Madras High Court
M/S.Chennimalai Yarns (P) Ltd vs The State Industries on 30 March, 2010
Author: Chitra Venkataraman
Bench: Chitra Venkataraman
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 30.03.2010
CORAM:
THE HONOURABLE MRS.JUSTICE CHITRA VENKATARAMAN
W.P.No.4864 of 2009
M/S.CHENNIMALAI YARNS (P) LTD.
REP.BY ITS MANAGING DIRECTOR P.M.RAMASAMY
OFFICE AT CHENNIYANGIRI VALASU
MUKASIPIDARIYUR POST
CHENNAIMALAI 51
ERODE DISTRICT. .. PETITIONER
Vs
1 THE STATE INDUSTRIES
PROMOTION CORPORATION OF TAMILNADU LTD.
REP. BY MANAGING DIRECTOR
NO.19-A RUKMANI LAKSHMIPATHI ROAD
CHENNAI-8.
2 SPECIAL TAHSILDAR
RECOVERY SIPCOT
NO.19-A RUKMANI LAKSHMIPATHI ROAD
CHENNAI-8.
3 TAMILNADU INDUSTRIAL INVESTMENT
CORPORATION
PERUNDURAI ROAD
ERODE.
4 N.SUBRAMANIAN
ADI GARMENTS
NO.1 KPN COLONY 5TH STREET
TIRUPUR-641 601.
5 THE SUB REGISTRAR
OFFICE OF THE SUB REGISTRAR
CHENNIMALAI
ERODE. .. RESPONDENTS
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Prayer: Writ petition filed under Article 226 of the Constitution of India for the issue of a writ of Declaration to declare that the tender process which was held on 18.10.2007 by calling for tender and the undated private negotiation between the first respondent and the fourth respondent based in the publication in the Tamil daily Dina Thanthi Kovai edition dated 7.10.2007 falsely stated by the first respondent as 10.1.2007 being item No.2 property in respect of sale of the property of the petitioner company which constitutes all the piece and parcel of land survey fielf No.203 (Part) situated in Chenniyangiri Valasu (Hamlet), Mukasipidariyar Post, Chennimalai, Perundurai Taluk, Erode District, land of an extent of acre 3.78 cents together with the superstructure thereon with a built up area of 28,685 sqpare feet, together with the plant and machinery as null and void and to consequently direct the first and second respondents to cancel the sale in favour of the fourth respondent herein and order for fresh sale.
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For petitioner : Mr.A.Palaniappan
For 1st respondent : Mr.M.Devaraj
For 3rd respondent : Mr.A.Ramesh Kumar
For 4th respondent : Mr.B.Ravi Raja
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ORDER
The petitioner herein availed of finance facilities from the first respondent herein for a sum of Rs.150 lakhs repayable in 24 quarterly instalments. The said loan was sanctioned on 30.1.1995. The petitioner agreed to pay interest at 16% per annum with a default clause of interest payable at 5% per annum with a moratorium period of two years. Admittedly, on the petitioner committing the default in the payment of the principal as well as interest, under proceedings dated 21.4.1998, the loan account was foreclosed. On the date of foreclosure, the petitioner had to pay Rs.111.58 lakhs with interest at Rs.15,00,172/-. It is not denied by the petitioner that after the foreclosure notice, nothing progressed from the part of the petitioner as regards the payment of the defaulted sum. Consequently, the first respondent took proceedings under the provisions of the State Financial Corporation Act, 1951 and issued possession notice on 13.6.2002. The possession was taken on 9.8.2002. In the meantime, the petitioner initiated proceedings before the B.I.F.R., on account of which, the first respondent did not bring the property for sale. Under proceedings dated 23.11.2005, the proceedings before the B.I.F.R. came to an end. Consequent on that, the first respondent brought the property for sale through public auction by causing advertisement in the newspapers dated 11.6.2006. The valuation was done as regards the property at Rs.159.02 lakhs which covered the land, building, plant and machinery. Since there were only two offers and that too were very low, the auction was not conducted as proposed. Once again, the property was brought for sale through advertisement by tender cum auction proceedings on 7.10.2007. There were four offers from one N.Subramanian for Rs.72 lakhs, C.Sivasubramaniam at Rs.50.40 lakhs and K.V.Tex at Rs.47.70 lakhs for the entire assets and from Jesus Enterprises at Rs.28.53 lakhs for plant and machinery alone. Since the bid amount quoted by three of the tenderers were very low when compared to the total valuation of Rs.175.37 lakhs, the first respondent called upon the highest bidder namely, the fourth respondent, to improve his offer. After negotiation, the fourth respondent offered to pay a sum of Rs.127 lakhs, apart from meeting the statutory dues.
2. In the tender form submitted, Originally, the fourth respondent restricted his offer excluding the statutory dues; yet, on the negotiation done, he agreed to pay the statutory dues, apart from paying Rs.127 lakhs as consideration to the first respondent. The first respondent accepted the said offer and by proceeding dated 18.6.2008, the Board passed a resolution confirming the said offer as recorded in its office note dated 18.11.2008.
