Gujarat High Court
Amrit Dye Chem Industries vs Bonzanza Durgs And Chemicals Ltd. on 1 September, 1998
Author: R.M. Doshit
Bench: R.M. Doshit
JUDGMENT M.R. Calla, J.
1. These nine Letters Patent Appeals arise from a common judgment and order dated 18.11.97 passed by the learned single Judge in Special Civil Applications Nos. 9327 of 1995 to 9331 of 1995. They have been filed on behalf of the purchaser Companies M/s. Amrit Dyechem Industries, Navinchandra Laljibhai Shah, M/s. Gujsynth and Ekka Danta Pharmaceuticals being Letters Patent Appeals Nos. 1471, 1472, 1473 and 1482 of 1997 respectively and the Gujarat State Financial Corporation being Letters Patent Appeals Nos. 1499, 1502, 1503, 1504 and 1512 of 1997. Whereas all these Appeals are directed against the same impugned order passed by the learned single Judge as a common order and they involve identical facts and common questions of law, all these nine Letters Patent Appeals are decided by this common order.
The contesting respondent herein in these Appeals i.e. Bonanza Pharmaceuticals Ltd./ Bonanza Drugs and Chemicals Ltd. entered into agreements with the Gujarat State Financial Corporation in the matter of purchase of certain industrial Units. Because the contesting respondent i.e. Bonanza Pharmaceuticls failed to pay the due amount of instalments as was contemplated under the agreements between the parties and heavy amounts with interest became due, the Gujarat State Financial Corporation wanted to recover its dues by selling these industrial Units. The initiation of the process of recovery by the Gujarat State Financial Corporation gave rise to the litigation between the parties. Whereas the learned single Judge has allowed the Special Civil Applications, filed by the Company i.e. Bonanza Pharmaceuticals against the Gujarat State Financial Corporation, the Gujarat State Financial Corporation as also the parties which had purchased these industrial Units through tenders invited by Gujarat State Financial Corporation, have preferred these Appeals.
2. The relevant facts relating to these Letters Patent Appeals are as under:
Out of five industrial Units, which are concerned and which form the subject matter of the litigation, Kothari Pharmaceuticals & Chemicals Pvt. Ltd. was one such Unit for which an agreement was executed between the Gujarat State Financial Corporation (hereinafter referred to as 'GSFC' for short) and Bonanza Drugs & Chemicals Ltd. on 18.3.92. Under this agreement, the Bonanza Drugs and Chemicals Ltd., which is represented before us through one Shri P.A. Akhani, claiming himself to be the Chairman and Managing Director, was required to pay Rs. 25 lacs towards purchase price and out of which 30% of the amount was to be paid by way of down payment while balance of 70% was to be paid in 12 quarterly installments alongwith interest etc in terms of the agreement within a period of three yeaRs. It was one of the terms of the agreement that in case of two consecutive defaults by the purchaser - Company in making payment of the installments the entire balance amount will become due and payable. There is no dispute between the parties that the purchasing Company made a down payment of Rs. 8.75 lacs on 18.3.92 itself. There is also no dispute between the parties that the possession of the Unit was handed over to the purchasing Company by the GSFC on 24.3.92. In terms of the agreement, the first instalment became due in June 1992 even from the date of the taking over of the possession of the Unit. Whereas the Company failed to make the payment as required under the agreement, a letter dated 3.2.93 was issued calling upon it to pay the amount due at the earliest. The case of the GSFC is that three post dated cheques for a total sum of Rs. 9,50,000/- were issued by the Company, out of which cheques for Rs. 7 lacs were dishonoured. A show cause notice dated 3.1.94 was, therefore, issued to the Company to make payment of outstanding dues and it was also called for personal hearing. On 25.2.94 three post dated cheques for a sum of Rs. 6 lacs were issued by the Company and all these three cheques were dishonoured. A telegram was then sent to the Company on 29.3.94 calling upon it to make the payment of the outstanding dues. Thereafter, a letter was sent on 8.4.94 by the Corporation calling upon the Company for personal hearing on 15.4.94. The case of the Corporation is that nobody turned up on behalf of the Company on that day. Finally under S. 29 of the Gujarat State Financial Corporations Act, 1951 a notice was issued to the Company on 9.5.94 calling upon it to pay the outstanding dues and again calling upon it to appear for personal hearing on 18.5.94. On 1.10.94 eleven post dated cheques amounting to Rs. 19,96,000/were given by the Company to the Corporation with an undertaking that all of them shall be honoured and if not, Corporation would be at liberty to take appropriate action. The Corporation has come with the case that few of the cheques only were honoured but most of them were dishonoured. This is the factual position as has been given out by the GSFC as it happened upto the year 1994.
3. The purchaser Company then filed Regular Civil Suit No. 41 of 1995 before the Civil Judge (J.D.), Pardi on 8.3.95 and an order of status quo was passed. This order granting status quo was vacated by the Civil Judge (J.D.) at Pardi on 29.9.95 and the Company's Application for temporary injunction was rejected. The trial court also observed while rejecting the Application for temporary injunction that even after the expiry of a period of about six months from the date of filing of the Suit, the plaintiff had failed to pay the outstanding dues and as the payments have not been made, the GSFC would be at liberty to take proceedings for recovery of the amount. On 7.10.95 the GSFC took over possession of the Unit in question and, thereafter, on 13.10.95 the advertisement was issued in the news papers advertising the sale of the said Unit. This notice inviting tender dated 13.10.95 required the submission of the tenders on or before 9.11.95 and the tenders were to be opened on 10.11.95. Immediately after the issue of the aforesaid notice inviting tenders the Company filed yet another Regular Civil Suit No. 150 of 1995 seeking to restrain the Corporation from selling the Unit in question and for direction to the Corporation to hand over the possession of the Unit to the plaintiff. Before any order could be passed in this Civil Suit No. 150 of 1995, the Company filed Civil Misc. Appeal No. 96 of 1995 before the District Court, Navsari on 26.10.95 challenging the order dated 29.9.95 whereby the ex parte ad interim order granted on 8.3.95 had been vacated and the application for temporary injunction had been rejected.
Dt:2.9.98 The Application, which had been moved for injunction in Civil Suit No. 150 of 1995 was rejected by the Civil Judge (J.D.), Pardi on 4.11.95 with the observation that though the petitioner -plaintiff had shown willingness to pay the amount, the amount had not been paid even after the expiry of a period of more than six months. On 6.11.95 the Civil Misc. Appeal No. 96 of 1995 moved against the order dated 29.9.95 passed in the earlier Suit was dismissed by the District Court, Navsari and on the very same date i.e. 6.11.95 the Special Civil Application was filed by the Company in this Court praying for a writ of mandamus for quashing and setting aside the advertisement dated 13.10.95 with regard to the sale of the Unit in question and for which purpose the tenders were invited. A writ , order or direction was also sought against the GSFC for handing over the possession of the properties in question and the prayer was also made for stay against the advertisement. On 7.11.95 notice was issued in this Special Civil Application filed by the Company and the same was made returnable for the date 30.11.95 and while issuing notice ad interim relief was also granted restraining the GSFC from auctioning the property in question on the condition that the original petitioner - Company shall deposit Rs. 10 lacs on 7.11.95 itself through an Account Payee cheque to the GSFC and post dated cheque for a sum of Rs. 15 lacs bearing date 24.11.95 shall also be handed over to the counsel for the GSFC and on a further condition that an undertaking of the Chairman - cum Managing Director of the Company be filed to the effect that the cheques, which were being handed over to the counsel for the GSFC, will be duly honoured and further that the Company is having an amount of more than Rs. 10 lacs in the account from which the cheque of Rs. 10 lacs was drawn and handed over to the counsel for the GSFC. This ad interim relief was to operate till the next date i.e. 30.11.95. On 7.11.95 on behalf of the Company an undertaking was field by Mr. Akhani claiming himself to be the Chairman and Managing Director of the Company to the effect that there is an amount of Rs. 10 lacs lying in the Bank account with Federal Bank Ltd., Bombay and that both the cheques i.e. the cheque dated 7.11.95 as well as the cheque dated 24.11.95 shall be honoured on being deposited on the date of the cheque. According to GSFC said Shri Akhani visited Bombay Office on 13.11.95 and had stated that there was no full balance of Rs. 10 lacs with the Bank and hence the cheques should be deposited after three to four days. He again visited on 16.11.95 and requested to deposit the cheques on 18.11.95 and upon assurance that the cheque dated 24.11.95 for Rs. 15 lacs will be honoured on that day, the GSFC waited for two more days and deposited the cheque in the Bank on 18.11.95 and an amount of Rs. 10 lacs pertaining to the cheque dated 7.11.95 was realised on 20.11.95. So far as the cheque dated 24.11.95 is concerned, when it was presented to the Bank, the same was returned by the Bank with the endorsement "full cover not received, you may present again tomorrow" and thus this cheque was not honored. These happenings after 13.11.95, as aforesaid, were recorded by the Manager, GSFC in his letter dated 29.11.95 sent to the Deputy Manager (Law) GSFC. It appears that the ad interim order, which was granted by the Court on 7.11.95 till the returnable date of 30.11.95, was continued upto 4.12.95 and while the matter was adjourned on 4.12.95, as recorded on the back of the order dated 7.11.95, the matter was simply made to stand over to 6.12.95 without continuing the ad interim order. The contents of this order dated 7.11.95 are reproduced as under:-
"Notice in each of these petitions returnable on 30.11.1995. Ad interim relief restraining the respondent Corporation from auctioning the properties in question of these five petitions or in any other manner alienating them is granted on the condition that the petitioner will deposit Rs. 10 lakhs (Rupees ten lakhs) today by handing over account payee cheque of that amount to the learned counsel who appears for the respondent Corporation and a post dated cheque of 24.11.1995 for a sum of Rs. 15 lakhs (Rupees fifteen lakhs) also to be handed over to the learned counsel for the respondent Corporation who appears in these petitions on caveat and on a further condition that the petitioner will file today an undertaking in each of these petitions of Mr. P.A. AKHANI, Chairman and Managing Director of the petitioner who is present in court to the effect that the cheques which are being handed over to the learned counsel for the respondent will be duly honoured and that as on today the petitioner is having an amount of more than Rs. 10 lakhs (Rupees ten lakhs) in the account from which the cheque of Rs. 10 lakhs is drawn and handed over to the counsel for the respondent Corporation. The ad interim relief granted as above will operate only if the undertaking is filed and the aforesaid two cheques are handed over to the learned counsel for the respondent Corporation today. The ad interim relief will operate until the next date of hearing. Mr. D.G. Chauhan, learned counsel for the respondent waives service of notice in each of these petitions. Direct service is permitted. D.S.today."
