High Court · 2007

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 19.12.2007CORAMTHE HONOURABLE MR. JUSTICE P.K. MISRA AND THE HONOURABLE MR. JUSTICE K.K. SASIDHARANWrit Appeal No.4198 OF 2005 A. Amaresan ..AppellantVs.1. The Tamil Nadu Industrial Investment Corporation Limited rep. By its Branch Manager, Thiruvallur District Branch Ambattur Industrial Estate Chennai-58.2. N. Venkatesan R.2 impleaded as party respondent vide order dt.25.1.2007 made in WAMP.No.8 of 2007 .. Respondents Writ appeal against the order dated 3.11.2004 in W.P.No.14111 of 2004 ofthe learned Single Judge, this writ petition filed under Article 226 ofthe Constitution of India, praying for the issuance of a Writ ofCertiorarified Mandamus, calling for the records relating to theproceedings of the respondent to accept payment as per letter dated17.02.2004. For Appellant : Mr.M. Devaraj For Respondents : Mr.A.Panneerchelvam for R.1 Mrs.Usha Ramman for R.2J U D G E M E N T K.K.SASIDHARAN, JThe unsuccessful petitioner in W.P.No.14111 of 2004 is the appellantin this writ appeal.2. The factual matrix of the case necessary for the disposal of thewrit appeal is as follows. https://hcservices.ecourts.gov.in/hcservices/ One Arunachala Nadar borrowed a sum of Rs.9.90 lakh in the year 1989for the purpose of construction of a lodging house in GummidipoondiVillage, Thiruvallur District in the State of Tamilnadu. 3. A term loan was sanctioned by the first respondent on 04-04-1999and the borrower availed the loan to an extent of Rs.8,39,255.30. Thelodging house constructed in the property was given as collateral securityfor due discharge of the loan amount. While so, Arunachala Nadar died inthe year 2002. Since the loan amount was not paid in time and as there wasan arrears to the tune of Rs.13,07,846/- the first respondent resorted torecovery proceedings and brought the property for sale. Challenging thesaid order the appellant preferred W.P.No.35771 of 2003 before this courtand the said writ petition was disposed as per order dated 08.12.2003 andthe operative portion of the order is extracted below."Confirmation of the auction held today in favour of thehighest bidder would stand deferred on condition that thepetitioner deposits a sum of Rs.50,000/= on or before 31.12.2003with the respondent and the balance sum of Rs.12,50,000/= shallbe paid either as one time payment or in instalments on or before28.2.2004. Failing compliance of the conditions referred to abovewould result in the order granting instalment payment todaystanding revoked with liberty to the respondent to proceed withthe legal consequences of the auction held today and in thatcourse this order will not come in the way of the respondents.This court is informed that the petitioner had already given arepresentation dated 22.10.2003 to the respondent offering an onetime settlement and such a request is will within the timenamely, 31.12.2003. Therefore, the respondent is directed toconsider that representation, in accordance with law and passorders thereon in any event not later than 10.1.2004. If thereis an order in favour of the writ petitioner, on thatrepresentation, then the petitioner would not be entitled to thebenefits of the instalment payment granted today and instead hehas to adhere to the terms and conditions of the acceptance, ifany, on the one time settlement offer made by the petitioner."4. The appellant subsequently approached the first respondent forone time settlement and waiver of interest in respect of the loan and thefirst respondent as per proceedings dated 17.02.2004 called upon thepetitioner to pay a sum of Rs.9,12,719.30 as onetime settlement to bepayable on or before 29.02.2004. The appellant failed to avail the onetimesettlement, which resulted in taking further action by the firstrespondent for sale of the collateral security. The property was soldsubsequently and the excess amount received by way of sale proceeds afteradjusting the loan amount viz., Rs. 30,206.70 was given to the appellantby way of a cheque and the said payment was made on 04.05.2004. https://hcservices.ecourts.gov.in/hcservices/

5. The appellant on receipt of the communication dated 04.05.2004along with the cheque for a sum of Rs. 30,206.70 challenged the saidproceedings before this court in W.P.No.14111 of 2004 contending that thevalue of the property is about Rs.65.15 lakh even according to the firstrespondent and as such the property was sold for a paltry sum andaccordingly the appellant prayed for setting aside the impungedproceedings and for a direction to the first respondent to accept thepayment as indicated in the letter dated 17.02.2004 of the appellantaddressed to the first respondent.6. During the pendency of the writ petition the successful bidderfiled an application to implead himself as a party to the proceedings andaccordingly he was impleaded as second respondent.7. When W.P.No.14111 of 2004 came up before the learned Single Judgefor vacating the interim order granted earlier, the learned counsel forthe appellant undertook to pay the entire amount of the sale proceeds,which the property secured in the auction along with an amount of Rs.1lakh and accordingly recording the said undertaking the matter wasadjourned to 18.10.2004. Subsequently the matter was taken up on18.10.2004 