Calcutta High Court
Jagannath Business Service Pvt. Ltd. ... vs West Bengal Financial Corporation And ... on 28 February, 2007
Equivalent citations: AIR2007CAL117, AIR 2007 CALCUTTA 117, 2007 (4) ALL LJ NOC 603, 2007 (4) AKAR (NOC) 483 (CAL), 2007 A I H C (NOC) 367 (CAL)
Author: Girish Chandra Gupta
Bench: Girish Chandra Gupta
JUDGMENT Girish Chandra Gupta, J.
1. A notice dated 6th July, 2005 is the subject-matter of challenge in this writ petition. The facts and circumstances of the case briefly stated are as follows:
2. The respondent No. 1 the West Bengal Financial Corporation (WBFC for short) and the respondent No. 4 the West Bengal Industrial Development Corporation Ltd. (WBIDC for short) are both the mortgagees in respect of the immovable properties belonging to S.P. Cycles Limited situate at Narendrapur in the district of 24-Parganas (South). The respondent No. 4/WBIDC advertised a sale notice intending to sell the fixed assets of the aforesaid S.P. Cycles Ltd. on terms and conditions available with the Follow Up and Recovery Division. Intending purchasers were to submit their tender to be opened on 10th November, 1997. The writ petitioner's offer to purchase the assets at a sum of Rs. 69 lakhs was accepted by WBIDC by its letter dated 9th February, 2000. The sum of Rs. 69 lakhs included down payment of a sum of Rs. 17.25 lakh, payable within a period of 45 days and the balance sum of Rs. 51.75 lacs was payable in 12 quarterly installments commencing from 30th June, 2000. There was a default clause which provided as follows:
In case of consecutive default in payment of any of the above installments, this offer of sale shall stand withdrawn.
3. According to the petitioner after the down payment was made the WBIDC for the first time disclosed that portions of the property belonging to S.P. Cycles Ltd. was in possession of Sen and Pandit Electronics Private Limited pursuant to a permission granted by WBIDC. The case of the petitioner in paragraph 12 of the petition is that "The WBIDC wrongfully and with ulterior motives suppressed the said agreements dated 2nd May, 1989 and the creation of leave and licence by the S.P. Cycles Limited in favour of Sen & Pandit Electronics P. Ltd." On 5th May, 2000 a joint meeting was held which was attended by the representatives of S.P. Cycles Ltd., Sen & Pandit Electronics P. Ltd., WBIDC and the petitioner No. 1. In the meeting the fact that the property had been agreed to be sold to the petitioner was discussed and/or disclosed by the WBIDC. The petitioner thereafter, as would appear from paragraph 15 of the petition, made repeated demands for possession of the property which was ultimately given to the petitioner on 10th July, 2000 on 'AS IS WHERE IS BASIS'. A certificate of possession duly signed by both the parties is annexure 'P-7' to the writ petition.
4. WBIDC has disclosed in its affidavit a letter dated 13th November, 2000 by which the writ petitioner sought for a moratorium of payment for a year. It would be appropriate to notice the letter in extenso which reads as follows:
In response to the letter given by the Financial Controller cum Secretary of your department, we would like to draw your kind attention that we have requested you for balance payment one year moratorium from the date of our down payment and your goodself has agreed for nine months moratorium which is up to 31 st March, 2001. We would like to inform you sir and we hope that we will be able to pay your installment as well as the interest in time. A xerox copy of the letter of the Financial Controller cum Secretary has been enclosed.
5. WBIDC in its affidavit-in-opposition in paragraph 4 (XV) has alleged as follows:
The petitioners, however, through their letter dated 13-2-2002 informed that some scrap materials sold at Rs. 1.50 lac and deposited 1.75 lac with WBIDC against the balance 75% of the sale price, without, however, informing the financial institutions about the details of the fixed assets disposed of, so far, as such, by the petitioners till today.