3. It may be noted that the petitioner had also borrowed money from TIIC, the third respondent in the writ proceedings. The first respondent informed the third respondent as to the steps taken and on receipt of the sale consideration from the fourth respondent, it settled the dues of the third respondent.
4. It is seen from the records that the fourth respondent has also settled the statutory dues by paying the dues to the Commercial Tax Department, EPF and other statutiory dues. In the background of the said facts, on the fourth respondent making the payment to the first respondent on 10.11.2008, the sale deed in respect of the immovable property was executed on 16.3.2009 in favour of the fourth respondent by the first respondent. The executed sale deed was handed over to the fourth respondent on 17.3.2009.
5. The petitioner, the owner of the land and building and plant and machinery and had given it as security to the first respondent in respect of the term loan availed of, submits that the tender proceedings and the sale are writ with illegalities on account of the mala fide conduct of the first respondent and consequently, aggrieved by the same, has approached this Court under Article 226 of the Constitution of India. The petitioner states that when compared to the value of the property and the value made by the first respondent, the price offered by the fourth respondent is very low and constituted only 72%. Hence, the property was sold for a sum prejudicial to the interest of the petitioner. Hence, the petitioner states that the unfair practice in the conduct of the sale demands that the sale be set aside.
6. It is further contended before this Court that there is no transparency in the conduct of the proceedings by the first respondent as regards the sale or as regards the negotiation which went on between the first respondent and the fourth respondent and in the said proceedings, the other secured creditor namely, the third respondent, was not involved at all. In the background of the said facts, the sale proceedings are illegal and hence, liable to be set aside.
7. The petitioner further submits that the petitioner got the notice as regards the price offered by the fourth respondent and the number of persons participated in the auction only through an application made under the Right to Information Act and after the receipt of the said information, the petitioner interacted on the same only to find that the offer made by the fourth respondent and accepted by the first respondent at Rs.127 lakhs was a mismatch to the valuation done. The advertisement effected carried no details as regards the valuation done and that there was no sufficient notice as to the proposed auction. The petitioner further submits that in the absence of proper publicity made, substantial prejudice has been caused to the petitioner. In these circumstances, the petitioner sought for a writ of Declaration declaring the tender process held on 18.10.2007 based on the advertisements in the Tamil Daily Dinathanthi Kovai Edition on 7.10.2007 to bring the property of the petitioner back to sale as null and void and to consequently direct the first and second respondents to cancel the sale in favour of the fourth respondent and order for fresh sale.
8. On notice, the first respondent has filed a counter affidavit denying the allegations. It is stated that as regards the first advertisement, since there were only two offers received and which were also very low, namely, the offer of Rs.63 lakhs from one N.Subramanian and Rs.35 lakhs from one M.Santhameena for the property valued at Rs.159.02, the first respondent thought fit to reject the same and subsequently, once again, the property was advertised for sale under the tender cum auction notice on 7.10.2007. Since the offer quoted by the fourth respondent was at Rs.72 lakhs, which was the best offer, the said party was called upon to improve his offer and he ultimately improved his offer to a sum of Rs.127 lakhs, which was accepted by the Board as a good price.
9. The first respondent states that in spite of several notices, the petitioner never responded to clear the dues and even after having come to know about the demand to clear the dues, the default continued. Hence, after issuing the foreclosure notice issued as early as 1998, possession taken in the year 2003. In any event, having regard to the fact that it was open to the petitioner to repay the loan within 7 days of the publication, or in the alternative, to assist the first respondent in securing the best price, the petitioner adopted a non-cooperative attitude did nothing to either repay or participate at the time of the auction. Hence, on the basis of the negotiation that went on between the highest bidder and the Board, the second respondent arrived at a sale consideration of Rs.127 lakhs. The first respondent further pointed out that the petition filed by the petitioner before the B.I.F.R. was rejected on 23.11.2005. Hence, with the amount remaining outstanding and with no progress from the side of the petitioner to repay the dues even after repossession, the only course open to the first respondent was to bring the property for sale.
10. It is contended in the counter affidavit that there are no materials to support the allegation that there was no fair play in the conduct of the auction proceedings in the matter of valuation and acceptance of the offer by the fourth respondent at Rs.127 lakhs. In this background of the facts which are evident from the records, the first respondent submits that the petition has to be dismissed.
11. It is seen from the records produced before this Court that by order dated 30.3.2009 in M.P.No.1 of 2009, this Court passed an order of status quo to be maintained, considering the allegations made by the petitioner and the prayer of the petitioner to forbear the first respondent from executing any sale deed and register the same in favour of the fourth respondent.
12. On the order passed by this Court dated 30th March 2009, the petitioner sent a telegraphic communication as well as a letter to the respondents herein informing about the status quo order passed by this Court. However, the sale deed was registered on 16.3.2009 which resulted in a contempt petition filed before this Court by the petitioner herein.
