993 and last on 26.02.1994. Total loan availed by JOM was Rs.7.45 lakhs. The first instalment payable was for Rs.1,29,551/- (including principal and interest) on 01.03.1994 but JOM failed to deposit. It requested HFC to reschedule repayment. Request was accepted and reshedulement was done. Then instalment fell due on 01.09.1994 of Rs.1,24,409/-. Again there was a default. JOM again requested for reshedulement. Again it was accepted. However, again default was committed when first instalment of Rs.1,31,046/- fell due on 01.03.1995. Since JOM proved to be a chronic defaulter in making payment of instalments, HFC initiated action under Section 29 of State Financial Corporations Act, 951 (hereinafter referred to as "Act, 1951") after recalling loan under Section 30 of the said Act. Possession of Unit was taken by HFC. JOM instituted Civil Suit No.86 of 1995 in the Court of Civil Judge (Senior Division), Ambala, seeking a decree for permanent injunction restraining HFC and its functionaries from auctioning the Unit, which was seized. Suit was decreed by Trial Court on the ground that HFC did not give breathing to JOM and possession was taken within one year from the date of last instalment hence such action cannot be sustained. Trial Court relied on Supreme Court judgment in Mahesh Chandra vs. Regional Manager, U.P. Financial Corporation (supra). The First Appeal No.37 of 1998 filed by HFC was dismissed and it also failed before Punjab and Haryana High Court in Second Appeal hence matter came to Supreme Court.
19. Before Supreme Court, judgment in Mahesh Chandra (supra) was sought to be distinguished on the ground that facts of the case were different, inasmuch as JOM had already proved to be a chronic defaulter and in such as case no further opportunity was needed to the defaulting unit.
20. On behalf of HFC in fact argument was raised that decision in Mahesh Chandra (supra) required reconsideration in the light of later judgment of Supreme Court in U.P. Financial Corporation vs. Gem Cap (India) (P) Ltd. (1993) 2 SCC 299. Supreme Court considered the object of Act, 1951 and said that intention was that State Financial Corporations being instrumentality of the State deals with public money shall have approach of public-orientation. It can operate effectively if there is regular realization of the instalments. While Corporation is expected to act fairly in the matter of disbursement of loans, corresponding duty is cast upon borrowers to repay instalments in time, unless prevented by insurmountable difficulties. Regular payment is the rule and non-payment due to extenuating circumstances is exception. If repayment is not received as per scheduled time-frame, equilibrium of financial arrangements of Corporation would get disturbed. Corporation do not have at their disposal unlimited funds. They have to cater to the needs of intended borrowers with available funds. Non-payment of instalment by defaulter may create obstruction in financial assistance to be extended to deserving borrower by Corporation. A Corporation is not supposed to give loan and right it off as a bad debt and ultimately to go out of business. Court approved observations made in Gem Cap (India) (P) Ltd. (supra) that promotion of industrialization does not serve public interest if it is at the cost of public funds. It may amount to transferring public money to private account.
21. Guidelines issued in Mahesh Chandra (supra) before exercising power under Section 29 were reiterated in para 7 of judgment but Court in Haryana Financial Corporation Vs. Jagdamba Oil Mills (supra) also said that these guidelines were stated to be necessary to ensure fair play. That decision [Mahesh Chandra (supra)], was rendered in a case where borrower intended to repay the debt and was anxious to do so.
