Madhya Pradesh High Court
Vinod Kumar Mathur And Ors. vs M.P. Financial Corporation And Ors. on 20 December, 1996
Equivalent citations: 1998(1)MPLJ168
JUDGMENT Shacheendra Dwivedi, J.
1. The appellants of both the appeals seek to challenge only the part of the order passed by the learned Single Bench in M. P. No. 207/87 since the petition filed by the appellants of LPA No. 71/96 was allowed in part and the remaining prayer made therein by the appellants was rejected. As both the parties are aggrieved of the impugned judgment and have preferred separate appeals, this order shall dispose of both the above appeals.
Appeal No. 71/96
2. The appellant No. 1 is the partner of the registered partnership firm M/s Modern Rice Mill, Industrial Estate, Morena, respondent No. 2. The appellant-firm wanted to instal a factory for processing the paddy in order to take out rice from it and to sell the products. The appellant-firm approached the respondent-M. P. Financial Corporation (for short 'the Corporation') established under M. P Financial Corporations Act, 1951 (hereinafter referred to as 'the Act') for advancing the loan and the Corporation agreed to advance a loan of Rs 6,12,000/- to the appellant-firm. The respondent-Corporation thereafter in fact advanced the loan of Rs. 3,11,000/- and the firm executed a mortgage deed in favour of the respondent-Corporation on 13-8-1981, copy of which was filed in the Writ Petition as Annexure P/2.
3. Since the appellants did not make the payment of the loan amount in terms of the agreement, the respondent-Corporation had served two notices mentioning that if the appellants failed to comply with the notices, the legal action would be taken against the firm. Since the notices so issued, were not responded, the Corporation took over the unit under Annexure P/5 (filed in the writ petition). The taking over of the unit by the respondent-Corporation was challenged by the appellants through the writ petition. In the meantime, the unit was put to auction after public notice and ultimately sold to respondent No. 2 being the highest bidder.
4. The respondent-Corporation contended that the appellant-firm was advanced the loan of Rs. 3,11,000/- against the sanctioned loan of Rs. 6,12,000/- but the balance amount of loan was not released to the firm, since it had itself made the request to cancel the loan for the balance amount, under its letter Annexure R/3 dated 19-1-1983. Further it was contended that the appellants had contravened the conditions Nos. 4 and 12 of the sanction (Annexure R/1) as the loan was sanctioned and advanced for establishing a rice mill, but the appellants had thereafter utilised the same in establishing an oil mill. In that regard, notice Annexure R/4 dated 21-6-1982 was issued by the Corporation to the appellants, stating that appellants had changed the original scheme of rice processing, for which the loan was advanced and had instead set up the oil extraction plant.
5. The Technical Expert of the Corporation on inspection of the unit found that the appellants had installed two oil expellers instead of installing Dandekar Rice Mill. However, the appellants were informed under annexures R/5 and R/6 to send the details of the change so made in the scheme, with its profitability data. But the appellants thereafter neither furnished the details of the changed scheme nor had paid the dues despite sufficient opportunities allowed to them. By making the further demand two documents i.e. a letter Annexure R/7 and a telegram Annexure R/8 were sent to the appellants.
6. Since the appellants did not co-operate even in regularising the breach. of the condition of agreement nor had shown the reasons for the change in the original scheme, for which the loan was sanctioned and advanced, and had failed to supply the revised profitability details so also the profit and loss accounts and when it was found by the respondents that the unit was closed since August 1983, the Corporation had to take the action under section 29 of the Act as it was further found that even the extraction of the oil from the oil seed was stopped by the firm and its liability was increasing every day.
7. Before taking the action under challenge, the appellants were informed under letter Annexure R/10 dated 14-5-1984 to remain present on 29-5-1984 in the meeting of recovery committee of the respondent-Corporation. But nobody for appellants had appeared on that date. The same step was again taken by Corporation vide letter Annexure R/11 calling upon the appellants to appear before the recovery committee in its meeting on 26-6-1984, to settle the overdues but there was again a default as none had appeared for them. A registered notice dated 20-7-1984 was sent thereafter to the appellants-firm to clear the dues within 7 days further informing that on their failure, a legal action would be taken under section 29 or 31 of the Act.
8. On a further inspection of the appellants' unit by the Technical Expert of the Corporation, it was found that not only the unit was closed but even the installed plant and machineries were not being kept in proper condition. There was continuous default on the part of the appellant-firm in the payment of due loan amount to respondent No. 1 and as the condition of unit was deteriorating day by day whereas the liability of the firm was increasing every day, the respondent-Corporation finally served a notice Annexure R/14 dated 5-1-1985 calling upon the appellants to appear on 11-1-1985 before the Recovery Committee with the concrete proposals for resolving the dispute. On this date i.e. 11-1-1985 one Mr. Ved Prakash Gupta, the representative of the appellant-firm had appeared before the Recovery Committee and had informed that it was not possible to run the unit smoothly because there were disputes between partners and they had lost interest in running the unit which had resulted in the closure thereof.
