V.K. Bali, J.@mdashChallenge herein is to order dated 303.1999, Annexure P-9, taking over the petitioner''s unit by resorting to provisions contained in Section 29 of the State Financial Corporation Act, 1951 (hereinafter referred to as "the Act") by respondent-Punjab State Industrial Development Corporation, a Government of Punjab undertaking and State within the meaning of Article 12 of the Constitution of India. The order, annexure P-9 is styled to be wholly illegal, without jurisdiction, wholly unreasonable, against the provisions of Section 29 of the Act, an outcome of obdurate attitude of the respondent Corporation and against the public policy, resulting into locking of a running concern, thus, rendering 700 employees jobless and 6000 farmers stranded, who had grown sugarcane under agreement with the petitioner concern on 25000 acres of land.
2. The facts, as projected in the petition and which according to the petitioner concern, have resulted into choking of petitioner''s industrial unit in its very infancy, deserve a necessary mention.
3. Petitioner is a Company incorporated under the Companies Act whereas the Punjab State Industrial Development Corporation (hereinafter referred to as the Corporation) is State Government undertaking and a prime institution of the Punjab Government for promoting large and medium scale industries in the State. In the year 1976, it was declared as a State Level Financial Corporation/Institution under the refinance scheme of the Industrial Development Bank of India. The Central Government, in exercise of powers conferred u/s 46 of the said Act notified the said Corporation to be a Financial Corporation established by the State Government in the State within the meaning of the said Act and the provisions of the said have been made applicable thereto. Earlier in point of time, in exercise of powers conferred u/s 29 of the Act, the respondent Corporation had taken over the assets of M/s Northland Sugar Complex Limited and in order to recover its due, advertised the sale of a sugar mill along with 163 acres of land at village Randhawa, District Hoshiarpur. On enquiry, the petitioner was informed that 164 acres of land along with buildings, plant and machinery and other immovable properties taken over by the respondent Corporation would be transferred to the highest bidder and accordingly the petitioner gave a bid of Rs. 45,00,00,007/- which was accepted and an agreement on that behalf was executed on 9.10.1997 between the petitioner and respondent Corporation. As per the terms of the agreement, petitioner paid a sum of Rs. 11.25,00,002/-, 25% of the consideration amount and the balance amount was to be paid in three equated yearly instalments with interest @ 15% per annum. It is the case of the petitioner that on receipt of consideration amount of 25%, respondent Corporation was bound to transfer the assets described in Schedule I attached to the agreement executed between the parties. Pursuant to the terms of the agreement, the petitioner made repeated requests to the respondent Corporation but it failed to transfer the assets in its favour or its assignee. It is further the case of petitioner that number of cases were pending against the assets which were transferred vide the agreement aforesaid to the petitioner wherein different banks had claimed the said assets. These assets were in fact hypothecated in favour of different banks which fact was concealed by the respondent Corporation at the time of advertisement as well as agreement between the parties. Various clauses of the agreement dated 9.10.1997, Annexure P-2, which have been relied by the petitioner concern in its endeavor to show that the action of the respondent Corporation in taking over the unit u/s 29 of the said Act was wholly unwarranted, need immediate mention at this stage:-
"1. That the PSIDC agrees to sell and the purchaser agreed to purchase the fixed assets of NSCL taken over by the PSIDC u/s 29 of the State Financial Corporation Act, more particularly described in the Schedule I attached to this agreement and forming part of hereof, for consideration of a sum of Rs. 45,00,00,007/- payable by the purchaser to the PSIDC and secured in the manner hereinafter mentioned.
2. That the purchaser has paid a sum of Rs. 11,24,00,002/- (Rs, Eleven crores Twenty five lakhs and two only) i.e. 25% of the consideration amount as per details given in Schedule II, the receipt of which is hereby acknowledged by the PSIDC. The purchaser shall be entitled to take over the possession of the assets as mentioned in Schedule I hereto and shall issue a certificate to the effect that the purchaser has taken over the possession of the assets to his entire satisfaction and no claim whatsoever regarding any discrepancy shall be entertained by PSIDC in this regard after the date of taking over the assets by the purchaser.
3. That the balance price shall be paid in three equated yearly instalments with interest at the rate of 15% p.a. compounded annual as per the details given below: -
Date Amount (Rs.)
8.10.1998 11,25,00,002/-
8.10.1999 11,25,00,002/-
8.10.2000 11,25,00,001/-
4. That in the event of default of payment as per schedule, penal interest @ 5% by way of liquidated damages for the period of default over the above normal interest of 15% p.a. shall be charged on defaulted amount of principal and interest.
5. That till the final payment is made by the purchaser, property transferred shall be in trust with the purchaser on behalf of the PSIDC.
6. That the amount due together with interest and other charges shall be secured by way of hypothecation of movable assets hereby transferred.
7. That the amount shall further be secured by way of equitable mortgage by deposit of title deeds of the immovable properties including the plant and machinery permanently fastened to earth.
8. That the charges above referred shall be created within 30 days of this agreement and shall be duly registered with the Registrar of Companies, Punjab, HP and Chandigarh.
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12. That the purchaser and the guarantors as per clause 8 hereto hereby agree and declare that in the event of default in payment of any instalment of principal or interest due, besides penal interest, it shall be open to the PSIDC to recall the total amount payable which then shall be liable to be recovered as arrears of land revenue under the Punjab Public Money (Recovery of Dues) Act, 1983.
Provided that notwithstanding anything contained in this agreement, the amount outstanding shall be treated to be a loan in terms of Section 29 of the State Financial Corporation Act and the PSIDC shall be free to take over the assets in the event of default of either principal or interest or both.
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15. That in case of registration of the deed, documents of title relating to the sugar mill shall be retained by the PSIDC till whole of the price agreed to be paid in respect of sale of the assets inclusive of the interest."
4. It is the case of the petitioner concern that as per the various clauses of the agreement, reproduced above, the property had to be transferred in the name of the petitioner and the amount payable was to be secured by way of equitable mortgage by deposit of title deeds of immovable properties including the plant and machinery permanently fastened to the earth. The charge on the property was to be created within 80 days of the signing of the agreement and was to be registered with the Registrar of Companies. There was, thus, an obligation on the part of respondent Corporation to transfer the immovable and movable properties in favour of the petitioner. After execution of the agreement, petitioner spent more than Rs. 9 crores towards repairs of the mill and made a request to the respondent Corporation for assignment of the agreement in favour of M/s Guru Teg Bahadur Sugars Limited, a subsidiary company of the petitioner, which was incorporated to run the sugar mill. M/s Guru Teg Bahadur Sugars Ltd. had agreed to mortgage and hypothecate the same assets which were to be mortgaged and hypothecated by the petitioner and the personal irrevocable guarantees were also to be issued by the same Directors. This request of the petitioner was declined and the petitioner was informed that the assignment of agreement could not be permitted as per the legal advice obtained by it. It is the positive case of the petitioner that the stand of the respondent Corporation was factually incorrect. As a matter of fact, the legal advice obtained by the respondent Corporation from Shri M.L. Sarin, Senior Advocate as well as from Shri Dharamvir Sharma, Advocate, was to the effect that the agreement could be assigned. However, instead of accepting the subsequent advice, respondent Corporation refused the request of assignment vide letter dated 7.1.1998. It is further the case of petitioner that agreement Annexure P-2 came into being between the respondent Corporation and M/s Chadha Papers Limited, a company registered under the Companies At and the term "purchaser" was to include its successors and. assignees. The opening part of the agreement, Annexure P-2, reads thus:-
"This agreement is made at Chandigarh this 9th day of October, 1997 between the Punjab State Industrial Development Corporation Limited, a company registered under the Companies Act with its registered office at Udyog Bhawan, 18 Himalaya Marg, Sector 17, Chandigarh (hereinafter referred to as the PSIDC, which term shall include its successors and assign) of the one part and M/s Chadha Papers Limited, a company registered under the Companies Act with its registered office at Compound Chadha Palace, Moradabad - 244001 (UP) (hereinafter referred to as the Purchaser, which term shall include its successors and assign) of the second part."
(It is admitted position that the words "successors and assign" precede with the word "agreed"). It is then pleaded that even though the provisions of Section 29 of the said Act were not applicable against the petitioner inasmuch as the petitioner was not advanced any loan, nor there was any default in repayment of any loan or advance or instalment by the petitioner, nor any charge had been created or registered with the Registrar of Companies for want of transfer by the respondent Corporation. However, the respondent Corporation, without any authority of law, issued a notice u/s 29 of the said Act, on 25.11.1998. Constrained, the petitioner submitted a detailed reply to the aforesaid notice on 28.11.1998. After receipt of the reply, petitioner was called for personal hearing and pursuant thereto hearing was held on 21.1.1999 in the presence of counsel for the petitioner as well as respondent Corporation. At the time of hearing, no arguments were raised by the counsel for respondent Corporation whereas the petitioner was called upon to submit its written arguments against the proposed action. After the matter was argued the Managing Director of the respondent Corporation-respondent No. 2 herein directed the petitioner to submit written arguments which was done on 27.1.1999. Petitioner was given an assurance by respondent No. 2 that after receipt of written arguments a date of final hearing would be fixed and it would also be supplied a copy of the written arguments to be submitted by the counsel for respondent Corporation. However, no such reply or written arguments were submitted nor any date was fixed for hearing. After submission of the written arguments, petitioner came to know that the take over of the unit u/s 29 of the said Act by the respondent Corporation from M/s Northland Sugar Complex Ltd. is subjudice before the Hon''ble Supreme Court of India in SLP No. 1429-1430 of 1999 wherein following order was passed on 23.1.1999:-
"Status quo as obtaining between the parties herein on this the 25th day of January, 1999 with regard to the subject matter which was in dispute before the High Court of Punjab & Haryana at Chandigarh in Civil Writ Petition No. 16127 of 1996 and F.A. No. 3 of 1998 in Civil Writ Petition No. 16127 of 1996 shall be maintained."
5. The SLP was, however, dismissed by the Hon''ble Supreme Court. Therefore, petitioner received summons from the Debt Recovery Tribunal, Jaipur in application No. 569 of 1998 titled as Canara Bank v. Northland Sugar Co. Ltd., in which respondent Corporation as well as petitioner were impleaded as respondents. In the said application the Bank had claimed that the plant and machinery sold to the petitioner stood hypothecated to it and therefore the dues of the Bank were recoverable by way of sale of hypothecated/charged properties, i.e. machinery etc. On these facts, the petitioner further asserts that the respondent Corporation had not complied with terms of the agreement executed between the parties with regard to transfer of land as well as plant and machinery in favour of the petitioner. In fact, it was a fraud played on the petitioner by the respondent Corporation on account of which it had to part with more than Rs. 20 crores, i.e., towards payment of instalment as well as on repairs of the plant and machinery. Further, in order to satisfy the obligations of the State Government, to help the farmers, the petitioner had to run the sugar mill at heavy losses. Not only the Canara Bank but the State Bank of India as well as State Bank of Patiala had also filed cases against the petitioner as well as respondent Corporation claiming the amount recoverable over the assets of M/s Northland Sugar Complex Limited. Meanwhile, the petitioner was repeatedly making requests to respondent Corporation to transfer the assets in its favour by allowing it to assign the agreement in favour of M/s Guru Teg Bahadur Sugars Ltd. which is running the sugar mill. Respondent Corporation, on the other hand, was always insisting on payment of balance amount in terms of the agreement without performing its obligations with regard to transfer so as to enable the petitioner to run the sugar mill. It is further the case of the petitioner that immediately on signing of the agreement and on receipt of 25% of the sale consideration, the asserts were to be transferred in the name of the petitioner so as to enable it to run the sugar mill by taking financial assistance from the banks and it was thereafter that the instalments were to become due and payable. However, the respondent Corporation without complying with any of its obligations and even by refusing the genuine request made by the petitioner, was insisting upon the payment of balance amount in terms of the agreement. Meanwhile, as mentioned above, the date of hearing, which was assured to the petitioner, having not been given, petitioner was threatened with take over of the until and resultantly petitioner was forced to file Civil Writ Petition No. 3767 of 1999 which was disposed of by the Court on 19.3.1999 by passing the following order:-
"What is challenged in this petition filed under Article 226 of the Constitution is the notice served by the Punjab State Industrial Development Corporation Ltd. (PSIDC) u/s 29 of the State Financial Corporation Act, 1951 proposing to take over the undertaking which was earlier sold to the petitioner. It is alleged that the petitioner has defaulted in the payment of second instalment which fell due in October, 1998. Admittedly, this instalment has not been paid so far. The grievance of the petitioner is that it was called for hearing on 21.01.1999 and that written arguments were submitted for consideration of the Corporation but without disposing of the contentions raised by the petitioner, the notice to take over has been issued. After hearing counsel for the petitioner and having regard to the facts and circumstances of the case, we dispose of the writ petition with a direction to the competent authority to take a final decision on the submissions made by the petitioner by passing a speaking order before passing an order taking over the unit u/s 29 of the Act."
