NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION
ORIGINAL PETITION NO. 95 OF 2005
RAMA MILK PRIVATE LTD.
R-346, ADINATH SOCIETY,
PUNE – 411009
(5TH, 7TH, 8TH, 9TH FLOORS)
A.K. NAYAK MARG,
2. THE REGIONAL MANAGER,
OPP. FIRE STATION,
HON’BLE MR. JUSTICE R.C. JAIN,
For the Complainant : Mr. S. P. Dange, Advocate
For the Opp. Parties : Mr. Santosh Paul & Mr. Arvind Gupta,
In this case the Complainant, M/s. Rama Milk Private Ltd. (for short “Rama Milk”) wanted to set up a milk processing plant with the financial help from Maharashtra State Finance Corporation (for short “Corporation”). As the Complainant became defaulter the Corporation initiated recovery proceedings against it u/s 29 of the State Financial Corporation Act, 1951 (for short the “Act”).
Aggrieved by the action of the Corporation, Rama Milk knocked the doors of the Hon’ble High Court of Bombay as well as the Hon’ble Supreme Court but without success. The Corporation had also given an offer for one time settlement to M/s. Rama Milk. After issuing a notice to the Corporation on 27.05.04 for payment of huge compensation the complainant filed complaint before us in October, 2005.
The main issue to be decided by us is as to whether there was any deficiency in service on the part of the Corporation and if so what relief the complainant is entitled to?
The Complainant is a proprietary concern and Shri Manik Chand is its sole proprietor who is an educated unemployed and wanted to set up a milk plant. On 20.04.81, Complainant submitted a loan application to the Corporation alongwith project report for the milk plant with a request of loan amount of Rs.20 lakhs. He was granted a loan of Rs.9,10,000/- on 10.5.84 on the security of land, factory building, plant and machinery. This amount was disbursed in installments from 25.09.85 to 28.08.88. His request for additional loan was not granted by the Corporation. It is the say of the Complainant that all of a sudden the Corporation issued notice on 14.12.92 under Section 29 of the Act for recovery of the loan amount with instructions to give possession of the unit. He approached the District Collector against the decision of the Corporation. The Corporation filed an FIR with the Police Station, Kalamb on 6.3.93 alleging that the Complainant had taken back the possession of the project site forcibly from them and henceforth Complainant would be responsible for the plant and machinery and all other articles lying at the site of the unit. Complainant also alleged that about 10 officials of the Corporation alongwith Police Force came to the project site on 22.8.93 and took forcibly the possession of the unit again without taking any inventory and without following the procedure. It is the say of the Complainant that the Opposite Parties had handed over back the possession of the unit to the Complainant and the Bhumi Pujan was organized on 1.10.96 which was attended by the officials of the Opposite Parties also. Complainant was shocked to receive letter from the Corporation on 14.11.03 stating that the Complainant had defaulted in making payment of the dues to the Corporation to the extent of Rs.14,27,765/-. In the letter dated 10.10.03 received on 14.11.03 the Corporation proposed to make one time settlement for an amount of Rs.7,75,463.45/-. According to the Complainant despite the fact that the unit never came into proper operation, an amount of Rs.18.50 lakhs was paid to the Corporation in the following manner:-
i) Rs.3.5 lacs
ii) Rs.5 lacs before the Hon’ble Supreme Court
iii) Rs. 5 lacs by way of Bank Draft
iv) Rs. 5 lacs as full and final settlement in the year 1996 after the function of “Bhumi Pujan” was done on 1.11.96.
According to the Complainant, the Corporation has committed deficiency in service such as sanctioning of inadequate finance, inordinate delay in disbursement of the loan installments, pressure to repay the loan amount despite unit having its gestination period and moratorium period by invoking provisions of Section 29 of the Act, filing four false criminal cases against them, callous and non-co-operative attitude of the Opposite Parties resulting to unit becoming sick and non-issuance of the NOC by the Corporation etc.
On account of the above said alleged deficiencies the Complainant had claimed the followings relief:-
i) direct the opposite parties to issue a “No Dues Certificate” to the complainant.
ii) award an amount of Rs.6,57,00,000 (Rupees six crore Fifty six lacs only) to the complainant against the opposite Parties as detailed in para no. 36 of the complaint with interest @ 12% from the date of loss suffered by the Complainant.
iii) award future interest @ 12% p.a. to the complainant on the claim amount of Rs.6,57,00,000/- till the date of payment of the said claim amount.
iv) award litigation expenses of Rs.50,000/- as cost to the complainants.
v) pass any other or further orders as this Commission may deem fit, just and proper in the facts and circumstances of the present case.
