@JUDGMENTTAG-ORDER
L. Narasimha Reddy, J.@mdashThe first petitioner is a partnership firm and the second petitioner is one of its partners. The second petitioner acquired a site of Ac.0.10 cents at a commercial area in the Kadapa Town. She intended to construct a Commercial Complex over the site and approached the Kadapa branch of A.P. State Financial Corporation (for short ''the Corporation'') for loan. A loan of Rs. 10 lakhs was sanctioned on 11.12.1995. Up to October 1996, a sum of Rs. 9,06,500/- was released to the second petitioner. The land, together with the proposed constructions was mortgaged in favour of the Corporation, through deposit of title deeds. Collateral security was also furnished by mortgaging four items of immovable property. Construction is said to have been completed by 1997. The Corporation itself joined as tenant in July 1997, in the ground floor, at a rent of Rs. 7,316/-. The second petitioner made some payments and the rents were also adjusted towards the loan.
2. The Corporation issued a demand notice, dated 15.09.1999, for a sum of Rs. 11,22,558/-. The second petitioner made certain payments, but not the entire demanded amount. The loan was recalled and in exercise of power u/s 29 of the A.P. State Financial Corporations Act, 1955 (for short "the Act"), the possession of primary asset was assumed by the Corporation. Two attempts made by the Corporation, to sell the property did not fructify. Thereafter, an advertisement was issued, on 05.02.2000 proposing to sell the newly constructed building, together with the land. 22.02.2000 was stipulated as last date for submission of tenders. The fourth respondent submitted her tender for a sum of Rs. 15.2 lakhs and another tender was received before the last date for Rs. 15.5 lakhs. One S.Ramalakshumma submitted her tender after the due date, quoting the consideration at Rs. 19 lakhs.
3. While the Corporation was negotiating with the tenderers, the petitioners approached this Court by filing writ petitions, and a suit before a civil Court, feeling aggrieved by the tender notice. The first respondent ultimately finalized the sale in favour of the fourth respondent for a sum of Rs. 22 lakhs. A sale deed was also executed on 21.03.2001. The petitioners challenge the action of the Corporation in selling the property.
4. It is urged that though the property was valued at Rs. 27.37 lakhs, it was sold at a totally disproportionate price. They contend that the Corporation deviated from the prescribed procedure and did not make any efforts to secure the maximum price. It is also stated that even though the Corporation was enjoying the property as a tenant and though there existed adequate security, the sale was conducted in violation of all the prescribed norms.
5. The Corporation, on the one hand, and the fourth respondent, on the other hand, filed separate counter-affidavits. They state that the petitioners committed default in repayment of the loan and left with no alternative, the mortgaged item of property was brought to sale. According to them, even before the sale was confirmed, an opportunity was given to the petitioners to pay the amount that was fetched in the auction and since they did not pay the amount, the sale was confirmed.
6. Sri Noushad Ali, learned Counsel, advanced arguments on behalf of the petitioners. He submits that the loan was sanctioned, only for the purpose of construction of ground and first floors and with her own resources, the second petitioner constructed a cellar portion as well as second floor. Learned Counsel contends that by March 2001, the petitioners paid a sum of Rs. 9,39,350/- and when a request was made for releasing one of the items of collateral securities to pay the demand amount, the request was not acceded to and with a deliberate intention to knock away the property of the petitioners, hasty steps were taken. He submits that the Hon''ble Supreme Court repeatedly held that the extraordinary power u/s 29 of the Act must be utilized by the Corporation to ensure that the mortgaged item of property fetches maximum price and in the instant case, efforts were made only in the reverse direction. He contends that the maximum latitude was shown towards the fourth respondent, so much so that a clause providing for forfeiture of the deposit in the event of default was also waived. Learned Counsel submits that the value of the property as assessed by the Corporation, at the time of issuing notification, was Rs. 27.37 lakhs; according to the office of Sub-Registrar, Kadapa, it is Rs. 31.47 lakhs, and the actual market value as on that date was around Rs. 60 lakhs. He alleges that no efforts were made to issue fresh notification and after lapse of one year from the date of tender and that during this period, there was a steep escalation of prices of immovable properties, in the area.
7. Sri Y.V. Ravi Prasad, learned Standing Counsel for the Corporation, and Sri P. Veera Reddy, learned Counsel for the fourth respondent, on the other hand, submit that every step in the matter, was taken strictly in accordance with the prescribed procedure. They also contend that the Writ Petition is not maintainable, since the earlier writ petitions filed challenging the notification were dismissed. They contend that the scope of interference by this Court in dealing with the matters of this nature, is very limited and that the Writ Petition is liable to be dismissed.