13. Subsequent to the registration of the same, a modified order was passed on 6.7.2009, wherein, this Court held that having regard to the registration of the document in favour of the fourth respoindent, taking note of the balance of convenience and the need for protecting and safeguarding of the property in question, the order of status quo was modified and this Court directed the fourth respondent to take control of the property and protect and safeguard the same till the final disposal of the writ petition.
14. By order dated 5th August 2009 in Contempt Petition 505 of 2009, this Court pointed out that the document was presented before the fifth respondent on 3.4.2009 and was registered on 15.4.2009. It is seen from the order in the contempt petition that although there was disobedience of the order of this Court in presenting and registering the document, yet, without going into the question whether the disobedience was wilful or wanton, taking note of the modification order, learned single Judge directed the main writ petition to be posted for hearing.
15. It is a fact that as of today, the first respondent is not in possession of the property and the fourth respondent had already taken possession of the same. The petitioner does not deny this. Taking me through the averments in the writ petition as well as in the counter affidavits, learned counsel for the petitioner raised an issue that when the entire proceedings are writ with mala fides, the petitioner is entitled to come before this Court with the writ petition under Article 226 of the Constitution of India seeking necessary relief.
16. In this regard, learned counsel for the petitioner placed reliance on the decision reported in (2004) 7 SCC 166 (S.J.S. Business Enterprises (P) Ltd. Vs. State of Bihar and others) that where the auction proceedings suffer from irregularities and the sale itself is for a price much below the upset price, the absence of the other bidders in the negotiation table takes away the transparency from the conduct of the sale. He further pointed out that there was no fair play either in the publication of sale or in the conduct of the auction proceedings. He further pointed out that in the context of the decision reported in (2004) 7 SCC 166 (S.J.S. Business Enterprises (P) Ltd. Vs. State of Bihar and others), when the proceedings are writ with mala fides, the mere existence of an alternative remedy does not stand in the way of this Court exercising its jurisdiction under Article 226 of the Constitution of India. He pointed out that the first respondent must act in accordance with law in a fair and reasonable manner, failing which, the action of the first respondent is amenable to writ jurisdiction.
17. In the absence of any attempt to secure a good price by causing adequate publicity to ensure maximum participation by the bidders, the mere acceptance of the offer of the fourth respondent is of no indication that the conduct of the auction proceedings was proper. Hence, as held by the Apex Court, this Court is bound to interfere in such a case of mala fide action and protect the interest of the borrowers like the petitioner. He pointed out that there are hardly any material in the files to show that there was a proper publication. Referring to the bid document from the fourth respondent containing the hand-written note at the bottom of the tender document that the price quoted did not include the statutory dues and that the fourth respondent had expressed his unwillingmess to pay the statutory dues as contrary to the terms of the auction notice and comparing the same with the copy of the said document filed in the typed set of papers before this Court not carrying any such statement, the petitioner pointed out that the original containing the hand-written statement is an after-thought and hence unreliable. He pointed out that at the time of the price negotiation taking place between the fourth respondent and the first respondent, the head of the Committee was absent and that this vitiates the entire proceedings.
18. He further pointed out that with TIIC as a major secured creditor and with no participation, the chances of getting the best price thus not there, the proceedings are one-sided and prejudicial to the rights of this petitioner. Apart from this, he pointed out that the sale deed is silient about when the fourth respondent paid the sale consideration and complied with the terms of the auction and even before the full consideration was passed, possession was handed over and the sale deed was executed only thereafter. Adding to this illegality, on the aspect of registration by the first respondent of the sale deed in favour of the fourth respondent, he pointed out that this Court had granted a status quo order as early as 30.3.2009 and the parties were informed about the order passed by this Court immediately. In spite of this, for reasons best known, there was a rush for registration of the document, a fact which cannot be lost sight of in assessing the mala fide nature of the conduct of the parties herein. In this background, he submitted that the conduct of the parties right from the tender proceedings to the date of registration of the document, the manner of negotiation, the lack of transparency in the conduct of negotiation and the acceptance of the price which is 72% of the valuation done, lead to an irresistible conclusion that the proceedings are writ with mala fides and merits to be interfered with by this Court.
19. In support of his contention, learned counsel for the petitioner placed reiance on the decision reported in (2004) 7 SCC 166 (S.J.S. Business Enterprises (P) Ltd. Vs. State of Bihar and others) as to the jurisdiction of this Court to interfere with the proceedings. He referred to the decision reported in (1993) 2 SCC 299 (U.P. Financial Corporation Vs. Gem Cap (India) Pvt. Ltd. and others) and (1988) 1 SCC 166 (Haji T.M.Hassan Rawther Vs. Kerala Financial Corporation) in support of his plea that when the respondents had not been disclosed the details of the private negotiation and hence lacking in transparency, apart from there being no public auction as originally proposed, the sale consideration reached on the private negotiation and the sale deed thus executed have to be set aside by this Court.