APPLICATION FOR CONDONATION OF DELAY
Complainant has filed an application under Section 24A of the Consumer Protection Act, 1986 for condonation of delay stating that the complaint is within limitation as cause of action arose in favour of the Complainant and against the Opposite Parties on 10.10.03 when the Corporation issued a letter alleging that Complainant had defaulted in making payment of dues to them to the extent of Rs.14,27,765/- and subsequently on 27.05.04 and 17.06.04 when the Complainant had given legal notices to the Opposite Parties. He has submitted that though the Complaint is within time but by way of abundant precaution to meet the situation if this Commission comes to the conclusion that there is a delay in filing complaint, the application has been filed and the delay, if any, is neither intentional nor deliberate for the following reasons :-
a) On 20.4.1981 the complainant made an application to the opposite parties for sanctioning of loan of Rs.20 lakhs, and thereafter kept on pursuing the matter with the opposite parties.
b) The Opposite Parties sanctioned the loan on 10.5.1984 and thereafter took four long years to disburse the loan, the last installment of Rs.59,000/- was disbursed on 23.08.1988.
c) Before the complete disbursement of the loan the opposite parties gave notices dated 25.09.1987, 28.09.1987 and 02.09,1988 to the complainant for recovery of its dues though the unit had not even gone into production.
That from the details given herein above it is evident that the opposite parties have always kept the complainant on his toes every time giving false hopes to the complainant for restarting his unit and at the same time never co-operated with him. The complainant on his part has been diligently making efforts to make his unit functional as his entire savings of life and the sale proceeds of his agricultural land had been pumped into the unit and his livelihood was solely dependent on the said unit. Further, four false criminal cases filed by the opposite parties against the complainant kept the complainant occupied. Besides this the complainant was not having any finances to initiate any litigation against the opposite parties.
REPLY OF THE OPPOSITE PARTIES TO THE COMPLAINT
The complainant originally approached the Corporation for loan of RS.14.92 lakhs vide its application dated 03.04.81. He paid processing fees on 15.04.81. Thereafter, the application was scrutinized by the Corporation. The Complainant was then requested to justify the machinery program as well as marketing. Considering the background of the promoter certain suggestions were made to reconsider the project, in view of the past experience of the Corporation of the similar assisted units. The applicant agreed to consider the suggestions and was to inform the Corporation accordingly. However, the Corporation did not receive any communication and hence the loan application was closed and the decision was communicated to the applicant unit vide letter dated 07.01.1982. It was also denied that Corporation delayed the sanction of loan on one or other pretext.
Under Secretary Agriculture and Co-operation Department Mantralaya, Mumbai informed the Managing Director of the Corporation vide letter dated 27.06.86 that he had already informed the complainant in 1982 that since Osmanabad District was covered under Operation Flood Programme for Government Dairy Milk Scheme and Milk Society, it was not possible to give permission to private milk processing units.
As per the application submitted by the complainant to the opposite parties the loan was sanctioned for Rs,9,10,000/- and sanction letter was issued on 10.05.84 as per the procedure of the Corporation. It was not proper to say that the sanction was not in accordance with the original request/demand of RS.20.00 lakhs, since the term loan was sanctioned on the basis of the norms of project feasibility and viability.
It was not correct that the loan amount was disbursed by the opposite party with inordinate delays spread over a period of more than four years. The disbursement was effected on the basis of compliances of the terms and conditions mentioned in the sanction letter.
As the complainant committed defaults in the repayment of the dues of the Corporation, Corporation issued notice u/s 29 on 14.12.92 and requested the complainant to pay the entire dues of the Corporation by 31.12.92, failing which the authorized representative of the Corporation would be coming to the factory premises on 01.01.93 to take over possession of the assets mortgaged/hypothecated to the Corporation.
The Complainant challenged the action of opposite
parties for taking over the possession of the assets by filing regular civil
suit in the Hon'ble Court of Civil Judge, Kalam.