Mr. Akhani has submitted that true it is that the cheque dated 24.11.95 was not honoured by the Bank on the date when it was presented but on 5.12.95 he had come with a Demand Draft for the same amount of Rs. 15 lacs and this Demand Draft for a sum of Rs. 15 lacs dated 5.12.95 was presented before the authorities of the GSFC on 6.12.95 but the authorities of the GSFC, including the Law Officer, the General Manager and the Managing Director refused to accept the same. According to Mr. Akhani he had offered this Draft alongwith a covering letter dated 6.12.95 stating therein that the ad interim order dated 7.11.95 was continuing and that the Unit in question may not be sold out. In answer to this, it has been submitted on behalf of the GSFC that in fact the stay order was not continued beyond 4.12.95, the mention made by Mr. Akhani was factually incorrect and on 6.12.95 the authorities of the GSFC were not obliged to accept that Demand Draft in lieu of the dishonoured cheque dated 24.11.95 because advertisement had already been issued and according to this advertisement, the tenders, which had been invited on 13.10.95, were to be opened on 10.11.95. In such a situation, the Demand Draft was not accepted by the authorities of the GSFC so as to stay the opening of the tenders in pursuance of the advertisement dated 13.10,95. In this regard, a further grievance has been raised by Mr. Akhani that tenders were not actually opened on the due date i.e. 10.11.95 but the same were done on a later date i.e. on 16.12.95 and that too at Ahmedabad instead of Valsad. On this aspect of the matter it has been explained by the GSFC that in fact the notice inviting tenders were issued for various Units including the five Units which are concerned in the present cases. It has been further explained that there was a separate notice inviting tenders with regard to Rupani Dye Chem Industries, Bonanza Pharmaceuticals Ltd. and Bonanza Drugs and Chemicals Ltd. for which tenders were to be opened on 8.11.95 at Jaldarshan Building, First Floor, Opp. Natraj Cinema, Ashram Road, Ahmedabad as per the advertisement. It has been submitted that in this notice inviting tenders names of Rupani Dye Chem Industries, Bonanza Pharmaceuticals Ltd. & Bonanza Drugs and Chemicals Ltd. had been included. It has been further explained that another notice inviting tenders had been issued on 13.10.95 with regard to several industrial units including Bonanza Drugs and Chemicals Ltd. (Indo German Laboratories) at Item No. 9 and Bonanza Drgus and Chemicals Ltd. (Kothari Pharmaceuticals and Chemicals) at Item No. 10 and according to this notice inviting tenders, the tenders were to be opened on 10.11.95 at GSFC, Valsad Regional Office. While mentioning the names of the concerned Units, the location of such unit had also been clearly mentioned in both the notices inviting tenders i.e. dated 9.10.95 and 13.10.95. It has been further explained that since three tenders under notice inviting tenders dated 9.10.95 were to be opened at the office of the GSFC at Ashram Road, Ahmedabad on 8.11.95 and in terms of the notice inviting tenders dated 13.10.95 with regard to the Units concerned in this notice inviting tenders, were to be opened at Valsad on 10.11.95, the GSFC had taken a decision to open the tenders under both the notice inviting tenders i.e. dated 9.10.95 and 13.10.95 at a common place on a common date and, therefore, the letters had been sent to the tenderers that all the tenders will be opened at Ahmedabad Regional Office of the GSFC at Ashram Road on 16.12.95 and they may remain present there at the scheduled time.
4. The tenders were actually opened on 16.12.95 and after negotiation the bids of the highest bidders were accepted and the same were later on acted upon and given effect to in favour of the respective parties in due course of time and the agreements were entered between the GSFC and such respective parties.
5. On 16.9.96 an amendment was sought so as to challenge the sales, which had been effected as aforesaid and the said amendment was allowed, the petition was amended accordingly. On 24.12.96 an order was passed by the Court (Coram: R.K. Abichandani, J). In this order dt. 24.12.96 while referring to his earlier order dated 7.11.95 and the details stated therein the submission of the GSFC was noted that three of the five Units had been sold out in December 1995 and the machinery of the 4th Unit was sold out on 16.7.96 and a total amount of Rs. 77,96,777/- had been realised as the sale price, which will be credited to the respective accounts of the petitioner - Company. Whereas the two Units had yet not been sold out, the Court noted this fact as was submitted on behalf of the original petitioner Company so as to make an interim arrangment in respect of these two Units, which had not been sold out. It was further noted by the Court in the order dt.24.12.96 that the petitioner Company had already paid the sum of Rs. 10 lacs as was directed by the Court on 7.11.95 and that a large amount as aforesaid had also been realised from the three units and the machinery of the fourth unit by the GSFC although those transactions are subject to the outcome of these petitions and other litigations and that the petitioner Company was prepared to pay a further amount even at this stage (when the order was passed on 24.12.96) as two Banker's Cheques, one of Rs. 10 lacs and the another of Rs. 4.50 lacs; in all a sum of Rs. 14.50 lacs, which were handed over to the counsel for the GSFC on the said date i.e. 24.12.96; the learned single Judge, who passed the order dated 24.12.96, therefore, considered that the petitioner Company has shown some bonafide and that having regard to the facts and circumstances it will be proper to direct the Corporation to hand over the said Units i.e. one Unit alongwith machinery and the other Unit consisting of land and building (where only the machinery is said to have been auctioned) which units are not yet auctioned, to the petitioner -Company represented by Mr. P.A. Akhani as its Chairman and Managing Director and that he will take the possession of these two Units. This was to be done within two days after the amount of Rs. 14.50 lacs is credited to the Account of the GSFC. All these transactions were made subject to the outcome of the petitions and other litigations and, therefore, it was ordered that the purchasers will not encumber or transfer any of the properties of the petitioners, which had been purchased by them during the pendency of these petitions. Thus by way of interim arrangement the Corporation was directed to hand over the possession of the aforesaid two Units to the petitioner Company through its Chairman cum - Managing Director Mr. P.A. Akhani subject to the realisation of the amount of Rs. 14.50 lacs. The order dt.24.12.96 (Coram: R.K. Abichandani, J) is reproduced as under:-
"ORAL ORDER These matters were listed today for final hearing, pursuant to the directions issued by the Hon'ble the Chief Justice on 12.12.1996 in view of the fact that the other Court where the matters were earlier listed was busy with other petitions and was not able to take up these matters for hearing. Today when the petitions are called out for hearing, the learned Counsel for the respondent Corporation submitted that a further affidavit has been filed by the petitioners which is required to be considered by the Corporation and therefore, it would not be possible to take up the final hearing till the reopening after the winter vacation. Mr. P.A. Akhani who is Chairman and Managing Director of the petitioner companies, represents each company and has made submissions as party-in-person. It appears that earlier by order dated 7.11.1995, ad-interim relief was granted against the respondent Corporation restraining it from auctioning the property in question in these five petitions or in any other manner alienating them, on a condition that the petitioner will deposit Rs. 10,00,000/- on that day i.e. 7.11.1995 by an Account Payee Cheque, and give a post dated cheque for a sum of Rs. 15 lacs. An undertaking was also required to be filed by the said Chairman and Managing Director. It appears that the amount of Rs. 10 lacs was paid, but the cheque of Rs. 15 lacs was not honoured. The learned Counsel for the Corporation submits that thereafter, three of the five units have been auctioned on 12.12.1995, 26.12.1995 and 16.12.1995 and machinery of the fourth unit was sold on 16.7.1996 and a total amount of Rs. 77,96,777/- has been realised from these auctions as sale price, which will be credited to the respective accounts of the petitioneRs. The learned Counsel for the Corporation submits that all these facts are to be placed on record by filing an affidavit on behalf of the Corporation, which will be done before the next date of hearing.
The learned Counsel and the party-in-person have submitted as regards an interim arrangement in respect of the two units which are not yet auctioned. The petitioners have already paid Rs. 10 lacs. A large amount has been realised by the auctions of three units and machinery of the fourth unit by the Corporation. It is stated on behalf of the Corporation that those transactions are subject to the outcome of these petitions and other litigations. The petitioners are prepared to pay a further amount even today and two Bankers' Cheques, one of Rs. 10,00,000/- and the another of Rs. 4,50,000/- - i.e. in all Rs. 14,50,000/- have been handed over today to the learned Counsel for the respondent Corporation. Thus, the petitioners have shown some bonafides and having regard to the facts and circumstances of the case, it would be proper to direct the respondent Corporation to hand over the said two units, i.e. one unit alongwith machinery and the other unit consisting of land and building (where the machinery is said to have been auctioned), which units are not yet auctioned, to the petitioners on whose behalf the Chairman and Managing Director who is appearing as party in person, will take possession. This will be done within two days after the said amount of Rs. 14,50,000/is credited to the account of the Corporation.
The transactions which have taken place in favour of the respondents auction purchasers who are represented by the learned Counsel Mr. R.S. Sanjanwalla, are all subject to the outcome of these petitions and other litigations. Therefore, the auction purchasers will not encumber or transfer any of the properties of the petitioners which have been purchased in the auctions by them, during the pendency of these petitions.
It is therefore directed by way of interim arrangement that the respondent Corporation will hand over the possession of the aforesaid two units to the petitioners through their Chairman and Managing Director Mr. P.A Akhani, within two days after the amount of Rs. 14,50,000/- is realised by the Corporation. The said property will remain subject to the charge of the dues of the Corporation and the petitioners, their Chairman and Managing Director and other Directors will not encumber or dispose of these properties without the permission of the Court. The respondents who have purchased the properties of the petitioners of three other units and the machinery of the fourth unit, will not in any manner encumber, transfer or dispose of the properties so purchased during the pendency of these petitions without the permission of the Court. This will also be without prejudice to the right of the GSFC to take action in respect of the auction transactions, if payments are not made by the auction purchaser. This arrangement will be without prejudice to the dues of the Corporation which may be recoverable from the petitioneRs. The main petitions are ordered to be listed for final hearing on 28th January, 1997."
At this stage, that is after the passing of the order dt.24.12.96 in pursuance of which the original petitioner was given two unsold Units, the Company unconditionally withdrawn all the Civil Suits being Nos. 41, 43, 46, 49 and 147/95 to 151/95 on 17.3.1997.