20. He further referred to the decision reported in 2002 (1) CTC 503 (Haryana Financial Corporation and another Vs. Jagdamba Oil Mills and another) in support of his contention that when on a comparison of the valuation of the property, the one arrived at as offered by the fourth respondent indicated lack of fair play, this Court's jurisdiction is not ousted; wherever the conduct of the proceedings is writ with mala fides, judicial review of such action is available to an aggrieved party. Learned counsel further referred to the decisions reported in (2005) 4 SCC 456 (Karnataka State Industrial Investment & Development Corpn. Ltd. Vs. Cavalet India Ltd. and others) and 2002 (1) CTC 503 (Haryana Financial Corporation and another Vs. Jagdamba Oil Mills and another) that, when there is a violation on the part of the statutory corporation or when there is unfairness and unreasonableness in the action of the statutory corporation , then under the above two circumstances,the Court is bound to interfere with the action taken by the statutory corporation. In the background of the said decisions, he prayed that the action of the first respondent be set aside.
21. Per contra, learned counsel appearing for the first respondent, bringing out the various aspects of the sale right from the date of borrowing made by the first respondent and to the possession taken thereafterwards and the auction done twice, took me through the files and the Board Resolution indicating the confirmation on the offer made by the fourth respondent as well as to the intimation to TIIC as regards the sale and the realisation of the amount. He also pointed out to the relevant documents before this Court as regards the deliberations that had taken place between the fourth respondent and the first respondent in the matter of arriving at the best price.
22. To the specific allegation made by the learned counsel for the petitioner to the photocopy of the tender document furnished to the Court not containing the written portion, he pointed out to the defective photocopying of the document produced before this Court and showed the original only to state that the photocopy was a defective one and the absence of the written portion in the photocopy filed before this Court was an inadvertent mistake. Further, there was no need for misleading anyone on this written portion, wherein, the fourth respondent, at the time of placing the bid, stated his reservation on paying the sale tax dues. Hence, the original produced before this Court containing the writing by hand by the fourth respondent clearly belies the contention as regards the allegation of mala fides. He further pointed out to the deliberations, wherein, subsequently, the fourth respondent had untertaken to pay the statutory liability and in fact, had paid the same. In these circumstances, it is not open to the petitioner to attribute motive and there is no material to substantiate the allegations on this aspect indicative of mala fides.
23. He pointed out that the fourth respondent had paid the sale consideration as agreed and had also paid the statutory dues. The documents available show that the petitioner had not cooperated at any point of time either on receipt of the possession notice or even thereafter to participate in the conduct of the auction, as required under the publication effected. In the above circumstances, the contention of the petitioner does not merit any consideration before this Court.
24. Placing reliance on the decision reported in (2005) 4 SCC 456 (Karnataka State Industrial Investment & Development Corpn. Ltd. Vs. Cavalet India Ltd. and others), he pointed that when there are no unreasonableness or unfairness in the conduct of the proceedings, and as evident from the documents produced before this Court, the fourth respondent had also improved on the price offered to match the valuation to enable the first respondent to get the maximum price, as pointed out by the Apex Court, the question of substitution of the price to the one arrived at after deliberation does not arise in this case. There are no merits in the contention of the petitioner and hence, the writ petition is liable to be dismissed.
25. Heard learned counsel appearing on either side.
26. I have perused the files produced before this Court. I am satisfied that the allegations are not supported by any materials. I am not in a position to find any material to support the plea of the petitioner that the proceedings are writ with mala fides. Going through the records, I am at a loss to find any material or circumstance to support the contention that the respondents acted mala fide and in an unfair manner which causes serious prejudice to the petitioner.
27. the Apex Court pointed out in the decision reported in (2004) 7 SCC 166 (S.J.S. Business Enterprises (P) Ltd. Vs. State of Bihar and others) that in matters of sale by the State Financial Corporation, interference is warranted only in cases where the action was unfair or unreasonable or was in violation of any statutory provision. The Supreme Court pointed out that the presumption that public officials will not discharge their duties honestly and in accordance with the law may be rebutted by establishing circumstances which reasonably probablize the abuse of that power. In such circumstances, it would be for the officer concerned to explain the circumstances set up against him. The Apex Court further pointed out that in the matter of sale under Section 29, the reasonableness of the action taken by the State Financial Corporation has to be tested against the dominant consideration to secure the best price for the property to be sold. The Apex Court further pointed out that there must be material to show that adequate publicity was effected to ensure maximum participation of the bidders, apart from the fact that there are no extraordinary circumstances which vitiates the sale notice. In the decision reported in (1993) 2 SCC 299 (U.P.Financial Corporation Vs. Gem Cap (India) Pvt. Ltd.), the Apex Court pointed out that while there can be no doubt that the Corporation has to act within the four corners of the State Financial Corporation Act, 1951 and in furtherance of the object underlying the same, yet, the said fact cannot be carried to the extent of obligating the Corporation to revive and resurrect every sick industry irrespective of the cost involved. The Supreme Court further pointed out that fairness is not a one way street, more particularly in matters where the borrower fails to honour the commitment, that fairness required of the Corporation cannot be carried to the extent of disabling it from recovering what is due to it. The obligation to act fairly in an administrative authority was evolved to ensure fair play and prevent failure of justice. The Apex Court further pointed out that where the proceedings are done in a fair and just manner, the Court will not substitute its view to the judgment of the administrative authorities. Only when the action of the administrative authority is unfair or unreasonable that no reasonable person would have taken such a decision, the Court would interfere.