After hearing the Court dismissed the Regular Civil Suit filed by the
complainant. After the receipt of order
As it was observed that some of the machinery items were not
found at the site, a complaint was lodged with the Police Station. Subsequently
the police located the items of machinery at Ale-Phata,
Dist. Pune and at Sankeshwar,
It is admitted that opposite parties has filed following criminal cases in the Hon’ble Court of Judicial Magistrate Ist Class Kalamb, Distt. Osmanabad due to misbehaviour of the Complainant.:-
1) RCC 169/94
2) RCC 376/94
3) RCC 375/94 US 457, 506 and 341 IPC
It was specifically denied that the Corporation has given back the possession of the assets to the complainant on paying the amount of Rs.5.00 lakhs to the Corporation. In fact complainant had taken possession of the assets forcibly from the Corporation by breaking open their locks and also by evicting the security guards from the premises on 10.05.97. Thereafter a complaint was lodged against the complainant when the Corporation took back the possession of the assets with the help of police on 22.07.97, it was found that no machinery was available in the factory premises except a few milk cans.
The present outstanding payable by the complainant is as under:-
Account No. R00323 R00321 R00325 Total
Principal Rs. 42770.00 567180.00 115000.00 724950.00
(Cal.upto Rs. 13690.00 492688.78 156923.00 663301.78
Expenses Rs. - 43063.45 - 43063.45
In September 2003 the Corporation introduced "NON DISCRETIONARY AND NON DISCRIMINATORY SCHEME" No. IV (NDND OTS IV)" for One time settlement of the dues of the Corporation for certain category of accounts.
All the eligible borrowers were informed about the scheme to avail benefit of the scheme to settle their accounts amicably. The complainant infact did not avail the benefits of settlement of the account even at that time and went into litigation. The settlement amount was to be worked out on the basis of the outstanding loan. Due credit was given to the amount paid by the borrowers to their accounts while working the settlement amount.
From the facts stated above, it was evident that there was no unfair trade practice and deficiency in service on the part of the Corporation as defined under the Consumer Protection Act, 1986.
Finally it was prayed by the Opposite Parties that the complaint be dismissed as without any merit and cost of proceedings be awarded in favour of the Opposite Parties.
SUBMISSION OF THE LEARNED COUNSEL FOR THE COMPLAINANT
Mr. Dange, Ld. Counsel for the Complainant made the following submissions:-
i) MSFC have granted inadequate finance to the Complainant;
ii) There was abnormal delay in grant of loan;
iii) MSFC has filed false criminal cases against the Complainant;
iv) MSFC did not co-operate in converting their unit into the limited company;
v) MSFC has initiated recovery proceedings u/s 29 of the State Financial Corporation Act in a harsh manner;
vi) MSFC is liable for making the unit sick;
vii) Complainant co-operated with MSFC by paying the loan amounts despite its financial contingencies;
viii) Because of the non-co-operative attitude of the MSFC the Complainant was made to run to the High Court and the Supreme Court for relief;
ix) The Complainant was acquitted in all criminal cases;
x) MSFC may be directed to stop all recovery proceedings illegally taken u/s 29 of the State Financial Corporation Act, 1951.
xi) MSFC may be directed to issue NOC to the Complainant.
xii) MSFC may be directed to pay Rs.6,57,00,000/- to the
Complainant with interest @ 12% p.a. from the date of loss suffered by the Complainant alongwith litigation expenses to the tune of Rs.50,000/-.
In support of the contentions of the
Complainant, Ld. Counsel for the Complainant has produced the record relating
to the cases filed before the High Court of Bombay Bench at
Ld. Counsel for the Complainant has placed heavy reliance on the judgement passed by the Hon’ble Supreme Court in the case of Mahesh Chandra Vs. Regional Manager, U.P. Financial Corporation and Ors. – AIR 1993 SC 935.
SUBMISSION OF THE LD. COUNSEL FOR THE OPPOSITE PARTIES:-
Ld. Counsel for the Opposite Parties, Mr. Santosh Paul reiterated the points made in the written version. He further submitted that the Complaint is very much belated. In the application for condonation of delay the complainant has stated that cause of action has arose in favour of the Complainant and against the opposite parties on 10.10.2003 when the opposite parties issued a letter alleging that the complainant has defaulted in making payment of the dues of the opposite parties to the extent of Rs.14,27,765 and subsequently on 27/05/04 and 17/06/04 when the complainant sent legal notices to the opposite parties. Hence, the Complainant cannot argue that there was any deficiency in service on the part of the Opposite Parties before 10.10.03. The complaint filed on 6.10.05 is barred by time as per Section 24A of the Consumer Protection Act, 1986 which is reproduced as below:-
“24A. Limitation period:- (i) The District Forum, the State Commission or the National Commission shall not admit a complaint unless it is filed within two years from the date on which the cause of action has arisen”.