7. A copy of the order aforesaid was served upon the Managing Director of the respondent Corporation on 24.3.1999. Despite that, respondent No. 2 did not fix any date of hearing arguments in the matter nor any order was passed. This constrained the petitioner to address yet another letter dated 19.4.1999 for compliance of the order passed by this, Court. Petitioner was yet not called or given any hearing nor any order was conveyed to it and yet the respondent Corporation deputed its officers to take over the unit of the petitioner. The request of the petitioner to supply a copy of order was declined by respondent No. 2 by stating that he was not directed by the High Court to supply a copy of order. It requires to be mentioned here that this writ was initially filed on 26.4.1999 at a stage when petitioner was not given a copy of order. At that stage, on the contentions raised by learned counsel for the petitioner, following order was passed on 27.4.1999 :-
"Inter-alia contends that despite order passed by this Court in the writ petition, the operative part of which runs as follows:-
"After hearing counsel for the petitioner and having regard to the facts and circumstances of the case, we dispose of the writ petition with a direction to the competent authority to take a final decision on the submissions made by the petitioner by passing a speaking order before passing an order taking over the unit u/s 29 of the Act."
The respondent Corporation has passed an order u/s 29 of the State Financial Corporation Act and despite verbal and written requests the copy of the said order has not been supplied to the petitioner by stating that this court has not directed to supply a copy of the order. Counsel further states that either no order has been passed or copy of the same has intentionally not been given to the petitioner.
Notice of motion for 3.5.1999. Process dasti as well.
If the allegations made in the petition are correct, this is certainly a serious matter. We would like the Managing Director of the Financial Corporation to be present in the Court on the next date of hearing."
8. Pursuant to notice, when Mr. R.S. Rai, counsel representing the respondent Corporation, put in appearance, the Court was informed that the order has been passed. The court, on the information given by Mr. Rai, passed following order on 3.5.1999:-
"Notice of motion was issued in this case on April 27, 1999. Mr. Rai, appears on behalf of the respondents and states that order has been passed and a copy of the same shall be handed-over to the counsel for the petitioner today. We had asked the Managing Director to be present in court today only for the reason that as per the case of the petitioner, before resorting to proceedings u/s 29 of the Act, order had either not been passed or it was not being handed-over to the petitioner. The Managing Director has not come present in the Court today as Mr. Rai informs us that order dated 29.4.1999 was not conveyed to him. Be that as it may, in view of the fact that order has since been passed and Mr. Rai states that a copy of the same shall be given to the counsel for the petitioner today itself, Managing Director need not come present on the next date of hearing.
At this stage, learned counsel for the petitioner states that he shall file amended petition challenging the order, copy of which is likely to be given to him by learned counsel for the respondents today. He requests for an adjournment. Allowed.
Adjourned to 7.5.1999."
9. In the amended petition that came to be filed challenging the order of take-over passed u/s 29 of the said Act, it has further been pleaded that respondent No. 2 did not call the parties for any hearing and passed an order without considering the points raised. The order was kept a close guarded secret. All of a sudden, unit of the petitioner was taken over on 26.4.1999 and at the time not take over, a copy of order was handed-over to the petitioner which was dated 23.4.1999. Thereafter, on 3.5.1999 the petitioner was supplied a copy of order which is alleged to have been passed on 30.3.1999.
Order, Annexure P-9 dated 30.3.1999, passed u/s 29 of the Act, has been challenged on variety of grounds. It is the case of petitioner that as per clause 12 of the agreement, vide which powers were given to respondent Corporation to initiate proceedings u/s 29 of the Act, were subject to clause 8 of the agreement under which it was incumbent upon the respondent Corporation to first transfer both movable and immovable assets in favour of the petitioner so as to enable it to create a charge over the property for the amount due. It is then pleaded that action of the respondent Corporation was totally arbitrary and violative of Article 14 of the Constitution of India inasmuch as it had failed to comply with its obligations as per the terms of agreement executed between the parties. In the absence of transfer of assets sold and treated as a loan, to invoke-the provisions of Section 29 of the Act would amount to cancellation of the agreement which could only be done after refund of the amount. It is then pleaded that the respondent Corporation, being State within the meaning of Article 12 of the Constitution of India was bound to act in an honest manner for development of industries but in the present case, a fraudulent approach had been adopted by directing the petitioner to make the payment without transferring the assets agreed to be transferred and also it concealed the factum of charges on immovable assets sought to be transferred. It is then pleaded that order, Annexure P-9 is not justified as it did not incorporate the advice given by Shri M.L Sarin, Senior Advocate and Shri D.V. Sharma, Advocate, of this Court. It is then pleaded that respondent No. 2 had wrongly mentioned that petitioner was not willing to make any payment. As a matter of fact the petitioner had offered a sum of Rs. Six crores with a condition that respondent Corporation should comply with its obligations. It is further pleaded and so argued that claim of respondent Corporation to interest is totally baseless as in absence of transfer of assets by way of registered sale deed, no amount become due or payable under the sale consideration and as such no interest can be claimed till the title is passed. The take over is styled to be not only without jurisdiction but against the policy of respondent Corporation as well in development of industries. It is also against the public policy as the running-concern has been locked, thus, rendering about 700 employees jobless and 600 farmers have been stranded as they had grown sugarcane under agreement with the petitioner In 25000 acres of land.
10. In response to notice issued by this Court, respondents have entered defence and filed written statement opposing the cause of the petitioner. By way of preliminary objections, it is pleaded that writ is not maintainable as the petitioner has failed to pay the second instalment as per the schedule appended in the agreement dated 9.10.1997. On number of occasions, petitioner was reminded about his liability towards the respondent Corporation but the petitioner failed to make the payment. The respondent Corporation issued a registered AD letter on 18.9.1998 to the petitioner Company requesting it to make the payment by 8.10.1998. This was followed by another reminder dated 24/25.9.1998. Subsequent reminders were sent on 28.9.1998 and 15.10.1998 which likewise failed to evoke any response from the petitioner. It is then pleaded that the petitioner had never the intention to pay the second instalment which was due on 8.10.1998. Respondent Corporation, being the State Financial Corporation and the premier Institute works with the objective to utilise the public money properly in the State of Punjab for rapid industrialisation. In the present case, due to failure of the petitioner Company to carry out its obligation to pay the second instalment despite repeated reminders left the respondent Corporation with no other option but to proceed u/s 29 of the Act. Judgment of Supreme Court in U.P. Financial Corporation v. Gem Cap (India) Private Limited and Ors., AIR 1993 S.C. 1435 as also DB judgment of this Court in Baldev Singh v. Union of India and Ors., in C.W.P. No. 18067 of 1997 have been pressed into service to dismiss this case by further stressing that the facts of these two cases were similar to the one in hand. Clause 12 of the agreement dated 9.10.1997 has also been relied upon to plead that notwithstanding anything contained In the agreement, the amount outstanding could be treated to be a loan in terms of Section 29 of the Act. Mere non-transfer of titles to the petitioner Company by the respondent Corporation would in no way give any benefit to the petitioner to delay the payment. It is then pleaded that it was not obligatory on the part of the answering respondents to register the sale deed within 30 days. As per clause 15 of the agreement, respondent Corporation was not obliged to execute the sale deed in favour of the petitioner as if the sale deed was executed, the title deed were to remain in custody of the respondent Corporation till the entire consideration was paid. It is further pleaded that the petitioner operated the unit at its capacity during the two crushing seasons, i.e., 1997-98 and 1998-99 and pursuant to the same, the petitioner has been able to get release orders from the Government of India. Clause 15 of the agreement specifically provides that in case of registration of the deed, documents of title relating to Sugar Mills shall be retained by PSIDC till the whole of the price agreed to be paid in respect of sale of assets inclusive of interest, is paid and that the preamble of the agreement dated 9.10.1997 itself provides that the purchaser would purchase the assets on "as is where is" basis. Relying upon this principle, the assets of the Northland Sugar Complex Limited were sold to the petitioner company and accordingly Shri R.K. Millu, Vice President of Chadha Papers Limited had taken over the assets and accordingly issued a certificate to the respondent Corporation on 9.10.1997.
11. While admitting the basic facts mentioned in the petition, it has further been stated on merits of the case that the petitioner is un-necessarily trying to confuse this Court by inter-mixing the issue regarding the assignment with the transfer of assets. As far as non-transfer of title in favour of M/s Chadha Papers Limited is concerned, the same would not. absolve the petitioner of making the payment. The stand of the respondent Corporation is stated to be fortified by clause 10 of the agreement dated 9.10.1997 executed between the parties. A bare reading of Clause 10 makes it clear that all consents and approvals etc. Which were necessary for running the Sugar Mill from the Government of India and other authorities concerned shall be taken by the purchaser. The respondent-Corporation was only to render necessary help in this regard. It was further provided in the agreement that any delay in regard to any consent or approval from Government or authority shall, however, not entitle the purchaser to any relief in the matter of payment to be made by the respondent Corporation. The transfer of assets caused no difficulty or problem for the petitioner in operating the unit as the unit operated at its capacity during the two crushing seasons, i.e., 1997-98 and 1998-99 and pursuant to the same, the petitioner had further got the release orders for the sale of sugar in free sale in market from the Government of India. Pendency of cases in the courts against the respondent Corporation is denied. In fact, it is stated that no bank had ever approached the Debt Recovery Tribunal on the day the advertisement was issued and till the date agreement was executed between the parties. Even though clause 12 of the agreement has been admitted, it has been denied that the provisions of Section 29 were to apply after the land and machinery were transferred in favour of the petitioner and thereafter the balance consideration amount was to be treated as charged amount. The proviso mentioned in clause 12 makes is clear that the amount, if outstanding, shall be treated to be a loan in terms of Section 29 of the Act and the respondent Corporation shall be free to take over the assets in the event of default of either principal or interest or both. A bare perusal of the said proviso, it is stated, would make it clear that in case of default, exercise of powers u/s 29 would in no way be affected by the other clauses of the agreement. Moreover, first part of clause 12 has to be read with clause 10 of the agreement which specifically provides that there will be no benefit to the purchase in regard to the delay in payment due to non-availability of any consent or approval from the Government of India or any other authority. The stand of the petitioner that it had spent lot of money in repairing the mill has been denied for want of knowledge. With regard to assignment in favour of M/s Guru Teg Bahadur Sugar Mills, it is pleaded that on receipt of the request made by the petitioner, the same was referred to leading solicitors of the country i.e., M/s J.B. Dadachanji Ravinder Narain Mathur and Company, New Delhi, which opined that the respondent Corporation could not assign the said contract/agreement dated 9.10.1997 to Sri Guru Teg Bahadur Sugar Limited. The petitioner was accordingly informed of the same on 31.12.1997. On the request of the petitioner, the matter was again sent for legal advice to the former Advocate General of Punjab, Shri M.L. Sarin, who also confirmed the opinion of M/s J.B. Dadachanji Ravinder Narain Mathur and Company. As per advice tendered by Shri Sarin, the respondent Corporation informed the petitioner that the Corporation could not assign the agreement in favour of M/s Sri Guru Tej Bahadur Sugar Limited. It is further stated that the agreement clearly envisages that if at all there is any assignment, that has to be agreed assigns meaning thereby that consent of both the parties to the agreement had to be there. One party as such was not given absolute right to assign as per terms of the agreement. With regard to opinion sought from Shri Dharamvir Sharma, Advocate, it is stated that the reference made to Shri Sharma was as follows:-
"You are requested to opine as to whether Rana Gurjit Singh can be appointed as a Director on the Board of Directors of Chadha Papers Limited."