28. Keeping the law declared by the Apex Court in the background, the allegations need to be considered with reference to the materials available on record. It is an admitted fact that the petitioner committed default in repayment of the amount due. The payment schedule started after two years moratorium immediately on taking of the loan in the year 1995. On the admitted position that the petitioner did not repay the loan nor took steps to settle the amount even by way of a one time settlement, possession notice was given on 13.6.2002 and possession was taken on 9.8.2002. Till the date the B.I.F.R. rejected the petition of the petitioner in the year 2005, the first respondent did not do anything to enforce its charge on the property. It is not denied by the petitioner that only on the default persisting that the first respondent went in for auction of the property by causing publication in the daily newspapers as early as 11.6.2006. A reading of the said tender-cum- auction notice shows that it contained a notice to the owner of the property namely, the defaulter, calling upon him to settle the arrears within seven days. By means of the publication, the first respondent had informed that in any event, defaulter was required to be present at the time of action, to witness the conduct of the auction proceedings, and to assist the first respondent in the matter of securing the best price. In default of the same, the SIPCOT would be at liberty to sell the property to the highest bidder at its discretion. It is not denied that the petitioner had knowledge of the notice issued in the year 2006. The first respondent could not progress anywhere on the basis of this notice for the simple reason that there were not enough offers. It is pointed out that the second publication was made giving tender-cum- auction notice in the Erode Edition of Dina Thanthi dated 7.10.2007. The conditions stated in the second auction notice is no different from the first one, wherein, as regards the participation in the tender-cum-auction proceedings, it was stipulated that the purchaser has to agree for paying the statutory liability. As far as the borrower is concerned, as in the earlier notice, it called upon the defaulter to settle the amount within seven days from the date of publication. In any event, the borrower was required to be present to witness the conduct of the auction and to assist the first respondent in getting the maximum price for the property auctioned. In the event of a default from the side of the borrower in not choosing any of the courses stated, it was open to the first respondent to go ahead with the sale by accepting the maximum price.
29. The petitioner contends that he had no knowledge of all these proceedings and hence, a letter was addressed by him on 6.11.2008, pointing out to the publication in the daily newspapers in the years 2006 and 2007 and sought for information as to who were the participants in the tender, the amount quoted therein, the amount for which the sale was confirmed, the person in whose favour the sale was confirmed and as to why the first auction was cancelled. The petitioner sought for details as regards the first tender notice as well as the second tender notice. Accordingly, by proceedings dated 24.12.2008, the petitioner was informed that on the advertisement, the auction could not go for any fruitful result on account of the fact that the bid amount was very low and that on the second advertisement effected, there were four bidders, of whom, the offer made by the fourth respondent was the highest. The said intimation under the Right to Information Act also shows that after the negotiation with the highest bidder, the bid amount was raised to Rs.127 lakhs and the bidder also paid the entire amont to SIPCOT. The petitioner had had due notice of the publication in the news papers both as regards the first notice of auction as well as to the second notice. The petitioner cannot deny the same, they being through widely circulated papers. The petitioner's letter also makes a reference to the same. Hence, the contention of the petitioner that it had no notice of the same cannot be accepted as a true statement.
30. As regards the negotiations that went on between the first respondent and the fourth respondent, it is relevant to note that the correspondence between the first respondent and the fourth respondent available in the document produced before this Court, reveal that there had been a serious deliberation on the price quoted by the fourth respondent which was subsequently improved. The documents produced before me shows that in the first auction conducted in the year 2006, the value fixed as regards the property brought for sale was arrived at Rs.159.02 lakhs and there were only two offers, i.e., Rs.63 lakhs from one N.Subramanian and Rs.35 lakhs from one M.Santhameena, which were too low. As regards the second auction, it is seen from the document produced before this Court that the value was arrived at Rs.175.37 lakhs. As already pointed out earlier, there were four offers received from one N.Subramanian, the fourth respondent herein for Rs.72 lakhs, C.Sivasubramaniam at Rs.50.40 lakhs and K.V.Tex at Rs.47.70 lakhs for the entire assets and from Jesus Enterprises at Rs.28.53 lakhs for plant and machinery alone. It is also relevant to note that in the bid document filed by the fourth respondent before the first respondent, there is a hand- written statement of the fourth respdt that he was not willing to pay the statutory liability. However, on the negotiation reached, the fourth respondent ultimately agreed for the payment of the statutory dues and the same had also been paid.
31. Learned counsel appearing for the petitioner pointed out that the sale deed does not disclose the manner of payment made and the time for payment and the payment details. A reading of the files produced before me shows that the fourth respondent, in fact, had remitted the sale consideration and as regads the last payment made beyond the time, the fourth respondent also paid the interest on the belated payment. In the background of the said payment, it is difficult for this Court to accept the plea of the petitioner that the fourth respondent had not made payment as per the intimation.