Mr. Paul quoted the judgments delivered by the Hon’ble Supreme Court in the cases of Hotel Seaking and Ors. Vs. Kerala Financial Corporation – (1996) 6 SCC 51, Haryana Financial Corporation & Anr. Vs. Jagdamba Oil Mills & Anr. – (2002) 3 SCC 496 and Karnataka State Industrial Investment & Development Corporation Ltd. Vs. Cavelet India Ltd. & Ors. – (2005) 4 SCC 456 in support of his case.
The Complainant had filed writ petition No. 1605/93 before the Hon’ble High Court of Bombay, which was withdrawn. Subsequently, the Complainant filed writ petition no. 4330/94 with the prayer to declare section 29 of the State Financial Corporation Act, 1951 as unconstitutional by issuing an appropriate writ, order or direction in that connection and certain others prayers were made.
The High Court after hearing the parties passed the following order dated 27.1.1995 :-
attention is invited to the earlier orders passed by this Court at Exh. ‘M’ dated
4. Mr. Deshmukh, the learned Counsel for respondent nos. 2 and says that as of this date, approximately Rs.29 lakhs are due to the second respondent. Under the circumstances, sheerly by way of indulgence, the following order is made :-
petitioners are directed to pay to the second
respondent by the end of February, 1995, a sum of Rs. 5 lakhs;
(ii) By the end of April 1995, the petitioners are further directed to pay to the second respondent a further sum of Rs. 5 lakhs.
(iii) In case of any single default the respondent No. 2 – Corporation is free to proceed in accordance with law;
(iv) However, in the event of the petitioners making the first payment by the end of February, 1995, the respondent Nos.2 and 3 are directed not to take any further action for recovery of the amount due, till the end of April, 1995 when the second instalment of Rs. 5 lakhs falls due.
Aggrieved by the order of the Hon’ble High Court, the complainant filed an Special Leave Petition No. 8724/95 before the Hon’ble Supreme Court on the following grounds:-
i) That the Hon’ble High Court after the direction of the Supreme Court by which leave was given to the petitioner for moving High Court has not considered that in commercial settlement, the production by giving possession to the petitioner is necessary. Otherwise petitioner has no other resources to meet the demand of Rs.34,00,000/- as claimed by the respondent. Moreover, the claim of Rs.34,00,000/- is not acceptable to the petitioner.
ii) That the Hon’ble High Court on demand of the petitioner should have asked the Respondent to furnish the details of the demand of loan claim and High Court should have finally settled the outstanding claim of the Corporation.
iii) That the petitioner had sold all his property to invest in the unit which was financially suffering. So, it is impossible for the petitioner to pay 10 lacs within four months without getting possession of the unit immediately. The loan can be repaid only after earning profit by running industry.
iv) That the Respondent had taken much time to sanction the loan, it resulted in escalation of cost of prices of the required material. Even the loan amount sanctioned was not released immediately, but was released in piece-meal method starting from 1985 and ending 1988.
v) That the machinery of factory is likely to be spoiled as it is out-dated. Only after receiving the possession of the plant with machinery, the existing machinery will be repaired and then sold. It will take at least six months to repair the machinery.
vi) That the impugned order of the High Court suffers for the reason that it has not considered the payment of 10 lacs before handing over possession of the unit to the petitioner does not give way-out.
The Hon’ble Supreme Court on 10.5.95 passed the following order in SLP NO. 8724/95:-
“The learned counsel for the petitioners state that a sum of Rs. 5 lacs has been deposited with the head office of Maharashtra State Financial Corporation, Bombay, yesterday in partial compliance of this Court’s order dated 21st April, 1995. In regard to the balance Rs. 5 lacs, learned counsel hands over to Mr. Bhasme, learned counsel for the M.S.F.C. a bank draft of Rs.5 lacs and seeks condonation of delay. Condonation is granted.
