Jammu & Kashmir High Court
Kamlesh Kumari vs State Th.S.F.C.And Ors. on 21 October, 2016
Author: B. S. Walia
Bench: B. S. Walia
1
HIGH COURT OF JAMMU AND KASHMIR AT JAMMU
OWP No.350/2015 & MP No. 506/2015
Date of order : 21st October, 2016
Kamlesh Kumari Vs. State & ors.
Coram:
Hon'ble Mr. Justice B. S. Walia, Judge
Appearing counsel :
For petitioner (s) : Mr. R. P. Sangra, Advocate.
For respondent(s) : Mr. M. A. Bhat, Advocate.
i/ Whether to be approved for reporting : Yes/No. in Digest/Journal ii/ Whether to be approved for reporting : Yes/No. in Press/Media.
Judgment.,
1. Petitioner seeks quashing of Notices, Annexure-D & E, dated 27.12.2014 and 25.02.2015 respectively whereby proceedings were taken out u/s 29 of the J&K State Financial Corporation Act, 1951 (hereinafter to be referred to as the Act) besides directions to the respondents to accept one time settlement proposal by waiving interest entirely.
2. Brief facts of the case leading to the filing of the writ petition are that the respondent-Corporation sanctioned a Term Loan of Rs.3.68 Lacs besides working capital of Rs.1.72 Lacs aggregating Rs.5.40 Lacs in favour of M/s Bawa Metal Moulders, Village Bhagatpur, P.O. Bhadrore Gho Manasan, Jammu on 14.09.1989 for the setting up of an Industrial Unit as a proprietorship concern. The Unit was provisionally 2 registered with District Industrial Centre, Jammu vide Provisional Registration Certificate, Annexure-A dated 29.08.1986.
3. Petitioner claims :
i) That her brother Dharamvir S/o Shri Mohan Lal might have raised loan to the tune of Rs.5,37,000/- for running of Unit M/s Bawa Metal Moulders from the Corporation but his whereabouts were not known to the petitioner or anyone in the family for the past 20/25 years ;
ii) That as per final opportunity auction Notice Annexure-D dated 27.12.2014, her father i.e. Shri Mohan Lal was Guarantor for repayment of aforesaid loan facility but he had also expired ;
iii) That her brother had kept her in two rooms in the premises of the Unit which were later converted/ renovated and bath room & kitchen etc., constructed for residential purposes and since then she had been residing there ;
iv) That she was neither the borrower nor the guarantor in the loan account of her brother but the Corporation had started interfering in her peaceful possession over the house built in the premises of the Unit and ultimately had proposed for one time settlement of the loan facility raised by her brother whereupon she deposited token money amounting to Rs.49,500/- vide receipt dated 28.08.2009, Rs.60,000/- vide receipt dated 08.02.2012 and Rs.15,000/-
vide receipt dated 15.02.2012 i.e. Annexures-A, B & C 3 respectively with the Corporation but still the Corporation proceeded u/s 29 of the Act and seized the Unit along with the house located therein ;
v) That no notice whatsoever was served by the Corporation on her before initiating proceedings u/s 29 of the Act despite accepting token money from her as one time settlement ;
v) That the Corporation published a final opportunity auction notice Annexure-D dated 27.12.2014 mentioning therein that the Unit Holder i.e. Dharamvir had failed to liquidate the loan liability of the Corporation in terms of the agreement executed, therefore, the Corporation in exercise of powers u/s 29 of the Act had seized the Unit on "as is where is basis" and subsequently, put the Unit to auction vide Auction Notice published in local dailies in "Kashmir Times" dated 02.10.2014 and "Early Times" dated 01.10.2014 and further extended till 25.10.2014 as per publication in "Early Times" and "Kashmir Times" dated 15.10.2014 ;
vi) That the highest bid amounting to Rs.5.19 Lacs was received and accepted by the Corporation in respect of the Unit with balance outstanding amount including interest of Rs.3,37,83,470.91/- as on 31.10.2014 ;
vii) That the Corporation had informed the Borrower and Guarantor about the highest bid received in response to the auction notice vide registered letters, therefore, the 4 Borrower and the Guarantor of the loan were informed vide notice to deposit the sum equivalent to the highest bids within seven days i.e. upto 03.01.2015 and to come up with proposal to pay the balance outstanding of the Corporation failing which the Corporation would hand over the possession of the Unit to the highest bidder without any further reference ;