32. It is seen from the records produced before this Court that the fourth respondent had paid the entire consideration, and with interest, as regards the last payment. The petitioner contends that a sum of Rs.114 lakhs was paid vide cheque dated 6.10.2008 on the penultimate day for payment and the amount was encashed four days later on 10.10.2008 and that there was a delay. It must be seen that with the encashment made on 10.10.2008, the payment has to date back to the date of presentation of the cheque i.e., 6.10.2008 and I do not find that the submission of the petitioner deserves any inference to be drawn against the respondents as indicative of mala fides in the action. In the decision reported in (2006) 9 SCC 458 Purushottam Kumar Jha v. State of Jharkhand and Ors. the Supreme Court pointed out:
" 23. It is well settled that whenever allegations as to mala fides have been levelled, sufficient particulars and cogent materials making out prima facie case must be set out in the pleadings. Vague allegation or bald assertion that the action taken was mala fide and malicious is not enough. In the absence of material particulars, the court is not expected to make fishing inquiry into the matter. It is equally well established and needs no authority that the burden of proving mala fides is on the person making the allegations and such burden is very heavy. Malice cannot be inferred or assumed. It has to be remembered that such a charge can easily be made than made out and hence it is necessary for the courts to examine it with extreme care, caution and circumspection. It has been rightly described as the last refuge of a losing litigant. (Vide Gulam Mustafa v. State of Maharashtra [1976] 1 SCR 875; Ajit Kumar Nag v. GM (PJ), Indian Oil Corpn. Ltd. (AIR 2005 SC 4217).
In the absence of any material to substantiate the allegations on malafides , the plea of the petitioner stands rejcted .
33. As regards the payment made on 3.11.2008 to the extent of Rs.1,27,10,000/-, it is seen that the first respondent had not suffered finacially on account of the delayed payment, since the first respondent had collected interest on the belated payment. Even though the bid document originally contained a written statement that the fourth respondent was not willing to meet the statutory liabilities, yet, on the negotiation table, the fourth respondent agreed to meet all the statutory liabilities and had, in fact, before the sale deed was executed and possession taken over, cleared off the dues, a fact which cannot be disputed in the face of the materials available before this Court. The records produced before this Court show the payment of the consideration in full, apart from satisfying the other tender conditions.
34. As regards the contention of the petitioner that the other secured creditors were not involved in the auction proceedins, it may be seen that the the third respondent was the only other secured creditor who had not objected to the sale and was also posted with details on the sale. Their claim was fully satisfied by the first respondent out of the sale proceeds. No grievance was raised by the third respondent as to the manner of conduct of the sale or as to the lack of knowledge as to the conduct of the sale. In fact, a reading of the documents produced before this Court shows that the fourth respondent informed the third respondent about the sale of the property and of the consideration received. The claim of the third respondent forms 5% of the claim of the first respondent.
35. The third respondent has not filed any counter affidavit before this Court. However, the file discloses satisfication entered by the third respondent as regards the dues payable by the petitioner herein. In the circumstances, no grievance had been raised by the third respondent as to the manner of conduct of the sale and there being no material to show that the third respondent had no knowledge in the matter of conduct of the auction of the property of the petitioner, I do not accept the plea of the petitioner that there is no transparency in this regard. Equally so, the records reveal that deliberations had gone in between the fourth respondent and the first respondent to arrive at the value of Rs.127 lakhs, apart from payment of the statutory dues. It is seen that as per the valuation made by the valuer, a sum of Rs.57 lakhs for the land, Rs.88 lakhs for the building and Rs.29.40 lakhs for the machinery were shown as the value. The deliberation of the Board dated 18.6.2008, which is shown in page No.2019 of the file produced before this Court, reveals that the note put up before the Board contains the details as to the deliberation as regards the sale of the petitioner's property, the details of the auction sale, the collective reply from the various bidders, the statutory dues, the valuation of the assets and ultimately the acceptance of the offer made by the fourth respondent.
36. It was also noted that the fourth respondent was directed to remit the entire amount of Rs.127 lakhs within one month from the date of confirmation and the bidder had to remit the statutory dues and all land revenue arrears, apart from property tax, PF dues, etc., due and payable to the Central and State Government. It was stated that the sale proposal was subject to the approval of TIIC.
37. Subsequent to this, by proceedings dated 18.11.2008, it is found in page 1957 of the note file that the Board had decided to confirm the sale, accepting the price offered. It must be noted that the first respondent is a statutory Corporation and on the confirmation of sale, it has to go for a resolution before the Board and rightly so, in this case, when the confirmation was made as to the offer made by the fourth respondent, vis-a-vis the valuation of the property, it is difficult for this Court to substitute its view on the price accepted by them. Consequently, I do not find any justification in the contention of the petitioner that in the absence of participation of the head of the Committee, the proceedings have to fail. After the Board's approval recording its satisfaction on the price with reference to the value fixed, it is not for anyone to substitute a decision on the price. In so recording the satisfaction, I do not find that the first respondent had acted against the interest of the petitioner, or for that matter, that the proceedings lacked transparency. In the circumstances, the said contention has to be rejected and it is accordingly rejected.