Having heard the Special Leave Petition on merits, we see no reason to interfere with the High Court’s order dated 15.2.95. However, the petitioner shall be at liberty to move such application as they deems appropriate before the High Court, having regard to the deposit of Rs.10 lacs made pursuant to this Court’s order. The Special Leave Petition is disposed of accordingly
It is clear from the order of the Supreme Court that the Supreme Court did not favourably consider the grounds urged by the Complainant. On the other hand, they held that having heard the SLP on merit, there was no reason to interfere with the High Court’s order dated 15.02.95.
In pursuance of the Supreme Court’s order the Complainant filed Civil Appeal NO. 3574/95 in writ petition No. 4330/94 inter-alia making following prayers:-
i) The M.S.F.C should transfer the existing plant and building to the new Rama Milk Co. Ltd. (public limited co.) keeping its first mortgage intact with priority of the repayments of its dues, or in the manner as this Hon’ble Court deed fit.
ii) The M.S.F.C. should permit the Petitioner to dispose of the existing unusable machinery under the directions of this Hon’ble Court, which will enable the petitioner to fetch more price, and to deposit half the amount in the Court for repayment of the dues of the M.S.F.C and to allow the petitioner to utilize the remaining half for establishment and implementation of new plant.
Writ petition No. 4330/94 was dismissed by the High Court on 6.07.98 vide following orders:-
1. As an educated unemployed the petitioner was granted Rs.10,66,000/- as loan by the Maharshtra State Financial Corporation. It appears that the petitioner was not able to repay the amount and therefore, the MSFC took the action under Section 29 of the State Financial Corporations Act. In this writ petition the petitioner challenges said action of the Corporation.
2. It may be stated that the writ petition was filed in November, 1994. Since then the petition has been adjourned on the request of the petitioner and certain directions were given which were not complied with by the petitioner. When the matter came up for hearing, the learned Counsel for the petitioner has no instructions as the petitioner has already taken the papers from him with no-objection. We do not know whether Shri Solshe has taken steps for withdrawal of his appearance in the petition. Mr. P.R. Deshmukh, learned counsel for the Corporation who is present submits that the petitioner was given opportunity to deposit certain amount in the Court there was no compliance by the petitioner. The petitioner is thus not interested in the writ petition. Mr. Deshmukh submits that earlier writ petition No. 1605/93 filed by the petitioner was withdrawn on the same cause of action and therefore, second writ petition is not maintainable.
3. In these circumstances, we find that there is no merit in this wit petition. The writ petition is dismissed.”
This judgement has weakened the case of the complainant to a great extent.
The Complainant in its application for condonation of delay has urged that he has filed the complaint on 6.10.05 because of lack of finance to initiate any legal action against the Opposite Parties. This is belied by the fact that the Complainant has gone to the High Court and even to the Supreme Court in the years 1994-95. If this is so, why the complainant could not knock doors of this Commission where only nominal fee is payable. In the complaint the complainant has alleged that the cause of action has arisen in favour of the complainant on 20.4.81 when despite the application of the complainant the opposite party did not sanction the loan and on 10.5.84 when the loan was sanctioned the disbursement was delayed and later on on 25.9.98, 28.09.87 and 2.9.88 when the opposite parties issued notices for the recovery of the dues. If the cause of action arose in 1987-88, nothing prevented the Complainant from filing the complaint in the year 1987-88 itself which has not been done. Clearly the cause of action arose on 10.10.03 as urged by the Complainant in para 2 of the Application for condonation of delay. If we presume that cause of action arose in 2003 when the Corporation issued a letter for one time settlement then this complaint is within time. If that is so, we cannot consider all other averments relating to the deficiency prior to this date. Our main task is to see whether there is deficiency in service or not.
Complainant has urged that action initiated u/s 29 of the State Financial Corporation Act is illegal. In this connection, it is worthwhile to quote provisions of Section 29 of the State Financial Corporations Act, 1951 which are extracted below:-
“29. Rights of Financial Corporation in case of default:-
When any industrial concern, which
is under a liability to the Financial Corporation under an agreement, makes any
default in repayment of any loan or advance or any instalment thereof (or in
meetings its obligations in
relation to any guarantee given by the Corporation) or otherwise fails to comply with the terms of its agreement with the Financial Corporation, the Financial Corporation shall have the right to take over the management or possession or both of the industrial concerns, as well as the right to transfer by way of lease or sale) and realize the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation.
(ii) Any transfer of property made by the Financial Corporation, in exercise of the powers under sub-section (1), shall vest in the transferee all rights in or to the property transferred (as if the transfer) had been made by the owner of the property.