13. Shri Sharma, however, exceeded the reference in his advise and made some reference pertaining to assignment, which had no relevance as the reference made to him did not contain the same. Petitioner had defaulted in paying the second instalment with interest as per agreed schedule in the agreement and a bare reading of clause 12 of the agreement would show that the respondent Corporation was empowered to take over the assets in case of default of either principal or interest or both.
14. The assertion of the petitioner that after the matter was argued, respondent No. 2 directed the petitioner to file written statement, has not been disputed. It is further stated that at no stage of argument, the counsel appearing for the respondent Corporation or its representative asked for an opportunity to file the written arguments. The petitioner company was given enough opportunity for placing its submissions before the quasi-judicial authority, i.e., Managing Director of the respondent Corporation. Not only this, the petitioner Corporation was also given an opportunity to file its written arguments in support of its submissions made before the Managing Director. Keeping in view the stand taken by the petitioner and respondent Corporation, the Managing Director of respondent Corporation, passed order dated 30.3.1999. With regard to assertions made by the petitioner of various banks having instituted Court proceedings, all that has been stated by the respondent Corporation is that an application No. 569 of 1998 titled as Canara Bank v. Northland Sugar Complex Limited and others is pending before the Debt Recovery Tribunal, Jaipur. Allegation of the petitioner on that count that fraud was played, has, however, been stoutly denied on the ground that on the date the assets of the Mill were transferred to the petitioner Company, there was no litigation pending against the assets taken over from Northland Sugar Complex which was ordered to be wound up on 9.10.1997. In fact, the litigation which is pending before the Debt Recovery Tribunal is the recovery application primarily against the guarantors of Northland Sugar Complex. It is further stated that the petitioner Company while making a bid for the purchase of assets of Northland Sugar Complex was well aware of the proceedings as well as the litigation that was going on against Northland Sugar Complex Limited as it made a bid at the time when the assets were offered for sale in the year 1996. The assertion of the petitioner that it had to part with more than Rs. 20 crores towards the payment of instalment as well as repair of the plant and machinery, has been denied and as per the agreement, petitioner was bound to pay Rs. 11.25 crores along with interest. Expenditure of Rs. 9 crores has, however, been denied for want of knowledge.
15. Petitioner has filed replication wherein it has been pleaded that agreement dated 9.10.1997 clearly envisages the sale of assets in favour of the petitioner within the definition of "sale" provided u/s 54 of the Transfer of Property Act, 1882 and contract for the sale of immovable property is a contract that a sale of such property shall take place on terms settled betwean the parties. It does not, of itself, create any interest in or charge on such property. The second instalment was, therefore, to be paid one year after the execution of the sale deed and creation of mortgage thereof. The date 8.10.1998 in the agreement was mentioned on the understanding that the sale was to be completed immediately after the execution of the agreement but, in any case, not later than 30 days of the execution so as to enable the petitioner to create mortgage and hypothecation on the property sold to it. Inspite of the repeated requests, the respondents failed to transfer the assets in favour of the petitioner by way of sale deed, as agreed to vide agreement, Annexure P-2 and, therefore, the letters referred to by the respondent Corporation were totally without jurisdiction and unwarranted in law. It has been denied that the petitioner had no intention to pay the second instalment. As a matter of fact, even at the time of personal hearing and reply to notice u/s 29 of the Act, it was clearly mentioned that on compliance of the obligations by the respondent Corporation, the petitioner would make the payment as per the agreed terms.-The averments with regard to utilisation of public money art totally misconceived as in the present case the respondent Corporation has not advanced any loan to the petitioner and in fact had agreed to the sale of the assets and the balance payment due thereof was to be treated as loan for the purpose of recovery thereof. The judgments, as mentioned while giving the defence projected by the respondents, are stated to be not at all applicable to the facts of this case. It has been denied that clause 12 of the agreement gave an absolute right to the respondent Corporation to take over the petitioner unit. The said clause was subject to clause 8 of the agreement which is in consonance with the law laid down by Kerala High Court in
16. The matter herein has been mooted on variety of grounds, both on law and facts. But before we might proceed any further in the matter, we would like to deal with the contention of learned counsel for the respondent, Corporation that the matter herein is covered by Division Bench judgment of this Court in
1. First instalment before or on : Rs. 2,65,45,876.91
31st March, 1995
2. Second instalment before or on : Rs. 5,00,00,000.00
31st March, 1996.
3. Third and final instalment before : Rs. 6,00,00,000.00
or on 31st March, 1997 ..........
Total : Rs. 13,65,45,876.91
17. Vide letter dated 22.10.1993 the Managing Director of the respondent Corporation informed the Northland Sugar Complex that the proposal for payment in instalments was being accepted "subject to the approval of the Board of Directors of the Corporation". It was further observed that the Company shall "pay interest as charged by the financial institutions calculated from the date of signing of agreement. Thereafter on August 30, 1994 a fresh agreement was executed between the Northland Sugar Complex and the respondent Corporation. It was recorded that the Northland Sugar Complex had requested the respondent Corporation to treat the payment due as term loan which had been accepted on the conditions contained in Schedule III. It was further stipulated that the borrower shall pay the lenders interest on the principal amount of loan outstanding from time to time at the rate of 19% p.a. The interest shall be paid with half yearly rests on 31st January and 31st July each year.. Various other terms and conditions were also laid down. It was the case of Northland Sugar Complex that on 2.9.1994 it paid about Rs. 92 lacs towards compensation for the land which had been acquired by the State Government. Simultaneously, it wrote various letters in the year 1995 requesting the respondent to get the letter of intent and title deed transferred in its favour and also to revise the schedule of repayment. Vide letter dated 21.12.1995 the respondent Corporation rejected the request of Northland Sugar Complex for deferment of payment. On 30.1.1996 it served a notice u/s 29 of the said Act calling upon the petitioner to pay a sum of Rs. 13,65,45,876.91 along with interest at the institutional lending rate from the date of taking possession of the assets in pursuance of the agreement till the date of payment within 15 days. It was further observed that in case of failure to make the payment, the assets and management of the unit shall be taken over by the Corporation in exercise of powers conferred u/s 29. Northland Sugar Complex sent a reply to this notice vide letter dated 6.3.1996 wherein it was alleged that on 39.3.1996 a meeting was held and the notice was well as all proceedings were dropped. Despite that, an order was passed for the take over of the Sugar Mill u/s 29 of the Act on 12.7.1996. On 2.8.1996 the Northland Sugar Complex represented that if the letter of intent and conveyance deed was executed in its favour, it would pay Rs. 25 lacs every month. Vide its letter dated 9.8.1996 the Company handed over current and post dated cheques for a total sum of Rs. five crores to the respondent Corporation. Inspite of that, on 2.10.1996 a notice inviting tenders for the sale of Sugar Mill was published in the Press. Aggrieved, Northland Sugar Complex filed the petition. It was alleged by it that the action of the Corporation in ordering take over of the unit was wholly illegal, arbitrary and discriminatory. The matter was contested by the Corporation by filing written statement wherein it was pleaded that the Northland Sugar Complex having failed to repay its debts, it had no right to claim intervention of this Court under Article 226 of the Constitution of India. Further, it was pleaded that Northland Sugar Complex was one of the promoters selected for setting up the Sugar Mill at Dasuya in the assisted sector. The project was to be transferred on "as is where is" basis along with all the assets and liabilities and an amount of Rs. 13,65,45,876.91 had already been spent in implementation of the project at the time of execution of the agreement with Northland Sugar Complex. The Mill was to be transferred in favour of the Northland Sugar Complex in consideration of payment of this amount, it was to be paid at the time of take over of the unit and it was only thereafter that any other action could be taken. Northland Sugar Complex, without making any payment in terms of clause 3 of the agreement executed between the parties, took over the possession of the unit and it failed to make the payment in spite of the demand having been raised. Lateron, a request was made by the Northland Sugar Complex for conversion of this amount into a term loan. For this purpose, an agreement dated August 30, 1994 was executed. It was also agreed that interest shall be paid. The machinery was hypothecated in favour of the respondent. Thus, it was clear that the amount was payable by Northland Sugar Complex before it could seek transfer of letter of intent or land in its favour. It had been admitted that the Government of India was requested vide letter dated 26.4.1993 to transfer the letter of intent. However, it was noticed that the intention of the Northland Sugar Complex was not clear as it had failed to make any payment towards the take over of the assets. The Northland Sugar Complex, before seeking any such transfer was bound to pay the amount which was the basic consideration which was liable to be paid simultaneously with take over of the assets in terms of clause 3 of the agreement. Northland Sugar Complex deliberately and intentionally avoided to make the payment and it was also revealed that the Company had also failed to make payment to the came growers. The non-transfer of letter of intent was on account of the default on the part of Northland Sugar Complex in not making payment as envisaged in the agreement for transfer. It was also pointed out that Northland Sugar Complex had taken possession even prior to the date on which it was actually given and had also utilised the material which had been rejected by the Dasuya Cooperative Sugar Mills Limited. This fact was admitted by the representative of Northland Sugar Complex during arbitration proceedings. It was further pointed out that the balance sheet as on 31.3.1993 as prepared by Dasuya Sugar Coop. Mills, was annexed with the agreement executed between the parties. Northland Sugar Complex, on the assurance that the payment would be made, had taken possession even before the execution of agreement. It had been admitted that the estimated cost of the work was Rs. 40.65 crores. it was further pointed out that in spite of raising public issue Northland Sugar Complex had failed to make payment which was required to be made and that on 30.9.1996 the amount payable to respondent Corporation was Rs. 29,94,83,468.54. It has further been mentioned that conveyance deed could be executed only if the Northland Sugar Complex had made the payment and since it had failed to make the payment in spite of the fact that it had started running of Sugar Mill, no conveyance deed could be executed. The averment that a revised schedule for payment was accepted, was controverted and it was categorically averred that there was no question of any revision of schedule of payment as the amounts in the instalments were duly agreed to in the agreement executed between the parties and assets were transferred on as is where is basis. In fact a favour was shown to Northland Sugar Complex inasmuch as its request for converting the amount into term loan was accepted. It had to pay the amount in instalments along with interest. However, it failed to make any payment. The payment of amount to the Land Acquisition Collector, if any, was to be over and above the amount due to the respondent and it had no relevance or concern with the payment made to the Collector. Since Northland Sugar Complex was completely ignoring its liabilities towards payment of money, it could not complain of discrimination vis-a-vis other Sugar Mills as they had discharged their obligations.
