2009 Supreme(SC) 1779

2009(8) Supreme
SUPREME COURT OF INDIA
G.S. Singhvi & Asok Kumar Gangualy, JJ.
Punjab Financial Corporation — Appellant
versus
M/s. Surya Auto Industries — Respondent
Civil Appeal No. 7910 of 2009
(Arising out of S.L.P. (C) No.2600 of 2009)
Decided on : 01-12-2009

IMPORTANT POINT
The proceedings initiated by the corporation and action taken for recovery of the outstanding dues cannot be nullified by the courts except when such action is found to be in violation of any statutory provision resulting in prejudice to the borrower or where such proceeding/action is shown to be wholly arbitrary, unreasonable and unfair.

Headnote:State Financial Corporations Act, 1951 – Section 29 – Appeal for setting aside order passed by High Court whereby it allowed the writ petition filed by the respondent, and quashed the action taken by the appellant Corporation under Section 29 of the Act for recovery of its dues and also directed review of all pending cases in which penal interest had been compounded – Held The proceedings initiated by the corporation and action taken for recovery of the outstanding dues cannot be nullified by the courts except when such action is found to be in violation of any statutory provision resulting in prejudice to the borrower or where such proceeding/action is shown to be wholly arbitrary, unreasonable and unfair- The court cannot sit as an appellate authority over the action of the corporation and substitute its decision for the one taken by the corporation – High Court committed an error in declaring that the action taken by the Corporation was unfair and unreasonable and the direction issued for review of all pending cases where penal interest had been compounded was legally unsustainable – While decrying the appellant – Corporation for allegedly going into slumber after taking over the unit of the respondent in furtherance of the first notice issued under Section 29 of the Act, the High Court overlooked many important factors that respondent miserably failed to discharge its obligation to repay the loan together with interest and as against the outstanding dues of more than Rs.36 lacs in 2002, a paltry sum of Rs.2.70 lacs was deposited – Again appellant – Corporation issued notices dated 2.12.2002; 3.3.3003, 30.5.2003 and 29.8.2003 to the respondent requiring it to pay the amount specified therein, but the latter did not respond to either of the notices- Apart from that appellant – Corporation even offered to reduce the rate of interest and reschedule the payment of dues, but the respondent did not avail the same- The respondent also did not take benefit of the schemes notified on 3.1.2005 and 18.3.2005 for restoration of the unit by paying the principal amount along with 10% of the outstanding interest - Appellant-Corporation had acted in a most reasonable and fair manner and the High Court was not justified in nullifying the second notice issued under Section 29 of the Act by assuming that the appellant – Corporation had not taken effective steps for realization of its dues in furtherance of first notice – High Court could not have suo motu altered terms of agreement and directed the appellant to make fresh calculation of the outstanding dues and allowed the respondent to pay the amount as per fresh demand by selling the mortgaged property – In the result, impugned order set aside – Appeal allowed. (Paras 15 to 19)

       Facts of the Case :

        Present Appeal has been filed for setting aside order passed by High Court whereby it allowed the writ petition filed by the respondent, and quashed the action taken by the appellant Corporation under Section 29 of the Act for recovery of its dues and also directed review of all pending cases in which penal interest had been compounded.

       Facts of the Case :

        Held The proceedings initiated by the corporation and action taken for recovery of the outstanding dues cannot be nullified by the courts except when such action is found to be in violation of any statutory provision resulting in prejudice to the borrower or where such proceeding/action is shown to be wholly arbitrary, unreasonable and unfair. The court cannot sit as an appellate authority over the action of the corporation and substitute its decision for the one taken by the corporation. High Court committed an error in declaring that the action taken by the Corporation was unfair and unreasonable and the direction issued for review of all pending cases where penal interest had been compounded was legally unsustainable. While decrying the appellant-Corporation for allegedly going into slumber after taking over the unit of the respondent in furtherance of the first notice issued under Section 29 of the Act, the High Court overlooked many important factors that respondent miserably failed to discharge its obligation to repay the loan together with interest and as against the outstanding dues of more than Rs.36 lacs in 2002, a paltry sum of Rs.2.70 lacs was deposited.Again appellant-Corporation issued notices dated 2.12.2002; 3.3.3003, 30.5.2003 and 29.8.2003 to the respondent requiring it to pay the amount specified therein, but the latter did not respond to either of the notices. Apart from that appellant-Corporation even offered to reduce the rate of interest and reschedule the payment of dues, but the respondent did not avail the same. The respondent also did not take benefit of the schemes notified on 3.1.2005 and 18.3.2005 for restoration of the unit by paying the principal amount along with 10% of the outstanding interest. Appellant-Corporation had acted in a most reasonable and fair manner and the High Court was not justified in nullifying the second notice issued under Section 29 of the Act by assuming that the appellant- Corporation had not taken effective steps for realization of its dues in furtherance of first notice. Unfortunately, the High Court ignored that the respondent had not only adopted a recalcitrant attitude in the matter of payment of the outstanding dues, but also failed to avail the concessions offered by the appellant-Corporation. High Court could not have suo motu altered terms of agreement and directed the appellant to make fresh calculation of the outstanding dues and allowed the respondent to pay the amount as per fresh demand by selling the mortgaged property. In the result, impugned order was set aside. Appeal was allowed

       Result : Appeal allowed.