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2012 (1) Supreme 311
SUPREME COURT OF INDIA
Aftab Alam and Ranjana Prakash Desai, JJ
M/s. Industrial Promotion And Investment Corporation Of Orissa Limited — Appellant
versus
M/S. Tuobro Furguson Steels Private Limited & Others — Respondents
Civil Appeal No.1850 of 2007
Decided on : 5-12-2011
(b) Contract Act, 1872 ¯ Section 37 ¯ Where both sides had acted on the basis of the contract, changing their respective positions and assuming rights and obligations against each other, the contract having been acted upon, it could not be unilaterally abrogated on the sweet will of any of the two sides. (Para 12)
Facts of the Case
In response to an advertisement issued by the appellant, a foundry unit was sold to the respondent on ‘As is where is’ basis for a sum of Rs. 40.00 lacs with down payment of Rs. 8.00 lacs, possession of the unit was also delivered ¯ The balance amount of Rs. 32.00 lacs was to be treated as fresh loan to the respondent ¯ Memo of delivery of possession was also executed, the sale formalities were to be performed within a period of one month ¯ The respondent did not complete the formalities, wrote to the appellant about high rate of interest, that the condition of machinery was in bad shape, the respondent was not getting loan, there were electricity dues also ¯ The respondent did not complete the formalities, and requested the appellant to take back the unit also intimated the appellant that the respondent would withdraw the security posted on the Foundry unit ¯ Faced with the recalcitrant attitude of respondent, appellant took possession of the assets of the unit under Section 29 of the State Financial Corporation Act ¯ The respondent by filing writ in the High Court challenged the taking over of the assets of the unit ¯ The appellant decided to sale the unit to Sun Agro Foods and Exports for a sum of Rs. 17.00 lacs but possession could not be delivered in view of the interim order passed by the High Court ¯ Finally the High Court allowed the respondents writ and directed the appellant to refund Rs. 8.00 lacs along with interest to the respondent paid earlier ¯ Hence, this appeal (Para 12)
Findings
Held, the parties with their eyes widely open, had entered into the contract for sale of the Unit which was subject to the terms and conditions clearly spelled out in the advertisement and in the sale letter; that in furtherance of the contract, payment was made and possession of the Unit changed hands. In other words, both sides had acted on the basis of the contract, changing their respective positions and assuming rights and obligations against each other. The contract having been acted upon, it could not be unilaterally abrogated on the sweet will of any of the two sides. In terms of the contract the respondents were obliged to pay the balance consideration amount of Rs.32,00,000/- (Rupees Thirty Two Lacs) along with interest as provided in the sale letter. In default of payment it was the statutory right of the appellant-corporation to take possession of the Unit under Section 29 of the Financial Corporation Act. (Para 12)
JUDGMENT
Aftab Alam, J.
1. This appeal, at the instance of M/s Industrial Promotion and Investment Corporation of Orissa Limited (“Corporation” for the sake of brevity), is directed against the judgment and order dated June 29, 2006 passed by a Division Bench of the Orissa High Court. By the impugned judgment, the High Court allowed the Writ Petition [W.P.(Civil) No.1556/2003] filed by respondent Nos.1 & 2 (M/s Tuobro Furguson Steels Private Limited and its Director) and undoing a contract of sale of an Industrial Unit entered into between the parties, directed the appellant to refund Rs.8,00,000/- (Rupees Eight Lacs), that was paid by the respondents to the appellant as part of the sale consideration, together with simple interest at prevailing rates of interest of the State Bank of India on deposits made by customers during the relevant period.
2. The facts relevant to appreciate the rival contentions of the parties are brief and may be stated thus. A Foundry Unit situated at Ganeswarpur Industrial Estate, Balasore, by the side of NH-5, along with land, building, plant and machineries was taken over by the Corporation under Section 29 of the State Financial Corporation Act, 1951, as its original promoters namely, M/s Josna Casting Centre, defaulted in payment of its dues. The taken-over Unit was put to sale vide advertisement dated February 8, 1999 issued in Oriya and English newspapers inviting offers for purchase of the Unit. A copy of the sale advertisement is at Annexure P1 which gives a complete description of the Industrial Unit along with all the relevant details. It is significant to note that in the advertisement it was stipulated that the sale would be on ‘AS IS WHERE IS’ basis. Further, the intending purchasers were allowed inspection of the Unit-on-sale from February 16 to 27, 1999.
3. In response to the advertisement the respondents made an offer (revised by letters dated April 12, 1999 and August 5, 1999) to purchase the Unit for a total consideration of Rs.40,00,000/- (Rupees Forty Lacs) with down payment of Rs.8,00,000/- (Rupees Eight Lacs). The offer made by the respondents was considered by the Advisory and Disposal Committee of the Corporation, and in acceptance of the offer, the Corporation issued the sale letter dated September 10, 1999. A copy of the sale letter is at Annexure P2. In the sale letter it was stated that possession of the Unit would be handed over to the respondents on payment of Rs.8,00,000/- (Rupees Eight Lacs) and the balance amount of Rs.32,00,000/- (Rupees Thirty Two Lacs) would be treated as fresh loan to respondent no.1 to be repaid within a period of 6 years in quarterly instalments after a moratorium of 18 months with interest at the rate of 18 per cent per annum from the date of handing over the physical possession of the Unit. The sale formalities were required to be completed within 30 days from the date of issue of the letter. It was further stipulated in the letter that the sale would lapse and the earnest money forfeited if the documents were not executed within the prescribed time. In clause 2 of the letter it was once again repeated that the sale was on “AS IS WHERE IS” basis and no further claim in that respect would be entertained by the Corporation. In clause 5 it was stated that the sale of fixed assets was free from liabilities other than the deferred payment of loan of Rs.32,00,000/- (Rupees Thirty Two Lacs) with interest as stated in the earlier paragraph of the letter. Clause 8 made it clear that the sale did not pre-suppose sanction of any additional loan in favour of the purchaser for operation of the Unit. In clause 9 of the letter it was stated that though the Corporation would recommend to all concerned to assist and help the buyer of the Unit (the respondents) but would not be in any manner responsible if any of the benefits were not granted to the Unit or if there was delay in grant of any of the benefits. It was expressly made clear that the denial of any
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