IMPORTANT POINT
Debt Recovery - Notice under Section 29 of the SFC Act is mandatory and in the absence of such a notice the order taking over the company and its assets would be vitiated.

, J.

1. C. W. P. No.7152 of 1989 this petition filed under Article 226 of the Constitution prays for quashing order dated 13.3.1987 (P-8) initiating proceedings against the petitioner-Company under Sec.29 of the State financial Corporation Act, 1951 (for brevity, the Act ). It also prays for quashing all the subsequent proceedings taken in pursuance to that order. It has further been prayed that the order of transfer dated 27.3.1989 and sale deed (P-9) in respect of the property of the petitioner-Company be also quashed.

2. The case of the petitioner-Company is as under:

3. That on 30.3.1976 the petitioner-Company, applied for a loan of Rs.30 lacs to respondent No.1 - Punjab Financial corporation (hereinafter to be referred as the Corporation)the corporation. However, an amount of Rs.14.33 lacs was the loan availed by the petitioner-Company between 15.3.1977 to 24.10.1978. The details of the loan amount disbursed by the Corporation to the petitioner-Company is as under:-

4. It is, thus, evident that an amount of Rs.15,67,000/- was not advanced. On account of non-advancing the balance amount, the petitioner-Company had to face a lot of harassment and financial difficulties in commencing the project. The petitioner-Company had also executed a mortgage deed on 18.3.1977 when the first instalment of Rs.3,10,000/- was advanced. As a consequence of mortgage deed, a charge was created in favour of the Corporation on the properties of the petitioner-Company. The petitioner-Company was able to repay the loan to the extent of Rs.7,02,119.33 till 2.12.1983. On account of wide spread terrorism at that time in the State of Punjab and deterioration of law and order situation, the industry, trade and development were vitally affected and suffered huge losses. The unit of the petitioner-Company was situated in District Ferozepur, which was worse affected. The petitioner-Company has claimed that the loan sanctioned by the Corporation was linked with the finances of the Industrial Development Bank of India (I. D. B. I. ). The rate of interest payable by the petitioner-Company was 9 % per annum and in case of any delay in making the payment of instalment on time, the corporation was to charge penal interest @ 12 % and 15 % on the total amount of loan advanced. The enhanced/penal interest was not confined to the amount defaulted. It is claimed that if the rate of interest had been correctly levied/calculated, the amount due to the corporation would have worked out far less than the amount given. In no circumstance the interest of 12% or 15 % could be charged. On account of its disability to pay back the instalment on time, the corporation filed a petition under Sec.31 of the Act against the petitioner-Company before the learned Additional District Judge, ferozepur, with a prayer that an order for recovery of Rs.24,07,551.24 paise along with interest @ 15 % with effect from 15.6.1984 with half yearly rest was to be made. The Corporation further requested for an interim injunction restraining the petitioner-Company from transferring or removing the plant and machinery from its premises without permission of the Corporation. It claimed the relief of attachment of mortgaged property with a further prayer for sale of the property to realize the amount due to the Corporation (P-1 ). The petitioner-Company filed its reply on 9.8.1985 (P-2 ). The corporation then filed replication (Annexure P-3) through its secretary Shri Harjit Singh (Respondent No.3 ). During the pendency of the proceedings under Sec.31 of the Act, the petitioner-Company filed an application under Order XXI Rule 83 read with section 151 of the Code of Civil Procedure, 1908 (for brevity, the code), seeking permission of the Court for disposal of the assets and land by private sale (P-4 ). The Corporation did not have any objection if the petitioner-Company was to be granted permission to sell the property for Rs.32,44,000/-. However, learned Additional district Judge allowed the