Orissa High Court
Raicharan Champati (Dead) After Him His ... vs Managing Director, Orissa State ... on 20 October, 2003
Equivalent citations: AIR2004ORI34, II(2005)BC527, 96(2003)CLT696, AIR 2004 ORISSA 34, (2004) 14 ALLINDCAS 422 (ORI), 2004 (14) ALLINDCAS 422, (2004) 1 CLR 211 (ORI), (2005) 2 BANKCAS 527, (2003) 96 CUT LT 696, (2004) 2 BANKCLR 368
Author: L. Mohapatra
Bench: L. Mohapatra
JUDGMENT L. Mohapatra, J.
1. In O.J.C. No. 8826 of 1997 the petitioners challenge the action of the Orissa State Financial Corporation in taking over possession of Hotel Kalinga Highway Restaurant-cum-Guest House, Bhubaneswar in exercise of powers under Sections 29 and 30 of the State Financial Corporation Act as well as action of the said Corporation in selling the aforesaid hotel unit by auction. The petitioner in O.J.C. No. 10177 of 1997 stood as a guarantor for the loan obtained from the Orissa State Financial Corporation for purchase of the aforesaid hotel and has filed this writ application challenging the notice under Section 30 of the State Financial Corporation Act asking him to pay defaulted dues.
2. One Raicharan Champati, since dead, purchased the hotel in question from the Orissa State Financial Corporation by mutual transfer from the earlier owner and liabilities of the previous owner stood transferred against the said Raicharan Champati. For purchasing the aforesaid hotel, down payment of Rs. 2.00 lakhs had been made. Thereafter, on an application filed by the said Raicharan Champati, an amount of Rs. 17,83,383.53 paise was sanctioned by the Corporation to be paid back in six years in half-yearly instalments starting from 31.12.1996. With the availed loan amount said Raicharan Champati made renovations to the hotel unit and when it just started functioning, said Raicharan Champati passed away all of a sudden on 12.12.1996. Immediately after his death, the unit was taken over on 30.1.1997 in exercise of power under Section 29 of the Orissa State Financial Act on the ground that there was an outstanding of Rs. 50,000/-. From the record, it appears that on 24.11.1996 the Corporation recalled the entire loan under Section 30 of the Act on the ground that an amount of Rs. 50,000/- had remained unpaid, whereas the said amount had already been paid on 30.3.1996. Pursuant to such notice under Section 30 of the Act, since no payments were made, the amount having been already paid in the month of March, 1996, the unit was taken over and was put to auction. The opposite party No. 4 purchased the unit for an amount of Rs. 17,68,398.35 which was much lower than earlier value of the unit. Said Raicharan Champati had no immediate legal heirs and therefore without serving any notice the unit was taken over and the same was put to auction. The petitioners in O.J.C. No. 8826/97 are the legal heirs of deceased Raicharan Champati being nephews and having come to know about such seizure and sale have filed this writ application.
Shri Bijan Ray, learned senior counsel appearing for the petitioners in both the cases submitted that after the unit was purchased by late Raicharan Champati, down payment of rupees two lakhs had been made. The loan was sanctioned by the Corporation in favour of Raicharan Champati for renovation of the hotel unit and first instalment was due on 31.12.1996. Therefore, by the time notice under Section 30 of the Act was issued in the month of November, 1996, there was no amount due from late Raicharan Champati and therefore on the basis of such notice the unit could not have been taken over under Section 29 of the Act, In view of the above, the petitioners have approached for restoration of the unit in their favour. At the time of hearing of the case, Sri Bijan Ray, learned counsel appearing for the petitioners submitted that in the event the Court feels that the Unit cannot be restored to the petitioners, compensation of Rupees twenty lakhs be allowed in favour of the petitioners. On similar allegations, one of the guarantors namely Padma Charan Champati has filed the other writ application (OJC No. 10177/97) praying for quashing the notice issued by the Corporation asking him to pay defaulted dues.
3. Counter-affidavit has been filed on behalf of the Corporation stating therein that on mutual transfer the hotel unit was sold to late Raicharan Champati and necessary agreement was executed on 30.3.1996. It is admitted that late Raicharan Champati had paid Rupees two lakhs towards down payment. It further appears from the counter-affidavit that out of total outstanding loan of Rs. 17,33,383.52 paise, rupees two lakhs having been paid, late Raicharan Champati was required to pay the balance in six years time. It is also admitted in the counter-affidavit that first instalment was due on 31.12.1996. It is further stated in the counter-affidavit that late Raicharan Champati, from the date of taking over possession of the hotel unit till it was taken over back on 31.1.1997 under Section 29 of the Act, had not paid any amount to the Corporation. However, it is admitted in the counter affidavit that demand notice issued on 18.11.1996 recalling the entire loan on the ground that Rs. 50,000/- had not been paid towards principal dues was a mistake.