38. So too, as regards the contention taken by the petitioner as to the written portion in the tender document, after the fourth respondent had agreed for the payment of the statutory dues and payment of the same, the contention that the written part in the tender document is not there in the document filed before this Court and hence the written portion is an after-thought and inserted in the tender document reflecting the mala fides on the conduct of the respondents, does not stand the scrutiny of this Court, since even a cursory glance at the photocopy shows that the copy furnished is a defective photocopying of the document. In the above circumstances, the said contention also stands rejected.
39. It is not denied by the petitioner even as to this date that the petitioner had not made any offer to settle the dues payable by it. Even after the possession notice was given in the year 2002, no interest was evinced by the petitioner in the settlement of the dues payable by the petitioner. It may be noted that the first respondent is a Financial Corporation which had issued notice to bring the property for sale. Till the B.I.F.R. proceedings came to an end in the year 2005, no action was taken by the petitioner to settle the dues. Consequently, the first auction was conducted in 2006, which was unsuccessful. This compelled the first respondent to go for a second auction in the year 2007. In the background of the above facts, the conduct of the parties needs to be seen.
40. It is not denied by the petitioner that the tender-cum-auction notice, as published in the newspaper, required the petitioner to come before the first respondent to settle the dues within seven days from the date of the publication. In any event, the public notice directed the petitioner to be present to witness the conduct of the proceedings as well as to assist the first respondent in getting the best price. Thus sufficient opportunity was granted to the petitioner to settle the dues before the extreme step of auctioning the property. However, these opportunities were not taken advantage of by the petitioner. The petitioner is not in a position to say anything as regards it not participating in the auction proceeding except to state that he had no knowledge about the publication. There is nothing on record to show that the petitioner had no knowledge of the auction notice as the same was published in the newspapers, a consequence which the petitioner is well aware of on the default committed by it, more so when possession notice was issued. It is also admitted by the petitioner that the first respondent had proceeded to bring the property for auction for realisation of the amount. Hence, between 2002 and 2006, except for hibernating, the petitioner did nothing to evince any interest towards settling the dues and when the the property had been sold and the accounts of one of the secured creditors got settled, the present contentions are indicative of a cry in despair and a 'last refuge of a losing litigant'.
41. Learned counsel appearing for the petitioner, however, made a serious objection that the silence maintained by the petitioner cannot be put against the petitioner for testing the reasonableness of the action taken by the first respondent. There are hardly any materials to show that he had been reasonable enough in taking steps to see that the claim of the first respondent is settled. It is equally true that in spite of the publication effected in the year 2006 as well as in 2007, no firm action was taken by the petitioner either in the matter of settling the dues or as regards assisting the first respondent in getting the best price which is satisfactory to the petitioner or to establish that he had no opportunity to make an issue out of the conduct of the proceedings. Given the object of giving such a notice as contained in the paper publication and having failed to avail of the same, the complaint made by the petitioner now could be seen only as an attempt to see that the fruits of the sale does not go either to the fourth respondent, or for that matter, above everything, to the first respondent that it remains ever an unsatisfied creditor. While this Court does not consider the delay as the only ground on which the petition has to be rejected, the materials as evident from the records produced before this Court, belie the claim of the petitioner in the aspect of mala fides.
42. The fact remains that there are no materials to substantiate the allegation on unfairness or unreasonableness in the conduct of the proceedings. In the background of the facts as stated above, I am at a loss to understand the complaint made by the petitioner that the proceedings were unreasonable and that there are mala fides on the part of the first respondent. In the background of the said facts, the contention of the petitioner based on the reliance placed on the decisions cited needs to be seen.
43. As already pointed out, in the decision reported in (2004) 7 SCC 166 (S.J.S. Business Enterprises (P) Ltd. Vs. State of Bihar and others), the Apex Court pointed out that the Court could interfere with the sale, if there are materials to show that the conduct of the said proceedings were unfair and unreasonable. As already pointed out, in order to secure the best price, there was a wide publication and the petitioner was also given an opportunity to assist the first respondent to get a fair price that meets the ends of justice. He was also given a fair opportunity to see that the proceedings are done in a fair and reasonable manner. Applying the law declared by the Apex Court in the aforesaid decision to this case, I do not find any justification in the contention of the learned counsel appearing for the petitioner that the proceedings of the first respondent are wanting in fairness or fair play that this Court should interfere with the same.