22. That was not the case either in Haryana Financial Corporation Vs. Jagdamba Oil Mills (supra) nor in the present case. Supreme Court in Haryana Financial Corporation Vs. Jagdamba Oil Mills (supra) further said that borrower cannot be insisted upon to honour commitments undertaken by him, Corporation alone cannot be shackled hand and foot in the name of fairness. One cannot lose sight that fairness cannot be a one-way street. Corporations borrow money from Government or other Financial Corporations and are required to pay interest thereon. Where borrower had no genuine intention to repay and adopts pretexts and ploys to avoid payment, such borrower cannot make grievance that Corporation was not acting fairly, even if requisite procedures have been followed. Fairness required of Corporations cannot be carried to the extent of disabling them from recovering what is due to it. Supreme Court further said :
"The Corporation is an independent autonomous statutory body having its own constitution and rules to abide by, and functions and obligations to discharge. As such in the discharge of its functions, it is free to act according to its own light. The views it forms and decisions it takes are on the basis of the information in its possession and the advice it receives and according to its own perspective and calculations. Unless its action is mala fide, even a wrong decision by it is not open to challenge. It is not for the courts or a third party to substitute its decision, however, more prudent, commercial or businesslike it may be, for the decision of the Corporation.
23. Relying on earlier decision in U.P. Financial Corpn. vs. Naini Oxygen & Acetylene Gas Ltd. (1995) 2 SCC 754 Court said that in commercial matters the courts should not risk their judgments for the judgments of bodies to whom that task is assigned. It also relied on another judgment in Karnataka State Financial Corpn. vs. Micro Cast Rubber & Allied Products (P) Ltd. (1996) 5 SCC 65 holding that for exercising power under Section 29, scope of judicial review is confined to two circumstances i.e. (a) where there is statutory violation on the part of State Financial Corporation, or (b) where State Financial Corporation acts unfairly i.e. unreasonably. Court very categorically said that High Court should not interfere with action under Section 29 of Act, 1951 unless aforesaid two situations exist.
24. Thereafter Court referred to guidelines referred in Mahesh Chandra (supra) and overruling the same, said in paras 17 and 18 as under :
"17. The aforesaid guidelines issued in Mahesh Chandra's case place unnecessary restrictions on the exercise of power by the Financial Corporation contained in Section 29 of the Act by requiring the defaulting unit holder to be associated or consulted at every stage in the sale of the property. A person who has defaulted is hardly ever likely to cooperate in the sale of his assets. The procedure indicated in Mahesh Chandra's case will only lead to further delay in realization of the dues by the Corporation by sale of assets. It is always expected that the Corporation will try and realize the maximum sale price by selling the assets by following a procedure which is transparent and acceptable, after due publicity, wherever possible.
18. The subsequent decisions of this Court in Gem Cap's (supra), Naini Oxygen (supra) and Micro Cast Rubber (supra) run counter to the view expressed in Mahesh Chandra's case. In our opinion, the issuance of the said guidelines in Mahesh Chandra's case are contrary to the letter and the intent of Section 29. In our view, the said observations in Mahesh Chandra's case do not lay down the correct law and the said decision is overruled. "
25. The aforesaid decision, in our view, fortifies our approach and justify no interference in the light of facts of present case.
26. Subsequently, similar issue has been considered in Punjab Financial Corporation vs. Surya Auto Industries (2010) 1 SCC 297. Therein also for setting up an Industrial Unit in Gurdaspur (Punjab), Punjab Financial Corporation (hereinafter referred to as "PFC") sanctioned a term loan of Rs.24.25 lakhs to M/s Surya Auto Industries (hereinafter referred to as "SAI"). Loan was to be repaid with interest on specified dates but SAI failed to adhere to repayment schedule and till 2002 could deposit only Rs.2.70 lakhs. PFC then issued notice under Section 29 and took possession of Unit. Thereafter notices dated 02.12.2002, 03.03.2003, 30.05.2003 and 29.08.2003 were issued by PFC but SAI failed to pay outstanding dues. It also failed to avail concession offered by PFC for reschedulement reducing rate of interest. Consequently, PFC also issued notice under Section 29 of Act, 1951 for taking over collateral security. Challenging the said notice on the ground of violation of principles of natural justice, SAI filed Writ Petition No.11932 of 2007 in Punjab & Haryana High Court, which upholding the contention held that possession of mortgage property could not have been taken without giving reasonable time and opportunity for payment. Hence, writ petition was allowed and High Court set aside compounding of penal interest from 01.04.2003 i.e. after expirty of a period of six months from the date of taking over of SAI. Supreme Court in appeal preferred by PFC after noticing contradictory decisions in Mahesh Chandra (supra) and U.P. Financial Corpn. vs. Gem Cap (India) (P) Ltd. (supra) referred to Larger Bench judgment in Haryana Financial Corporation Vs. Jagdamba Oil Mills (supra) and following the same, in paras 21 and 22 of judgment in Punjab Financial Corporation vs. Surya Auto Industries (supra) said as under :
"21. The proposition of law which can be culled out from the decisions noted above is that even though the primary function of a corporation established under Section 3 of the Act is to promote small and medium industries in the State, but it is not obliged to revive and resurrect every sick industrial unit de hors the financial implications of such exercise The corporation is not supposed to give loans and refrain from taking action for recovery thereof. Being an instrumentality of the State, the corporation is expected to act fairly and reasonably qua its borrowers/ debtors, but it is not expected to flounder public money for promoting private interests.