and as it was found that the appellant had not deposited theamount as undertaken by him, the learned Single Judge directed him tobring a demand draft for a sum of Rs. 17.50 lakhs on 26.10.2004 andfurther observed that in the event of default, the writ petition would besummarily rejected without any further hearing.8. The writ petition was taken up for final hearing on 3.11.2004 andwhen it was found that the earlier order dated 18.10.2004 has not beencomplied with, the learned Judge found that the order had already workedout itself and there is nothing to be decided in the writ petition andaccordingly disposed the writ petition with the said observation. It isthe said order dated 3.11.2007 in W.P.No.14111 of 2007 which is impugnedin this writ appeal.9. In this factual background, we have heard Mr.M. Devaraj, learnedcounsel for the appellant; Mr. A. Panneerchelvam, learned counsel forrespondent No.1 and Mrs.Usha Ramman, learned counsel for the secondrespondent. 10. The main contention of the learned counsel for the appellantrelates to the sale of the property for a lesser amount than the actualmarket price, which it would have fetched, in case the sale was done ina more transparent manner. By relying on the judgment reported in 2004(7)S.C.C. 166 (S.J.S. BUSINESS ENTERPRISES (P) LTD. v. STATE OF BIHAR), thelearned counsel submitted that the first respondent is expected to securethe best price for the property and failure of the same vitiates the verysale made by the first respondent. https://hcservices.ecourts.gov.in/hcservices/

11. The learned counsel for the first respondent Corporationsubmitted that the auction was conducted in an open and transparent mannerwith due publicity and in the said auction, the highest bid was for a sumof Rs.14 lakhs and the said offer by the second respondent was accepted.The first respondent further contended that in spite of giving adequateopportunity to the appellant to pay the amount, he did not avail the saidopportunity and as such there is no illegality in the order of learnedSingle Judge, which needs interference in this writ appeal. 12. The learned counsel for the auction purchaser vehementlycontended that the auction was conducted as early as in the year 2003 andthe second respondent took part in the auction and his bid for an amountof Rs.14 lakhs was confirmed and as per the terms and conditions ofauction, the second respondent has also deposited the said amount of Rs.14lakhs before the first respondent. Because of the pendency oflitigation, the second respondent was not able to get physical possessionof the property, though auction was confirmed in his name.13. There is no dispute with regard to the availing of loan by thefather of the appellant and the subsequent proceedings initiated by thefirst respondent for recovery of the arrears and the legal proceedingsinitiated by the appellant to avoid the auction and the orders passed bythis court on three occasions for the purpose of enabling the appellant todischarge the loan amount and save the property from auction. In theinitial stage itself, this court as per order dated 8.12.2003 inW.P.No.35771 of 2003 permitted the appellant to pay a sum of Rs.50,000/-on or before 31.12.2003 and the balance sum of Rs.12,50,000/- was directedto be paid on or before 28.2.2004. It was clearly indicated in the saidorder that failing compliance of the conditions, would result in the ordergranting instalment payment automatically revoked, which would giveliberty to the first respondent to proceed with the auction proceedings.When it was found that the appellant has already given a representation tothe first respondent on 22.10.20003 for the purpose of payment of theamount by way of one time settlement, the court directed the firstrespondent Corporation to dispose of the said representation on or before10.1.2004. It is a matter of record that the first respondent dulyconsidered the request made by the appellant for one time settlement andas per proceedings dated 17.2.2004, the appellant was directed to pay asum of Rs.9,12,719.30 and the said offer was also not taken seriously bythe appellant and in such circumstances, there was no other way for thefirst respondent than to continue with the auction proceedings for thesale of the property given as collateral security for the amount inquestion. https://hcservices.ecourts.gov.in/hcservices/

14. The first respondent published the auction notice in "DailyThanthi" and in the auction concluded thereafter, the bid given by thesecond respondent was found to be the highest one for a sum of Rs.14 lakhsand accordingly the bid was confirmed in favour of the second respondentin November, 2003.15. When the appellant filed W.P.No.14111 of 2004 challenging theproceedings dated 4.5.2004, in and by which the first respondent forwardedthe cheque for a sum of Rs.30,206.70 being the excess sale proceeds, thelearned Single Judge passed an order recording the undertaking of theappellant whereby he had agreed to pay the entire amount of sale proceedsalong with a sum of Rs.1 lakh and the said undertaking was also flouted bythe appellant. Subsequently the learned Single Judge again passed adiscretionary order on 18.10.2004 directing the appellant to bring ademand draft for a sum of Rs.17,50,000/- on 26.10.2004 and