44. As regards the decision reported in (1988) 1 SCC 166 (Haji T.M.Hassan Rawther Vs. Kerala Financial Corporation), the Apex Court pointed out that the public property owned by the State or by its instrumentality should generally be sold by public auction or by way of inviting tenders not only to get the highest price for the property but also to ensure fairness in the activities of the State and public authorities. The facts in the said case related to a case of a decree obtained against an individual. In the execution of the decree, the defaulter's property was brought for sale. In view of the long-standing dispute between the workmen of the estate and the previous management relating to payment of their wages, the Financial Corporation could obtain possession only belatedly. Thereafter, the property was brought for sale more than once. At the time of auction, the offer of the appellant, who was the highest bidder, was accepted but he failed to pay the instalments as per the terms. Thereupon, the respondent re-negotiated the terms with the next highest tenderer which was accepted by the Financial Corporation. Ultimately, when the said action was challenged before the Court, the Court found that the bidder had failed to remit the amount. Ultimately, the Apex Court pointed out that there may be situations necessitating departure from the rule in the case of public auction, but then such instances should be justified by compelling reasons and not by mere convenience.
45. As already pointed out, in the instant case, auction was held twice by way of proper publication. However, in both the auction notices, barring the offer of the fourth respondent, the other bidders' offer were very low. Hence, the first respondent called upon the fourth respondent to improve his offer, which ultimately resulted in Rs.127 lakhs to be paid by the fourth respondent as against the original offer made. The note file produced before this Court runs contra to the claim of the petitioner that the proceedings lacked transparency. In the circumstances, the reliance placed on the decision reported in (1988) 1 SCC 166 (Haji T.M.Hassan Rawther Vs. Kerala Financial Corporation) is not applicable to the case of the petitioner.
46. As regards the reliance placed by the petitioner on the decision reported in (1993) 2 SCC 299 (U.P. Financial Corporation Vs. Gem Cap (India) Pvt. Ltd. and others), a reading of the said decision of the Apex Court shows that it only advances the cause of the respondents. The Apex Court pointed out that when action is taken to exercise the power, by the Financial Corporation, taking note of the status of the Corporation, they being instrumentalities of the State, when the action is fully justifiable and there being no material to indicate unreasonableness or unfairness or even mala fide nature of the transaction, this Court is not in a position to accept the case of the petitioner. Hence, the decision relied on by the petitioner, merely justifies the cause of the first respondent herein.
47. As regards the decision reported in 2002 (1) CTC 503 (Haryana Financial Corporation and another Vs. Jagdamba Oil Mills and another), which also reaffirmed the principles as in the decision reported in (1993) 2 SCC 299 (U.P. Financial Corporation Vs. Gem Cap (India) Pvt. Ltd. and others) and also reiterated in the decision reported in (2005) 4 SCC 456 (Karnataka State Industrial Investment & Development Corpn. Ltd. Vs. Cavalet India Ltd. and others), as stated in the preceding paragraphs, I am not in a position to accept the plea made by the petitioner that the tender notice, which ultimately culminated into the confirmation of sale in favour of the fourth respondent, has to be declared as null and void.
48. It is a matter of record that the proceedings taken by the first respondent was in tune with the terms of financial assistance given to the petitioner. An opportunity was given to the petitioner before taking charge of the property which was given as security. Even after the property was possessed by the first respondent, nothing prevented the petitioner to go in for a one-time settlement. A final opportunity was granted at the time when the auction notice was published in the year 2006 and also in the year 2007. In none of the occasions, the petitioner took any step to settle the dues.
49. It is seen that opportunities were granted to the petitioner in the matter of conduct of sale and that there is no unreasonableness in the conduct of the auction, but the same had not been taken advantage of by the petitioner. Hence, having failed to avail the opportunities and having evinced no interest in the matter of settlement of the claim, the proceedings having been conducted in a fair and reasonable manner, the contentions now taken by the petitioner are only to somehow wriggle out of the liability. In the circumstances, I have no hesitation in rejecting the writ petition.
50. As rightly pointed out by the learned counsel appearing for the first respondent, the prayer before this Court seeking a declaratory relief itself is a misconceived prayer that with the auction conducted and the sale confirmed, the question of challenging the same right from the stage of notice does not arise.
51. As aready pointed, having failed to make use of the opportunities granted, it is not open to the petitioner now to challenge the auction proceedings under Article 226 of the Constitution of India. If at all anybody has to be blamed for this state of affairs of the petitioner, it is none else than the petitioner itself. Consequently, this writ petition stands dismissed. No costs.
Index: Yes / No
Internet: Yes / No 30.03.2010
To
1 THE STATE INDUSTRIES
PROMOTION CORPORATION OF TAMILNADU LTD.
REP. BY MANAGING DIRECTOR
NO.19-A RUKMANI LAKSHMIPATHI ROAD
CHENNAI-8
2 THE SPECIAL TAHSILDAR
RECOVERY SIPCOT
NO.19-A RUKMANI LAKSHMIPATHI ROAD
CHENNAI-8
3 TAMILNADU INDUSTRIAL INVESTMENT
CORPORATION
PERUNDURAI ROAD
ERODE
4 THE SUB REGISTRAR
OFFICE OF THE SUB REGISTRAR
CHENNAIMALAI ERODE.
CHITRA VENKATARAMAN,J.
ksv
W.P.No.4864 of 2009
Dated: 30.03.2010