This interim arrangement, as was ordered by the Court on 24.12.96 during the pendency of the Special Civil Applications, has continued through-out during the pendency of the petition and it continues even today during the pendency of these Letters Patent Appeals inasmuch as both these units are with the original petitioner - Company. This order was passed by the Court because a grievance was raised that after the pruchase, the purchasing parties are likely to encumber or transfer the properties. The purchasing parties allegations are that between the date of purchase and the amendment challenging the sale, they had renovated the factories and spent huge amount for further construction and renovation, purchased new machinery and that they had also made payment to the notified area authorities towards GIDC water dues, towards GIDC drainage fees, audit fees, GEB dues, transfer fees, new electric fitting, new power connection, etc. and further that they have some of the bills supporting the averments that expenses had been incurred and they had acted to their prejudice. To explain the delay in filing the amendment application, challenging the sale, the case of the original petitioner Company is that it did not know the names of the new purchaseRs. Thereafter, on 9.7.97 the Court (Coram :K.R. Vyas, J) passed an order directing the petitioner Company to make a detailed representation to Joint General Manager for settlement of accounts and also directed the Joint General Manager to give audience to the petitioner Company and its Chartered Accountant and to give benefit to the petitioner - Company in case he finds any substance in the say of the petitioner -Company and in the event of not agreeing with the view point of the petitioner - Company, he may record his dissenting findings with reasons supported by material and to submit his report before the Court. On 6.8.97 the report was submitted by the General Manager (Fin.) alongwith the statement of accounts, loan ledger sheet, etc.
6. The matter was, thereafter, kept for final hearing by the learned single Judge (Coram: D.G. Karia, J). The copy of the judgment shows that the judgment was dictated on 12.11.97 to 15.11.97 and on 17.11.97 and on 18.11.97. The learned single Judge has quashed and set aside the impugned actions of the GSFC in respect of taking over possession/management of the Industrial Units and a writ has been issued staying the transfer of the Industrial Units in question. The restoration of the possession of the industrial units in question has also been ordered in favour of the original petitioner company and a further order was passed for special cost to be paid to the petitioner Company to the tune of Rs. 2 lacs in each of the petitions making all respondents jointly and severally liable for said cost. The GSFC has been further directed to give proper, perfect and correct accounts in respect of each of the Industrial Unit to the petitioner Company within a reasonable time and an undertaking of the petitioner Company has been recorded to pay the outstanding dues on taking of such accounts by way of installments, as may be determined by the GSFC including the subsidy amount, if payable, under the Rules. The petitioner Company was also permitted to take over possession with the help of the police in accordance with law.
7. We have given the aforesaid facts by way of narration of case in general, but it appears from the judgment and the record of these cases that in fact the dispute between the parties was about 5 Units as under:-
(1) First Unit was M/s. Kothari Pharmaceuticals and Chemicals Pvt. Ltd. in respect of which the agreement was executed on 18.3.92 for a sum of Rs. 25 lacs, which is the subject matter of Special Civil Application No. 9327 of 1995 and Letters Patent Appeal No. 1499 of 1997.
(2) The second Unit is M/s. Indo German Laboratories for which the agreement was entered into on 31.3.92 for a price of Rs. 8.25 lacs, which is the subject matter of Special Civil Application No. 9328 of 1995 and Letters Patent Appeal No. 1503 of 1997.
(3) The third Unit is M/s. Lenec Pharmaceuticals Pvt. Ltd. for which the agreement was entered into on 31.3.92 for a sum of Rs. 31.25 lacs which is the subject matter of Special Civil Application No. 9330 of 1995 and Letters Patent Appeal No. 1504 of 1997.
(4) The fourth Unit is M/s. Mangalsons Capsules Pvt. Ltd. for which the agreement was entered into on 4.6.91 for a sum of Rs. 48 lacs and which is the subject matter of Special Civil Application No. 9329 of 1995 and Letters Patent Appeal No. 1502 of 1997.
(5) The fifth Unit is M/s. Rupani Dye Chem Industries Pvt. Ltd. which had been directly purchased by the original petitioner -Company in consultation with the GSFC with all assets and liabilities and for a sum of Rs. 37.55 Lacs, which is the subject matter of Special Civil Application No. 9331 of 1995 and Letters Patent Appeal No. 1512 of 1997.
Aggrieved from the aforesaid judgment and order dated 18.11.97, the present Letters Patent Appeals have been filed by the aggrieved parties i.e. GSFC and such other parties, which had purchased these industrial Units.
8. The parties are at serious dispute with regard to the accounts. According to the original petitioner Company represented through Mr. P.A. Akhani their dues are only to the extent of 9.88 lacs, whereas on behalf of the GSFC it has been pointed out that there are dues to the tune of Rs. 1,49,63,028/- as on 1.11.95. Even if the amount of RS. 24.50 lacs deposited by the original petitioner Company during the pendency of the Special Civil Applications is credited in favour of the Company and debited out of the dues of the petitioner, as pointed out by the Corporation,. the outstanding amount against the original petitioner Company shall still be in excess of Rs. 1 crore and 23 lacs. It may also be pointed out that, as has been mentioned in the earlier part of the order, during the pendency of the Special Civil Applications, when the order was passed on 9.7.97 (Coram: K.R.Vyas, J), a report was submitted by the General Manager (Fin.) of the GSFC on 6.8.97 and even as per this report dated 6.8.97, which was prepared after considering the representation dated 17.7.97 made by the original petitioner - Company sent through fax and the copy of the same presented in person on 19.7.97, the dues as per the report after calculating the amount paid by the original petitioner -Company against the interest, penalty and other expenses as on 1.11.95 comes out to be 1,47,63,028/-. In this report, it has also been noted that the original petitioner had paid Rs. 24.50 lacs pursuant to the directions dated 7.11.95 and 24.12.96 passed by the Court and that even after crediting this amount, the outstanding amount as on 1.11.95 is Rs. 1,23,13,028/-. Assertions, which have been made by the original petitioner - Company, that it had made the total payment of Rs. 1,09,75,331/- as per the petitioner's Annexure 'D' are found to be incorrect and as per the books of accounts of the GSFC it had paid only Rs. 99,75,331/- as on 1.11.95 including 30% down payment. In this report it has also been noted that the party had shown Rs. 10 lacs as paid to the GSFC between January to May 1993, but as per the accounts of the GSFC no such amount is credited or paid to the Corporation. Even during the course of hearing of these Appeals, we called upon Mr. Akhani to produce any receipt or any document or any other contemporaneous or any other piece of evidence to show that this amount of Rs. 10 lacs was received by GSFC or not, but he failed to produce any such evidence with regard to this sum of Rs. 10 lacs and it is not possible to say that this amount of Rs. 10 lacs had been paid to the Corporation and yet remained unaccounted for in the ledgers of the Corporation.
Dt:3.9.98
9. As per the Corporation, the total amount outstanding as on 1.11.95 has been given, which includes the interest at the rate of 19.5%. However, the break-up of these total outstanding amount against each of the Units as per the Corporation is as under:-
(1) M/s. Kothari Pharmaceuticals Pvt. Ltd. Rs. 25,75,955/-
(2) M/s. Indo German Laboratories Pvt. Ltd. Rs. 4,54,233/-
(3) M/s. Mangalsons Capsules (Bonanza) Rs. 35,94,939/-
(4) M/s. Lenec Pharmaceuticals (Bonanza Drugs & Pharmaceuticals) Rs. 30,83,546/-
(5) M/s. Rupani Dye Chem Industries Pvt.Ltd. Rs. 50,54,355/-
Mr. V.B. Patel appearing on behalf of the GSFC has submitted that the outstanding amount has been worked out on the basis of the record of the GSFC maintained in the normal course of business. He has also placed reliance on the Schedules annexed with the reply, loan ledger sheets, Memorandum Sheet and the statement of installments, interest, penalty and other charges due, paid and default such as document B/W (Schedule) Loan ledger sheet (page 513/514/515, Z/1 - Z/2 etc) in Special Civil Application No. 9327 of 1995 and documents of the similar nature in other petitions. Thus, so far as the dues are concerned, Mr. Patel has relied upon the record of the GSFC and its ledgers etc. and has submitted with regard to S. 44 of the State Financial Corporations Act, 1951 that the Financial Corporation shall be deemed to be a Bank for the purposes of the Bankers' Books Evidence Act,1891 (Act 18 of 1891). He has also placed reliance on AIR 1970 SC 161 (Meghraj v. Bayabai). In this case the Supreme Court after considering the decisions of the Privy Council in the case of V.A. Row v. P.A. Row, reported in AIR 1922 PC 233, referred to the observations of the Privy Council to the effect that upon taking an account of principal and interest due, the ordinary rule with regard to the payments by the debtor unappropriated either to principal or interest is that they are first to be applied to the discharge of interest. Following observations of the Privy Council were quoted:
"There is a debt due that carried interest. There are moneys that are received without a definite appropriation on the one side or on the other, and the rule which is well established in ordinary cases is that in those circumstances the money is first applied in payment of interest and then when that is satisfied in payment of the capital. That rule is referred to by Rigby, L.J., in the case of Parr's Banking Co. v. Yates (1898(2) QB 460) in these words: "The defendant's counsel relied on the old rule that does, no doubt, apply to many cases, namely, that, where both principal and interest are due, the sums paid on account must be applied first to interest. That rule, where it is applicable, is only common justice. To apply the sums paid to principal where interest has accrued upon the debt, and is not paid, would be depriving the creditor of the benefit to which he is entitled under his contract."