viii) The petitioner has also attached communication (Annexure-E) dated 25.02.2015 from the respondents to the Incharge Police Station Pouni Chak, Jammu for providing police assistance to deal with untoward incident at the time of takeover of possession of the Unit ;
4. That in the aforementioned background, the petitioner has challenged the proceedings u/s 29 of the Act on the ground of the same being illegal as the Corporation had come forward to settle the case with the petitioner by way of one time settlement by accepting token money as per receipts (Annexures-A, B & C), therefore, the proceedings initiated without notices were liable to be quashed, Secondly, as per notice (Annexure-D), the highest bid received by the Corporation was Rs.5.19 Lac and vide said notice, the Borrower and the Guarantor had been asked to deposit the amount equivalent to the highest bid and since the Corporation had accepted token money from the petitioner as one time settlement, the petitioner was ready to deposit the amount equivalent to the highest bid minus the token money within reasonable period of time, Thirdly, the 5 Corporation had resorted to auctioning the Unit without verifying the status of the borrower and guarantor despite the fact that the Borrower's whereabouts were not known for the last more than 20/25 years, Guarantor had expired and the petitioner who had deposited the token money for one time settlement had not been issued any notice by the Corporation, besides, no decision had been taken by the Corporation on the one time settlement despite having taken token OTS money.
5. That objections have been filed to the effect that the petitioner has no locus-standi to file the writ petition as she was alien to the proceedings and had no right or interest whatsoever over the premises in question, therefore, the writ petition was totally misconceived solely intended to stall proceedings against the defaulter, that disputed questions of facts were raised which could not be adjudicated in exercise of the writ jurisdiction of the High Court, besides none of the rights of the petitioner had been violated, that the Corporation had sanctioned a term loan of Rs.3.68 Lac and working capital of Rs.1.72 Lac on 14.09.1989 aggregating to Rs.5.40 Lac in favour of M/s Bawa Metal Moulders Bhagatpur, Bhadrore, Jammu for setting up industrial Unit which had Provisional Registration Certificate dated 29.08.1986 i.e. Annexure-A to the objections and that since inception the promoter had only paid a sum of Rs.1,11,314.09 towards the borrowed term loan account and despite regular follow up as also issuance of notices u/s 29 of the Act, the promoter had not come forward to clear the balance 6 outstanding of the Corporation, eventually in the year, 2007, the Corporation put the unit to auction but the same evoked no response, again in the year 2012, auction notice was published and in response to that one Pawan Kumar S/o Mohan Lal R/o Bhagatpur, Jammu approached the Corporation for settlement of the above loan on behalf of the promoter, accordingly, auction proceedings were dropped and said Pawan Kumar was asked to furnish institutional formalities but he failed to do the needful, rather disappeared from the scene.
6. That it has further been contended that various reminders were issued to the promoter for furnishing institutional formalities for the settlement of the loan account. Last reminder was dated 19.02.2014 but the same evoked no response. However, in between, Corporation again issued fresh notice under Section 29 of the Act on 10.01.2014 and final opportunity notice through local "Daily Excelsior" dated 20.09.2014 and "The News Now" dated 21.09.2014 but to no avail. The assets of the Unit evaluated by the approved valuer of the Corporation were assessed as under :
(i) Market Realizable Value-Rs.6,00,000/-;
(ii) Replacement Value-Rs.8,31,000/-;
(iii) Minimum Reserve Value-Rs.5,00,000/- &
(iv) Distress value-Rs.4,50,000/-.
