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Andhra Pradesh High Court
Judges : SARDAR ALI KHAN
Indent: A.P.State Financial Corporation - Appellant
Versus
A.P. State Financial Corporation - Respondent
Decided On : 07-27-89
STATE FINANCIAL CORPORATIONS ACT - SECTION 29 - SALE OF DEFAULTING INDUSTRIAL CONCERN'S ASSETS - PROCEDURE - PUBLIC AUCTION OR TENDER - FAIRNESS AND EQUITY - INADEQUACY OF PRICE - JUDICIAL REVIEW - CONDITIONS FOR INTERFERENCE.
Fact of the Case:
The petitioner, a sole proprietor of a glass-moulding small scale industry, defaulted on a loan from the first respondent-State Financial Corporation (SFC). The SFC initiated action under section 29 of the State Financial Corporations Act, 1951, to recover the dues. The petitioner obtained an injunction against the SFC's actions, but the injunction was later lifted by the High Court. The SFC seized the petitioner's factory and invited tenders for its sale. The highest tender received was for Rs. 3,35,000, which the petitioner challenged as inadequate and mala fide. The petitioner also claimed that he had received higher offers from other parties, including Rs. 4,60,000 from one Sri B. Naga Malleswara Rao and Rs. 4,25,000 from an advocate, Sri A. Jagadish.
Finding of the Court:
The court held that the SFC had followed the proper procedure for bringing the petitioner's property to sale by inviting tenders. The court noted that the SFC had advertised the sale in two newspapers and had received two tenders, which were negotiated to arrive at the highest offer. The court also found that the petitioner had not provided any evidence to support his claim that the SFC had acted in a mala fide manner or that the sale price was inadequate. The court further held that the petitioner's claim that he had received higher offers from other parties was irrelevant, as the SFC was not obligated to entertain private offers.
Issues: 1. Whether the SFC had followed the proper procedure for bringing the petitioner's property to sale by inviting tenders? 2. Whether the sale price was inadequate? 3. Whether the SFC had acted in a mala fide manner? 4. Whether the petitioner's claim that he had received higher offers from other parties was relevant?
Ratio Decidendi: 1. The court held that the SFC had followed the proper procedure for bringing the petitioner's property to sale by inviting tenders. The court noted that the SFC had advertised the sale in two newspapers and had received two tenders, which were negotiated to arrive at the highest offer. 2. The court held that the sale price was not inadequate. The court noted that the petitioner had not provided any evidence to support his claim that the SFC had acted in a mala fide manner or that the sale price was inadequate. 3. The court held that the SFC had not acted in a mala fide manner. The court noted that the petitioner had not provided any evidence to support his claim that the SFC had acted in a mala fide manner. 4. The court held that the petitioner's claim that he had received higher offers from other parties was irrelevant, as the SFC was not obligated to entertain private offers.
Final Decision: The court dismissed the petitioner's writ petition, holding that the SFC had followed the proper procedure for bringing the petitioner's property to sale by inviting tenders, that the sale price was not inadequate, that the SFC had not acted in a mala fide manner, and that the petitioner's claim that he had received higher offers from other parties was irrelevant.
( 1 ) THE petitioner prays for a 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 Vijaya Engineering Enterprises. He was allotted plot No. 81 in Industrial Development Area, Cherlapally, wherein he constructed a shed and installed machinery to run a glass- moulding small scale industry in the name and style of "m/s Vijaya Engineering Enterprises. " The first respondent-State Financial Corporation lent Rs. 2,15,000 to the petitioner for the purchase of the plot, erecting the shed, purchase of machinery, etc. The total amount agreed to be lent to the petitioner according to the contract is Rs. 3,60,000. The first respondent- Corporation wanted to initiate action under section 29 of the State Financial Corporations Act, 1951, against the petitioner for recovery of the amount due from him. The petitioner filed O. S. No. 286 of 1986 in the Court of the Principal District Munsif (East and North), Rangareddy District, and obtained a perpetual injunction against the defendants restraining them from committing breach of their loan agreement dated 8/08/1984. Thereafter, it seems that the petitioner filed an interlocutory application seeking directions to the first 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 the running of his factory and a Commissioner was also appointed. He also moved the same court to commit the officials of the first respondent-Corporation to civil jail for two months for disobedience of the orders of injunction. The trial court passed orders committing the respondents to civil jail for two months as requested by the petitioner. However, the first respondent-Corporation filed C. R. P. No. 3269 of 1986 against the order appointing the Commissioner and Transfer C. M. A. No. 217 of 1988 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 dated 26/02/1988. 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 Transfer 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 under section 29 of the State Financial Corporations 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 land only twice, while charging exaggerated 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 only Rs. 2,15,000, due to which he could not operate the industrial unit started by him. The total amount due from the petitioner now is said to be Rs. 4,35,000 odd. The respondent- Corporation invited tenders for the purchase of the unit of 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 acre 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 to sale to realise the dues of the Corporation. The petitioner further states that the respondent-Corporation has been discouraging persons to submit tenders with higher rates and cites e
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