22. The relationship between the corporation and borrower is that of creditor and debtor. The corporation is expected to recover the loans already given so that it can give fresh loans/financial assistance to Ors. The proceedings initiated by the corporation and action taken for recovery of the outstanding dues cannot be nullified by the Courts except when such action is found to be in violation of any statutory provision resulting in prejudice to the borrower or where such proceeding/ action is shown to be wholly arbitrary, unreasonable and unfair. The Court cannot sit as an appellate authority over the action of the corporation and substitute its decision for the one taken by the corporation. "
27. Having said so, Court held that PFC had acted in a most reasonable and fair manner and High Court was not justified in nullifying the second notice issued under Section 29 of Act, 1951 assuming that PFC had not taken effective steps for realization of dues in furtherance of first notice. Court said that High Court ignored conduct of borrower, who adopted a recalcitrant attitude in the matter of payment of outstanding dues, but also failed to avail concession offered by PFC by reducing rate of interest and reschedulement. It also held that High Court should not have reduced interest to simple interest, altering terms of loan agreement, which is not permissible.
28. Following decision in Haryana Financial Corporation Vs. Jagdamba Oil Mills (supra) Supreme Court in Managing Director, Maharashtra State Financial Corporation and others vs. Sanjay Shankarsa Mamarde (2010) 7 SCC 489 held that where borrower had no genuine intention to repay and adopts pretexts and ploys to avoid payment, he cannot make grievance that Corporation was not acting fairly, even if requisite procedures have been followed.
29. In these facts and circumstances we do not find any illegality on the part of UPFC in proceeding to take possession of petitioner's Unit in exercise of power under Section 29 of Act, 1951 and putting the Unit for auction.
30. Moreover, nothing has been placed by petitioners on record to show that there was any bona fide, willing buyer actually available to purchase Unit and its assets, for more than Rs.5 lakhs i.e. consideration whereupon it has been sold to respondent 6. In absence of any buyer offering higher price than that whereupon it has been sold to respondent 6, we find no reason to interfere with sale transaction of Unit in favour of respondent 6.
31. In the entirety of the facts and circumstances we find that petitioners have not approached this Court in a bona fide manner. It was financed by UPFC but committed repeated defaults in repayment. Despite demand and notices, petitioners made no attempt to clear outstanding dues. Several cheques issued by petitioners towards repayment of outstanding dues were dishonored. Even when One Time Settlement was accepted and Rehabilitation Committee of State Government made proposal to petitioners to deposit just 10 percent of the total outstanding dues, at that time i.e. Rs.1,40,000/-, vide letter dated 06.01.2001, still petitioners had no intention to pay the said amount and made no attempt to do so.
32. In these facts and circumstances, we do not find that petitioners are entitled to any relief and this is not a fit case justifying interference in extra ordinary equitable jurisdiction under Article 226 of Constitution. Writ petition lacks merit.
33. Dismissed.
34. Interim order, if any, stands vacated.
Order Date :- 14.01.2020 KA