8. Before adverting to the merits of the case, the objection raised by the respondents, as to the maintainability of this Writ Petition, needs to be dealt with. It is stated that challenging the various steps initiated, to bring the property, the petitioners filed writ petitions and they were dismissed. This writ petition, according to them is not maintainable. It is no doubt true that the petitioners filed W.P. No. 17143 of 2000 assailing the steps initiated by the Corporation for sale of the property. That however was in relation to a notification, which was issued, much prior to the one dated 05.02.2000. Similarly, another writ petition, being W.P. No. 143 of 2000, was filed before the sale took place. So is the case with W.P. No. 4342 of 2000, which was withdrawn. It is not even urged by the respondents that the sale conducted, in pursuance of the notification, dated 05.02.2000 and the execution of sale deed in favour of the fourth respondent was the subject matter of any earlier writ petitions. Hence, the objection is held untenable.
9. The Corporation released Rs. 9,60,500/- in favour of the petitioners, up to October, 1996, for construction of a building. Security, which is several times more than that amount, was furnished. The construction of the building progressed very well and by July, 1997, the Corporation itself joined as a tenant in the prime part of the premises, namely entire ground floor. The efforts of the petitioners to sell the ground and first floors did not fructify. The petitioners made some payments, to the Corporation. Apart from that, the rents were being adjusted. By the time, the construction was completed, the resources of the petitioners were completely exhausted and they have to naturally rely upon the sale proceeds of the constructed area or the rents thereof. Exactly at that stage, the Corporation swung into action. The primary assets were seized in exercise of power u/s 29 of the Act, and demand was made through notice, dated 15.09.1999. It has also proceeded to issue a sale notice, dated 05.11.1998. The petitioners went on making intermittent payments and the further proceedings, in pursuance of the notification, dated 05.11.1998, were dropped. Same thing happened with the second notification, dated 20.03.1999. With the issuance of these two notifications, the liquidity or the credibility of the petitioners did suffer a dent. Even while enjoying the possession of the prime properties, the Corporation issued the third notice, dated 05.02.2000. According to the certificate obtained by the Corporation, the value of the property as in February, 2000 was 27.37 lakhs. The last date for submission of tenders was fixed as 22.02.2000. Only two bids were received. The fourth respondent offered Rs. 15.2 lakhs and another Rs. 15.5 lakhs. This was no way nearer to the assessed value of the property. In the normal course of conduct, fresh tenders ought to have been invited. The very fact that a person submitted a tender subsequent to the last date for a sum of Rs. 19 lakhs discloses that adequate publicity or renewed efforts would have fetched a better price.
10. The Corporation has chosen to negotiate with the fourth respondent, that too, on the basis of a higher offer made by a third party after the last date. This negotiation went up to a sum of Rs. 22 lakhs. The record discloses that it was only on 01.02.2001, that is one year after the date of tender notification that the fourth respondent paid a sum of Rs. 5 lakhs. The balance was to be deposited on 05.02.2001. A default clause was incorporated to the effect that in case the balance is not paid by that date, the amount paid by the fourth respondent would be forfeited. This, however, was not adhered to. A facility was provided to the fourth respondent to pay the balance on 12.03.2001 and this was followed by execution of sale deed.
11. The Corporation is vested with the extraordinary power u/s 29 of the Act. It is relieved of the necessity to approach a civil Court either for a decree for the amount due or for the execution of the decree, if passed. It is not only assigned the roles of a trial Court and the executing Court but is also relieved of the ordeal of trial and enquiry. With a stroke of pen, it can bring about sale of a property offered as security. Time and again, the Hon''ble Supreme Court held that such an extraordinary power is coupled with the duty to ensure that the property fetches the maximum price. In
13. ...Under Section 29(1), the Corporation while enforcing the first charge was required to put the assets charged with the debt to sell and apply the sale proceeds in the manner stated in Section 29(4). But before doing so, it is imperative to have the assets proposed to be sold, valued...
