The court emphasized the importance of maintaining accurate accounts and the need for transparency in financial transactions, especially in the context of demand and recall notices issued by financial institutions.

ORDER

1. This petition points to the sad state of affairs of maintenance of accounts by some of the State public finance corporations, in this case, the Odisha State Finance Corporation (OSFC).

2. The background facts are that the Petitioner was on 18th March 1989, sanctioned a loan of Rs.57,75,000/- by the OSFC. Interest was to be charged at the rate of 13.5% per annum and the entire amount was to be repaid within ten years with a three year moratorium period. Availing such loan, the Petitioner set up a cold storage unit at a total cost of Rs.90,60,000/-.

3. The Petitioner claims to have paid by 2001, more than Rs.73,00,000/- towards principal and interest. According to the Petitioner, after reconciliation of the loan ledger account in 2001, the OSFC through its Branch Manager, Sambalpur/Bargarh Branch on 18th October 2011, demanded a sum of Rs.29,42,764/-. According to the Petitioner, this was unjustified because on 22nd April 2002, a letter had been issued by the OSFC, Bargarh Branch to the Petitioner that 'there was no outstanding in its principal and interest account as per the loan ledger.'

4. The Petitioner stated to have made an application on 4th November 2011, for return of the mortgaged documents. However, the OSFC on 9th December 2011, issued a recall notice under Section 30 of the State Finance Corporation Act (SFC Act) stating that the mortgaged assets of the Petitioner would be taken over if it defaulted in making payment of the demanded sum.

5. Challenging the aforementioned notices dated 18th October 2011 and 9th December 2011, the Petitioner filed the present writ petition in which notice was issued on 9th February 2012, and an interim order was passed directing that no coercive action would be taken in relation to the seizure of the assets of the Petitioner.

6. A counter affidavit was filed by the OSFC more than eight years later on 25th November 2020 seeking to defend the demand notice dated 18th October 2011 and the recall notice dated 9th December 2011. It is stated in the counter affidavit that on 3rd February 2012, prior to the interim order passed by this Court, OSFC took over possession of the Petitioner's industrial unit under Section 29 of the SFC Act. According to the OSFC, the Petitioner had submitted a compromise settlement proposal for release of the unit on payment of the outstanding principal amount against which the Petitioner paid Rs.1,00,000/- on 11th December, 2014. Subsequently, it was decided by the OSFC to release the industrial unit of the Petitioner if the Petitioner made a further payment of Rs.2,00,000/-. This was communicated to the Petitioner on 19th January, 2016.

7. In paragraph 17 of the reply affidavit, OSFC accepts that the Petitioner has paid it Rs.124.68lakhs. While not denying that it issued a letter dated 22nd April 2002 to the Petitioner indicating that there was Nil balance in the loan ledger, OSFC has tried to project that this was 'on the insistence of the Petitioner Company'. In the same breath, it is tried to be projected that OSFC 'has never issued any No Dues Certificate (NDC) to the Petitioner Company as claimed by the Petitioner'.

8. Strangely, the subject matter of the letter dated 22nd April 2002 of the OSFC states 'issue of NDC in favour of the M/s. Balaji Ice Cold Storage Pvt. Ltd., Bargarh (provisionally)'. There is in fact no denial by OSFC in its reply that it has indeed issued an NDC on 22nd April 2002. Also nowhere in the reply affidavit is there an averment that such NDC was issued by mistake. Again, nowhere in the reply affidavit is it explained by the OSFC how the impugned notice under Section 30 of the SFC Act was issued to the Petitioner on 9th December, 2011 calculating the amount due as Rs.29,42,764/- when in fact an NDC was issued in favour of the Petitioner more than nine years earlier. The basis of calculation of such figure is not indicated.

9. It appears to this Court that the OSFC is acting unreasonably in raising a fresh demand more than nine years