(iii) 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.
(iv) Where any action has been taken against an industrial concern under the provisions of sub-section (1) all costs, charges and expenses which in the opinion of the Financial Corporation have been properly incurred by it as incidental thereto shall be recoverable from the industrial concern and the money which is received by it shall, in the absence of any contract to the contrary, be held by it in trust to be applied firstly, in payment of such costs, charges and expenses and, secondly, in discharge of the debt due to the Financial Corporation, and the residue of the money so received shall be paid to the person entitled thereof.
(v) 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 purpose of suits by or against the concern, and shall sue and be sured in the name of the concern.
The Complainant has urged several grounds attacking the provisions of Section 29 of the Act before the High Court of Bombay. The High Court has rejected its prayers. Even the Supreme Court had dismissed the SLP filed by the Complainant against the initial order of the High Court directing it to pay certain amount as noted above. Finally in 1995, the High Court dismissed the writ petition as quoted above.
The order of the High Court quoted above indicates that the High Court has considered the Complainant as a defaulter and hence directed the Complainant to pay certain amounts in installments to the Corporation. After knocking the doors of highest court of Judicature of our land and failing miserably, the complainant has filed this complaint before us.
The Complainant has tried to support his case by quoting the judgment of the Supreme Court in the case of Mahesh Chand Vs. Regional Manager, U.P. Financial Corporation and Ors. (Supra), wherein it was held as under:-
“ Section 29 confers very wide power on “Corporation” to ensure prompt payment by arming it with effective measure to realise the arrears. But the simplicity of the language is not an index to enormous power stored in it. From notice to pay the arrears, it extends to taking over management and even possession with a right to transfer it by sale. Every wide power, the exercise of which has far-reaching repercussion, has inherent limitation on it. It should be exercised to effectuate the purpose of the Act. The exercise of discretion should be objective. Test of reasonableness is more strict. The public functionaries should be duty conscious rather than power charged. Its actions and decisions which touch the common man have to be tested on the touch-stone of fairness and justice. Power under S. 29 of the Act to take possession of a defaulting unit and transfer it by sale requires the authority to act cautiously, honestly, fairly and reasonably…..
Corporation deal with public money for public benefit. The approach has to be public oriented, helpful to the loanee, without loss to the Corporation. S. 24 of the Act itself required the Board “to discharge its function on business principles, due regard being had to the interest of industry, commerce and general public”. ‘Business’ is a word of wide import. It has no definite meaning. Its perceptions differ from private to public sector or from institutional financing to commercial banking. The Financial Corporations under the Act were visualized not as a profit earning concerns but an extended arm of a welfare State to harness business potential of the country to benefit the common ma.
Sub-sec. (4) of S.29 treated the Corporation “to be a trustee” of the debtor or person claiming title through him. It saddles the Corporation or the officer concerned with inbuilt duties, responsibilities and obligations towards the debtor in dealing with the property and entails him to act as a prudent and reasonable man standing in the shoes of the owner.”
The judgement in Mahesh Chandra’s case (supra) has been quoted in a subsequent judgment of the apex court in the case of Hotel Seaking and Ors. Vs. Kerala Financial Corporation – (1996) 6 SCC 51 wherein it has been held as under : -
14. Learned counsel has
also referred to a case in which the ruling in Mahesh Chandra case was
distinguished where it has been made clear that the financial corporations
cannot be made to suffer as the loans granted by them had to be recovered vide
U.P. Financial Corpn. v. Gem Cap (
“10. It is true that the appellant Corporation is an instrumentality of the State created under the State Financial Corporations Act, 1951. The said Act was made by Parliament with a view to promote industrialisation of the States by encouraging small and medium industries by giving financial assistance in the shape of loans and advances, repayable within a period not exceeding 20 years from the date of loan. We agree that the corporation is not like an ordinary moneylender or a bank which lends money. It is a lender with a purpose — the purpose being promoting the small and medium industries. At the same time, it is necessary to keep certain basic facts in view. The relationship between the corporation and the borrower is that of creditor and debtor. The corporation is not supposed to give loans once and go out of business. It has also to recover them so that it can give fresh loans to others. The corporation no doubt has to act within the four corners of the Act and in furtherance of the object underlying the Act. But this factor cannot be carried to the extent of obligating the corporation to revive and resurrect every sick industry irrespective of the cost involved. Promoting industrialisation at the cost of public funds does not serve the public interest; it merely amounts to transferring public money to private account. The fairness required of the corporation cannot be carried to the extent of disabling it from recovering what is due to it. While not insisting upon the borrower to honour the commitments undertaken by him, the corporation alone cannot be shackled hand and foot in the name of fairness. Fairness is not a one-way street, more particularly in matters like the present one.”