14. ...In the case of
12. Even while sounding a note of caution that the High Court must be slow to interfere with the sale of property effected u/s 29 of the Act, the Supreme Court held that the dominant concern of the Corporation must be to secure the best possible price. It was also observed that any instance of unfairness or unreasonableness or mala fide exercise of power would constitute the grounds for interference. It was emphasized that securing the best price must be the ultimate goal. Para 19 of the judgment, in
From the aforesaid, the legal principles that emerge are:
(i) The High Court while exercising its jurisdiction under Article 226, of the Constitution does not sit as an appellate authority over the acts and deeds of the Financial Corporation and seek to correct them. The doctrine of fairness does not convert the writ courts into appellate authorities over administrative authorities.
(ii) In a matter between the Corporation and its debtor, a writ court has no say except in two situations:
(a) there is a statutory violation on the part of the Corporation, or
(b) where the Corporation acts unfairly i.e. unreasonably.
(iii) In commercial matters, the courts should not risk their judgments for the judgments of the bodies to which that task is assigned.
(iv) Unless the action of the Financial Corporation is mala fide, even a wrong decision taken by it is not open to challenge. It is not for the courts or a third party to substitute its decision, however, more prudent, commercial or businesslike it may be, for the decision of the Financial Corporation. Hence, whatever the wisdom (or the lack of it) of the conduct of the Corporation, the same cannot be assailed for making the Corporation liable.
(v) In the matter of sale of public property, the dominant consideration is to secure the best price for the property to be sold and this could be achieved only when thee is maximum public participation in the process of sale and every body has an opportunity of making an offer.
(vi) Public auction is not the only mode to secure the best price by inviting maximum public participation, tender and negotiation could also be adopted.
(vii) The Financial Corporation is always expected to try and realize the maximum sale price by selling the assets by following a procedure which is transparent and acceptable, after due publicity, wherever possible and if any reason is indicated or cause shown for the default, the same has to be considered in its proper perspective and a conscious decision has to be taken as to whether action u/s 29 of the Act is called for. Thereafter, the modalities for disposal of the seized unit have to be worked out.
(viii) Fairness cannot be a one-way street. The fairness required of the financial Corporations cannot be carried to the extent of disabling them from recovering what is due to them. While not insisting upon the borrower to honour the commitments undertaken by him, the Financial Corporation alone cannot be shackled hand and foot in the name of fairness.
(ix) Reasonableness is to be tested against the dominant consideration to secure the best price.
These principles were followed and reiterated in subsequent judgments also.
13. If the law laid down by the Supreme Court in the judgments referred to above, is applied to the present case, it becomes too difficult to up held the sale in favour of the fourth respondent. It has already been pointed out that the value of the property was assessed at 27.37 lakhs. The reserve bid ought to have been for that amount. Only two tenders were received before the last date. The tender received after the last date was fairly higher price. That itself was a clear indication, that if adequate publicity was given, many more offers would have been received for higher amounts. The Corporation and the fourth respondent dragged the matter for one year. By that time, there was further escalation of prices. The District Registrar certified that in April, 2001 the property would have fetched Rs. 31.47 lakhs, according to their parameters. Things would have been different, had there not been any improved response to a fresh notification. Further, any expenditure incurred for publishing such notification was to go to the account of the petitioners alone. Therefore, there was no justification for the Corporation in not going for a fresh tender notice.
14. There is a serious defect as to the manner in which the sale offered in favour of the fourth respondent. The bids were received in February, 2001. It was only on 05.02.2001, that she paid a sum of Rs. 5 lakhs. Her offer was accepted with a specific stipulation that the balance of consideration must be paid on or before 05.02.2001. It was indicated that in default, the amount of Rs. 5 lakhs would be forfeited. Admittedly, the balance was not paid by that time and it was paid only on 12.03.2001. The cumulative effect of all these factors is that the sale effected by the Corporation in favour of the fourth respondent is contrary to the law laid down by the Supreme Court.
15. Accordingly, the Writ Petition is allowed, directing that :
a) the sale of the property by the Corporation in favour of the fourth respondent through sale deed, dated 23.02.2001, is set aside and the Corporation shall refund the sale consideration to the fourth respondent;
b) since the fourth respondent had the benefit of enjoyment of the property, he shall not be entitled for any interest; and
c) the Corporation shall be entitled to proceed against the petitioners to recover the amount due as on 23.02.2001. In case the petitioners fail to pay that amount, it shall be open to them to sell the same item of property by following the principles enunciated by the Hon''ble Supreme Court in its judgment in Karnataka State Industrial Investment and Development Corporation Limited''s case (2 supra), which in turn, are reproduced in the preceding paragraphs of this judgment.
15. There shall be no order as to costs.