The Supreme Court has then observed in Para 6 that the normal rule is that in the case of a debt due with interest any payment made by the debtor is in the first instance to be applied towards satisfaction of interest and thereafter to the principal. Therefore, it is clear that if any payment is made, the first charge has to be against the interest and the remaining amount will be adjusted against the principal amount and it appears that the GSFC has calculated the dues on application of the principle, as aforesaid. Mr. Akhani on the other hand has submitted that the figures given by him are based on the balance sheet prepared by the Chartered Accountant and his Company is a Public Limited Company. While making reference to AIR 1994 Allahabad 123 (Bharat Explosives Ltd. v. The Pradeshiya Industrial & Investment Corporation of U.P.Ltd.) he has submitted that the petitioner Company is a Public Limited Company and in case of Public Limited Companies, balance sheet prepared by Chartered Accountant has a legal evidentiary value. But we find that no such proposition of law has been laid down in this judgment. As against this in AIR 1960 SC 1006 (Petlad Turkey R.D. Works v. Workers' Union) it has been laid down by the Supreme Court in no uncertain terms that in many cases the Companies may feel inclined to make incorrect statements in the balance sheets for ulterior purposes. While that is no reason to suspect every statement made in a balance sheet, the balance sheet does not by itself prove any fact mentioned therein and the law requires that such an important fact as the utilisation of a portion of the reserve as working capital has to be proved by evidence given on affidavit or otherwise and after giving an opportunity to the opposite party to contest the correctness of such evidence by cross-examination. Now having considered the rival submissions on the question of accounts, deposits made by the petitioner - Company and the dues, as have been found by the Corporation, we find that as per the record in the form of documents B/W, ledgers, Memorandum sheets and Z/1 and Z/2 etc. all the deposits made by the petitioner Company have been duly credited and Mr. Akhani has not been able to point out that any deposit made by him has remained unaccounted for or has not been credited in his favour in the records of the GSFC. In such a situation, more particularly when Mr. Akhani himself admits that even according to his Accounts a sum of Rs. 9.88 lacs is due, it is not possible for this Court to enter into the exercise to find out the exact amounts due and this Court cannot enter into such disputed questions of facts and the vortex of accountancy so as to say that what is the exact amount which is due or as to whether only 9.88 lacs is due and, therefore, it is not possible for this court to come to a finding that the petitioner Company has not been a defaulter in the matter of making payments in terms of the agreements which had been entered into with the GSFC by it. In this regard, a Judgment of the Patna High Court in the case of M/s. Koshi Refinery v. Union of India, reported in AIR 1995 Patna 129, cited by Mr. Patel may be relevant and we may quote from para 6 of this judgment as under:-
"This court is not in a position to go into the vortex of accountancy and cannot decide whether the said amount stated in the couter-affidavit of respondent Corporation is due from the writ petitioner or not. In the absence of necessary expertise, the court should not go into those questions."
10. This brings us to other submissions based on the provisions of S. 29 of the State Financial Corporations ACt,1951. S. 29 is reproduced as under:-
"29. Rights of Financial Corporation in case of default.-
(1) Where any industrial concern, which is under a liability to the Financial Corporation under an agreement, makes any default in repayment of any loan or advance or any instalment thereof or in meeting its obligations in relation to any guarantee given by the Corporation or otherwise fails to comply with the terms of its agreement with the Financial Corporation, the Financial Corporation shall have the right to take over the management or possession or both of the industrial concern, as the right to transfer by way of lease or sale and realise the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation.
(2) Any transfer of property made by the Financial Corporation, in exercise of its powers under sub-section (1), shall vest in the transferee all rights in or to the property transferred as if the transfer had been made by the owner of the property.
(3) The Financial Corporation shall have the same rights and powers with respect to goods manufactured or produced wholly or partly from goods forming part of the security held by it as it had with respect to the original goods.
(4) Where any action has been taken against an industrial concern under the provisions of sub-section (1), all costs, charge and expenses which in the opinion of the Financial Corporation have been properly incurred by it as incidental thereto shall be recoverable from the industrial concern and the money which is received by it shall, in the absence of any contract to the contrary, be held by it in trust to be applied firstly, in payment of such costs, charges and expenses and, secondly, in discharge of the debt due to the Financial Corporation, and the residue of the money so received shall be paid to the person entitled thereto.
(5) Where the Financial Corporation has taken any action against an industrial concern under the provisions of sub-section (1), the Financial Corporation shall be deemed to be the owner of such concern, for the purposes of suits by or against the concern, and shall sue and be sued in the name of the concern."
Mr. Akhani appearing for the original petitioner - Company has submitted that the petitioner Company had not taken any loan from the Financial Corporation and the petitioner Company's case not being a case of repayment of any loan or advance or any instalment thereof, there was no occasion for the Financial Corporation to take resort to the provisions of S. 29 against the petitioner Company. However, we find that the language of S. 29 is not restricted only to the cases of the loan or advance or any instalment thereof. It also covers the cases when a party fails to comply with the terms of the agreement with the Corporation. In the instant case the agreement had been entered into by the petitioner Company with the Financial Corporation and the payment should be made in terms of this agreement. No doubt, certain payments have been made by the petitioner Company as have been given out on behalf of the petitioner Company, but on the basis of those payments it cannot be said that the payment has been made of the entire due amount as per the time schedule. Neither the time schedule with regard to the instalments has been adhered to nor the terms of the agreement have been complied with, with reference to the amounts which are due and, therefore, merely because it is not a case of the repayment of any loan or advance, the Corporation could not be precluded from taking resort to the provisions of S. 29 of the Act.
11. S. 31 of the Act provides special provisions for enforcement of claims by Financial Corporation and this S. 31 is without prejudice to the provisions of S. 29 of this Act and, therefore, it cannot be said that the Corporation was obliged to take resort to the provisions of S. 31 and that it could not take resort to the provisions of S. 29 of the Act. In AIR 1985 Orissa 153 ( M/s. Kharavela Industries Pvt. Ltd. v. Orissa State Financial Corporation) we find that in the end of para 8 of this judgment the Court had come to the conclusion after consideration of the materials on record that admittedly the authorities did not take into consideration the payments made after 6.1.1984 and also the adjustment made by the petitioner in respect of the subsidy grant received from the Corporation. Having found this admitted position, the Court also noted that on 28.1.1984 it was published in the local news paper that the industry in question would be sold on 1.2.1984 and that the tender papers should be submitted before 5.00 P.M. on 31.1.1984. Besides noticing that the authorities of the Corporation acted in undue haste because the notice for sale was published on 28.1.1984 and the tenders were to be received within three days i.e. by 31.1.1984 and the same were to be opened on 1.2.84 and the sale was finalised on the same day; it was also found that in the body of the notice nothing was indicated from which it could be inferred that the industry in question was going to be sold out on 1.2.1984. It was in this background that the sale was vitiated, but no where it has been laid down as a proposition of law that the Corporation could not have taken resort to S. 29 of the Act and, therefore, on that aspect of the matter this authority is of no help to the original petitioner - Company as that case was decided on its own facts by the Orissa High Court.
12. On this aspect of the matter we have the basic case of Alka Ceramics v. G.S.F.C., reported in 1990(1) GLR 628 on which considerable reliance has been placed by Mr. Patel while assailing the order passed by the learned single Judge. In this case, the Division Bench of our own High Court considered the averments made on behalf of the Financial Corporation that the Corporation is a public authority established for the purpose of industrial growth with no profit motive and it seeks to use its funds for helping industrial concerns to come up and recycles the recoveries and funds for the same purpose and any delay or impediment in the recovery would affect the working of the Corporation in helping the new industrial concerns to start and grow. It is with a view to promote quick credit for the purpose of industrial growth and for speedy recovery of the dues that special privileges have been conferred upon the Corporation. S. 29 of the Act is not merely a remedy, but a right and an extension of the principle of S. 69 of the Transfer of Property Act with a view to help industrial growth of medium and small scale industries. S. 69 of the Transfer of Property Act enables the mortgagee if it is a Government, or even a private mortgagee in a Metropolitan City, to take direct action of taking possession and effecting sale without intervention of the Court and the validity of that provision has been upheld long back by Madras High Court. The same right is given to the statutory Corporation which has been specially created to advance loans to small and medium size industries and to recycle these funds for the said purpose. Even a notice is given before taking action under S. 29 of the Act so as to enable the party to explain, reply or comply with the demand and the principles of fair play and natural justice are complied with. If any party has a genuine and reasonable apprehension of any illegal act, it can always have remedies in law by a Civil Suit or writ petition in order that the acts and commissions on both the sides can be adjudged. The provisions in S. 29 are reasonable provision made in public interest and in the interest of the industrial growth. The say of the Corporation was that S. 29 is a right or privilege and S. 31 is a remedy to be availed of wherever felt necessary. S. 29 also provides sufficient guidelines. Even the preamble and the scheme of the Act and the statement of objects and reasons of the Act give guidelines. The industrial concern while taking the loan not only know, but also accept the legal liability and also expressly agree in the agreement also about this kind of consequence in case of default or breach of that agreement. In para 12 of this judgment, the Division Bench has observed that as far as the question of dues of the Corporation are concerned, the entries in the books are evidence of the dues in view of S. 44 of the Act which provides that, "The Financial Corporation shall be deemed to be a bank for the purpose of the Bankers Books Evidence Act,1891." and, therefore, the entries in the books of the Corporation are evidence of the outstanding dues and non-payment thereof by the party. Once such dues are duly ascertained, the only question is of its recovery or execution of the decree and exercising right of its secured creditor. The Court has also considered that under S. 58 of the Transfer of Property Act, the mortgagee has a right to sell the mortgaged property and S. 67 provides for right to foreclosure or sale of the mortgaged property. S. 69 provides for power of sale by the mortgagee without the intervention of the Court. With reference to S. 69 relating to the power of sale by the mortgagee without intervention of the Court, three principles have been laid down as under:
(a) where the mortgage is an English mortgage;
(b) where the mortgagee is the Government; and
(c) where mortgagee is in a Metropolitan city.
In the last two cases i.e. (b) and (c) the power of the sale without the intervention of the Court is required to be expressly conferred whereas S. 69(3) provides that when a sale has been made in professed exercise of such a power, the title of the purchaser shall not be impeachable on the ground that no case had arisen to authorise the sale or that due notice was not given or that the power was otherwise improperly or irregularly exercised, but any person damnified by an unauthorised, or improper or irregular exercise of the power shall have his remedy in damages against the person exercising the power. The Division Bench has also considered the judgment of Orissa High Court in the case of M/s. Kharavel Industries Pvt. Ltd. v. Orissa State Financial Corporation (Supra) with which we have already dealt with and the Division Bench of our own High Court had observed that the Orissa case is a direct case under S. 29 and it has been held in para 6 of Orissa judgment that the Corporation cannot be forced to take recourse to S. 31 and it is open to the Corporation to take recourse to S. 29 of the Act and S. 31 is expressly without prejudice to the provisions of S. 29. The Division Bench has also noticed that Orissa High Court had further come to the conclusion that reading of S. 29 of the Act does not exclude application of the principles of natural justice. But whether in a given case the said rules have been complied with or not, depends upon the facts and circumstances of the case. In the Orissa case the Financial Corporation had afforded sufficient opportunity to the industry inasmuch as the Corporation gave due notice to the industries as to the default position and further its decision to take over possession on failure of industry to pay the installments. It was held to be due compliance with the principles of natural justice. However, subsequently, the industry made some payments and the earlier order to take over possession was not given effect to and subsequently other order for taking possession of the industry without giving any notice was passed though in the meantime there had been some substantial payment by the industry and Orissa High Court held that the Corporation has failed in its duty to give reasonable notice to the industry, that the Corporation was going to take over the industrial concern and a minimum opportunity to the industrial concern to put forth its case before the Corporation ought to have been given. The earlier order did comply with the requirements of principles of natural justice but the subsequent order failed to give any opportunity whatsoever. In any case, the Division Bench has ultimately concluded and made it clear that merely because there is some subsequent payment, it would not nullify the earlier notice and action under S. 29 unless the payment is substantial i.e. about one third of the outstanding and there is a concrete and reasonable proposal and promise to pay the balance within a reasonable period. It has been held that if such substantial payment and proposal is made, the Corporation has to consider afresh whether to proceed under S. 29 after taking into account the reasonableness and reliability of the offer. It is, therefore, clear that no exception could be taken to the recourse taken to S. 29, which provision is in the nature of right with the Corporation, S. 31 being only a remedy and further that the notice issued by the Corporation may not ensure the Corporation to take the final action of selling of the properties in case a substantial payment is made after the notice and there is a promise to pay the balance. In the light of these principles laid down by the Division Bench, if the facts of the present case are examined, it is found that the relevant date was when the Corporation initiated the action. Further it was during the pendency of these cases and under the orders passed by this Court (Coram: R.K.Abichandani, J) that a payment of Rs. 10 lacs and further a payment of Rs. 14.50 lacs was made and in lieu thereof, two Units were given to the petitioner Company. So far as these two Units, which were given to the petitioner - Company, are concerned, the sum of Rs. 24.50 lacs was considered to be a substantial amount and the orders were passed accordingly. However, looking to the total amount, there was no requirement to give a notice afresh or a second notice in relation to the other three Units when it cannot be said in the facts of the present case that any substantial payment was made or that there was any concrete and convincing proposal and on these grounds the action taken by the Corporation under S. 29 was not open to be assailed.