in the eventof default, it was ordered that the writ petition would summarily berejected without any further hearing. The appellant very convenientlyignored the said order also and ultimately when the matter came up forfinal hearing, the learned Single Judge having found that the earlierorder dated 18.10.2004 had already worked itself out, disposed the writpetition with the said observation, as according to the learned Judgenothing survives in the writ petition on account of the conditional orderpassed on 18.10.2004.16. The order dated 18.10.2004 is a discretionary order passed by thelearned Single Judge permitting the appellant to produce a demand draftfor a sum of Rs.17,50,000/- with a condition that in case the amount isnot deposited, the writ petition would be dismissed without any furtherhearing. Subsequently when it was found that the appellant had notcomplied with the conditional order and as the order had worked outitself, the learned Single Judge disposed the very writ petition. Theorder dated 18.10.2004 has become final as the appellant did not challengethe said order in a manner known to law. The jurisdiction under Article226 of the Constitution of India is a discretionary jurisdiction, which isalso often called as equity jurisdiction. The learned Judge in spite ofthe fact that the property was sold way back in 2003, permitted theappellant to make a deposit of the auction amount with a view to passappropriate orders to safeguard the interest of both the appellant as wellas the Corporation and also the successful bidder. The appellant failedto make use of the said opportunity and therefore the appellant cannot beheard to say that he has been prejudicially affected on account of thesale of the property. In view of the discretionary nature of the orderpassed by the learned Judge on 18.10.2004 we do not find any scope forinterference in a proceedings under Article 226 of the Constitution ofIndia. https://hcservices.ecourts.gov.in/hcservices/

17. It is trite law that the Court exercising jurisdiction underArticle 226 of the Constitution of India is not an appellate authority inthe matter of financial dealings of the Corporations. Judicial review isvery limited in such cases and unless the order is found to be arbitrary,unreasonable irrational or shocking the conscience of the court in thefact situation, there cannot be any inference for substituting thedecision. 18. Therefore we do not find any reason, much less justifiablereason to interfere with the proceedings of the first respondent inauctioning the property in favour of the second respondent, in as much assufficient opportunity was given to the appellant to pay the amount. Nodocument is produced by the appellant to show that before fixing the upsetprice due notice has to be issued to the borrower with respect to the saleof the property. In view of the fact that this court has shown indulgenceto the appellant on three occasions to discharge the loan amount and asthe appellant has not availed the said opportunity we do not find anyreason to interfere with the order of the learned Single Judge. 19. The learned counsel for the appellant relied on the judgments ofthe Apex Court reported in 2004(7) S.C.C. 166 (S.J.S. BUSINESSENTERPRISES (P) LTD. v. STATE OF BIHAR) and 2004(7) S.C.C.151 (GAJRAJ JAINv. STATE OF BIHAR) and contended that the power vested in the FinancialCorporations must be exercised bonafide and fairly and that in mattersof sale, the Financial Corporations must act in accordance with theStatute and must not act unfairly and unreasonably. There is no quarrelwith regard to the legal preposition that the Financial Corporationsshould show utmost good faith and bonafides in the matter of conduct ofsale of the property given as collateral security.20. In the decision in S.J.S. BUSINESS ENTERPRISES (P) LTD. v. STATEOF BIHAR, the Apex Court was considering the sale made by Bihar StateIndustrial Credit and Investment Corporation Limited and the observationcontained in the said judgment was on account of unusual haste shown bythe Corporation to sell the property and the Supreme Court also found thatthe Financial Corporation deviated from the norms in respect of the saleand shown unusual haste in the matter and set aside the sale. Similarly inthe decision in GAJRAJ JAIN v. STATE OF BIHAR and others (2004(7) SCC151), the Apex Court considered the issue with regard to the sale of theproperty of Bihar State Industrial Credit and Investment CorporationLimited and in the said case also there were serious irregularities in thesale, which made the Apex Court to comment about the auction sale. In thesaid matter, there were different items of property and after putting theassets to sale by public auction, the Corporation entered into anagreement of sale of the assets with the fourth respondent, withoutascertaining the market value and realising the sale proceeds fordistribution. In the said context, the Supreme Court observed that themortgaged assets of the company could have been sold on itemised basis or https://hcservices.ecourts.gov.in/hcservices/ as a whole, whichever is found on valuation to be more profitable. TheSupreme Court in the facts of the said case found that the Corporation hasmisused the authority and power in breach of Law by taking into