6. The writ petitioner in its reply, affirmed by Sri Ratan Maruthia on 15th September, 2005 has alleged as follows:
With regard to the contents of paragraphs 4(xiii) to 4(XIX) of the said affidavit, it is denied that there has been any default in making payment of installment as alleged or at all. It is denied that any installment is payable till such time vacant possession of the said property is given to the petitioners. It is denied that any plant and machinery has been disposed of by the petitioners without notice or knowledge of the respondents as alleged or at all. Such allegations are false, untrue and incorrect and as such the respondents are put to strict proof of such allegations. It is relevant to note that no particulars of such alleged machinery purported to have been sold by the petitioners have been provided. I repeat and reiterate that any plant and machinery or any scraps were sold by the petitioners as alleged or at all. No copy of the said purported letter dated 13th April 2002 has been disclosed as such I reserve my right to comment thereon at the appropriate time and upon such letter being disclosed. It is denied that there is any ulterior or oblique motive on the part of the petitioners as alleged or at all.
7. It is not however in dispute that apart from a total sum of Rs. 20 lacs including the down payment of Rs. 17.25 lacs no other or further payment was made by the writ petitioner. The three years period for making payment in 12 quarterly installments expired on 30th June, 2003. WBIDC in the circumstances, by a letter dated 19/21st July, 2004 gave the following ultimatum.
Your company is, therefore, advised to pay the entire dues as above to this Corporation within one month from the date of receipt of this letter, failing which the offer of sale of the asset shall stand withdrawn, the down payment made by your company would be forfeited and the assets handed over to you would be taken possession of by this Corporation without any further notice to your Company.
8. The petitioner did not however make any payment pursuant to the aforesaid letter or at all. The writ petitioner shortly thereafter appears to have filed a Title Suit being No. 79 of 2004 seeking specific performance of the contract and perpetual injunction restraining WBIDC, S.P. Cycles, P. Ltd., Sen & Pandit Electronics P. Ltd. from re-selling the property in question and other and further reliefs which are not necessary to be noticed for our present purpose. An ex parte ad interim order of injunction was passed which was subsequently directed to be continued and is still continuing.
9. The petitioner has disclosed letters commencing from 14th January, 2002 appearing at pages 150-155 of the writ petition containing demands made by WBFC for payment and in default thereof proposing to take measures for recovery. These letters, four in number, do not appear to have been replied to by the writ petitioner. WBFC in the circumstances took over possession of the assets on 21st March, 2005 and sold the same to a third party at a sum of Rs. 1 crores 40 lacs. The writ petitioners challenged the aforesaid action of WBFC by way of a writ petition which was registered as W.P. 6567 (W) of 2005 wherein an order dated 30th March, 2005 was passed granting liberty to the petitioners to take back possession with the help of police. Directions were also issued for filing affidavits. WBFC preferred an appeal. Before the Appellate Court the third party purchaser intervened and refused to be involved in the complications and insisted upon cancellation of the sale and refund of the consideration paid to WBFC. The sale in the circumstances was set aside; the consideration paid was refunded to the third party and the writ petition was also disposed of granting liberty to the parties to take steps as they may be advised. The Appellate Court has, however, expressed its displeasure against the ad interim order dated 30th March, 2005 in the following words.
We have seen the order dated 30th March, 2005 passed by the learned Judge of the Writ Court. Apart from the question of maintainability of the writ petition on the basis of the dispute between the parties involving number of questions of fact the question which disturbed us most is that, by the order under appeal the learned Judge of the Writ Court directed by way of a mandatory interim direction restoration of possession of the property in question in favour of the writ petitioners from the possession of some other party, who was not before the writ Court.
10. After the sale was made and unmade, after possession was taken and given back, the WBFC has issued the notice dated 5th July, 2005 seeking to re-possess the entire assets, both movable and immovable, on 20th July, 2005. The notice dated 5th July, 2005 was challenged in the present writ petition. An ad interim order dated 19th July, 2005 was passed staying the operation of the notice dated 5th July, 2005. The writ petition was dismissed for default on 29th March, 2006. The writ petition was restored to its original number and file by an order dated 3rd April, 2006. However, possession of the unit had already been taken during the interregnum by the WBFC.
11. The grievance of the writ petitioner against the notice dated 5th July, 2005 as would appear from paragraphs Nos. 46-49 of the writ petition are as follows:
(a) The petitioner did not take any loan or credit facility from WBFC and WBIDC and therefore neither Section 29 nor Section 31 of the State Financial Corporation Act would apply.
(b) In any event the notice is misconceived and the demands made were illegal because the financial institutions cannot insist upon payment without ensuring vacant possession of the property sold to the petitioners.
