NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION |
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ORIGINAL PETITION NO. 95 OF 2005 |
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RAMA
MILK PRIVATE LTD. R-346,
ADINATH SOCIETY, PUNE
– 411009 |
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Complainant |
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Vs. |
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1. FINANCIAL CORPORATION NEW (5TH, 7TH, 8TH,
9TH FLOORS) A.K. NAYAK MARG, FORT, BOMBAY-400001 2. THE REGIONAL MANAGER, FINANCIAL CORPORATION OPP. FIRE STATION, STATION ROAD ( |
…Opp. Parties |
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BEFORE: |
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HON’BLE MR. JUSTICE
R.C. JAIN,
PRESIDING MEMBER
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For
the Complainant : Mr. S. P. Dange,
Advocate |
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For
the Opp. Parties : Mr. Santosh
Paul & Mr. Arvind Gupta, Advocates
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Dated |
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ORDER |
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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
from
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
08.02.93)
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
:-
“ Our
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 :-
(i) The
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.
FINDINGS:-
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:-
(i)
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.
In Karnataka
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.
The recent
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.
.............……......................J.
(R.C.JAIN)
PRESIDING MEMBER
.............……......................
(P.D.
SHENOY)
MEMBER
YD