9. The Corporation had thereafter passed a Resolution as contained in Annexure R/22 of the writ petition. Since the liabilities were not discharged by appellants, the possession of the Unit was taken over and a panchanama in that regard was prepared on the spot on 15-1-1987 which was also filed in the writ petition as Annexure R/23.
10. Thereafter, the Corporation had published an advertisement for the auction of the Unit through tenders. In all 6 offers were received and the offer of respondent No. 2, i.e., Parag Oil Mill, Morena was accepted for Rs. 7.00 lacs by the Board of Directors of the Corporation.
11. The learned Single Bench of this Court had considered in details all the contentions advanced by the counsel for the appellants and had concluded that the sale made by the Corporation of the Unit in favour of respondent No. 2 was valid and as such it was upheld. However, the learned Single Bench directed the Corporation to refund the excess amount received by it, to the appellants with interest thereon at the rate of 12% p.a. from 16-2-1987 till the payment thereof was made.
12. In this appeal, Shri R. D. Jain, the learned Senior Advocate appearing for the appellants, firstly contended that when the Corporation had resorted to the provisions of section 31 of the Act, it could not invoke nor apply the provisions of section 29, and secondly that there are contradictory findings in the impugned judgment resulting in contradictory directions, regarding the payment of excess amount and the interest.
13. In order to examine the first contention, the reference to section 31 is necessary :
"31. Special provision for enforcement of claims by Financial Corporations. - (1) Where an industrial concern in breach of any 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 or where the Financial Corporation requires an industrial concern to make immediate repayment of any loan or advance under section 30 and the industrial concern fails to make such repayment then, without prejudice to the provisions of section 29 of this Act and of section 69 of the Transfer of Property Act, 1882 any officer of the Financial Corporation generally or specially authorised by the Board in this behalf, may apply to the District Judge within the limits of whose jurisdiction the industrial concern carries on the whole or a substantial part of its business for one or more of the following reliefs; namely, -
(a) for an order for the sale of the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation as security for the loan or advance; or (aa) for enforcing the liability of any surety; or
(b) for transferring the management of the industrial concern to the Financial Corporation; or
(c) for an ad interim injunction restraining the industrial concern from transferring or removing its machinery or plant or equipment from the premises of the industrial concern without the permission of the Board, where such removal is apprehended.
(2) An application under sub-section (1) shall state the nature and extent of the liability of the industrial concern to the Financial Corporation, the ground on which it is made and such other particulars as may be prescribed."
14. It is apparent that section 31 of the Act has its existence without prejudice to the provisions of section 29 of the Act. The express language of section 31 makes it abundantly clear that the legislature has deliberately provided a special and additional right and privilege to Corporation in section 29 indicating the guideline that expeditious remedy of section 29 may be resorted to and section 31 is an additional right which is without prejudice to the provisions of section 29, to approach the Court, whenever the Court assistance is felt necessary by the Corporation.
15. The remedy made available and the power conferred on the Corporation may be invoked in suitable cases. Section 31 also provides the mode for enforcement of the claim of the Corporation, through the provisions of section 69 of Transfer of Property Act, which confers the power of sale also. The section gives authority to sale without the intervention of the Court. These arc the alternative powers and the Corporation may proceed either under section 29 or 31 of the Act or under 69 of the Transfer of Property Act. The power to proceed under section 31 is not concurrent with the power to proceed under section 29 of the Act or under section 69 of the Transfer of Property Act. The powers are independent of each other and alternative in nature. Although there is no express prohibition against Corporation for proceeding simultaneously in more ways than one yet in order to avoid any clash, either of them may be put in service.
16. In the instant case, since the application filed under section 31 of the Act was not pressed, the Corporation could legally resort to the action under section 29. It is for the party to the agreement to decide which kind of step is required to be taken for the speedy recovery and whether the assistance of the Court is necessary, as under section 69 of the Transfer of Property Act, a mortgagee can take a decision to proceed itself and if the difficulty is found in proceeding without the assistance of the Court, it may take a decision to go to the Court.
17. It is not the law that there can be only one remedy for recovery of loans from defaulters where there are guidelines to control the discretion to be exercised. The guidelines need not be specifically numerated in the section, but can be gathered from the other provisions of the Act. At times, the delay in taking possession may be suicidal to the interest of the Corporation and also of the industry. The Legislature can also provide more than one procedure covering the same field.
18. There is no arbitrariness in applying the provisions of section 29 of the Act. The action under section 29 is not judicial or quasi-judicial act, but is an administrative function. The object of the provision is the promotion of industry and the recycling of the funds. Sections 29 and 31 although operate in the same field, yet section 29 cannot be said to be harsher nor it can be said that resort cannot be had to section 29, if section 31 is sought to be applied. Under section 29, the decision regarding default and the urgency of taking over of the Unit, is taken by the administrative authority, whereas, the judicial authority has to act under section 31.