extraneousmatters and by ignoring relevant matters which has rendered all its actsultravires. The observations were made in the said factual context andultimately the agreement of sale entered into by the Corporation to sellthe property by private negotiation was set aside.21. So far as the present case is concerned, it is on record that thefirst respondent has published the sale notification in "Thina Thanthi"and only after receiving the bids from various tenderers, the auction wasconfirmed in favour of the second respondent. Even after issuing the salenotification the first respondent permitted the appellant to pay theentire amount by way of one time settlement and the said offer has notbeen made use of by the appellant. Subsequently, the learned Single Judgeas a condition for postponing the auction, permitted the appellant to paythe amount in two instalments, the substantial second instalment beingpayable after a period of one year. The appellant also failed to make useof the equitable order granted by the learned Single Judge. After thesale was conducted and the bid was confirmed in the name of the secondrespondent, again on two occasions, the learned Single Judge permitted theappellant to deposit the amount. However the appellant failed to complywith those orders also. In such circumstances, the judgment relied on bythe learned counsel for the appellant would not come to his rescueinasmuch as the facts in those cases are entirely different.22. Public Financial Institutions are dealing with public funds andunless the dealer repays the loan amount as per schedule it will not bepossible for the institution to discharge their functions and to assistnew entrepreneurs in opening their venture by granting necessary financialassistance. It is needless to say that the financial Corporations also ontheir part must act fairly.23. The Apex Court in the case of HARIYANA FINANCIAL CORPORATION v.JAGADAMBA OIL MILLS (2002(3) SCC 496) considered the issue regarding thescope of interference in the functioning of Public Financial Corporationsand held thus:-"6. The Corporation as an instrumentality of the State dealswith public money. There can be no doubt that the approach has tobe public-oriented. It can operate effectively if there isregular realization of the instalments. While the Corporation isexpected to act fairly in the matter of disbursement of theloans, there is corresponding duty cast upon the borrowers torepay the instalments in time, unless prevented by insurmountabledifficulties. Regular payment is the rule and non-payment due toextenuating circumstances is the exception. If the repayments arenot received as per the scheduled time-frame, it will disturb theequilibrium of the financial arrangements of the Corporations. https://hcservices.ecourts.gov.in/hcservices/ They do not have at their disposal unlimited funds. They have tocater to the needs of the intended borrowers with the availablefinance. Non-payment of the instalment by a defaulter may standin the way of a deserving borrower getting financial assistance. 7. As was observed by this Court in Gem Cap case 2 thelegislative intent in enacting the statute in question was topromote industrialization of the States by encouraging small andmedium industries by giving financial assistance in the shape ofloans and advances, repayable within a stipulated period. Thoughthe Corporation is not like an ordinary moneylender or a bankwhich lends money, there is purpose in its lending i.e. topromote small and medium industries. The relationship between theCorporation and the borrower is that of a creditor and debtor.That basic feature cannot be lost sight of. A Corporation is notsupposed to give loan and then to write it off as a bad debt andultimately to go out of business. As noted above, it has torecover the amounts due so that fresh loans can be given. In thatway industrialization, which is the intended object, can bepromoted. It certainly is not and cannot be called upon to pumpin more money to revive and resurrect each and every sickindustrial unit irrespective of the cost involved. That would bethrowing good money after bad money. As was rightly observed inGem Cap case 2 promoting industrialization does not serve publicinterest if it is at the cost of public funds. It may amount totransferring public money to private account. In Mahesh Chandracase 1 this Court issued directions which were required to beobserved by Financial Corporation while exercising power underSection 29. In this regard, it was observed at pp. 297-98 asfollows: (SCC para 22)“Every endeavour should be made, to make the unitviable and be put in working condition. If it becomesunworkable: ( 1 ) Sale of a unit should always be made by publicauction. ( 2 ) Valuation of a unit for purposes of determiningadequacy of offer or for determining if bid offered wasadequate, should always be intimated to the unit-holder toenable him to file objection if any as he is vitally interestedin getting the maximum price. ( 3 ) If tenders are invited then the highest price onwhich tender is to be accepted must be intimated to the unit-holder. ( 4 )( a ) If unit-holder is willing to offer the saleprice, as the tenderer, then he should be offered same facilityand unit should be transferred to him. And the arrears