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Andhra Pradesh High Court
Judges : SARDAR ALI KHAN
S.K.Nagaraju - Appellant
Versus
A.P. State Financial Corporation, Managing Director - Respondent
Decided On : 07-27-89
SALE OF DEFAULTING INDUSTRIAL UNIT - PUBLIC AUCTION - PROCEDURE - VALIDITY - CHALLENGE - HIGH COURT'S POWER TO INTERFERE.
Fact of the Case:
Petitioner's factory was seized by the 1st respondent-Corporation under Section 29 of the State Financial Corporation Act, 1951, due to default in loan repayment. The Corporation invited tenders for the sale of the unit, and the highest tender was received from the 4th respondent. The petitioner challenged the sale, alleging irregularities in the tender process and a higher offer from another person.
Finding of the Court:
The Court held that the Corporation had followed the proper procedure for the sale of the unit by inviting tenders and negotiating with the highest tenderer. The Court also held that the petitioner's challenge based on a higher offer from another person was not tenable as the sale had already been concluded with the 4th respondent.
Issues: 1. Whether the Corporation followed the proper procedure for the sale of the unit? 2. Whether the petitioner's challenge based on a higher offer from another person was tenable?
Ratio Decidendi: 1. The Court held that the Corporation had followed the proper procedure for the sale of the unit by inviting tenders and negotiating with the highest tenderer. The Court relied on the principle that public property should be generally sold by public auction or by inviting tenders to ensure the highest price and fair dealing. The Court also held that the Corporation had complied with the rules and regulations governing such sales and that there was no evidence of any irregularity or breach of procedure. 2. The Court held that the petitioner's challenge based on a higher offer from another person was not tenable as the sale had already been concluded with the 4th respondent. The Court held that once the Corporation had exercised its powers under Section 29 of the Act and brought the assets of the defaulting concern to sale by public auction, it would not be open for anyone to claim cancellation of the sale on the basis of a higher offer. The Court held that such a request would amount to putting the public auction or the tender accepted in a state of uncertainty.
Final Decision: The Court dismissed the writ petition, holding that the sale of the unit to the 4th respondent was valid and binding and that the petitioner had no locus standi to challenge the sale.
( 1 ) THE petitioner prays for the Writ of Prohibition restraining the respondents from accepting the tender of Rs. 3,35,000/ for the petitioner s shed and plot (Plot No. 81, Shed No. 19, I. D. A. , Cherlapally ).
( 2 ) THE salient facts of the case are that the petitioner is the sole proprietor of M/s Vijaya Engineering Enterprises. He was allotted Plot no. 81 in Industrial Development Area, Cherlapally, wherein he constructed shed and installed machinery to run a glass moulding small scale industry in the name and style of "m/s Vijaya Engineering Enterprises". The 1st respondent-State Financial Corporation lentrs. 2,15,000/ to the petitioner for the purchase of the plot, erecting the shed and purchase of machinery etc. The total agreed amount to be lent to the petitioner according to the contract is Rs. 3,60,000/. The 1st respondent-Corporation wanted to initiate action u/s 29 of the State Financial Corporation Act against the petitioner for recovery of the amount due from him. The) petitioner filed o. S. No. 286/86 in the Court of the Ptl. District Munsif (East and North), rangareddy District and obtained a perpetual injunction against the defendants restraining them from committing a breach of their loan agreement dt. 8-8-1984. Thereafter, it seems the petitioner filed an interlocutory application seeking directions to the 1st respondent Corporation not to prevent him from manufacturing or running his factory, which was also granted. Then, he filed a petition for appointment of a Commissioner to remove the obstructions placed by the respondents in running of his factory and a Commissioner was also appointed. He also moved the same Court to commit the officials of the 1st respondent-Corporation to civil jail for two months for disobedience of the orders of injunction. The trial Court passed the orders committing the respondents to civil jail for two months as requested by the petitioner. However, the 1st respondent-Corporation filed C. R. P. No. 3269/86 against the order appointing the Commissioner and tr. C. M. A. No. 217/88 against the order committing the respondents to jail. The Civil Revision Petition and the Transfer C. M. A, were heard jointly by the High Court and were allowed by an order dt. 26-2-1988. Thus, the litigation initiated by the petitioner in the Civil Court had come to an end by the orders passed in the Civil Revision Petition and in the Trl. C. M. A. by the High Court.
( 3 ) THE Corporation then seized the factory of the petitioner and kept it under lock and key in April 1988 in exercise of the powers vested in it U/s. 29 of the State Financial Corporation Act. The petitioner makes a grievance of the fact that during the last 12 months, the respondents invited tenders For the shed and plot of the land only twice, while charging exaggerated grated items of expenditure in the account of the petitioner. The petitioner submits that while the Corporation had agreed to lend him a sum of Rs. 3,60,000/- in all, they gave ooly Rs. 2,15,000/ due to which, he could not operate the industrial unit started by him. The total amount due from the petitioasr now is said to be Rs. 4,35,000/ and odd. The respondent-corporation invited tenders for the purchase of the unit of the petitioner in July 1988 ; but no tenders were submitted by anybody. Again, they invited tenders in january 1989 and the highest tender received was for a sum of Rs. 3,65,000/ -. In the estimate of the petitioner his shed and plot of land is likely to fetch not less than Rs. 5,00,000/ and his machinery is supposed to be worth another Rs. 2,50,000/. The petitioner states that he has been kept completely in the dark about the procedure adopted by the Corporation to bring the unit of the petitioner for sale to realise the dues to the Corporation. The petitioner turther states that the respondent-Corporation has been discouraging the persons to submit tenders with higher rates and cites examples of several such persons who have suppo
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