(c) Demand for a sum of Rs. 74,22,259.31/- on account of interest is unconscionable and mala fide.
(d) WBFC is seeking to repeat its illegal and wrongful dispossession.
12. Mr. Saptangshu Basu, learned Advocate appearing for the writ petitioner has not disputed the fact that the WBFC is a mortgagee in respect of the property in question. His contention however is that Section 29 of the State Financial Corporation Act has no manner of application to the facts of this case. In support of his submission he relied on a Division Bench judgment of the Kerala High Court in the case Kaveri Meat Export Ltd. v. Kerala Financial Corporation wherein the following view was expressed.
Section 29 will apply only to the industrial concern which has pledged, mortgaged or hypothecated or assigned any of its right in a property to the Corporation. It does not apply to any property transferred by the Corporation to a third party. Of course, it is open to the Corporation to resort to the civil remedy for enforcing its unpaid vendors' lien.
13. His second contention is that the terms and conditions of the sale disclosed by the WBIDC in its affidavit was never made available and therefore the same is not applicable to the present case.
14. His third submission is that installments were not paid because possession of the property in its entirety was not made over to the petitioner.
15. Finally he submitted that in order to buy peace his client is willing to pay the balance amount.
16. Mr. A.K. Dhandhania, learned Advocate appearing for WBFC submitted that dues of the West Bengal Financial Corporation as on 30th June, 2000 were about Rs. 1,91, 16, 103/- as stated in paragraph 4(b) of the affidavit affirmed by Nilojit Bhattacharyay on 23rd August, 2005 which must have shot upto more than Rs. 4 Crores by lapse of time and it was no longer possible for WBFC to accept the offer of the writ petitioner at this stage considering the fact that there are buyers who are willing to buy the property at Rs. 4 Crores.
17. He further submitted that the payment made by the writ petitioners may however be refunded to them from out of the sale proceeds of the unit. He disputed that Section 29 of the State Financial Corporation Act is not applicable to the case in hand. Accordingly WBFC is entitled to exercise its right to sell the property for recovery of its dues and the impugned notice is valid and legal.
18. The learned Advocate for WBIDC disputed that the terms of sale were not made available to the writ petitioners. According to him the sale was on 'as is where is basis' and there was no obligation on the part of WBIDC to give vacant possession of the entire property to the petitioner. According to him the aforesaid basis of agreement was clearly realised by the writ petitioner and was also acted upon. The contract according to him is no longer in force.
19. The following questions in my view arise for determination.
(A) Did WBIDC undertake to give vacant possession of the entire immovable property to the petitioners?
(B) Is the contract of sale between the petitioners and WBIDC subsisting?
(C) Is WBFC entitled to sell the property for recovery of its dues?
(D) Is the notice dated 5th July, 2005 issued under Section 29 of the State Financial Corporation Act valid and legal?
20. I shall take up the issues in the order they have framed.
A:
The advertisement published in the newspapers by WBIDC inviting tender for sate of the assets of the S.P. Cycles Ltd. goes to show that sale was intended on the terms & conditions available with the Follow Up and Recovery Division I. The copy of the terms & conditions of the sale has been disclosed by WBIDC in its affidavit in opposition which goes to show that the property was put up for sale on 'AS IS WHERE IS BASIS' subject to statutory dues/government dues. The petitioner alleges that the copy of the terms and conditions was never made available to it which assertion is denied by WBIDC. The fact remains that the notice inviting tenders refers to the terms and conditions. It is, therefore, difficult to believe that the terms and conditions of sale were not disclosed to the writ petitioners. When the terms and conditions have been referred to in the notice inviting tenders the petitioners shall be deemed to have notice of the terms and conditions. Particularly when no grievance with regard thereto was contemporaneously made. In any event there are other pieces of evidence which have the effect of clinching the issue. It would appear from paragraphs Nos. 11,12 and 13 and 14 of the writ petition, that by 5th May, 2000 the petitioner was fully aware that the portions of the property was in possession of Sen and Pandit Electronics Private Ltd. If the petitioners proceeded on the basis that WBIDC was obliged to give vacant possession of the entire property it should not have insisted upon possession being made over of part of the property. Paragraph 15 of the petition goes to show that the petitioner made repeated demands for possession. Ultimately on 10th July, 2000 possession was given to him on 'AS IS WHERE IS BASIS'. The petitioner has unconditionally signed the possession certificate. The petitioner now seeks to get rid of the possession certificate by alleging in paragraph 9 of the affidavit in reply affirmed on 15th September, 2005 that signature of the petitioner was wrongfully and illegally obtained on the possession certificate, a copy whereof is annexure 'P-7' to the writ petition.