remainingthereafter should be rescheduled to be recovered in instalmentswith interest after the payment of last instalment fixed underthe agreement entered into as a result of tendered amount. https://hcservices.ecourts.gov.in/hcservices/ ( b ) If he brings third parties with higher offer it wouldbe tested and may be accepted. ( 5 ) Sale by private negotiation should be permitted onlyin very large concerns where investments run in very huge amountfor which ordinary buyer may not be available or the industryitself may be of such nature that by ( sic many) normal buyersmay not be available. But before taking such steps there shouldbe advertisements not only in daily newspapers but businessmagazines and papers. ( 6 ) Request of the unit-holder to release any part of theproperty on which the concern is not standing of which he is theowner should normally be granted on condition that sale proceedsshall be deposited in loan account.” 8. The guidelines were stated to be necessary to ensurefair play. That decision, as the factual position would go toshow, was rendered in a case where the borrower intended torepay the debt and was anxious to do so. While not insistingupon the borrower to honour the commitments undertaken by him,the Corporation alone cannot be shackled hand and foot in thename of fairness. 9. In matters like the present one, fairness cannot be aone-way street. Corporations borrow money from the Government orother Financial Corporations and are required to pay interestthereon. Where the borrower has no genuine intention to repayand adopts pretexts and ploys to avoid payment, he cannot makethe grievance that the Corporation was not acting fairly, evenif requisite procedures have been followed."24. The Apex Court considered the extent of judicial review in thecase of administrative action in Jagdamba Oil Mills case cited supra andheld as follows:-10. The obligation to act fairly on the part of theadministrative authorities was evolved to ensure the rule of lawand to prevent failure of justice. This doctrine iscomplementary to the principles of natural justice which thequasi-judicial authorities are bound to observe. It is true thatthe distinction between a quasi-judicial and the administrativeaction has become thin, as pointed out by this Court as far backas 1970 in A.K. Kraipak v. Union of India 3 . Even so the extentof judicial scrutiny/judicial review in the case ofadministrative action cannot be larger than in the case ofquasi-judicial action. If the High Court cannot sit as anAppellate Authority over the decisions and orders of quasi-judicial authorities, it follows equally that it cannot do so inthe case of administrative authorities. In the matter ofadministrative action, it is well known, more than one choice isavailable to the administrative authorities; they have a certain https://hcservices.ecourts.gov.in/hcservices/ amount of discretion available to them. They have “a right tochoose between more than one possible course of action on whichthere is room for reasonable people to hold differing opinionsas to which is to be preferred” (as per Lord Diplock in Secy. ofState for Education and Science v. Metropolitan Borough Councilof Tameside, All ER at p. 695 f ). The court cannot substituteits judgment for the judgment of administrative authorities insuch cases. Only when the action of the administrative authorityis so unfair or unreasonable that no reasonable person wouldhave taken that action, can the court intervene. To quote theclassic passage from the judgment of Lord Greene, M.R. inAssociated Provincial Picture Houses Ltd. v. Wednesbury Corpn. 5: (All ER pp. 682H-683A) It is true the discretion must be exercised reasonably. Nowwhat does that mean? Lawyers familiar with the phraseologycommonly used in relation to exercise of statutory discretionsoften use the word ‘unreasonable’ in a rather comprehensivesense. It has frequently been used and is frequently used as ageneral description of the things that must not be done. Forinstance, a person entrusted with the discretion must, so tospeak, direct himself properly in law. He must call his ownattention to the matters which he is bound to consider. He mustexclude from his consideration matters which are irrelevant towhat he has to consider. If he does not obey those rules, he maytruly be said, and often is said, to be acting ‘unreasonably’.Similarly, there may be something so absurd that no sensibleperson could ever dream that it lay within the powers of theauthority.”.25. We have considered the entire matter in the light of the factualmatrix and with reference to the principles laid down by the Supreme Courtand we do not find any reason to interfere with the discretionary orderwhich is impugned in the writ appeal. Accordingly, the writ appeal isdismissed. However, in the facts and circumstances of the case, therewill be no order as to costs.Sd/Asst.Registrar/true copy/Sub Asst.RegistrarTr/ https://hcservices.ecourts.gov.in/hcservices/ ToThe Tamil Nadu Industrial InvestmentCorporation Limited rep. By its BranchManager, Thiruvallur District BranchAmbattur Industrial EstateChennai-58.1 cc To Mr.G.R.Swaminathan, Advocate, SR.75417.1 cc To Mr.A.Pannerselvam, Advocate, SR.75334.1 cc To Mr.M.Devaraj, Advocate, SR.75068.W.A.NO.4198 OF 2004 VRK(CO)RVL 03.01.2008