13. Even if the case of the petitioner - Company is tested on the principle that in case the substantial payment is made, notice has to be given again, we find that as per the figures given out before us by Mr. Akhani himself the payments made in 1994 - 1995 till the date 1.11.95 before the Court's order dated 7.11.95 are as under:-
Year 1994 17.1.94 Rs.2 lacs
17.1.94 Rs.2 Lacs
17.1.94 Rs.1 lac
25.5.94 Rs.10 lacs (3+3+1+3)
2.9.94 Rs.1,20,000/-
11.11.94 Rs.8,10,000/-
Total Rs.24,10,000/-
Year 1995 9.2.95 Rs.2 lacs
30.3.95 Rs.2,27,000/-
Total Rs.4,27,000
Even if we consider certain payments made by the original petitioner - Company, as given out by him, on 21.5.94, 11.11.94 and 9.2.95 relating to the 5th Unit, which he had purchased directly, this amount comes out to be Rs. 7 lacs inasmuch as Rs. 3 lacs were paid on 21.5.94, Rs. 2 lacs were paid on 11.11.94 and Rs. 2 lacs were paid on 9.2.95. Thus the total cost of the five Units, which is paid after the issue of the notice by the GSFC and before the date 7.11.95, the total comes out to be Rs. 35,57,000/-. This amunt of Rs. 35,57,000/- cannot be said to be a substantial payment in view of the outstanding determined by the Corporation to the extent of Rs. 1 Crore and 47 Lacs, as has been stated herein above. Besides this, the payment alone cannot be the criterion. The conduct of the party in the matter of making payment, bonafides with regard to the honouring of the cheques in the past period and as to whether there is any feasible proposition or a real likelihood of further payment etc. are all relevant considerations, which weighed with the GSFC. In such matters the object of the Act is speedy recovery and also the utilisation of such amounts for the industrial growth and distribution to the other enterpreneuers and also for the purpose of meeting the requirements of the other financial institutions to which the Corporation itself has to repay. It, therefore, cannot be said that the Corporation did not take into consideration the relevant factors or the considerations which can be said to be germane for such matters and even if the figures given by the petitioner Company are accepted to be correct with regard to the deposits made by the petitioner - Company in the years 1994 and 1995 against all the Units after the issue of the first notice and before the proeprties were notified to be sold out, notice afresh could not be claimed as a matter of right and on that ground the sale in pursuance of the advertisement issued by the GSFC cannot be said to be illegal nor it can be said to have ben vitiated in so far as the three Units are concerned.
14. The argument is that the Corporation should have taken recourse to Gujarat Public Moneys (Recovery of Dues) Act, 1979. This is a general local law for the State of Gujarat for recoveries of the dues of public money. It is, therefore, not necessary for the GSFC to give up the special enactment relating to the Financial Corporations and to take resort to the general law and it is trite law that special enactment always prevails over general law. The GSFC was not under an obligation not to take recourse, which was available to it under S. 29 of the special enactment and to go for recovery before some authorities under the Gujarat Public Moneys (Recovery of Dues) Act, 1979 and, therefore, this argument cannot be sustained in the eye of law for the purpose of defending the impugned order.
15. In this regard we may also quote the following observations from the Division Bench Judgment in Alka Ceramics case (Supra) in the end of para 46:-
"The cases which have remained are of such industrial units which are unable to pay or do not want to pay and yet want to restrain the recovery. Naturally, the Court cannot help them against public interest and against the provisions of law."
16. It is the case of the petitioner - Company itself that the Units were working as profit making Units and in this context Mr. Patel has placed reliance on (1994) 5 SCC 566 (Maharashtra State Financial Corporation v. M/s. Suvarna Board Mills). The Supreme Court while dealing with the contention regarding natural justice has observed that it is well settled that natural justice cannot be placed in a straight-jacket; its rules are not embodied and they do vary from case to case and from one fact situation to another. All that has to be seen is that no adverse civil consequences are allowed to ensue before one is put on notice that the consequence would follow if he would not take care of the lapse, because of which the action as made known is contemplated. No particular form of notice is the demand of law. All will depend on facts and circumstances of the case. And in the facts of the present case, it cannot be said that the GSFC has not acted fairly inasmuch as the notice had been given, fax message had been sent and even though the cheques had been dishonoured, re-scheduling was also made to certain extent, but on account of the dishonouring of the cheques on more than one occasions, the GSFC did not find that the conduct of the petitioner -Company was inspiring any confidence. The petitioner - Company was not only given several opportunities and accommodated in the matter of re-payment even by re-scheduling, it did not even avail of the same although it was the case of a profit making Unit. Thus, it was a case of wilful default to delay the payment. The GSFC could not have, therefore, waited indefinitely beyond a reasonable time and it cannot be said that whatever payments had been made by the petitioner Company were so significant so as to nullify the earlier notice or the action initiated under S. 29 of the Act.
17. Notwithstanding the question of sufficiency of the opportunity, it was submitted that it was a case in which the Units of the original petitioner - Company had been sold out for inadequate price. In such matters when the dues were piling up and the tenders had been invited through a notice inviting tender, whatever offers came, out of those offers, the bids given by the highest offerer were accepted. In case of one of the Units i.e. Kothari Industries, according to the report of the Valuer, the value of the Unit was 23 lacs whereas it has been sold out for Rs. 28 lacs. In the case of Indo German as per the valuer it was Rs. 14,80,000/- but it was sold out for Rs. 9,11,000/-, which was the highest bid. In the case of Lenec Industries, as per the valuation report, it was Rs. 56,96,000/- but it was sold out for Rs. 38,10,111/to the highest bidder. Thus in case of two out of three units, it is of course true that they have been sold out for an amount short of the amount of approved value but for that it has been explained that there are many factors, which become relevant. The very fact that the properties were made a subject matter of litigation was an important factor, on account of which it could not have fetched the full price at which it was valued. Besides this, it has also been given out that the parties purchasing the same had made a down payment of the entire amount at which they were sold out and it has also been stated that the condition of slow market at a given point of time is also a relevant consideration. In any case, the sale of these three Units has fetched an amount of nearly Rs. 77 lacs, which has been realised by the GSFC against the dues of the petitioner -Company and keeping in view the price, which was given by the valuer and the other factors, to which reference has been made hereinabove, it cannot be said that they have been sold out at an inadequate price.
18. While assailing the order passed by the learned single Judge Mr. Patel has argued in particular before us with regard to the scope of Article 226 of the Constitution of India and has submitted that in such cases writ can be issued when there is a statutory violation on the part of the Corporation or when the Corporation has acted unfairly or unreasonably. His contention is that judicial review in the case of administrative action cannot be larger than in the case of quasi judicial action and this Court cannot substitute its judgment for the judgment of administrative authorities. It is only when the action of the administrative authority is so unfair or unreasonable that no reasonable person would have taken such course of action, that the writ jurisdiction can be exercised. It has also been argued that power of the High Court while reviewing the administrative action is not that of an appellate Court and the doctrine of fairness, evolved in administrative law, is not supposed to convert the writ Court into appellate authority over administrative authority. This principle has been clearly enunciated in (1993)2 SCC 299 (U.P. Financial Corporation v. Gem Cap (India) Pvt. Ltd.), (1996)5 SCC 65 (Karnataka State Financial Corporation v. Micro Cast Rubber & Allied Products (P) Ltd.) and (1995) 2 SCC 74 (Central Bank of India v. Shivam Udyog) in which it has been laid down that unless malafide is shown it is not open to interference by the High Court. Even otherwise, the jurisdiction of this Court under Article 226 is an equitable jurisdiction and through Article 226 no assistance can be given to those, who fail to re-pay their dues either in accordance with the time schedule or with regard to the amount and in this connection judgment reported in (1994) 2 SCC 647 (A.P. State Financial Corporation v. M/s. Gar Re-Rolling Mills and another) is also relevant.
19. Mr. Akhani has placed strong reliance on the case of Mahesh Chandra v. Regional Manager, U.P.F.C., reporteed in (1993) 2 SCC 279. In this case the Supreme Court gave following guidelines to be observed by the Corporation while exercising power under S. 29.
"Section 29 confers very wide power on the Corporation to ensure prompt payment by arming it with effective measures to realise the arreaRs. From notice to pay the arrears, it extends to taking over management and even possession with a right to transfer it by sale. Power under Section 29 requires the authority to act cautiously, honestly, fairly and reasonably. Default in payment of loan may attract Section 29. But that alone is insufficient either to assume possession or to sell the property. Neither should be resorted to unless it is imperative. Even though no rules appear to have been framed nor any guideline framed by the Corporation was placed, yet the basic philosophy enshrined in Section 24 has to be kapt in mind. Rationale of action and motive in exercise of it has to be judged in the light of it. Lack of reasonableness or even fairness at either of the two stages renders the take over and transfer invalid. The Corporation, therefore, should honour their committments of releasing entire loan timely except for very good reasons which should be intimated before hand to enable the unit holder to comply with shortcomings if any. In its absence of its completion, the proceedings for recovery under Section 29 may not be justified. Similarly various situations may arise which may hamper start of the unit - delay in electric supply or delayed delivery of machinery vital for the functioning of the unit. Such difficulties do require rescheduling of payment of instalment because, if the unit, for reasons beyond the control of unit holder, could not start, then how will the amount be repaid. Endeavour should be to adjust and accommodate as business considerations require the unit to function for benefit, both, of the general public and the Corporation. It is not mandatory, as a matter of law, to observe the process of taking over strictly. But if there is no option left and the unit is taken over then its transfer requires not only sincere effort but to act reasonably and fairly."