18. On the facts, as have been detailed above, the contention of learned counsel for the petitioner, in the said case, that the Corporation had to get the letter of intent transferred in favour of the petitioner and the conveyance deed for the land had to be executed, was repelled by the Bench while observing that "admittedly vide agreement dated June 24, 1993 the petitioner had undertaking to pay a sum of Rs. 13,65,45,876.91 to the State Government on behalf of the respondent Corporation. It was in consideration of the payment by the petitioner that the obligation to transfer the assets and liabilities etc. would have arisen. The petitioner did not carry out its part of the obligation. The occasion for the respondent to execute the conveyance deed or to transfer the property, thus, never arose". It was further observed that "in any event, whatever may be the position with regard to other two mills, there is nothing on record to show that the respondent Corporation was" under any obligation to get the letter of intent transferred or to execute a conveyance deed in favour of the petitioner without getting the price of the property or the repayment of the loan." It was further observed that "as already observed, the petitioner was under an obligation to pay the consideration money. It did not do so. In spite of that, the respondents had requested the competent authority to transfer the letter of intent. However in the circumstances of the case, it can not be said that the respondents were bound to even transfer the land in favour of the petitioner. It was. not in public interest to do so. The petitioner having continuously defaulted can not complain that the respondents had failed to carry out their obligations or that they were estopped from resorting to the provisions of Section 29 of the said Act." It was further observed that " a perusal of the documents produced by the petitioner on record belies the claim that the respondents were bound to transfer the letter of intent and land before asking for money or resorting to the provisions of Section 29 of the Act. Learned counsel for the petitioners was unable to refer to any specific provision in any of the agreements in support of his contention."
19. With regard to desirability of resorting to provisions of Section 29 of the Act, on the facts of the said case, it was observed that "the learned counsel is absolutely right in his contention. However, in the present case, there is nothing to indicate that the respondent Corporation had adopted an unfair procedure. It had handed over possession of the Mill to the petitioner even without getting a penny. It had later on accepted the petitioner''s request to convert the sale consideration into a loan. It had even accepted the request for payment according to a time schedule. The Corporation had executed a fresh agreement on August 30, 1994. Inspite of that, the petitioner did not carry out its obligation to repay even the first instalment which had fallen due on March 31, 1995." It was further observed that "the Corporation had given a notice dated January 30, 1996 to the petitioner. The petitioner had submitted a reply which was duly considered. Thereafter the impugned order dated July 12, 1996 was passed. In spite of this order, the Corporation had shown willingness to reconsider the matter if the petitioner deposited an amount of Rs. 5 Crores. This was even less than the principal amount of Rs. 5,65,45,876.91 which had fallen due till March, 1996. The petitioner did not pay even a penny."
20. The facts of the case, as have been fully detailed above and on the basis of which observations, as referred to above, came to be made by the Hon''ble Bench deciding Northland''s case (supra), would demonstrate a stark difference between the case in hand and the one under discussion. The facts of Northland''s case (supra) would demonstrate that on 24.6.1993 an agreement was executed between the petitioner and respondent No. 3. By this agreement the petitioner had undertaken to pay the State of Punjab directly on behalf of the PSIDC a sum of Rs. 13,65,45,876.91. On 26.6.1993 physical possession of the Sugar Mills was handed over to the petitioner. On 22.10.1993 the petitioner addressed a communication to the Managing Director of the respondent Corporation stating therein that according to the agreement entered with the Corporation, petitioner has to pay Rs. 13,65,45,876.91 to the Punjab Government and the petitioner proposed to pay the money as per the projective repayment schedule attached to Annexure ''A''. Vide letter dated 3.12.1993, the Managing Director of the respondent Corporation informed the petitioner that the proposal for payment in instalment was being accepted subject to the approval of the Board of Directors of Corporation. It was further observed that the Company shall pay interest as charged by the financial institutions calculated from the date of signing of agreements. Thereafter on 3.8.1994 a fresh agreement was executed between the/petitioner and the respondent Corporation wherein it was recorded that the petitioner had requested the PSIDC to treat the payment due as term loan which had been accepted on the conditions contained in Schedule III. It was further stipulated that the borrower shall pay the lenders interest on the principal amount of the loan outstanding from time to time on the rate of 19% p.a. The interest shall be paid with half yearly rests on 31st January and 31st July each year.
21. The facts, detailed above, would manifest that insofar as original agreement dated 24.6.1993 is concerned, the same came to be totally replaced by fresh agreement dated 30.8.1994. The erstwhile sale consideration of Rs. 13,65,45,876.91 was treated to be a pure and simply term loan. Concededly, the Northland Sugar Complex had not paid a single penny towards the sale consideration that might have been agreed to vide agreement dated 24.6.1993 and had yet entered possession and started functioning the Mill. The entire erstwhile sale consideration was treated to be loan payable as per Schedule of payment mentioned in the agreement. It had to be conceded during the course of arguments by even the counsel representing respondent Corporation that the erstwhile agreement representing sale consideration of Rs. 13,65,45,876.91, by virtue of later agreement dated 30.8.1994 came to an end. The stark difference between the two cases is that whereas in the present case, concededly an amount of over 14 crores was paid by way of sale consideration representing 25% of the total amount, in the case of Northland Sugar Mills, not even a penny was paid out of the amount of Rs. 13,65,45,876.91 which was erstwhile sale consideration vide first agreement and which came to be treated as pure and simple "term loan" by virtue of later agreement dated 30.8.1994. It was further stipulated in the later agreement that the borrower shall pay the lenders interest on the principal amount of the loan outstanding from time to time on the rate of 19% p.a. and the interest shall be paid with half yearly rests on 31st January and 31st July each year. The terms of the agreement dated 30.8.1994, but for the term, as referred to above, have not been mentioned in the judgment recorded in Northland''s case (supra) and, therefore, we called for the same from the Corporation, a copy whereof has been placed on records. We had also called for letter dated 3.12.1993 vide which the proposal of Northland Sugar Mills for payment of instalments was accepted. The relevant clauses of the agreement dated 30.8.1994 need an immediate notice. It has been mentioned therein that:--
"whereas a tripartite agreement was entered into among PSIDC, SUGARFED and the said Cooperative Society on 24.6.1993 transferring all the assets and liabilities on "as is where is" basis to PSIDC.
and whereas vide another agreement dated 24.6.1993 was entered into between PSIDC had Northland Sugar Complex Limited further transferring all the assets and liabilities to Northland Sugar Complex Limited.
And whereas the borrower had undertaken to repay to the State Government through PSIDC a sum of Rs. 13,65,45,876.91, i.e., the amount spent by the Sugar Mills towards acquisition of land, construction of buildings and foundations, payment of machinery suppliers etc. along with interest from the date of acquisition of assets.
And whereas the borrower has requested the PSIDC to treat the payment due as term loan, which has been accepted by PSIDC with the consent of the Government of Punjab on the terms and conditions hereinafter appearing in Schedule III.
The principal as aforementioned shall be payable on the respective dates along with interest as accrued on the said dates."
22. Along with the agreement aforesaid, there are thirteen articles and three schedules. These articles and schedules are part and parcel of the agreement dated 30.8.1994. Article 1 defines due dates, lenders, loan project etc. Article 2 gives the description of the project as financed in Schedule I, Article 3 deals with agreement and terms of loan. Clause 3.1 of Article 3 states that the Corporation has agreed to repayment from the borrower of the loan of Rs. 13,65,45,876.91 on the terms and conditions set forth. Clause 3.2 of Article 3 deals with interest. Clause 3.4 regarding disbursement reads as follows:-
"The borrower agrees that it has received the assets minus liabilities worth Rs. 13,65,45,876.91 which is to be treated as the principle amount of the loan.
23. Clause 3.5 deals with repayments and clause 3.7 mentions premature repayments. Article 4 deals with security for the loan. Article 5 deals with borrower''s warranties whereas Article 6 deals with covenants and terms to apply during the currency of this agreement. Article 7 deals with inspection whereas Article 8 deals with remedies in the event of default. Whereas, Article 9 deals with waiver, Article 10 deals with assignment of debt and security. Article 11 is with regard to earlier agreement and it is stated therein that the terms and conditions'' contained in the earlier agreement shall apply mutatis mutandi vis-a-vis the borrower in respect of the loan to the extent that they are consistent and capable of taking effect. Article 12 deals with effective date of agreement whereas Article 13 deals with misc. matters. Schedule I gives description of the project and schedule II gives the financing plan. Schedule III is with regard to arbitration. The terms and conditions of the agreement dated 30.8.1994, relevant clauses whereof along with Articles and Schedules have been noted above, make it out and out case of pure and simple term loan. Even at the cost of repetition, it requires to be mentioned that whereas in the present case, the petitioners Company paid over Rs. 14 crores, concededly, towards sale consideration, in the case of Northland Sugar Complex (supra), the petitioner did not pay even a penny before entering into possession of the Mills and, as mentioned above, the entire erstwhile sale consideration was treated to be term loan. It is for that precise reason that the Division Bench dealing with Northland''s case (supra), while making a distinct on between the case of petitioner of the said case, and two other companies which were transferred assets by way of sale, mentioned in paragraph 9 that "secondly, it has not even been suggested that any of the two firms had requested the respondent Corporation to convert the amount of sale consideration into a term loan. It was not even suggested that any of them had executed an agreement like the one produced by the petitioner as Annexure P-7 with the writ petition. This agreement was executed by the petitioner on August 30, 1994 whereby it had agreed to treat the sale consideration as a loan which carried interest and laid down the time schedule for payment. So such agreement was executed by either M/s Nahar Sugar and Allied Industries Limited or M/s Piccadilly Sugar and Allied Industries Limited." It may be mentioned at this stage that Northland Sugar Complex had convassed before the Court that all the three Mills had entered into similar agreement had, thus, they were similarly placed. However, the petitioner alone had been singled out for action u/s 29 of the said Act for no valid reasons. Again, while noticing the facts of the case in paragraph 16 it was mentioned by the Division Bench that "the amount in question was the consideration on receipt of which the assets etc. had to be transferred, it took possession of the property. Thereafter, it requested for conversion of the sale consideration into a loan. Even the time schedule was given. The request was accepted vide letter dated 3.12.1993. According to this agreement, petitioner had to make the payment of the first instalment of Rs. 2,65,45,876.91 on or before March 31, 1995. It had also to pay the interest." True, some reference has also been made to the earlier agreement but the observations of the Hon''ble Division Bench, extracted above, on this precise question, i.e., earlier agreement, clearly demonstrate that the contention of learned counsel for the petitioner in the said case was repelled primarily on the ground that transfer in favour of the petitioner and the conveyance deed for the land was on the undertaking of the petitioner that an amount of Rs. 13,65,45,876.91 shall be paid to the State Government on behalf of the Corporation and it is in consideration of the payment by the petitioner that the obligation to transfer the industrial unit could have arisen." Even the observations with regard to desirability of resorting to Section 29 of the Act have been made in peculiar facts of that case. Surely, if it was an out and out case of term loan, the petitioner, in the said case, having not paid even a penny and having agreed to pay interest on the loan as such, could not ask for execution of the title deeds as also in the facts and circumstances of the said case, when not even a penny was paid, even after sufficient time had elapsed and number of letters and reminders were issued, resort could be had to the provisions contained in Section 29 of the Act. We are quite convinced that Northland''s case (supra), relied upon by learned counsel for the respondent Corporation can not come in the way of petitioner in getting the desired relief, if the contentions raised by learned counsel, to be referred in the later part of the judgment, are to be accepted.
