HARYANA FINANCIAL CORPORATION & Anr. v. MIS. JAGDAMBA OIL MILLS & Anr.

A that instalments were to be disbursed on the basis ofsecurities created by the borrowers and as and when enough securities were created, the loan amount was to be disbursed. Appellant disbursed the loan. Respondent failed to repay the instalments by due date; instead requested for rescheduling the payment schedule. Despite rescheduling, the respondent defaulted again. Respondent again requested for rescheduling the payment B schedule but again failed to repay the due instalment by the due date. Since Respondent No. 1 was a chronic defaulter in making repayment of loan instalment, appellant initiated action against Respondent No. I under Section 29 of the State Financial Corporation Act, 1951 after recalling the loan under Section 30, and accordingly taken over possession of the unit C of the respondent. The respondent filed suit in the Civil Court seeking a decree for permanent injunction restraining the appellant from auctioning the seized unit. Trial Court decreed the suit. Unable to succeed in appellate Court and the High Court, appellant-Corporation preferred appeal to this Court. D It was contended for the appellant that Courts below erred in placing reliance on the decision in Mahesh Chandra's Case without noticing the distinguishing factual backgrounds; that they did not follow the decisions of this Court in Financial Corporation v. Gem Cap India (P) Ltd. which was squarely applicable; and that ample opportunity was granted to the E respondents to make repayment of loan instalments but they failed to make payment. It was contended for the respondent that the Financial Corporation as trustee was not expected to act like any other individual money-lender. Partly allowing the appeal, the Court F HELD 1.1. Financial Corporation is expected to act fairly in the matter of disbursement of loans. There is corresponding duty cast upon the borrower to repay the instalments in time, unless prevented¥by unsurmountable difficulties. Regular payment is the rule and non-payment due to extenuating circumstances is the exception. If the repayments ar G not received as per the scheduled frame, it will disturb the equilibriu the financial arrangements of the Corporations. Non-paymeiit of instalments by a defaulter may stand in the way of deservi~~ borrower getting financial assistance. (628-E-F) ·

1.2. Legislative intent in enacting the Statute in questions was to H promote industrialisation of the States by encouragini:; slnall and medium , / / HARYANA FINANCIAL CORPN. v. JAGDAMBA OIL MILLS 623 industries by giving financial assistance in the shape of loans and advances, A repayable within a stipulated period. There is a purpose in its lending i.e. to promote small and medium industries. The relationship between the Corporation and the borrower is that of creditor and ~ebtor. (628-H; 629-A) That basic feature cannot be lost sight of. A Corporation is not B supposed to give loan and then to write it off as a bad debt and ultimately to go out of business. It has to recover the amounts due so that fresh loan can be given. In that way, industrialisation which is the intended object, can be promoted. (629-A-B) U.P. Financial Corporation v. Gem Cap (India) Pvt. Ltd & Ors., (1993) 2 sec 299, relied on. Mahesh Chandra v. Regional Manager U.P. Financial Corporation & Ors., (1999) 2 SCC 279, overruled.

2.1. Fairness cannot be a one way street. Financial Corporation borrows money from the Government or other Financial Corporations and are required to pay interest thereon where the borrower has no genuine intention to repay and adopts pretexts and ploys to avoid payment, he cannot make the grievance that Financial Corporation was not acting fairly. (630-D) c D E

2.2. Obligation to act fairly on the part of the administrative authorities was evolved to ensure rule of law and to prevent failure of justice. This doctrine is complimentary to the principles of natural justice which the quasi-judicial authorities are bound to observe. The distinction F between a quasi-judicial and the administrative action has become thin. Even so the extent of judicial scrutiny/judicial review in the case of administrative action cannot be larger than in the case of quasi judicial action. If the High Court cannot sit as an appellate authority over the decisions and orders of quasi-judicial authorities, it follows equally that it cannot do so in the case of administrative authorities. Thus, the power G of the Courts while reviewing the administrative action is not that of an appellate Court. (630-E-F-G; 631-C-E)