7. That auction notice was published on minimum reserve value in "Kashmir Times" dated 02.10.2014 and "Early Times"
dated 01.10.2014 but no bid was received. Thereafter, on 7 approval by the Head Office, Auction Notice was extended till 25.10.2014 vide publication in "Early Times" and "Kashmir Times" dated 15.10.2014. In response thereto, three bids were received by the Corporation on 25.10.2014 by the Committee constituted in the matter and the same were opened by the members of the Committee at 2:30 p.m. on 27.10.2014. The highest bid was offered by Shri Rajinder Kumar S/o Muni Ram R/o Talab Tillo, Jammu for an amount of Rs.5,19,000/- against the minimum reserve value of Rs.5,00,000/- assessed by the valuer of the Corporation. The same was accepted by the Corporation on 17.12.2014 on the following terms and conditions:-
'a) The auction shall be implemented on the
following terms and conditions:-
b) The concerned branch will certify that all
the requisite formalities governing the auction package have been fulfilled.
c) The highest bidder shall, after observing the legal requirements, be advised to deposit 30% of the bid amount within '10' days from the date of acceptance of bid by the Corporation and 50% before taking possession of the unit, but not later than '60' days from the date of acceptance of the bid and balance 20% will have to be paid at the time of handing over possession letter. The highest bidder shall forfeit the first instalment and earned money in case he fails to deposit the amount within the stipulated period and the offer shall be deemed to have been rejected by the Corporation.
d) The CDRs in respect of failed bidders shall be returned under proper receipt.' 8
8. That pursuant to the acceptance of the bid of said Rajinder Kumar on 17.12.2014, final opportunity notice dated 24.12.2014 i.e. Annexure-B to the objections was given to the promoter as well as the guarantor vide registered A/D covers granting opportunity to deposit the amount equivalent to the approved highest bid amount in one go and also to come up with proposal for liquidation of the balance amount within seven days, failing which it was made clear that the Corporation would be constrained to hand over the possession of the unit premises to the highest bidder at the risk and cost of the promoter/guarantor. Final opportunity notice was also given by way of publication in local English "Daily Excelsior"
(Annexure-C to the objections) dated 27.12.2014 granting opportunity to the promoter/guarantor to deposit the highest bid amount within seven days as also to come up with the proposal for liquidation of the balance amount within seven days, failing which it was made clear that the Corporation would be constrained to hand over the possession of the unit premises to the highest bidder at the risk and cost of the promoter/guarantor.
9. That it has further been mentioned that no response was received for depositing the amount equivalent to the bid amount, thereafter, the highest bidder deposited the bid amount of Rs.5.19 Lacs with the Corporation i.e. Rs.1,60,000/- on 15.01.2015 and Rs.3,59,000/- on 18.02.2015 and when the Corporation went on spot for handing over the possession of the 9 premises on spot to the successful bidder, the petitioner who claimed to be the sister of the promoter/defaulter created hurdles in handing over the possession of the unit along with certain local persons who prevented the Corporation Team and the Police Party from handing over the possession of the unit premises to the successful bidder and in view of the law and order problem created by the petitioner and her accomplices leading to threat to the life and limb of the team which had gone to site, the Corporation was constrained to file an application before the learned Chief Judicial Magistrate for necessary action. Copy of the complaint/application as marked to the concerned police is attached along with Annexure-D to the objections.
10. That it is the stand of the Corporation that the petitioner has no right to the property in question and has invoked the jurisdiction of this Court by concealment and suppression of material facts and had forcibly occupied two rooms in the unit premises in all probability in connivance with the promoter/guarantor, therefore the petitioner, an intruder and encroacher was seeking to justify her illegal action by pleading a concocted story. It has been denied that the petitioner ever paid anything to the Corporation or the Corporation had ever been approached the petitioner for one time settlement and the reasons for the same were because the petitioner was no one to have a settlement with the Corporation and being a trespasser, she could not claim any relief on equity. Money had been 10 received from M/s Bawa Metal Moulders and not the petitioner. It has further been contended that the Corporation had already auctioned the unit premises along with structure thereon and had received the bid amount, consequently, they were bound to hand over the vacant possession of the premises to the successful bidder and it was only by virtue of status quo order passed by this Court on the basis of misrepresentation by the petitioner that the respondents/Corporation in deference to the orders of this Court allowed the petitioner to continue in the unit and the respondents/Corporation would proceed against the petitioner in accordance with law as and when the order of stay was vacated. In the aforementioned background it has been contended that the writ petition was liable to be dismissed with exemplary costs therefore prayer was made for dismissal of the writ petition with exemplary costs.