The grievance has been raised that these guidelines have not been followed and it has been submitted that in the instant case, the Corporation has not acted in a fair and reasonable manner. We find that in the case of Maheshchandra (Supra) the case of the appellant before Supreme Court was tested on the guideliens, as aforesaid, and it was left open to the appellant to pay the entire liability and have the hypotheca redeemed as per contract and that if it was not possible, the respondent shall release plot No. 220 to enable the appellant to do ploting alongwith plot Nos. 212 and 221 with the further order that the release shall be made within four weeks from the date of the receipt of the order or produced before the respondent and such release shall be subject to payment of the entire sale price to the loan account. The respondent - Corporation was also asked to grant six months' time from the date of release to pay the entire arrears outstanding towards the loan and that if he fails to do so, the Corporation is directed to sell the same in open auction, after giving wide publicity in the press and in the terms, as aforesaid, the Appeal was allowed. Mr. Akhani has submitted that his case is fully covered by the aforesaid authority and the principle, as laid down by the Supreme Court, in Mahesh Chandra's case (Supra) and he has also submitted that in fact, his case stands on a better footing than the case of Mahesh Chandra. It has been pointed out that the case of Mahesh Chandra was a case in which a loan had been sanctioned, a substantial part of the loan had been paid and he had deposited only one instalment and yet the properties, which had been sold out in the auction, were directed to be restored, time was also granted by the Supreme Court for making the payment of the outstanding dues. As against this Mr. Patel has cited A.P. State Financial Corporation's case (Supra). In para 9 of this judgment the Supreme Court has observed as under:-
"Analysis of Section 29 of the Act reveals that where any industrial concern which is under an obligation and a liability to the Corporation under an agreement makes a default in repayment of the loan or advance or any instalment thereof or otherwise commits breach of any of the terms of the agreement, the Corporation has the right to take over the management or possession or both of the defaulting industrial concern. It also has the right to transfer by way of lease or sale and realise the property pledged, mortgaged or hypothecated or assigned to the Corporation as security for the loan. Any transfer of property of the defaulter thereafter made by the Corporation shall vest in the transferee all rights in or to the property transferred by virtue of Section 29(2) of the Act. Vide Section 29(3) of the Act, the Corporation has the same rights with respect to the goods manufactured, or produced wholly or partly as it had in respect of the original goods forming part of the security. Section 29 of the Act, therefore, deals with not only the rights of the Corporation in cases of default by the industrial concern, but also provides for a remedy to take over the management of the defaulting industrial concern with or without possession as well as the right to transfer by way of lease or sale."
In this very judgment it has been then observed in para 18 that, " There is no equity in favour of a defaulting party which may justify interference by the courts in exercise of its equitable extraordinary jurisdiction under Article 226 of the Constitution of India to assist it in not repaying its debts. The aim of equity is to promote honesty and not to frustrate the legitimate rights of the Corporation which after advancing the loan takes steps to recover its dues from the defaulting party." It has been further held that a Court of equity while exercising its equitable jurisdiction under Article 226 of the Constitution must so act as to prevent perpetration of a legal fraud and the courts are obliged to do justice by promotion of good faith, as far as it lies within their power. The Corporation has to recover the loans and advances, so as to be able to give financial assistance to other industries and unless it recovers its dues, the money will not remain in circulation for long. It has been noticed by the Supreme Court in para 21 of the judgment that the facts are rather eloquent to show that the respondents did not have any intention of repayment of any part of the debt and their attitude was not different even before the Supreme Court as they were merely adopting delaying tactics. In (1995) 2 SCC 754 (U.P. Financial Corporation v. Naini Oxygen and Acetylene Gas Ltd.) while it was held that the Corporation's action was not open to interference unless mala fides are shown, the Supreme Court observed that the fact cannot be lost sight of that the Corporation is an independent autonomous statutory body having its own constitution and unless its action is mala fide, even a wrong decision taken 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 business like it may be, for the decision of the Corporation. Hence, whatever the wisdom (or the lack of it) of the conduct of the Corporation, the same cannot be assailed for making the Corporation liable. It has also been observed that the Company in that case before the Supreme Court had made persistent defaults in repayment of the loan instalments with the result that the recovery certificate had to be issued against it under S. 3 of the U.P. Public Moneys (Recovery of Dues) Act and that the non-discharge of the liabilities of the Company was on account of the fraudulent practices of the Management. What has been observed in the end of para 23 of this Judgment is that in matters commercial, the courts should not risk their judgments for the judgments of the bodies to whom that task is assigned and to grant any indulgence to the Company at this stage will be akin to flogging a dead horse. In (1995) 4 SCC 595 (Chairman and Managing Director, Sipcot, Madras v. Contomix Pvt.Ltd.) the principles have been laid down with regard to the procedure to be followed in the case of the mortgaged property of the defaulter industrial concern. In this case the procedure of inviting tenders were followed and the Supreme Court has clearly observed that the procedure was not faulty and the same was not contrary to the dictum of Mahesh Chandra's case (Supra) and that the instrumentality of the State may resort to inviting tenders followed by private negotiations. It has been clearly held in the end of para 12 that sale by auction is permissible and valid. The Supreme Court has also considered in the above case in the end of para 12 (1995) 4 SCC 595 (Supra - Para 19) that in Mahesh Chandra's case, the decisions of the Supreme Court in the cases of Sachidanand Pandey v. State of W.B. ((1987) 2 SCC 295) and Haji T.M. Hassan Rawther v. Kerala Financial Corporation ((1988) 1 SCC 166) have been referred, wherein it had been held that one of the modes of securing the public interest, when it is considered necessary to dispose of a property, is to sell the property by public auction or by inviting tendeRs. It has, therefore, been concluded that it can not be said that a sale by inviting tenders is ipso facto invalid. The validity of such a sale will have to be considered in the light of the facts and circumstances of the particular case. The aforesaid view has been expressed by the Supreme Court in this case after considering the guidelines given in Mahesh Chandra's case. In the case of Karnataka State Financial Corporation v. Micro Cast Rubber & Allied Products (P) Ltd. (Supra) the Suprme Court was concerned with the question of judicial review with regard to the action taken under S. 29 by the Financial Corporation in the matter of sale of the industrial unit by the Corporation in case of default. It has been observed in para 6 by the Supreme Court that the directions contained in para 22 of the judgment in Mahesh Chandra v. Regional Manager, U.P. Financial Corporation are in the nature of guidelines for the exercise of the power under S. 29 of the Act. The action of the State Financial Corporatioon is not liable to be interfered with, if it has acted broadly in consonance with these guidelines and the Supreme Court found that the guidelines 2,3 and 4 had been substantially complied with. Thus, the principle, which is discernible, is that if the Corporation acts in violation of any Statute or acts unreasonably, the Court's interference is called for and the directions issued in Mahesh Chandra's case (Supra) for observation by the Corproation while exercising the power under S. 29 are in the nature of guidelines, which had to be followed substantially and its action is not liable to judicial review and the Supreme Court in the facts of that case held that the directions had been substantially complied with by the Corporation and, therefore, the High Court was not found to be justified in interfering with the Corporation's decision to accept the offer of a particular purchaser of the Unit. In the case of Orissa State Financial Corporation v. Hotel Jogendra, reported in (1996) 5 SCC 357 while dealing with the scope of S. 29 and S. 30 of the Act, it has been held that persistent default committed by respondent and dilatory tactics adopted by protracting litigation and taking indulgence of court's directions amounted to abuse of process of Court and the Corporation was, therefore, entitled to take action under S. 29. The Court found it to be a case of abuse of process of the Court. In AIR 1994 Bombay 388 (Naivedhyam Ice-Creams Pvt. Ltd., Nagpur v. M.S.F.C., Bombay) the Division Bench of the Bombay High Court (At Nagpur) held that in absence of any concrete proposal for repayment given by borrower in spite of rescheduling of instalments by the Corporation, advertisements for sale of the Unit by Corporation after giving sufficient time of repayment to borrower was not arbitrary. In AIR 1994 Patna 114 (Hotel Babadham and others v. Bihar State Financial Corporation and others) the Division Bench of Patna High Court considered the exercise of power in cases of default in payment of loan and held that defaulter is disentitled from obtaining an equitable relief and the demand for another opportunity would be unjust. In 1997(1) GLH 504 (Flair Heals Pharmaceuticals v. Gujarat State Financial Corporation) after considering several cases, to which we have made reference hereinabove, including that of Mahesh Chandra's case (Supra) a single Bench of this Court has taken the view that when opportunities to make payments are not availed of and guidelines for taking action properly complied with, the Court cannot act as appellate authority and in such cases no interference is warranted by the Court. In AIR 1998 Punjab & Haryana 40 (Gee Kay Textiles Ltd. v. Haryana Industrial Development Corporation) it has been considered that there was a default in payment of Rs. 130.34 lacs by the petitioner industry, four cheques for Rs. 5 lacs each given by petitioner for repayment had been dishonored and consequent step taken by Corporation for taking possession of Unit under S. 29 was held to be not contrary to 'business principles' and hence not illegal.
After going through the principles laid down in the aforesaid cases and keeping in view the well considered judicial opinion based on the analysis of these cases, we have not been able to persuade ourselves with the contention of Mr. Akhani that his case is covered by the Supreme Court decision in Mahesh Chandra's case. In the case of Mahesh Chandra the conduct of the Corporation was found to be unreasonable but in the case before us conduct of the Company shows the lack of bonafides when it is established that number of cheques were dishonoured time and again and on the part of the Company there was a persistent default in the matter of payments as also the time Schedule. The Corporation could not have waited indefinitely. It was permissible for the Corporation to resort to the process of inviting tendeRs. Inviting tenders and public auction - either of the two is permissible under law. In our opinion, the guidelines required to be followed in accordance with Supreme Court's decision in Mahesh Chandra's case (Supra) have been substantially followed.