24. Corning now to the reliance placed by learned counsel for respondent Corporation on judgment of the Apex Court in U.P. Financial Corporation v. Gem Cap (India) Pvt. Ltd. and others, AIR 1993 S.C. 1435, it shall be useful to see the facts of the said case. At the request of the Managing Director of Gem Cap (India) Private Limited (hereinafter referred to as "the Company"), the U.P. Financial Corporation sanctioned a loan of Rs. 29.70 lakhs. The terms and conditions of the loan and the manner of repayment were contained in the agreement and hypothecation deed executed in 1981. Loan was repayable in certain specified instalments along with interest. A sum of Rs. 2,29,578/- was released to the Company. The Company went into production in December, 1982. Within a few months i.e., in March, 1983 its operation ceased and by order dated 21.2.1984 the Company was declared a sick unit. The Company did not make any payment as stipulated in the agreement by hypothecation deeds whereupon the Corporation took steps to take over the unit u/s 29 of the said Act for recovering an amount of Rs. 38.57 lakh due to it by that date, vide notice dated 10.7.1984. A series of proceedings were then started by the Company, all designed to stall the Corporation from taking over and/or recovering the amount due to it. A Civil Writ Petition was filed in 1986 questioning the taking over of the unit by Corporation u/s 29 of the Act and for a direction to the Corporation to reschedule the repayment-s of debt in accordance with the earlier orders of the High Court. The writ petition was allowed. In an appeal preferred by the Corporation, the Hon''ble Supreme Court, while issuing notice in the S.LP. directed stay of operation of the judgment of High Court. After the Company appeared and filed its counter affidavit, following order was made by the Hon''ble Supreme Court on 18.9.1987:-
"Stay made absolute with the direction that there shall be no sale of the industrial unit. Hearing expedited. To be heard along with Civil Appeal No. 568 of 1987."
The SLP could not be heard finally, though it was posted for hearing on certain dates. On 13.11.1991 the counsel for the Company made an offer which was recorded in the interim order and which reads as follows:-
"This matter is adjourned for 11.12.1991. Mr. Shanti Bhushan, Senior Advocate, suggests that in view of the lapse of time of more than 5 years the position has changed and the Corporation should now consider the feasibility of taking over the assets in liquidation of the dues by making an assessment and consider relieving the directors from their personal responsibilities to the Corporation and the other creditors."
The Apex Court, in paragraph 6 of the report noticed that the subsequent order dated 12.12.1991, however, would show that the Company refused to bite the bait. The amount due to it had risen to over a crore of rupees by then. The Court passed following order:-
"The appellant in consultation with the other creditors is permitted to put up the industrial undertaking of the first respondent for sale. It may do so either by public auction or by inviting tenders or by a combination of both. It may proceed to do so within a period of two months from today. While permitting the appellant to take steps for the sale, we make it clear that before accepting the offers, the appellant should obtain prior permission of this Court."
The Unit, however, could not be sold and the Court passed an order on 13.3.1992 directing the Company and Shri K.P. Chaturvedi, who claimed to be incharge of the affairs of the Company, to confirm in writing to the Corporation within three weeks that they unconditionally agreed to settle the claims of the Corporation at a figure which would represent the principal amount and interest thereon from the inception at 13.5% per year with half yearly rests calculated upto 25.7.1986. If such an offer was made, the Corporation was to assess the merit and acceptability of that offer and take within six weeks thereafter an appropriate decision including the manner in which and the period over which the payment should be completed and if the Corporation agreed to grant time for payment, the rate of interest for the deferred period. The decision taken by the Corporation was to be placed before the Supreme Court. If offer was not to be communicated by the Company within three weeks, the Corporation was to be at liberty to initiate, with notice to the Company, steps for the sale by public auction. Pursuant to orders aforesaid, the Company merely wrote a letter to the Corporation mentioning therein they unconditionally agreed to abide with the direction given to them by the Supreme court and further as the Corporation was aware that the unit as well as the registered office of the Company, both were in possession of the Corporation, they shall be obliged if the Corporation was to communicate its views at the given address. The Court then observed that the letter written by the Company was not in terms of the order of the Court dated 13.3.1992. No figure was mentioned nor it was mentioned as to how and in what manner the said huge debt was sought to be repaid by the Company. Evidently, the Corporation could not pay any heed to such a letter. When the matter came up before the Court the second respondent appeared in person and stated that he had discharged his advocate and that he would argue the matter himself. In the facts, as have been fully detailed above, the Court observed as follows:-
"It is true that the appellant Corporation is an instrumentality of the State created under the State Financial Corporation Act, 1951. The said Act was made by the 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 the period not exceeding 20 years from the date of loan. We agreed that the Corporation is not like an ordinary money lender or a Bank which lends money. It is 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 can not 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 can not 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 can not 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 above narration of facts shows that the respondents have no intention of repaying any part of the debt. They are merely putting forward one or other ploy to keep the Corporation at bay. Approaching the Courts Through successive writ petitions is but a part of this game."
25. It was further observed that "in a matter between Corporation and its debtor, a writ court has no say except in two situations: (1) there is a statutory violation on the part of the Corporation or (2) where the Corporation acts unfairly, i.e., unreasonably. While the former does not present any difficulty, the latter needs a little reiteration of its precise meaning. What does acting unfairly or unreasonably mean? Does it mean that the High Court exercising its jurisdiction under Article 226 of the Constitution of India can sit as an appellate authority over the acts and deeds of the Corporation and seek to correct them? Surely, it can not be. That is not the function of the High Court under Article 226. Doctrine of fairness, evolved in administrative law was not supposed to confer the writ courts into appellate authorities over administrative authorities. The constraints-self imposed undoubtedly - of writ jurisdiction still remain". While further elaborating, it was held that "the Court can not substitute its judgment for the judgment of administrative authorities in such cases, Only when the action of administrative authority is so unfair or unreasonable that no reasonable person would have taken that action, can the Court intervene. In support of the observations, as quoted above, Hon''ble Supreme Court then quoted a passage from the judgment of Lord Greene MR in Associated Provincial Picture Houses Ltd. v. Wednesbury Corporation, (1948)1 K.B. 223 which reads as under:-
"It is true the discretion must be exercised reasonably. Now what does that mean? Lawyers familiar with the phraseology commonly used in relation to exercise of statutory discretions often use the word "unreasonable" in a rather comprehensive sense. It has frequently been used and is frequently used as a general description of the things that must not be done. For instance, person entrusted with the discretion must, so to speak, direct himself properly in law. He must call his own attention to the matter which he is bound to consider. He must exclude from his consideration matters which are irrelevant to what he has to consider. If he does not obey those rules, he may truly be said and often is said, to be acting "unreasonably". Similarly, there may be something so absurd that no sensible person could ever dream that it lay within the powers of the authority."
26. The Hon''ble Supreme Court, then while dealing with an other judgment of its Court in Mahesh Chandra v. Regional Manager, U.P. Financial Corporation, JT(1992)2 326, which was relied by other side, observed that" it was a case where the debtor was anxious to pay off the debt and had been taking several steps to discharge his obligation. On the facts of that particular case it was found that the Corporation was acting unreasonably. In that context, certain observations were made". It requires to be mentioned at this stage that the judgment of Hon''ble Supreme Court in Mahesh Chandra''s case (supra) has been relied in the case in hand also by learned counsel for the petitioner. But after going through this judgment, it has to be said the observations in Mahesh Chandra''s case (supra) came to be made in the context of the facts of that case and that being so, the law, as appears to be settled by virtue of judgment of the Supreme Court in Gem Cap''s case (supra) is that the High Court can interfere when there is statutory violation on the part of the Corporation or where the Corporation acts unfairly, i.e., unreasonably. It may be unreasonable only when the action of the administrative authority is so unfair or unreasonable that no reasonable person would have taken that action. It further requires to be mentioned that this judgment came in wake of the facts, as have been fully detailed above and law has been laid down in a matter between Corporation and debtor. The law laid down in Gem Cap''s case (supra) in our view, is not enough to straightaway dismiss this petition as is the clamour of the counsel representing the respondent Corporation. It shall have to be seen in the present case as to whether, in-deed it is a matter between the Corporation and its debtor and it may be mentioned at this stage that the principal argument raised on behalf of learned counsel for the petitioner is that it is not a case of debt or loan that might have ever been given to the petitioner concern by virtue of provisions contained in the Act. It is further the case of the petitioner that it is a case of an agreement of sale between the parties and the proviso to clause 12 of the agreement, which has been pressed by the respondent Corporation would come into operation only when the respondent Corporation completes its part of agreement. Inasmuch as the Corporation had not advanced even a penny as loan to the petitioner concern and quite on the contrary it accepted more than 14 crores as part payment towards the sale consideration, the remaining amount by virtue of proviso to clause 12 of the agreement could be treated as loan only if the other clauses in the agreement were met by the Corporation. It is further the ease of the petitioner that Section 29 of the Act could not possibly be invoked in the present case and further that in any case the action of the respondent Corporation culminating into an order u/s 29 of the Act, in the facts and circumstances of this case, is so unreasonable that no reasonable person would have taken the same and, therefore, the court can interfere. These being the contentions raised by learned counsel for the petitioner, obviously, the same have to be gone into and in case the findings can be returned in favour of the petitioner on the points, referred to above, the Court would be duty bound to interfere. As mentioned above, therefore, the writ can not be dismissed on the twin objections based upon a DB judgment of this Court in Northland''s case (supra) and judgment of the Supreme Court in Gem Cap''s case (supra).
27. Preliminary contentions raised by the learned counsel for the respondent Corporation, having been repelled, time is now ripe to evaluate the contentions raised by the learned counsel for the petitioner on merits of the case. To appreciate the contentions advanced by learned counsel for the petitioner and a partial reference whereof has been given in preceding paragraphs, it would be relevant to revert to the basic clauses of the agreement, Annexure P-2 dated 9.10.1997. A prelude to the agreement is reference to the parties and the same has been reproduced above. Undisputedly, whereas Punjab State Industrial Development Corporation, which term shall include its successors and assign, has been described to be of the one part and M/s Chadha Papers Limited, a company registered under the Companies Act, which term shall include its successors and assign, of the second part. Further, M/s Chadha Papers Ltd. has been described as purchaser and which term includes its successors and assign. The first para of the agreement, after the prelude, only mentions that the Corporation had taken over the assets of M/s Northland Sugar Complex Ltd. u/s 29 of the Act. The second para of the agreement clearly mentions that a notice was published in the leading newspapers for sale of the assets for a consideration of Rs. 45,00,00,007/-. Last para on page 1 of the agreement further mentions that the Directors of the PSIDC had accepted the offer of the purchaser for purchase of the assets on "as is where is" basis for consideration of Rs. 45,00,00,007/- on 2.9.1997. The terms and conditions, insofar as the same are relevant, have been reproduced in the earlier part of the judgment. The first clause clearly mentions that the Corporation had agreed to sell and the purchaser agreed to purchase the fixed assets of NSCL taken over by the PSIDC u/s 29 of the State Financial Corporation Act, for consideration of a sum of Rs. 45,00,00,007/- payable by the purchaser to the PSIDC and secured in the manner hereinafter mentioned. The second clause mentions that the purchaser had paid a sum of Rs. 11,24,00,002/- i.e. 25% of the consideration. The purchaser by virtue of this clause is entitled to take over the possession of the assets as mentioned in Schedule I and was to issue a certificate to the effect that the purchaser has taken over the possession of the assets to its entire satisfaction. As per clause 3 of the agreement the balance price has to be paid in three equated yearly instalments with interest at the rate of 15% p.a. as per schedule. Clause 4 caters for default in payments. It says that in the event of default of payment as per schedule, penal interest @ 5% by way of liquidated damages for the period of default over the above normal interest of 15% p.a. shall be charged on defaulted amount of principal and interest. It could not be disputed and in fact has been conceded that till such time due date arrived i.e., 10.10.1998, nothing either towards principle or towards interest or damages was at all payable by the petitioner concern. Clause 5 stipulates that till the final payment is made by the purchaser, property transferred shall be in trust with the purchaser on behalf of the PSIDC, meaning thereby that even in the event of transfer of the property and in the event of petitioner having not made the payment, the purchaser would hold the property as trustee on behalf of the respondent Corporation. Clause 6 stipulates that the amount due together with interest and other charges shall be secured by way of hypothecation of movable assets hereby transferred. There has to be transfer by virtue of this clause as it is only thereafter that the amount and interest could be secured by way of hypothecation of movable assets. By virtue of Clause 7 of the agreement the amount has further to be secured by way of equitable mortgage by deposit of title deeds of the immovable properties including the plant and machinery permanently fastened to earth. By virtue of clause 8, the charged referred to above, i.e., hypothecation of movable properties and mortgage of immovable properties had to be created within 30 days of this agreement and were to be duly registered with the Registrar of Companies, Punjab, HP and Chandigarh. Clause 9 deals with irrevocable and unconditional guarantees in individual capacity of Kulwant Singh Chadha and Gurdeep Singh Chadha etc. for due payment of the amount along with interest. Clause 10 talks of consents and approval to be obtained by the purchaser which were necessary for running of the Sugar mill. Clause 12 stipulates that the purchaser and the guarantors as per clause 8 i.e., those who are to hypothecate and mortgage the movable and immovable properties, had agreed that in the event of default in payment of any instalment of principle or interest due, besides penal interest, it would be open to the respondent Corporation to recall the total amount payable. It is to this clause, i.e. Clause No. 12 that proviso has been attached and the same says that notwithstanding anything contained in this agreement, the amount outstanding shall be treated to be a loan in terms of Section 29 of the State Financial Corporation Act and the PSIDC shall be free to take over the assets in the event of default of either principal or interest or both. Clause 14 deals with registration charges to be borne by the purchaser. Clause 15 stipulates that documents of title relating to the sugar mill shall be retained by the PSIDC till, whole of the price is paid which is possible only after registration of the sale deeds.