11. That I have heard learned counsel for the parties and considered the matter. A perusal of the publication of final opportunity auction notice of Industrial Unit M/s Bawa Metal Moulders i.e. Annexure-C in newspaper "Daily Excelsior" dated 27.12.2014 reveals balance outstanding including interest due towards the loan liability as Rs.3,37,83,470.91 whereas the highest bid received for the unit was a paltry amount of Rs.5,19,000/-. Despite intimating the borrower and guarantor about the highest bid received by the Corporation in respect of auction notice besides final notice by way of publication to the borrower and guarantor to deposit the amount equivalent to the 11 highest bid within seven days upto 03.01.2015 and to come up with the proposal to pay the balance outstanding of the Corporation as on said date, failing which the Corporation would hand over the possession of the unit to the highest bid without further reference, no response in respect thereto was received, therefore it is apparent that as against a term loan of Rs.3.68 lac and working capital of Rs.1,72,000/- advanced to the sole proprietor of M/s Bawa Metal Moulders Village Bhagatpur, Post Office Bhadrore Gho Manasan Road, Jammu on 14.09.1989, a sum of Rs.3,37,83,470.91 was due to the Corporation on account of principle plus interest as on 31.10.2014 and that ever since availing of financial assistance to the Corporation only a sum of Rs.1,11,314.09 has been paid for discharging liability against term loan and no other amount had been received by the Corporation. It has been denied that the amount of Rs.49,500/-, Rs.60,000/- and Rs.15,000/- received by the Corporation as per details given in Annexures- A,B&C to the writ petition was paid by the petitioner. It has been contended that the amount was received towards the loan account of M/s Bawa Metal Moulders and the petitioner was nobody as far as the loan assistance was concerned. It was denied that the petitioner had ever paid anything to the Corporation or that the Corporation had ever approached the petitioner or vice versa for any settlement and the reason for the same was that the petitioner was nobody to have a settlement 12 with the Corporation as she was only a trespasser, therefore, could not claim any relief.
12. At this stage, it needs mention here that the petitioner claims to be the sister of the borrower whom she states is missing and not heard of since past more than 25 years. She also claims to be the daughter of the guarantor who also is stated to have since died. However, there is no documentary proof in respect of the said averments nor for that matter has any documentary proof been adduced of the petitioner being the representative-in-interest of the borrower/guarantor. She has also not placed on record any scheme for one time settlement floated by the Corporation or for that matter the proposal, if any, for one time settlement submitted by her nor has she stated as to in which capacity, she submitted the said proposal nor has the copy of the said proposal or for that matter the acceptance of the same and the terms and conditions of one time settlement been placed on record. In the aforementioned background, the petitioner has failed to establish locus standi to challenge the action by the Corporation.
13. That Section 29 of the State Financial Corporations Act, 1951 deals with the rights of a financial Corporation in case of default. The same is reproduced hereunder :-
"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 2 [or in meeting its obligations in relation to any guarantee given by the Corporation] 13 or otherwise fails to comply with the terms of its agreement with the Financial Corporation, the Financial Corporation shall have the 3 [right to take over the management or possession or both of the industrial concerns], as well 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 2 [* * *] under sub-section (1), shall vest in the transferee all rights in or to the property transferred 3 [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, 6 [charges and expenses which in the opinion of the Financial Corporation have been properly incurred] by it 7 [as incidental thereto] shall be recoverable from the industrial concern and the money which is received by it 8 [* * *] 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 l)[the concern]."
14. As per the stand of the Corporation, action has been taken against the Industrial concern on account of the default in the payment of loan, whereupon possession of the Industrial 14 concern was taken over and has been sold by way of auction receiving highest bid of Rs.5.19 lac from one Rajinder Kumar. The amount received by way of auction is to be applied for discharge of debts to the Financial Corporation in accordance with mandate of Section 29(4), after first meeting, the cost charges and expenses for the action against an Industrial concern.
15. In view of the factual position as noted above, the petitioner has failed to show any cause of action entitling her to invoke the jurisdiction of this Court against the action by the Corporation in exercise of its powers under Section 29 of the State Financial Act. The writ petition being bereft of merit is dismissed.
B. S. Walia.
Judge Jammu 21st October, 2016 Ram Murt.