The Bench held that Mahesh Chandra was decided on the facts of the particular case.
15. After analysing the rulings referred to by both the sides and perusing the records we are of the opinion that the judgment of the High Court is correct. The view taken that Section 34 CPC cannot be invoked in proceedings instituted under Section 31 of the Act and interest will be payable in accordance with the terms of the agreement is right. The question has been squarely answered in Everest Industrial Corporation which in turn based on the principle laid down in Natson Manufacturing Co. (P) Ltd. The rulings cited by learned counsel for the appellants have no relevance in this case as pointed out earlier.”
In the case of Haryana Financial Corporation & Anr. Vs. Jagdamba Oil Mills & Anr. – (2002) 3 SCC 496, the Hon’ble apex Court has held as follows :-
13. The fairness required of the Corporations cannot be carried to the extent of disabling them from recovering what is due to them. The matter can be looked at from another angle. The Corporation is an independent autonomous statutory body having its own constitution and rules to abide by and functions and obligations to discharge. As such in the discharge of its functions, it is free to act according to its own light. The views it forms and decisions it taken are on the basis of the information in its possession and the advice it receives and according to its own perspective and calculations. Unless its action is mala fide, even a wrong decision by it is not open to challenge. It is not for the courts or a third party to substitute its decision, however, more prudent, commercial or businesslike, it may be, for the decision of the Corporation.
15. The view in Mahesh Chandra case appears to have been too widely expressed without taking note of the ground realities and the intended object of the statute. If the guidelines as indicated are to be strictly followed, it would be giving premium to a dishonest borrower. It would not further the interest of any Corporation and consequently of the industrial undertakings intending to avail financial assistance. It would only provide an unwarranted opportunity to the defaulter (in most cases chronic and deliberate) to stall recovery proceedings.
State Industrial Investment & Development Corporation Ltd. Vs. Cavelet
21. The examination of the facts, in the light of the aforenoted legal principles reveals that KSIIDC acted in a bona fide manner. The procedure followed by KSIIDC to dispose of the assets of the borrower to realise the dues cannot be held to be unreasonable or unfair. The sale was conducted by issuing advertisements in the newspapers. Steps were taken to secure the best price. The question before the High Court was only about the validity of sale to Vinpack and the plea of the borrower was that the unit was sold at a ridiculously low price. The learned Single Judge gave reasonable opportunity to the borrower to pay the same amount as payable by Vinpack failing which the unit was directed to be sold to Vinpack after a specified date. The borrower failed to comply with the order of the learned Single Judge or seek extension of time and also did not challenge it in writ appeal within the time specified in the order of learned Single Judge. Under these circumstances, the unit was sold to Vinpack and the possession handed over to it. The Division Bench, after holding that the procedure adopted was not in conformity with the guidelines enumerated in Mahesh Chandra case did not examine the effect of offer given to the borrower and not availed by him resulting in the sale in favour of Vinpack. In this view, the approach of the Division Bench cannot be sustained. Further, the subsequent line of cases distinguishing Mahesh Chandra and the decision in the case of Jagdamba Oil Mills which overruled Mahesh Chandra have already been noticed hereinbefore.
judgments of the
The main issue is whether there is any deficiency in service by the Corporation. Despite of the short-comings and negative action by the complainant, the Corporation in all fairness has given an One Time Settlement offer to the Complainant on 10.10.03 asking the complainant to pay Rs.7,75,468/- making the offer valid upto 31.10.03. Instead of accepting this offer the Complainant had issued a legal notice alleging unfair trade practice on the part of the Corporation on 27.10.04. We do not find an iota of deficiency on the part of the Corporation in view of the above detailed analysis of the facts and also the recent judgements of the Supreme Court which have distinguished the judgement delivered in Mahash Chanda’s case (supra) quoted by the Ld. Counsel for the Complainant. Accordingly, this complaint deserves to be dismissed. Hence, dismissed as such. There shall be no orders as to cost.