28. Mr. Sharma, learned counsel appearing for the petitioner, on the basis of the clause of agreement, referred to above and other attending circumstances, vehemently contends that the respondent Corporation could not have had resort to the provisions of Section 29 of the Act. The same being wholly inapplicable in the facts and circumstances of the present case. In support" of his contention, what is further stated by learned counsel is that an industrial concern, which is made a liability to the Financial Corporation under an agreement, has to make default in repayment of loan or advance or any instalment thereof. The sine-quo-non for the application of Section 29 is non-payment of a loan or advance whereas in the present case not a penny was given by the respondent Corporation as loan nor anything was advanced. Loan, according to learned counsel imparts a positive act of lending coupled with an acceptance by the other side of the money as loan. The respondent Corporation had not advanced anything to the petitioner concern which, in fact, had given more than 14 crores towards sale consideration. We have given our anxious thoughts to the contention raised by learned counsel but we do not find much substance in the contention of learned counsel, noted above. True, the learned counsel is technically correct to canvass before us that it is not a case of loan, default of payment of which, is dealt with by the provisions of Section 29 of the Act but the petitioner consciously arrived at an agreement with the respondent Corporation, relevant clauses whereof have been mentioned above. Proviso to clause 12 clearly states that notwithstanding anything contained in the agreement, the amount outstanding shall be treated to be a loan in terms of Section 29 of the Act. It requires to be mentioned here that proviso is appended to clause 12 which is clear terms deals with default in payment of any instalment of principal or interest due. Whereas, it may be true that insofar as part of sale consideration of little more than Rs. 14 crores is concerned, proviso to clause 12 could not possibly operate as that was certainly not an amount for which a default in payment might have been made by the petitioner concern but surely, the same can not be said with regard to the amount that fell due after the date when first instalment towards sale consideration was payable by the petitioner concern. We, thus, hold that insofar as an amount of little more than Rs. 14 crores is concerned and which was given by the petitioner concern to the respondent Corporation as part of sale consideration, the respondent Corporation could not resort to provisions of Section 29 of the Act, whereas with regard to the amount that was payable after the due date, i.e. 8.10.1998, when the amount of Rs. 11,25,00,002/- became due, the respondent Corporation could have resorted to the provisions contained in Section 29 of the Act.
29. The controversy really veers thick on the question as to at what time and in what circumstances the respondent Corporation could resort to the provisions of Section 29 of the Act. Could it do so before the title was passed to the petitioner concern, completely ignoring the other terms and conditions of the agreement, Annexure P-2 and at any stage treating proviso to clause 12, as trump card or that they had also necessarily to transfer the title of the property and only thereafter, in case of default of payment, provisions contained in Section 29 of the Act could be pressed. After deliberating over the issue, we have arrived at the conclusion that the respondent Corporation could not resort to provisions contained in Section 29 of the Act till such time the property, subject matter of sale vide agreement, Annexure P-2, was first transferred to the petitioner concern. It requires to be mentioned at this stage that even though it is not a case of loan at all and, as mentioned above, far from the respondent Corporation paying or advancing anything to the petitioner concern, it received an amount of Rs. 14 crores towards sale consideration, whereas Section 29 in clear terms talks of a loan or advance and vests the Corporation with jurisdiction to take over an industrial unit and such an industrial unit in the very nature of things has to belong to the defaulting concern and not to the Corporation itself. Even though, therefore, Section 29 in terms does not apply to the facts of this case, the same was applicable by virtue of proviso to clause 12 of the agreement. The proviso to Section 12 is a conscious act of the parties who clearly understood that even though Section 29 of the Act may not be applicable in terms of other clauses of the agreement, the same shall still apply with regard to outstanding amount and regarding which a default might have been made by the petitioner concern. It is in that context only that the proviso came to be incorporated in agreement, Annexure P-2. Further, the proviso to clause 12 is preceded with clauses 6, 7, 8 and 12 and followed by clause 14. Whereas, clause 6 deals with securing the amount due together with interest by way of hypothecation of movable assets and further goes on to say "assets hereby transferred". By virtue of agreement, Annexure P-2, it is, thus, clear that if the assets had actually been transferred, principal amount along with interest was to be secured by way of hypothecation of movable assets. There could not be any question of hypothecation of movable assets till such time the property had since been actually transferred in favour of the petitioner. Insofar as clause 7 is concerned, that talks of immovable properties. It has been said therein that the amount shall further be secured by way of equitable mortgage by deposit of title deeds of the immovable properties including plant and machinery. Could title deeds be deposited with the respondent Corporation till such time the property had actually been transferred? The answer has to be in negative. It is now clause 8 that needs to be dealt with. The same in clear terms commands the parties that the charges above referred, i.e., hypothecation of movable assets and mortgage of immovable properties, have to be created within 30 days of the agreement and shall be duly registered with the Registrar of Companies, Punjab, Himachal Pradesh and Chandigarh. From a combined reading of clauses 6, 7 and 8 it is thus, apparent that the movable assets had to be hypothecated whereas immovable properties had to be mortgaged and that all these had to be registered with the Registrar of Companies. Surely, it is only owner of the property, who could hypothecate and mortgage the movable and immovable properties. Clause 12, to which proviso, referred to above, has been appended, stipulates that the purchaser and guarantors, as per clause 8 had agreed and declared that in the event of default in payment of any instalment of principal or interest due, it shall be open to the PSIDC to recall the total amount payable. Clause 12 could not possibly operate sans compliance to clauses 6, 7, and 8 and if clause 12 does not come into operation, how shall proviso operate? Further, by virtue of clause 12 the purchaser and guarantors, as per clauses 8 i.e., those who were to hypothecate and mortgage the properties, had agreed and declared that in the event of default of payment of principal or interest, it shall be open to the PSIDC to recall the total amount payable. The mention is of words "purchaser and guarantors". If there was no purchaser and no guarantor, as the purchaser or guarantor could be only after the sale and not before that, the proviso to clause 12 could not possibly operate.
30. This very aspect of the matter can be looked from another angle. As mentioned above, Section 29 deals with taking over of an industrial unit, i.e., management or possession or both and the right to transfer by way of lease or sale. Surely taking over the management and possession of an industrial unit could not be of such a concern which did not belong to someone else other than the respondent Corporation. Till such time, the petitioner concern was transferred movable and immovable properties of the industrial unit, the property was still owned by the Corporation itself and surely, Section 29 could not be applied to take over of its own property by the Corporation. At this stage, it will be relevant to deal with various clauses of the agreement which have been relied upon by learned counsel for the respondent to contend otherwise. His reliance is upon clauses 5 and 15. Whereas, clause 5 stipulates that till such time the final payment is made, property transferred shall be in trust with the purchaser on behalf of the respondent Corporation, clause 15 mentions that in case of registration of the deed, documents of title relating to the sugar mill- shall be retained by the PSIDC till whole of the price agreed to be paid in respect of sale of the assets including of the interest, was paid. The more we read these clauses, more our view is strengthened that in the present case title had to be transferred to the petitioner concern. True, till such time final payment is made, property transferred is only a trust with the purchaser on behalf of the respondent Corporation. The clause only manifests that after the property is transferred, till such time entire payment is made, the purchaser will hold the same as a trust on behalf of the PSIDC. This clause presupposes transfer of title as otherwise, there is no question for the petitioner to hold it as a trust on behalf of the respondent Corporation. The clause further, in terms, mentions the petitioner as a purchaser and the property having been transferred. Further clause 5 again gives us a clear impression that there had to be registration of the deed as in that case alone the documents of title relating to the Sugar Mill could be retained by the respondent Cprporation till whole of the price was to be paid in respect of the assets inclusive of interest. How could the title deeds be deposited or retained by the respondent Corporation till such time there was registration, could not be explained to us by the counsel for the respondent. Looked from any angle, thus, we have arrived at an irresistible conclusion that proviso to clause 12 could operate only after clauses 6, 7, 8 and 14 had first been adhered to by the parties to the agreement, Annexure P-2. If these clauses have remained a dead inert affair, proviso to clause 12 can not possibly operate and that being so, at this stage or any other before registration of title deeds in favour of the petitioner Company, the respondent Corporation could not have resorted to the provisions of Section 29 of the Act.
31. Coming now to the conduct of respondent Corporation in invoking Section 29, the charge of the petitioner that the same is wholly unreasonable, in our view is well founded. Before we might proceed on this aspect of the case, we would like to mention that strict-senso it is not a case of respondent Corporation having given a loan or advanced something to the petitioner concern. Quite on the contrary, it received an amount of Rs. 14 Crores. We are analysing the aforesaid charge of the petitioner in view of the law laid down by the Supreme Court in Gem Cap''s case (supra), despite the fact that there is a marked distinction between the case in hand and the one that was before the Hon''ble Supreme Court. However, we might mention here that the observations of the Supreme Court precede with the findings that "the relationship between the Corporation and the borrower is that of creditor and debtor and 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 four corners of the Act and in furtherance of the object underlying the Act. But this factor can not 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 can not be carried to the extent of disabling it from recovering what is due to it.......These Corporations are not sitting on King Solomon''s mines. They too borrow monies from Government or other financial Corporations. They too have to pay interest thereon.....The constraints with the High Court to upset the orders passed by the Financial Corporation on the two grounds, as stated in the report, further precede with the words "indeed in a matter between the Corporation and its debtor."
32. Is the relationship between Corporation and petitioner concern in this case of a creditor and borrower? Has the Corporation given any loan to the petitioner? Has the Corporation in the present case to recover the loan and give fresh loans to others? Is it in deed a matter between Corporation and its debtor? In strict sense, our view is that it is not a case of that kind, as mentioned above. Nothing at all has been loaned or advanced to the petitioner concern. Only by proviso to clause 12 of the agreement, resort could be had to the provisions of Section 29 of the Act as agreed to between the parties and that too with regard to the amount that might have been defaulted by those who were covered under Clause 8 of the agreement, referred to above, it was, therefore, not a case of simple loan having been made over to the petitioner concern and conscious or contumacious default thereof that might have been made by the petitioner concern. We are of the clear view that in a case of this kind resort should first have been made to clause 4 which caters for default by melucting the petitioner with penal interest of 5% over and above the normal rate of interest. This clause should have been first resorted to. If the respondent Corporation was to resort to Section 29 of the Act in the very first instance, there was no need at all to incorporate clause 4 and the very fact that the said clause has been incorporated, in our view, the same should have been first resorted to. This is only one aspect of the case which shows unreasonableness on the part of the respondent Corporation.