Dt:4.9.98
20. Mr. Akhani also submitted while contesting these Appeals that the Letters Patent Appeal Nos. 1471, 1472 and 1473 of 1997 had been filed on 18.11.97 itself without the copy of the judgment and even before the judgment was signed and, therefore, the Appeals were not maintainable. While referring to the provisions relating to the Appeals under Clause 15 of the Letters Patent and Rule 21 under Chapter XXVI of the Gujarat High Court Rules, 1993 and Order 21, it was submitted that the judgment of the learned single Judge had to be filed alongwith the Appeal. His contention is that in the instant case on the date when the aforesaid Appeals were preferred i.e. on 18.11.97 the Judgment had not even been signed and he has submitted that the Judgment was in fact signed on 25.11.97 and, therefore, there was no question of entertaining the Appeals on 18.11.97 for circulation on 19.11.97. Rule 81 of the High Court Rules requires the copy of the judgment to be filed, but it cannot be said that the filing of the copy of the Judgment cannot be dispensed with in a given case. He has also cited I.L.R. 1937(1) Calcutta 149 (Ganga Dhar Bagla v. Kanti Chandra Mukherji). The record shows that on 18.11.97 the Division Bench ordered for the circulation of these matters on filing an application for exemption for the copy of the order and thereupon the matter came up before the Division Bench on 19.11.97, on which date the Division Bench (Coram: C.K. Thakkar and A.R. Dave, JJ) after mentioning that the matters are placed in exceptional circumstances before the Bench and after recording the statement that the judgment of the learned single Judge was not ready and that the Judgement is very lengthy, entertained the Appeals. This order dated 19.11.97 also shows that Mr. Akhani was present before the Court on 19.11.97 and after hearing both the sides an order was passed for maintaining status quo as on that day i.e. 19.11.97. It is also clear tat the dictation of the judgment was complete on 18.11.97, judgment runs into several pages and, therefore, it could not have been signed on 18.11.97 itself.
21. The Division Bench while passing the order on 19.11.97 has passed a detailed order, which is self explanatory against all the objections, which were raised at that stage. Even if it is taken that any caveat application had been filed by Mr. Akhani on 18.11.97 itself, we find that whereas the order was passed on 19.11.97 after hearing him, nothing turns out on such hyper technical objection about the maintainability of the Letters Patent Appeals, more particularly when the High Court Rule 52 itself provides that the filing of the certified copies can be dispensed with and in this case the Court had entertained the Appeals even without the copy of the Judgment looking to the exigency of the matter and these objections in any case are now irrelevant and futile. Thereafter, the matter came up before the Division Bench (Coram: K.G. Balakrishnan & C.K. Thakkar, JJ) on 28.11.97 on which date the Letters Patent Appeals were admitted and it was ordered that the status quo as on that day be maintained, the order requiring the cost to be paid was stayed and with a view to protect and safeguard the interest of the petitioner as well as the respondent, so that no prejudice is caused to any party, it was directed that all the parties will maintain the status quo as on that day and that they will not create any equity or encumbrance on the property, they will not alienate, transfer or assign in any manner whatsoever the disputed property till the final disposal of Appeals or without permission of the Court. The matters were ordered to be placed for final hearing on 22.12.97. On behalf of the original petitioner - Company Mr. Akhani sought leave to approach the Hon'ble Supreme Court against this order passed in the Civil Application, but the leave was refused. However, original petitioner Company preferred Special Leave Petition before the Supreme Court. The Special Leave Petition was called out for hearing before the Supreme Court on 2.2.98 and upon hearing the counsel the Supreme Court passed the order dismissing the Special Leave Petition. The matter then came up before the Division Bench (Coram: C.K. Thakkar & A.L. Dave, JJ) on 27.2.98 on Civil Application No. 1954 of 1998, which was moved by the original petitioner Company represented through Mr. Akhani. Through this Civil Application, the order dated 28.11.97 was sought to be vacated. On this date i.e. 27.2.98 leave was sought to add the contesting respondents as party in this Civil Application. Permission was granted and thereafter when the matter came up before Court on 20.3.98 before the Division Bench (Coram: C.K. Thakkar and A.L. Dave, JJ) at the request of Mr. Akhani the Civil Application was directed to be heard alongwith the main matter. It appears from the note dated 24.3.98 submitted by the Registry to the Hon'ble Chief Justice that on 20.3.98 an exception was made by Hon'ble Justice C.K. Thakkar and, therefore, the matter was placed before Hon'ble Chief Justice for suitable direction. On 26.3.98 it was ordered by the Chief Justice that the matter may be listed before Hon'ble K.G. Balakrishnan and J.M. Panchal, JJ. On 26.3.98 the matters were ordered to be notified for final hearing on 16.4.98 before Hon'ble K.G. Balakrishnan and J.M. Panchal, JJ. It is given out by the parties that the matter was heard before Hon'ble K.G. Balakrishnan and J.M. Panchal, JJ on and from 16.4.98 to 8.5.98. Summer vacation commenced thereafter and on re-opening of the Courts the matters were listed again before same Bench but the matter could not be taken up and on 24.7.98 it was recorded by the order of the Chief Justice that these matters be placed before Hon'ble R.K. Abichandani and A.L. Dave, JJ. When the matters came up before the Division Bench of Hon'ble R.K. Abichandani and A.L. Dave, JJ on 29.7.98 it was pointed out to the Court by Mr. Sanjanwala that Hon'ble R.K. Abichandani, J had passed some order on 24.12.96 in these matters and in the Appeals, certain aspects may be virtually against that order passed by Hon'ble R.K. Abichandani, J and that since the validity of the order dated 24.12.96 passed by Hon'ble R.K. Abichandani, J was required to be gone into, the Court directed the Registry to place the matters before Hon'ble Chief Justice for assigning the matters before appropriate court where Hon'ble R.K. Abichandani, J is not a party. On 30.7.98 under the orders of the Chief Justice, it was recorded that the matters be placed before a Division Bench (Coram: M.R. Calla and J.R. Vora, JJ) and on 14.8.98 again it was recorded under the orders of the Chief Justice that these matters be placed before this Bench and this is how the matters came up before us and have been heard. We have set out these facts from record in detail because Mr. Akhani has raised lot of controversy as to how the Appeals were entertained without the copy of the Judgment and the proceedings thereafter.
22. Mr. Akhani still argued with regard to the powers of the High Court to grant status quo ante and that the anticipatory order of status quo could not have been granted and that the appellants had not come with clean hands, that there are suppression of material facts by the appellants. Firstly we find that these submissions are without any basis and the same deserve to be rejected. Secondly we have heard the matters on merits, and we find that the question with regard to powers of the High Court to grant status quo ante and anticipatory order of status quo, could at the most be relevant only for the purpose of interim order.
He has also made reference to the commentaries by author Shri R.G. Chaturvedi in his book on Law of State Finances; Constitution etc. He has also cited AIR 1994 H.P. 120 (H.P. Financial Corporation v. Parveen Kumar), which has no direct bearing on any of the points involved in these matteRs. He has also placed reliance on AIR 1981 SC 1681 (M/s. Hindustan Sugar Mills v. The State of Rajasthan) with regard to subsidy to be released. It is the case of the respondent - Corporation that it is not for the State Financial Corporation to give subsidy and the State Government was never arrayed as a party and, therefore, there is no question of any direction for subsidy. Mr. Akhani has also read out certain commentaries from the Book of M.C.Agarwal on State Financial Corporation on the question of illusory price at which the properties have been sold out. Mr. Akhani has cited following authorities :-
(1) AIR 1989 SC 1551 (Weney D.Souza v. G.A. Conceicao) (2) AIR 1974 SC 1331 (M/s. Kayjay Industries (P) Ltd. v. M/s. Asnew Drums (P) Ltd.) (3) AIR 1986 SC 1158 (C.Rami Reddy v. Govt. of A.P.) (4) AIR 1988 SC 157 (Haji T.M. Hassan v. Kerala Financial Corporation.
(5) AIR 1989 Allahabad 96 (Durgesh Cold Storage & Ice Factory v. U.P. Financial Corporation) (6) (1994) Comp. Cases 558 (Rajasthan) (7) AIR 1989 Karnataka 90 (M/s.Hotel Nataraj v. Karnataka State Financial Corporation) (8) AIR 1997 Kerala 75 (Achamma Cyriac v. Kerala Financial Corporation) (9) AIR 1993 Orissa 238 (Sk. Kamiruddin v. Union of India) (10) AIR 1985 SC 1147 (Ram & Shyam Company v. State of Haryana) (11) 1990 Lab.I.C. 756 (Jute Mill Mazdoor Sabha, Katihar v. State of Bihar) (12) AIR 1992 Allahabad 108 (Uttar Pradesh Financial Corporation v. M/s. Gajendra Cold Storage (P) Ltd.) (13) AIR 1986 Karnataka 268 (Manjamma v. S.N. Suryanarayana Rao) (14) AIR 1991 SC 478 (M/s. Seth Kashi Ram Chemical (India) v. State of Haryana) (15) AIR 1993 P & H 156 (M/s. Bags and Cortons v. Haryana Financial Corporation) (16) AIR 1993 A.P.166 (M/s. Arisetty Satyanarayana Murty Sugars & Industries v.The Sub-Collector and others) (17) AIR 1988 Orissa 60 (Pitabash v. Orissa State Financial Corporation) (18) AIR 1973 Mysore 131 (Mohammed Ali Abdul Chanimomin v. Bisahemi Kom Abdulla Saheb Momin) (19) AIR 1983 Rajasthan 161 (Sayar Bai v. Yashoda Bai) On the question of lis pendence and S. 52 of the Transfer of Property Act and Order 21 Rule 102 C.P.C., he has cited 1964(4)SCR 892 and AIR 1985 Gujarat 184 (Kanbi Vaju Vasta v. Kanbi Popat Vasta) and has submitted that the registration of lis pendence is required only in State of Bombay and not in any other State. We do not consider it necessary to deal with all these cases in this judgment, because for the purpose of decision in this case either they are not relevant or are of no avail in favour of the respondent - Mr. Akhani.
He (Mr. Akhani) has also made reference to certain orders passed in these matters (in Special Civil Applications) on several dates such as :
7.11.95 passed by R.K. Abichandani, J as a common order in Special Civil Application Nos. 9327 to 9331 of 1995 restraining the Corporation from auctioning the properties in question subject to the condition that the Company will give a cheque of Rs. 10 lacs to the counsel for Corporation and a post dated cheque dt. 24.11.95 for Rs. 15 lacs.
18.9.96 passed by N.N. Mathur, J with regard to amendment (challenging the sales) of the Special Civil Application. 17.10.96 passed by S.K. Keshote, J issuing contempt notice suo motu against respondent No. 2 for not accepting the service of the notice of this court.
