( 1 ) CANARA Bank, represented by its Senior Manager, Narayanaguda, Hyderabad, has filed Writ Appeal No. 682/90 against the order dated 16-5-1990 made in W. P. M. P. No. 8409/90 in W. P. No. 6601/90 granting an interim direction against the appellant Bank thereby restraining it from transferring any amount deposited by the petitioner-company in its current account to the loan account and to allow the petitioner-company to operate the current account.

( 2 ) WHEN the matter came up for consideration before us it was deemed fit and proper to direct that the Writ Appeal as well as Writ Petition No. 6601 of 1990 may be posted for final hearing together so that the matter may be decided once and for all. Therefore, this judgment is being passed after the combined hearing of Writ Appeal No. 682/90 and Writ Petition No. 6601/90.

( 3 ) IT would be appropriate to refer to the affidavit filed in support of the writ petition for narration of essential facts of the case.

( 4 ) M/s. Taraka Prabhu Publishers (Pvt.) Limited is a private limited company incorporated under the provisions of the Companies Act, 1956. The Andhra Pradesh Industrial Development Corporation has contributed to the share capital of the 1st petitioner and extended term loans to it. The object of the company is to publish Udayam Telugu daily newspaper. The 1st petitioner is also printing and publishing Udayam family weekly, Sivaranjani Cine Weekly. Petitioners 2, 3 and 4 are connected with the running of the business of the company and they assist the company in the publication of the newspaper, weeklies etc. , referred to above. Respondents 1 and 2 are Canara Bank and Andhra Bank respectively, which are nationalised Banks and come within the meaning of "state" under Art. 12 of the Constitution of India. In order to run its business the 1st petitioner-company had obtained term loans and working capital loans etc. , from respondents I and 2. It is alleged that there was inordinate delay in the sanctioning of the loan by respondents 1 and 2 and that the petitioners were put to great hardship for purchase of news prints and in the running of its business. As a result of the inevitable economic circumstances the unit became a loss-making-unit and was unable to discharge its liabilities to the respondents. With a view to tide over the financial crisis. The management of the 1st petitioner-company decided to involve a financially stable business group in the management of the unit so that it could provide the necessary facilities to make the unit self-sufficient and stable. With this view they requested M/ s. Balaji Group of Companies to take over the management of the unit. M/s. Balaji Group of Companies came to the conclusion that the unit should be taken over in spite of its commercial non-viability to protect the newspaper dailies, weeklies etc. , which are catering to the needs of the members of the public. In conjunction with the Balaji Group of Companies, the 1st petitioner has, therefore, hammered out a recovery proposal and submitted the same to the respondents, vide their letter dated 16-2-1990. The proposals made by the 1st petitioner-company were discussed between the concerned parties and the 1st petitioner-company was hopeful of an avoidable decision from the respondents to rehabilitate the unit.

( 5 ) HOWEVER, the 1st respondent Canara Bank got a legal notice dated 18-3-1990 issued to the 1st petitioner-company and filed a suit in O. S. 470/1990 on the file of the V Additional Judge, City Civil Court, Hyderabad, for recovery of Rs. 1,39,53,650-18 Ps. towards the amounts alleged to be due from the 1st petitioner-company under various loan accounts. The contention raised on behalf of the 1st petitioner-company is that there is no reason whatsoever for the respondent Bank to reject the proposal put forward in their letter dated 16-2-1990 which are thoroughly in accordance with the guidelines issued by the Reserve Bank of India. It is also alleged that in some other

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