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High Court of Patna
R.N. Prasad, J.
Haridwar Choubey – Petitioner
Vs.
Managing Director B.S.R.T.C. & ors. – Respondents
C.W.J.C. No. 9667/98
Decided On : 25.6.1999
STATE FINANCIAL CORPORATION ACT - SECTION 29 - SALE OF MORTGAGED ASSETS - GUIDELINES - UNIT HOLDER'S RIGHT TO RETAIN UNIT ON MATCHING TERMS - INTERPRETATION AND APPLICATION.
Fact of the Case:
A partnership firm, M/s. Rama Rice Mill, defaulted on a loan disbursed by the State Financial Corporation (SFC). The SFC initiated action under Section 29 of the State Financial Corporation Act to recover the loan amount by selling the mortgaged assets of the firm. The assets were advertised for sale, and tenders were invited. The highest tender was accepted, and a sale order was issued in favor of the tenderer. However, the tenderer failed to deposit the initial 25% of the consideration money, and the sale order was withdrawn. Subsequently, another tenderer, Respondent No. 3, approached the SFC and offered a higher price. The SFC accepted the offer and issued a sale order in favor of Respondent No. 3. The petitioner, one of the partners of the firm, challenged the sale order, claiming that the SFC failed to offer him the opportunity to retain the unit on matching terms, as required by the guidelines laid down by the Supreme Court in Mahesh Chandra vs. Regional Manager, U.P. Financial Corporation and others.
Finding of the Court:
The Court held that the SFC had complied with the guidelines laid down in Mahesh Chandra. The SFC had issued a notice to the unit holder, i.e., the firm, to retain the unit on matching terms of the sale order in favor of the first tenderer. However, the firm did not offer to retain the unit. The Court further held that the petitioner, being one of the partners of the firm, could not claim a separate notice to retain the unit on matching terms. The Court also held that the SFC's action was neither malafide nor unreasonable, as it was taken in accordance with the provisions of Section 29 of the State Financial Corporation Act.
Issues: 1. Whether the SFC complied with the guidelines laid down by the Supreme Court in Mahesh Chandra while selling the mortgaged assets of the firm? 2. Whether the petitioner, being one of the partners of the firm, was entitled to a separate notice to retain the unit on matching terms? 3. Whether the SFC's action in selling the mortgaged assets to Respondent No. 3 was malafide or unreasonable?
Ratio Decidendi: 1. The Court held that the SFC had complied with the guidelines laid down in Mahesh Chandra. The SFC had issued a notice to the unit holder, i.e., the firm, to retain the unit on matching terms of the sale order in favor of the first tenderer. However, the firm did not offer to retain the unit. The Court further held that the petitioner, being one of the partners of the firm, could not claim a separate notice to retain the unit on matching terms. 2. The Court held that the SFC's action was neither malafide nor unreasonable, as it was taken in accordance with the provisions of Section 29 of the State Financial Corporation Act.
Final Decision: The Court dismissed the writ petition filed by the petitioner.
Initially the writ petition was filed for issue of a writ in the nature of mandamus commanding respondent nos.1 & 2 not to sell M/s. Rama Rice Mill in favour of third party or to respondent no.3, without offering the same to the unit holder and transfer the unit to the petitioner or allow the petitioner to sell out the unit on market value which is much higher on which the Corporation is intending to sell the unit to third party or allow the petitioner to dispose of some of the lands of the mill in question to deposit the loan of the Corporation. However, by amending the writ petition a prayer has been made for quashing the sale order dated 24.9.1998 and sale agreement dated 14.11.1998 in favour of respondent no.3.
2. From the pleadings of the petitioner in the writ petition, supplementary affidavit and the respondents in the counter-affidavit the facts not in dispute are that M/s. Rama Rice Mill is partnership firm and the petitioner is one of the partners of the firm. Loan was disbursed by the Corporation to M/s. Rama Rice Mill for modernisation of the unit in the year 1987-88. The loan amount was to be paid back in instalment. The firm did not pay the instalment in spite of repeated demand by the Corporation and it raised to the tune of Rs.43.49 lacs till 31.5.96. The Corporation took action u/s 29 of the State Financial Corporation Act. On 4.3.95 the assets of the firm was advertised for sale in daily Newspaper 'Hindustan Times'. It was re-advertised on 10.1.97 in daily Newspaper 'Hindustan Times' and again on 14.1.97 in Hindi daily Newspaper 'Hindustan' for wider publicity. Different persons filed tender for purchase of the mortgaged assets of the unit. One Sunil Kumar Singh and Akhilesh Kumar Singh offered Rs.40 lacs after negotiation. One Md. Azim, respondent no.3, offered Rs.39.75 lacs. The Corporation accepted the offer of Sunil Kumar Singh and Akhilesh Kumar Singh and ordered to sell in their favour on consideration of Rs.40 lacs. Sale order was issued in their favour on 10.3.1997. A notice vide memo no. 433 dated 10.3.97 was sent to the promoter to retain the unit on the matching terms of the sale order but the promoter did not offer to retain the unit on the matching terms rather the promoters filed T.S. No. 156/97 against the Corporation for setting aside the sale order in favour of Sunil Kumar Singh and Akhilesh Kumar Singh. Injunction petition was also filed which was rejected vide order dated 23.2.1998. However, Sunil Kumar Singh and Akhilesh Kumar Singh, the first tenderes did not deposit initial 25% of the consideration money and as such sale order was withdrawn. Respondent no.3 the second tenderer approached the Corporation for issue of sale order in his favour and on negotiation he offered Rs.40,1000/- (sic). The Corporation accepted his offer as his offer was more than Rs.40 lacs i.e. offer of first tenderer. The sale order was issued on 24.9.1998 in favour of Md. Azim, respondent no.3 who deposited 25% of the consideration money. Sale agreement was also executed on 14.11.1998 and possession of the unit was also handed over to respondent no.3 on the same day i.e. 14.11.1998 by the Corporation. The grievance of the petitioner is that after 24.9.1998 i.e. the date on which sale order was issued in favour of respondent no.3 no notice was given to the firm to retain the unit on matching terms of the sale order in favour of respondent no.3 though the petitioner who is one of the partners of the firm filed a petition on 12.10.1988, Annexure-1, for time for consultation with the other partners of the firm to deposit the amount and subsequently on 20.10.1998, Annexure-2 admitting that no amount of loan was deposited but now he is able to deposit the amount and as such requested to grant permission to deposit the amount and to run the Mill. The sale order, the agreement to sale and subsequently handing over possession of the unit to respondent no.3 is against the guide line laid down in the case of Mahesh Chand
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