11.12.96 passed by S.D. Shah, J to place the matters before Chief Justice for placing the matters before appropriate Court.
24.12.96 passed by R.K. Abichandani, J by which 2 Units were ordered to be given to the original petitioner Company.
14.2.97 passed by S.K. Keshote, J in an application with regard to the claim of compensation of Rs. 50 crores by the petitioner Company, directing respondent Corporation to file reply to this application.
6.3.97 yet another order passed by S.K. Keshote, J disposing of petitioner - Company's application dt.7.1.97 declining the relief.
9.7.97 passed by K.R. Vyas, J directing Corporation to consider petitioner's representation and calling for the report relating to accounts from the Corporation.
7.8.97 passed by K.R. Vyas, J recording the compliance of the order dt.9.7.97.
3.9.97 passed by K.R. Vyas, J, that petitioner wanted continuous hearing for about 15 to 20 days which was just not possible due to heavy pressure of admission board hence petitioner was permitted to move Hon'ble Actg. Chief Justice for appropriate directions.
23.9.97 passed by S.K. Keshote, J - being overburdened -asking for additional Private Secretaries.
16.10.97 passed by D.G. Karia, J taking affidavit dt.4.12.96 by respondent No. 2 on record in the interest of justice during the midst of the hearing.
Mr. Akhani thinks that all these orders are orders in his favour.
He has also referred to an order dated 30.7.98 passed in contempt matter by S.D. Dave and C.K. Buch, JJ, the order dated 25.9.97 passed in Misc. Civil Application by Y.B. Bhatt and R. Balia, JJ, and the order dated 23.12.96 passed by N.J. Pandya and H.L. Gokhale, JJ in Special Civil Application for giving certified copies.
In our opinion these orders do not advance the case of the original petitioner - Company so far as the merits of these Letters Patent Appeals are concerned at this final stage of hearing so as to defend the impugned order dt.18.11.97 passed by the learned single Judge.
23. Having given our thoughtful consideration to the averments, as aforesaid, we find that in a matter like this, where the amount of default cannot be determined by this Court and there are disputed questions of facts, looking to the limited scope of Article 226 and the judicial review of such action taken by the Financial Corporation, to which we have already made reference hereinabove, there is no scope for interference with the action taken by the Corporation in the matter of the sale of the Units, in respect of which the original petitioner Company had failed to discharge its obligations under the agreement with regard to the time schedule as also with regard to the amount. It is very clear from the record that the cheques, which had been given by the original petitioner - Company, were bounced more than once and the original petitioner - Company had failed to fulfill its obligations in the matter of making payments of due installments within time and had failed even when the payments were rescheduled and it is also clear that reasonable opportunity had also been given to the original petitioner - Company. In accordance with the principles laid down by the Supreme Court for judicial review against such action of the Corporation in number of cases, as have been discussed hereinabove, and keeping in view the ratio laid down by the Supreme Court, we find that the order passed by the learned single Judge and the directions, which have been given in this regard, in favour of the original petitioner - Company and against the Corporation, can not be sustained in the eye of law. There was hardly any occasion for the purpose of issuing a direction so as to render the police aid straightaway . Unless a positive case was made out that there was such a resistance or invincible repugnance by the Corporation or the concerned parties, no such direction could be said to be necessary. That stage had not been reached. So far as the direction for payment of subsidy is concerned, such direction could not be given in the facts of this case when the State of Gujarat was not even a party in the Special Civil Applications and it was also not adjudicated as to whether there was any proper application registered with the concerned authority for the purpose of granting the subsidy. Keeping in view the aims and objects for which the Corporations are set up, the Corporation could not have waited for the original petitioner - Company to give its dues for an indefinite period. We find that it is only a case of giving premium to the defaulter when he is awarded exemplary cost of Rs. 2 lacs in each of the petitions; total amount of cost coming to Rs. 10 lacs, for which there was no justification and therefore, the action of the Corporation in taking over the possession/management of the industrial Units of the petitioner could not be quashed and no writ could be issued for quashing the sale of the industrial units and transferring them to the second/third respondent by the Corporation. The direction to restore the possession of the industrial Units in question to the petitioner forthwith is devoid of any justification and cannot be sustained in the eye of law. Whereas proper and correct accounts had already been placed on record of this Court and the copy had also been given to the petitioner Company in terms of the order dated 9.7.97 passed by K.R. Vyas, J, the direction to give proper and correct account in respect of each of the industrial units to the petitioner within reasonable time was not at all warranted. It is for the respondent Corporation to realize its dues in accordance with law and in case, the petitioner Company disagrees and seeks to contest the liability, as determined by the Corporation, it is open for it to contest that liability through proper proceedings before appropriate forum in accordance with law, if permissible and still available and it may also be open for it to press for the release of the subsidy amount before the Government in accordance with Rules, but there is no question of giving the direction by the Court for paying the same in the Special Civil Applications, as has been done by the impugned order.
24. So far as the question of contempt for refusing to accept the process of Court against respondent No. 2 N.L. Shah, as mentioned in the impugned judgment at pages 100 and 101, is concerned, we find that Mr. Sanjanwala appearing for the respondent had tendered an unconditional apology. But Mr. Akhani appearing for the original petitioner - Company has submitted that the concerned contemnor had not filed the apology and the apology had been filed under the signature of the power of Attorney Holder only. It has been explained by Mr. Sanjanwala with reference to the order dated 17.10.96 that Mr. N.L. Shah is a NRI and Mr. J.C. Shah is his power of Attorney Holder. The allegation was that J.P. Shah and K.J. Shah had refused to accept the service. Apology is signed by J.P. Shah himself. It has also been submitted that only J.P. Shah was concerned in this matter as the holder of Power of Attorney on behalf of NRI and, therefore, he signed the apology. That may be so, but we do not want to express any opinion on this aspect of the matter because that matter is being separately dealt with by a Division Bench (Coram: S.D. Dave and J.R. Vora, JJ). However, we find that after making reference to the apology, the learned single Judge at page 101 of the impugned order dated 18.11.97 has observed as under:-
" The apology, if any, should be real and genuine and should not be with a view to avert the proceedings under the contempt of Court Act. It transpires from the record and the affidavit of the petitioners that the respondent No. 2 never bothered to remain present as directed by this Court. Under the circumstances, the second respondents are liable under the contempt of Court Act for deliberately and purposefully refusing to accept the process of the Court. The Registrar is, therefore, directed to initiate action against the respondent No. 2. In this connection, the petitioners to give detailed representation along with the copies of the necessary affidavit so as to enable the Registry to initiate action against the respondent No. 2 in the petitions under the Contempt of Courts Act promptly and properly."
Mr. Sanjanwala has raised a grievance that the observation that the respondents are liable under the Contempt of Courts Act for deliberately and purposefully refusing to accept the process of the Court, as contained in the above passage from the judgment of the learned single Judge, may render the parties in the contempt proceedings to be vulnerable and may be used against them by the other side before the Division Bench, which is considering the contempt matter. Whereas the Division Bench is already seized of this matter, we do not want to express any opinion on this aspect, except saying that such observations in the order of the learned single Judge could be avoided as the same were not at all warranted so far as the merits of the Special Civil Applications are concerned.
25. For the reasons, as aforesaid, we find that the order passed by the learned single Judge, which is impugned in these Appeals, cannot be sustained in the eye of law and the same is hereby quashed and set aside. However, so far as the two Units i.e. M/S. Mangalson Capsules Pvt. Ltd. and Rupani Dye Chem Industries Pvt. Ltd., which had been given to the petitioner by way of interim arrangement, as had been ordered by the court on 24.12.96, are concerned, we find that for those two Units, the original petitioner Company had paid a sum of Rs. 24.50 lacs in all under the directions of the Court during the pendency of the Special Civil Applications and that a sum of Rs. 10 lacs had already been paid by the original petitioner Company at the time when the agreement was entered into on 4.6.91 and to that extent it can be said that once an order had been passed by the Court during the pendency of these Special Civil Applications the petitioner has shown its willingness and has also been able to make the payments as directed by this Court on 24.12.96 read with the order dt.7.11.95 and these two Units are with the original petitioner Company, in terms of the order of this Court, and, therefore, to that extent we order that these two Units may rest with the original petitioner Company subject to the condition that it will be obliged to pay the remaining dues to the GSFC and GSFC shall also re-schedule the payment of these dues and the arrangement of re-scheduling of the outstanding worked out against these two units shall be intimated to the original petitioner Company through Mr. Akhani at the registered address, which shall be given by Mr. Akhani to the GSFC within a period of two weeks from today under a registered cover. So far as the machinery of M/s. Mangalson Ltd. is concerned, which had been sold out by the Corporation to Ekka Danta Pharmaceuticals Pvt. Ltd., appellant in one of these Appeals i.e. L.P.A. No. 1482 of 1997, Mr. Joshi has submitted that he is prepared to return the same to the GSFC provided the Corporation pays the amount, which he had paid alongwith interest plus expenses, if any, because his case is that he had purchased it from the Corporation and this machinery has through out remained idle because only a part of machinery was given. In these circumstances, we order that it will be open for the original petitioner Company to ask for the return of the machinery and it will be entitled to the return of this machinery subject to the condition that it deposits the cost with interest and expenses in respect of this machinery as the Corporation may intimate to Mr. Akhani within a period of four weeks and, thereafter, the petitioner - Company may deposit the said amount in respect of this machinery with the GSFC within such period and in such installments, which will not be less than six monthly installments. These arrangements are with regard to the two Units, which are with the petitioner Company in terms of the orders dt.24.12.96 read with the order dt.7.11.95 passed by the single Bench during the pendency of the Special Civil Application and the same may be treated as final, subject to the conditions as mentioned in this order, and to this extent the order of the learned single Judge shall stand modified in relation to these two units.
26. All these nine Letters Patent Appeals are allowed, as above, but the impugned order of the learned single Judge shall stand modified as above in relation to the two units i.e. M/S. Mangalson Capsules Pvt. Ltd. and Rupani Dye Chem Industries Pvt. Ltd. (held by the original petitioner - Company) in the concerned Appeals and Special Civil Applications. No order as to costs.
27. In view of the order passed in the main Appeals by the common order, as above, no orders are required to be passed in any of the pending Civil Applications numbered in the title and all these 18 pending Civil Applications in these matters are hereby disposed of accordingly and the notice issued in Civil Application No. 1954/98 in Letters Patent Appeal No. 1471/97 is hereby discharged with no order as to costs.