21. Further evidence in this regard is the petitioners' unconditional undertaking to pay contained in its letter dated 13th November, 2000 noticed above. If WBIDC was obliged to make over vacant possession to the writ petitioner and the writ petitioner was not obliged to pay the agreed consideration unless vacant possession was made over to him in its entirety, as is his case noticed above, he should not have written the letter dated 13th November, 200 because default in making over vacant possession had already been taken place on 10th July, 2000. The writ petitioner not only took possession of the property in question, but also sold some portion of the movables. The case of the WBIDC in this regard and the petitioners' reply thereto have been set out here-inabove. It would appear that the case of the petitioner is that movable assets were not sold without knowledge or notice of the WBIDC. Therefore, the sale of the movables by the petitioner is not in dispute. I, therefore, am of the view that the issue must be answered in the negative.
B:
22. The default clause contained in the letter dated 9th February, 2000 has already been set out hereinabove. Not only that there has been consecutive defaults in making payment but also no payment whatsoever was made except for a sum of Rs. 20 lacs, although time to make entire payment expired in the month of June, 2003.
23. Irrespective of any default clause further time was given to the writ petitioners by WBIDC by its letter dated 19th /21st July, 2004 noticed above. In spite thereof the writ petitioner did not make any payment. The letter dated 19th /21st July, 2004 clearly recited that if the payment were not made within a month the deposit would be forfeited and possession would be taken back. Therefore consequent to the breach on the part of the petitioner the contract was put to an end by WBIDC to the notice and/or knowledge of the petitioner as would appear from paragraphs 25 and 28 of the plaint filed in T.S. No. 79 of 2004 for specific performance of the contract. Therefore this issue is also answered in the negative.
C:
24. Mr. Saptangshu Basu, learned Advocate appearing for the petitioner has not disputed the fact that the WBFC is a mortgagee of the property in question. A mortgagee is clothed with legal right to put up the mortgaged property for sale and to recover its dues. The Division Bench judgment in the case of Kavery Meat Export Ltd. (supra) relied upon by Mr. Basu does not lend any assistance for the simple reason that the properties in that case were sold by WBFC itself in exercise of its right as a mortgagee and it is in the peculiar facts of that case that it was held that steps could not be taken against the purchasers under Section 29 of the State Financial Corporation Act. Once it is accepted that WBFC is a mortgagee in respect of the properties in question right of the WBFC under Section 29 to proceed against the mortgaged properties cannot be disputed. WBFC has a choice to proceed either under Section 29 or under Section 31 but the writ petitioner cannot take any exception to steps under Section 29 initiated by WBFC. In the case of Rose Potteries v. W.B. Financial Corporation it was held that "the provisions of Section 29 are similar to the power given to a mortgagee under Section 69 of T.P. Act."
25. Even without taking into consideration the views expressed above, in answer to issues Nos. A and B, the general law of the land is that a purchaser of a mortgaged property, in law, purchases the equity of redemption.
26. In the present case at the highest the petitioner contracted to buy the mortgaged property. The petitioner has been seeking to specifically enforce the contract but is not agreeable nor has offered to redeem the property by paying the dues of WBFC. In the premises the right of WBFC to sell the property for recovery of its dues cannot be questioned. The issue is accordingly answered in the affirmative.
27. For the reasons discussed above, answer to issue No. D, I am firmly of the view, must be in the affirmative.
28. The writ petition accordingly fails and is dismissed with costs assessed at 600 G.Ms. to be equally shared by the respondents Nos. 1 and 4.
29. Urgent certified copy of this judgment, if applied for, be supplied to the learned Advocates for the parties upon compliance of all formalities.
Later
30. The learned Advocate, for the petitioner, prays for stay of operation of the judgment/order. Such prayer is considered and rejected.