1998 Supreme(Guj) 487

Gujarat High Court
Judgename :M.R.CALLA, R.M.Doshit
AMRIT DYE CHEM INDUSTRIES - Appellant
Versus
BONZANZA DURGS AND CHEMICALS LIMITED - Respondent
L.P.A. 1471 of 1997
Decided On : 09/01/1998

Headnote:(a) Constitution of India, 1950 — Art. 226 — Gujarat State Financial Corporation Act, 1951 — Sec. 29 — Action by corporation for failure of respondent to pay the due amount of instalments as contemplated under agreements — Scope of interference by Court under Art. 226 — Court can not determine the amount of default and that matter involves disputed question of fact, there is no scope of interference by Court in its limited jurisdiction under Art. 226.

       Court find that in a matter like this, where the amount of default cannot be determined by this Court and there are disputed questions of facts, looking to the limited scope of Art. 226 and the judicial review of such action taken by the Financial Corporation, to which we have already made reference hereinabove, there is no scope for interference with the action taken by the Corporation in the matter of the sale of the Units, in respect of which the original petitioner-Company had failed to discharge its obligations under the agreement with regard to the time schedule as also with regard to the amount. It is very clear from the record that the cheques, which had been given by the original, petitioner-Company, were bounced more than once and the original petitioner-Company had failed to fulfil its obligations in the matter of making payments of due instalments within time and had failed even when the payments were rescheduled and it is also clear that reasonable opportunity had also been given to the original petitioner-Company. In accordance with the principles laid down by the Supreme Court for judicial review against such action of the Corporation in number of cases, as have been discussed hereinabove, and keeping in view of the ratio laid down by the Supreme Court, we find that the order passed by the learned single Judge and the directions, which have been given in this regard, in favour of the original petitioner-Company and against the Corporation, cannot be sustained in the eye of law.

       [Para 23]

       (b) Gujarat State Financial Corporation Act, 1951 — Sec. 29 — Scope of — Not restricted to cases of the loan or advance or any instalment thereof — It also covers cases when party fails to comply with the terms of agreement with corporation — In the instant case neither time schedule has been adhered to nor terms of agreement have been complied — Merely because it is not a case of repayment of any loan or advance corporation can not be denied right from taking resort to Sec. 29 of the Act.

       Court find that the language of Sec. 29 is not restricted only to the cases of the loan or advance or any instalment thereof. It also covers the cases when a party fails to comply with the terms of the agreement with the Corporation. In the instant case the agreement had been entered into by the petitioner-Company with the Financial Corporation and the payment should be made in the terms of this agreement. No doubt, certain payments have been made by the petitioner- Company as have been given out on behalf of the petitioner-Company, but on the basis of those payments it cannot be said that the payment has been made of the entire due amount as per the time schedule. Neither the time schedule with regard to the instalments has been adhered to nor the terms of the agreement have been complied with, with reference to the amounts which are due and, therefore, merely because it is not a case of the repayment of any loan or advance, the Corporation could not be precluded from taking resort to the provisions of Sec. 29 of the Act.

       [Para 10]

       (c) Gujarat State Financial Corporation Act, 1951 — Sec. 29 — Confers very wide powers on Corporation — Exercise of such power — Guidelines to be observed — Laid down by Supreme Court in case of Mahesh Chandra vs. Regional Manager, U.P.F.C., 1993 (2) SCC 279.

       Section 29 confers very wide power on the Corporation to ensure prompt payment by arming it with effective measures to realise the arrears. From notice to pay the arrears, it extends to taking over management and even possession with a right to transfer it by sale. Power under Sec. 29 requires the authority to act cautiously, honestly, fairly and reasonably. Default in payment of loan may attract Sec. 29. But that alone is insufficient either to assume possession or to sell the property. Neither should be resorted to unless it is imperative. Even though no rules appear to have been framed nor any guidelined framed by the Corporation was placed, yet the basic philosophy enshrined in Sec. 24 has to be kept in mind. Rationale of action and motive in exercise of it has to be judged in the light of it. Lack of reasonableness or even fairness at either of the two stages renders the take over and transfer invalid. The Corporation, therefore, should honour their commitments of releasing entire loan timely except for very goods reasons which should be initimated before hand to enable the unit holder to comply with shortcomings if any. In its absence of its completion, the proceedings for recovery under Sec. 29 may not be justified. Similarly various situations may arise which may hamper start of the unit delay in electric supply or delayed delivery of machinery vital for the functioning of the unit. Such difficulties to require rescheduling of payment of instalment because, if the unit, for reasons beyond the control of unit holder, could not start, then how will the amount be repaid. Endeavour should be to adjust and accommodate as business considerations require the unit to function for benefit, both, of the general public and the Corporation. It is not mandatory, as a matter of law, to observe the process of taking over strictly. But if there is no option left and the unit is taken over then its transfer requires not only sincere effort but to act reasonably and fairly.

       [Para 19]

       (d) Gujarat State Financial Corporation Act, 1951 — Secs. 29 & 31 — Provision under Sec. 31 is expressly without prejudice to the provisions of Sec. 29 — Corporation taking action under Sec. 29 can not be forced to have recourse to Sec. 31.

       The Division Bench of our own High Court had observed that the Orissa case is a direct case under Sec. 29 and it has been held in para 6 of Orissa judgment that the Corporation cannot be forced to take recourse to Sec. 31 and it is open to the Corporation to take recourse to Sec. 29 of the Act and Sec. 31 is expressly without prejudice to the provisions of Sec. 29.

       [Para 12]