19. The accounts of the Corporation are well kept and properly accounted for, those arc also reflected in the required Registers. As such, there cannot be any hanky-panky in such transactions as the power is exercisable by high officers and it can be presumed that the maturity of the high officers, takes care that there is no arbitrariness. Section 29 of the Act has provided mechanism for speedy recovery. The Hon'ble Apex Court in Maganlal Chhaganlal v. Greater Bombay Municipality, AIR 1974 SC 2009 held that :
"It does not follow that merely because one procedure provides the forum of a Civil Court while the other provides the forum of an administrative tribunal, the latter is necessarily more drastic and onerous than the former."
The mere possibility of invocation of power under section 29 in a similar situation cannot be regarded as discriminatory.
20. It is not necessary that if once a notice under section 30 has been issued or if the Financial Corporation proceeds under section 31 of the Act, it cannot resort to section 29 of the Act. Section 29 gives a right to the Corporation to take over the management and/or the possession of the Industrial Concern, if there is default in the repayment of the loan amount. The Corporation has the choice, which is not wholly unguided, to resort to either of the procedures as provided under sections 29 and 31 of the Act. If the Corporation in the given case did not press the application under section 31 and proceeded under section 29, it cannot be said that such an action was illegal, as long as section 29 is a valid piece of Legislation. The Corporation has every right to proceed under section 29 unless it is shown that it acted arbitrarily or maliciously.
21. In the instant case, it was found by the Writ Court that no mala fides could be attributed to the respondent nor there was arbitrary exercise of power. Since the appellants had, firstly committed breach of the condition of loan and secondly, they had failed even to take steps to regularise the default and lastly, as the Industrial Unit was completely closed down and its partners were not taking interest in running the Unit, its machinery was not being looked after properly and further that the liabilities on the Unit were increasing every day, therefore, in such circumstances, if the immediate action was not taken by the respondent under section 29, the money advanced by the Corporation and also the money invested by the firm, could have gone waste, as such, the necessity was felt by respondent-Corporation of taking over possession of Unit.
22. The action under section 29 is an administrative action. Although, it is desirable that in a Statute, complete guidelines be provided in itself, when the administrative authority is to resort to a drastic procedure. But in the prevailing conditions of the modern society, it is now impossible for any Legislature to anticipate all such circumstances or to provide for all eventualities, in the Statute. Therefore, the Legislature can validly leave it to the discretion of the Executive Body to select a particular procedure. Such discretion, when conferred on the official agencies, it cannot be condemned, if the statute indicates some guidelines for the exercise of such a discretion. If the Act does not provide specific guidelines by way of specific provision, it would still not be arbitrary or discriminatory if those are inferrable from the preamble, surrounding circumstances and the provisions of the Statute.
23. In the circumstances, we are of the view that in this case, the Corporation acted with due care and caution and that it did not act arbitrarily or capriciously in taking possession of the Unit under section 29 of the Act. The learned Single Judge, of this Court, took note of all circumstances which had led the respondent to the application of section 29 of the Act. Therefore, the contention advanced by the appellants that the respondent could not resort to section 29 of the Act, has no merit and is rejected.
24. In this appeal preferred by the Corporation, the challenge is only to the part of the impugned judgment and decree in respect of the refund of excess amount and the payment of interest thereon, to the respondent-Unit. The learned Single Bench in that regard, in para 7 held that "the Corporation shall refund back the amount to the petitioner after deducting the principal sum of Rs. 3.11 lacs with interest and after giving a rebate of the amount, which has already been deposited by the Unit." Now it would be the matter of accounting for the parties. The deposited amount came to be mentioned as Rs. 94,951.74 paise, as such, a statement was made by the respondent unit in its application dated 1-9-1988 filed in the Writ Court. But the appellant-Corporation has very fairly submitted in this appeal that the Unit had deposited the amount of Rs. 1,03,196.56 paise. This amount may be settled. The Bench had in fact directed that the rebate be given by the Corporation of the amount deposited by the respondent-unit.
25. The Corporation has in its appeal claimed that it did not receive any surplus or the excess amount as it has further claimed the interest on the amount of interest which the learned Judge of the Single Bench in its discretion, did not allow. The discretion reasonably exercised by the Single Bench does not call for any interference. Regarding interest, the submission of the counsel, Shri R. D. Jain, for the respondent-Unit that though the Corporation had taken over the Unit on 15-1-1987, the interest on the excess amount was wrongly allowed to the respondent-Unit from the Corporation since 16-2-1987, is also misconceived. The learned Single Bench has allowed the interest on the excess amount after the transaction of sale of the Unit by auction was complete. As such, the date (16-2-1987) from which the interest has been allowed by the learned Single Bench can also not be faulted with.
26. On the foregoing discussion, we have found no substance in both the appeals. The accounting, in view of the order, be settled by the parties themselves as neither in the Writ Court nor before us, the accounts were submitted by the parties. Both the appeals are, therefore, dismissed.
27. In the facts and circumstances, there shall be no order as to the costs.