4. In view of what has been stated in the petition and partly admitted in the counter-affidavit, it is clear that late Raicharan Champati had purchased the hotel unit by way of mutual transfer with consent of the Financial Corporation in March, 1996 on payment of Rupees two lakhs as down payment. There appears to be no dispute about the fact that first instalment out of the total loan amount was due to be paid on 31.12.1996. In view of such admitted position, there was no occasion on the part of the Corporation to issue notice on 18.11.96 recalling the entire loan on the ground that there was default of Rs. 50,000/- towards principal. In the counter-affidavit, the Corporation having admitted that it was a mistake, taking over possession of the unit on the basis of such notice was definitely improper and illegal. Apart from above, it is found that by the time first instalment was due, the loanee Raicharan Champati had already expired. It was therefore duty of the Corporation to find out as to whether the original loanee had left any legal heir who could be made liable for payment if the first instalment was not paid on 31.12.1996. Instead of taking any such step, the hotel unit was taken over by the Corporation in the month of January, 1997 without issuing any further notice under Section 30 of the Act for non-payment of instalment which was due on 31.12.96. Confronted with the aforesaid position, learned counsel appearing for the Corporation submitted that since the unit was not functioning and nobody was in possession of the same, the Corporation had no other option excepting taking over the same. Even accepting such contention that the unit had been abandoned and the Corporation in order to protect the property, had taken over the same under Section 29 of the Act, before putting it to sale by auction, we are of the view that the Corporation was duty bound to find out as to whether the original loanee Raicharan Champati had any legal heir or not. In view of the above, we accept the case of the petitioners that taking over the hotel unit by the Corporation under Section 29 of the Act was illegal and improper.
5. Question that arises for consideration now is whether at this point of time any direction can be issued for restoration of the unit in favour of the petitioners ? There is no dispute that the opposite party No. 4 has purchased the unit in auction and is in possession of the same since 1997. Learned counsel appearing for the opposite party No. 4 also; submitted that after taking over the unit, a lot of investment was made and at this stage if the unit is restored to the petitioners, the opposite party No. 4 shall be put to irreparable loss. Having gone through the counter-affidavit filed by the opposite party No. 4, we are also of the view that it will not be appropriate on the part of this Court to direct restoration of the hotel unit in favour of the petitioners after the opposite party No. 4 has remained in possession of the same for about six years having invested considerable amount in the said unit. Therefore, only option for the Court is to consider prayer of the petitioners for payment of compensation. In view of our finding that taking over of the hotel unit by the Corporation under Section 29 of the Act was illegal and improper, the question that remains to be considered is what compensation the petitioners should be entitled to ? It is evident from the record that the hotel unit was purchased by mutual transfer in March, 1996 and it had just started running when Raicharan Chamapti expired. Therefore, it is obvious that amount of money invested by late Raicharan Champati had not brought any profit. We are, therefore, of the view that the legal heirs of late Raicharan Champati who are petitioners before this Court in O.J.C. No. 8826/97 should be paid back Rupees two lakhs with interest at such per cent per annum that the Corporation used to charge at the relevant time and subsequent thereto on the loan sanction from the date the unit was taken over the Corporation till date of payment. O.J.C. No. 8826/97 is disposed of accordingly.
6. So far as O.J.S. No. 10177/97 is concerned, it appears that the petitioner therein who was one of the guarantors had been directed to pay outstanding dues of Rs. 20,57,415.42. From the counter-affidavit filed by the opposite parties 1 to 3 in OJC No. 8826/97 it appears that after taken over the unit the same was sold to opposite party No. 4 for an amount of Rs. 17,68,398.35 paise on 18.6.97. The figure mentioned in Annexure-5 indicates outstanding dues as on 30.12.96. This notice is dated 10.6.97 and admittedly the unit was taken over in January, 1997. Since the unit was taken over in January, 1997, there was no reason for the Corporation to issue notice to the petitioner therein in June, 1997 to clear the amount. However, the unit having been sold for Rs. 17,78,398.35 paise, at best the Corporation can claim for payment of balance dues and not the entire dues. Such dues shall be calculated and interest thereon shall be charged up to the date it was taken over. After arising at the amount payable by the guarantor, the same shall be recovered from the amount payable to the petitioners in O.J.C. No. 8826/97. With the above observation, we dispose of this writ application.
Sujit Barman Roy, C.J.
7. I agree.