33. The highhandedness on the part of respondent Corporation in this matter is further high lightened from the fact that even if it is assumed that provisions of Section 29 of the Act could be invoked at any time and at any stage, yet, concededly, Section 29 could not in any case apply to the amount of more than Rs. 14 Crores, already paid. There is no mention in the order with regard to this amount. It has no where been stated that this amount shall be returned to the petitioner. Assuming, therefore, the respondent Corporation could invoke the provisions of Section 29, the same could not possibly be with regard to an amount of Rs. 14 crores and, therefore, some orders ought to have been passed. We could understand if the respondent Corporation had cancelled the agreement and forfeited the amount of Rs. 14 crores. However, that course was not adopted and instead provisions of Section 29 of the Act were invoked. Learned counsel for the respondent-Corporation could not refer to any clause in the agreement that might have entitled the respondent Corporation to forfeit this amount of Rs. 14 crores if default was made by the petitioner in making further payments. We do understand that the petitioner had worked the mill for two seasons before the possession was taken over by the respondent Corporation but that ought to have been set off by the respondent Corporation in utilising a huge amount of Rs. 14 crores. Be that as it may, some orders with regard to this amount ought to have been passed.
34. The matter does not end there. The persistent demands made by the petitioner to transfer the assets of industrial unit on its name or in the name of its subsidiary company, had not been acceded despite the fact that by doing so, respondent Corporation was not to lose anything. The various clauses of the agreement that have been reproduced above, had vouched safe the interest of the respondent Corporation in every event. On the persistent queries made to learned counsel for the respondents, he could not urge even a word as to what loss the respondent Corporation would have suffered if the properties were transferred in favour of the petitioner concern or its assignee. A comprehensive protection of the respondent Corporation is provided from the terms of the agreement itself and surely the respondent Corporation could not be interested in anything but for the balance amount that was payable by the petitioner towards sale consideration. If that was protected, by hypothecating of movable properties and mortgage of immovable properties, and the personal guarantees, which were offered by the Directors of the petitioner concern, we find absolutely no justification for the respondent Corporation to have not acceded to the request of the petitioner concern which was not by way of charity but on account of various terms of the contract itself. Not only that movable and immovable properties were totally secured, the title deeds had to be deposited by the petitioner concern with the respondent Corporation and till such time last penny was paid, the property was to be held by the petitioner concern as trust on behalf of the respondent Corporation. Surely, the petitioner could not do anything with these properties till such time the entire amount was paid to the respondent Corporation and on the contrary, the petitioner concern could certainly advance its business and run into profits for which purpose everyone takes up any business, profession or avocation. It is the positive case of the petitioner concern that if the assets of the industrial concern were transferred to it, it could set its house in order. The pleadings of the petitioner to that effect have since already been detailed above and which, it may be mentioned at this stage, have not been controverted. It is not the case of respondent Corporation that by mere non-transfer of the title deeds, petitioner could not run its business in a more effective and meaningful way. But for a mere denial, there is nothing substantial which might have been given to show otherwise. At this stage, we would like to mention that at the close of arguments by learned counsel for the parties, we had put it to the learned counsel for the respondent that besides covenants, mentioned in the agreement, which completely vouch safe the interest of the respondent Corporation, in receiving the full amount of sale consideration, what more could possibly be done to ensure that the petitioner does not get the properties till such time the entire payment is made. The counsel could not urge anything nor was able to tell us anything thereafter, i.e., after conclusion of the arguments in this case. He was told to even now find out as to in what more effective way the interest of Corporation could be protected. The judgment was reserved to pass on this information but Mr. Rai, learned counsel for the respondent Corporation could not say anything on this count.
35. Coming now to the request of the petitioner concern for assigning the property to its subsidiary Company M/s Guru Tej Bahadur Sugar Mills, we again find that the stand of the respondent Corporation in not doing so was unjustified. It is true that it was for the respondent Corporation to agree to a particular assign and the terms of the agreement do suggest that, but was that sufficient to refuse a request which could not possibly harm the interest of the respondent Corporation and which in turn might have helped the petitioner concern to settle its house in order. All that could be pleaded or urged before us on that count was that advice of leading lawyers were obtained and the same turned against the request made by the petitioner concern. We hardly find any truth in this assertion made by the respondent Corporation. The respondent Corporation first sought opinion from M/s J.B. Dadachanji Ravinder Narain Mathur & Company. The reply received by the respondent Corporation on the aforesaid advice has been appended with the written statement as Annexure R-9. After tracing the facts as to how the industrial unit was given to the petitioner company and some of the clauses of agreement, operative part of the opinion proceeds as follows:-
"A. PSIDC can not, assign, the said contract/agreement dated 9.10.1997 to Guru Teg Bahadur Sugars Limited even assuming that its promoters are also the promoters/shareholders/directors of Chadha Papers Limited in view of the various restrictive clauses of the agreement referred to above.
B. The Corporation can protect its interest and secure the balance amount recoverable from Chadha Papers Limited. As provided in the agreement dated 9.10.1997 and if necessary through recourse to law. For the present CPL should be called upon to fulfill its various obligations under the agreement dated 9.10.1997 first.
C. As the Corporation can not agree to any assignment by CPL in favour of GTBSL due to the applicable clauses in the agreement and also by operation of law, the question of listing out the documents to be executed between CPL is merely academic."
36. In Clause ''A'' of the opinion, referred to above, all that has been mentioned is that assignment could not be made in view of the restrictive clauses of the agreement. In the para preceding clause ''A'', reference has been made to clause 5, 6 and 7 of the agreement. As per clause 5, property was to be held by the petitioner concern as trust on behalf of the Corporation till final payment was made. Clauses 6 and 7 are with regard to the petitioner concern hypothecating and mortgaging the movable and immovable properties with the respondent Corporation. The reference is also to clause 12 which has been fully detailed above and needs no reiteration. It is true that the respondent Corporation did receive the opinion, Annexure R-9, but we are surprised to see how these so called restrictive clauses become a hurdle in the way of respondent Corporation in making an assignment. All these clauses were naturally to apply mutatis mutandi to the assignee as well and further that in no uncertain terms by various requests made by the petitioner concern, the Directors of the petitioner concern had offered to give personal guarantees as well. Clause ''B'' of the opinion states that Corporation can not protect its interest and secure the balance amount recoverable from the petitioner concern through recourse of law and that the present petitioner should be called upon to fulfill its various obligations under the agreement. We are again unable to agree with this view. When the assignment was to be made, it had necessarily to be on the same terms and conditions and the terms and conditions of agreement Annexure P-2 had fully protected the interest of respondent Corporation. Clause ''C'' in the very nature of things needs no comments from us. Had the matter ended there and the respondent Corporation had not asked for fresh opinion, we might have still agreed that even though such opinion was not correct or had raised false apprehension, some one in the office thought not to take any un-necessary risk and close the chapter at that. However, that was not to be. Concededly, second opinion was sought. The opinion this time was sought from Shri M.L. Sarin, a Senior Advocate of this Court. We are quite sanguine that if the respondent Corporation was convinced with the reasons given in opinion, Annexure R-9, so as not to make any assignment, it would have certainly not sought for second opinion. However, second opinion was sought and that leaves an undeniable impression upon us that the Corporation was not convinced by the opinion given by J.B. Dadachanji Ravinder Narain Mathur & Company. Mr. M.L. Sarin, Senior Advocate of this Court, gave opinion, Annexure R-10 and answer to question No. 1 is certainly in tune with what has been said by us above. The question that was posed to Mr. Sarin for answer is as under:-
"i) Whether PSIDC should assign the said contract/agreement dated 9.10.1997 to a newly incorporated company, M/s Guru Teg Bahadur Sugars Ltd., whose promoters are the promoters of M/s Chadha Paper Limited (the purchaser company)?"
37. Mr. Sarin, in answer to the question aforesaid clearly stated that "the interest of the purchaser can be assigned with consent of PSIDC even before all the restrictive clauses of the agreement are fulfilled by the petitioner concern." He further stated that "it was clear that the Corporation did have the power to refuse to agree to the transfer of interest of the purchaser by assignment. How-ever, such refusal should be for good, valid and cogent reasons:. Mr. Sarin further went on to say that "if the Corporation was to agree to transfer the interest of CPL to GTBSL, the restrictive clauses of the agreement dated 9.10.1997 would still have to be complied with and be binding on GTBSL after the assignment is agreed to by the PSIDC". This is exactly what we have observed while commenting upon the opinion given by J.B. Dadachanji Ravinder Narain Mathur and Company. The answer to the first question which is most relevant question, being in favour of the petitioner Company, respondent Corporation had yet audacity to say before us and that too in pleadings, that the opinion of Mr. Sarin was against assignment. The second question posed to Mr. Sarin and its answer run as follows:-
(ii) If yes, how PSIDC could protect its interest and secure the balance amount recoverable from M/s Chadha Papers Limited in respect of sale of assets?
Ans:- If PSIDC does agree to the proposed assignment, it can protect its interest by insisting on the compliance with the provisions of agreement dated 9.10.1997 and in addition thereto certain further guarantees from CPL and GTBSL. In this regard, it may be pointed out that CPL in their letter dated 7.1.1998 (at page 166-167) have offered to give such guarantees that would protect the interest of PSIDC. PSIDC is primarily interested in recovering the full amount of Rs. 45,00,00,007/- out of which 25% i.e., Rs. 11,24,00,002/- have already been paid. The interest of PSIDC requires that the payment of the balance amount should be secured. This can be done by requiring CPL/GTBSL to furnish Bank guarantees for the said amount. Of course, the restrictive clauses already incorporated in the agreement dated 9.10.1997 will continue to apply."
38. The answer given to question No. (ii) is again in tune with the observations made by us above and it may be mentioned here that the Directors of the petitioner concern had undertaken to give even personal guarantees to secure the interest of the respondent Corporation. It has been clearly mentioned by Shri Sarin that the respondent Corporation was only interested in its money and that the petitioner concern vide its letter dated 7.1.1998 had offered to give personal guarantees that would protect the interest of the respondent Corporation. Question No. (iii) and answer thereof are not much relevant to the controversy in issue and, thus, need no comments from us. Suffice it to say that the opinion of Mr. Sarin is out and out in favour of the petitioner concern by clearly mentioning therein that the respondent Corporation was only interested in its money and that could be very well secured, it is interesting to note that even though an opinion of a very Senior Advocate of this Court was obtained, the respondent Corporation obtained yet another opinion of Mr. D.V. Sharma, Advocate. Concededly, opinion given by Mr. Sharma is also in favour of the petitioner and all that the respondent Corporation has to say in reply to the same is that Mr. D.V. Sharma, Advocate had exceeded the reference made to him.
39. The facts stated above, do constitute totally unreasonable attitude on the part of the respondent Corporation. If respondent Corporation was not to lose a penny of its due amount, and if the assignment could really help the petitioner in running its business in a better way so as to earn some profits, could this be refused by the respondent Corporation on the only plea-that the agreement talked of an agreed assignee and it would not agree to whatever be the circumstances. It requires to be mentioned at this stage that Mr. Sarin, in his opinion, clearly mentioned that the respondent Corporation did have the power to refuse to agree to the transfer of interest of the purchaser by assignment but such refusal should be for good, valid and cogent reasons. But for pressing upon the opinion given by J.B. Dadachanji Ravinder Narain Mathur and Company, counsel for the respondent could not urge even a word as to what good, valid and cogent reasons prevented the respondent Corporation in not permitting the petitioner concern to have assignment in favour of Guru Teg Bahadur Sugars Limited.
40. In support of its assertion that the respondent Corporation has acted in a most unreasonable manner in this case, by invoking the provisions of Section 29 of the Act, learned counsel for the petitioner has further highlighted the pleadings made in the petition to the effect that the respondent Corporation had indulged in concealing material facts inasmuch as at the time when industrial unit was sold to the petitioner concern, it was not disclosed that number of civil suits for recovery from the assets of industrial unit were pending before various courts including the Debts Recovery Tribunal, Jaipur. Insofar as institution of an application by Canara Bank before the Debt Recovery Tribunal, Jaipur, is concerned, it is not denied. All that is stated in response to the assertion made by the petitioner in this behalf is that at the time when agreement, Annexure P-2 came into being, Canara Bank had not filed the suit. Insofar as suits filed by other banks are concerned, no reply has been given in the written statement. The ground pressed into service has further been defended on the ground that the property was sold on "as is where is" basis. Before we might proceed with regard to this aspect of the matter, we would like to mention that this Court would surely not comment anything upon the liability of payment pursuant to the suits, referred to above. It is not required to comment for variety of reasons inclusive of that any observations made by us on that count, are bound to prejudice either of the parties before the concerned courts. We are, however, taking this matter in evaluating the assertion of the petitioner that the action of respondent Corporation culminating into order. Annexure P-9, u/s 29 of the Act was unreasonable. The aforesaid facts would clearly demonstrate one thing, i.e., that a dispute had come to surface with regard to recovery orders that may be made pursuant to decrees that might be passed in the cases, referred to above and that it was not clear that the respondent Corporation itself had a clear title to be passed to the petitioner concern. True, it is the stand of the respondent Corporation that the property was sold on "as is where is" basis which according to it mean "subject to all kinds of charges earlier created". The reply of the petitioner is that "as is where is" basis can not possibly pertain to clear title and it only pertains to quality, quantity and conditions of the assets. As referred to above, we are not commenting upon the merits of this controversy but the fact remains that till such time something was clarified on this issue, it was not in the fitness of things to apply Section 29 of the Act as certainly doubt had crept in the mind of the petitioner concern as to whether it was to get clear title or not. The petitioner concern had to cough up an amount of Rs. 40 crores which happens to be four times more than for which the property in question was offered to M/s Northland Sugar Complex and still it was not sure of a clear title. At this stage, it may also be relevant to mention here that Northland Sugars Limited was in litigation with the respondent Corporation and by the time first instalment became due, said litigation was still going on. The Hon''ble Supreme Court had granted an order of status-quo to Northland Sugars Limited on 23.1.1999 and before that first instalment payable by the petitioner had become due. We do not have the date of dismissal of SLP preferred, by Northland Sugar Limited but surely it had to be after 23.1.1999. Once a serious litigation between Northland Sugars Limited and the respondent Corporation was going on, wherein Hon''ble Supreme Court had even passed an order of status-quo, would there not be a reasonable apprehension in the mind of the petitioner that the payments made before culmination of litigation may go waste or in any case, drag the petitioner in endless litigation on so many fronts. This fact was concededly known to the respondent Corporation and yet it is before that date that the respondent Corporation started insisting upon the petitioner concern to make payment due towards the first instalment. The respondent Corporation had issued a registered AD letter on 18.9.1998 to the petitioner asking it to make the payment by 8.10.1998. This was followed by another reminder dated 24/25.9.1998. Subsequent reminders were sent on 28.9.1998 and 15.10.1998 and so much so even notice u/s 29 of the Act was issued on 25.11.1998. It is true that insofar as impugned order is concerned, the same has been passed on 30.3.1999 and at a stage when litigation, reference where of has been given above, had come to an end but the way and manner the Corporation proceeded against the petitioner concern, in its ultimate endeavour to pass an order u/s 29 of the Act, clearly demonstrates unreasonableness on its part. Far before the litigation had come to an end before the Hon''ble Supreme Court, but for passing the impugned order, virtually all proceedings, preceding the impugned order, had already come into existence.
41. What has been said above, in our view, is enough to show that no reasonable person would have acted in a manner the respondent Corporation did in this case in invoking the provisions of Section 29 of the Act. Further, we may hasten to add that even at a stage immediately preceding the litigation and thereafter, the conduct of respondent Corporation had not been as desired from a prestigious institution on which people normally should have unflinching faith. Earlier in point of time, petitioner had to come running to this Court by complaining that it was called for hearing on 21.1.1999 and that written arguments were submitted for consideration of the Corporation but without disposing of the contentions raised by the petitioner, notice for take over had been issued. The Hon''ble Division Bench dealing with C.W.P. No. 3767 of 1999 vide order dated 19.3.1999, operative part whereof has already been reproduced above, had to intervene when the writ was disposed of with a direction to the competent authority to take a final decision on the submissions made by the petitioner by passing a speaking over before passing an order taking over the unit u/s 29 of the Act. The petitioner had to approach this Court by way of present petition at a stage when, according to it, order in compliance with the directions, referred to above, had either not been passed or a copy thereof had not been made available to it. While issuing notice of motion, contention of learned counsel for the petitioner was noted by us and has already been reproduced in the earlier part of this judgment. However, when Mr. Rai appeared on behalf of the respondent Corporation, we were informed that the order has been passed and a copy of the same shall be handed over to the counsel for the petitioner on that day itself. The assertion of the petitioner is that possession of the unit was taken over on 26.4.1999 and at the time of take over, a copy of order was handed over to it which was dated 23.4.1999. Thereafter, on 3.5.1999 petitioner was supplied a copy of order which is alleged to have been passed on 30.3.1999. It is, thus, clear that possession was taken over without supplying a copy of order to the petitioner concern. As we understand, it could be only with a view to frustrate the effort of the petitioner in obtaining a stay from this Court and, naturally, after the court came to know that possession has since already been taken over, no stay was granted to the petitioner. It is surprising to note that not only while arguing the matter before us but in writing (in pleadings) it has been stated that since the Court, while disposing of the earlier writ petition on 19.3.1999 had not issued any direction to give a copy of order, the respondent Corporation was not under an obligation to supply the same. Does it behave such an institution to act in such a manner? We are afraid, we can only adversely comment upon the attitude adopted by the respondent Corporation.
42. What we have mentioned so far only exhibits non-cooperative, obdurate, unnecessarily harsh and unreasonable attitude on the part of the respondent Corporation. Positive attitude of the petitioner, which should have further restrained the respondent Corporation in resorting to provisions to Section 29 of the Act, still remains to be commented. At every stage, the petitioner .concern was willing to stand by various clauses of the agreement. The only innocent prayer was for transfer of title deeds in its favour or in favour of its assignee. The respondent Corporation, as mentioned above, neither chose to transfer the title deeds in favour of the petitioner nor its assignee. There could be some reason for it not to agree to make assignment in favour of a subsidiary company of the petitioner but it had no earthly reason not to transfer the industrial unit in favour of the petitioner company. Despite this hurdle in the way of petitioner, an amount of Rs. six crores was offered at the time when reply to notice issued to the petitioner u/s 29 of the Act was given as also at the time of personal hearing. It was clearly told to the Managing Director, who decided the case after hearing, that petitioner was willing to pay the amount and this fact has even been recorded in the impugned order. We have not calculated but we are of the view that an amount of Rs. six crores would have exceeded the amount of interest and damages, even in case the respondent Corporation was entitled to it, being of the opinion that the petitioner had made a default in payment without any cogent ground. Yet, this offer was not accepted and instead resort was made to Section 29 of the Act. This fact, whereas shows willingness on the part of the petitioner concern to discharge its liabilities, it equally shows totally non-cooperative attitude of the respondent Corporation. It is rather surprising to note that the learned counsel for the respondent has relied upon offers/letters whereby an amount of Rs. six crores was offered to say that this fact in itself is sufficient to show that the petitioner concern was at fault and had admitted so. On the aforesaid contention of the learned counsel, we only observe that no body wants to come to Court and every effort is made by the concerned party to avoid litigation and if, therefore, while making an offer of Rs. six crores, petitioner did not highlight the attitude of respondent Corporation, it does not mean that the petitioner had conceded its default and that too without any cause.
43. Last but not the least, impugned order dated 30.3.1999, Annexure P-9. would further demonstrate that the respondent Corporation was perhaps not even tuned to the points raised before it by the petitioner concern. While disposing of the matter, as the same had to be as per the directions issued by this Court in C.W.P. No. 3767 of 1999 by passing a speaking order, the respondent Corporation did not even remotely touch the basic issue raised by the petitioner concern, even though in earlier part of the order non-transfer of letter of intent/industrial licence has been mentioned to be a point raised by the petitioner. However, while discussing point No. 1 re: non-transfer of letter of intent/industrial licence, it was said that "non-transfer of letter of intent in the name of GPL would not devolve on them in not making the payment". The case projected by the petitioner concern that there could not be any default nor Section 29 could be applied by virtue of proviso to Section 12 till such time assets were transferred by way of a deed, was not even discussed. Quite curiously, the Managing Director, while further discussing point No. 1, went on to say that the stand of the Corporation is further fortified under clause 10 of the agreement and that the petitioner was responsible to get all the consents/approvals which were necessary for running the Sugar Mills from the State Government/Government of India and in any case the petitioner concern did not have any real problem in operating the unit as the mill had been in operation. The Managing Director then discussed point No. 1, as formulated by him in the earlier part of the order, on the basis of Data Book pertaining to boiler/approval by the Chief Inspector of Boilers and then went on to comment with regard to assignment in favour of Guru Teg Bahadur Sugars Limited. To reiterate, the real issue raised by the petitioner, as has been discussed by us as well, regarding transfer of assets before resorting to provisions of Section 29 of the Act, was lost in the din. While discussing willingness of the petitioner concern to make the payment, the Managing Director commented that the same was a hollow assertion as not a single rupee had been paid towards the second instalment. The offer of petitioner to pay an amount of Rs. six crores was again not even touched. With regard to assignment as well, the Managing Director wrongly recorded that it was not possible in view of the advice tendered by Shri M.L. Sarin, Senior Advocate of this Court. As discussed above, the advice of Shri Sarin was that the assignment could be made and if the same had to be refused, it could be done only on good, valid and cogent reasons. The more we read the impugned order, more we are convinced that, in all probability, decision had already been taken to invoke the provisions of Section 29 of the Act and take over the industrial unit irrespective of merit in the contentions raised before the Managing Director by the petitioner concern. This again, in our view, is totally an unreasonable approach that was adopted by the respondent Corporation.
44. For the reasons stated above, we allow this petition. Consequently, impugned orders, Annexure P-8 and P-9 are quashed. In consequence of setting aside of orders aforesaid, we direct the respondent Corporation to hand over the possession of industrial unit to the petitioner concern within ten days from today. We further direct the respondent Corporation to get title of industrial unit transferred in favour of the petitioner or its assignee within thirty days from today. Obviously, all provisions, that protect the interest of respondent Corporation shall be strictly adhered to by the petitioner concern. If there still be any ground for the respondent Corporation not to transfer the title of the industrial unit to he assignee of petitioner concern, then it that case, cogent reasons shall have to be given.
45. Before, however, we may part with this order, we would like to secure the interest of the respondent Corporation as well. With a view to settle the equities in order for both the parties, we direct the petitioner concern as well to pay the second instalment within two months from the date title deeds are transferred either in its favour or in favour of its assignee and further instalments as per schedule, i.e., the time lag between the payment shall be same as envisaged in agreement, Annexure P-2. In case default is made by the petitioner concern, of any of the instalments, it shall be open to the respondent Corporation to invoke the provisions of Section 29 of the Act. With a view to further settle the equities between the parties, we direct the petitioner so as not to raise any plea with regard to cases pending against the assets of the petitioner concern, with liberty to take the pleas, as have been taken in the present writ, before the concerned Court and abide by the decision of the said Courts. It shall be open to the respondent Corporation to reject any complaint made by the petitioner concern with regard to cases pending against the assets of the industrial concern, reference whereof has been given above. In the facts and circumstances of the case, however, the parties are left to bear their own costs. Order Dasti.
