JUDGMENT Giridhar Malviya, J. - This petition has been challenging action of the U.P. Financial Corporation Ltd. under Section 29 of the State Financial Corporation Act, 1951. 2. In the Industrial State, NOINA in Ghaziabad, Uttar Pradesh there was a sick unit by the name and style of M/s. Lineer Accoustics (India) Pvt. Ltd., which appears to have been taken over by the U.P. Financial Corporation (hereinafter referred to as Corporation). The petitioner M/s. Magnum Telelink (P) Ltd. agreed to take over the total assets and liabilities of M/s. Liner Accoustics (India) Pvt. Ltd. The transfer was duly permitted by the NOIDA. The agreement (registered on 11-4-1988) between M/s. Liner Accoustics (India) Pvt. Ltd. and the petitioner M/s. Magnum Telelink (P) Ltd. which has been filed as Annexure I to the supplementary counter affidavit dated 30-4-1990 of Sri N.M. Singh, Manager (Law), U.P. Financial Corporation Ltd. NOIDA, Ghaziabad hears out the above mentioned facts. U.P. Financial Corporation Ltd., approved the proposal of mutual transfer on 9th June, 1987. The proposal to permit the petitioner M/s. Magnum Telelink (P) Ltd. to take over the assets and liabilities of M/s. Lineer Accoustics (India) Pvt. Ltd., was approved by the Corporation in the meeting of its Board held on 30-12-1987 by which a term loan of Rs. 30.90 Lacs was also sanctioned. The Board had decided that the liabilities of M/s. Lineer Accoustics (India) Pvt Ltd., at the time of its possession being handed over to M/s. Magnum Telelink (P) Ltd., was Rs. 13.10 Lacs and the agreement, between the Corporation and the petitioner M/s. Magnum Telelink (P) Ltd., confirming the mutual transfer and the payment of term loan, was to be signed after the petitioner deposited Rs. 2.60 Lacs immediately to the Corporation. After the deposit of Rs. 2.60 Lacs the liability of M/s. Lineer Accoustics (India) Pvt. Ltd. was to be reduced to a fixed sum of Rs. 10.60 Lacs. on the sum of Rs. 2.60 Lacs being deposited by the petitioner, an agreement was executed between the petitioner and the Corporation. This agreement as already stated has been annexed as Annexure-1 to the counter affidavit dated 10th April, 1990 of Sri N.M. Singh. 10.60 Lacs. on the sum of Rs. 2.60 Lacs being deposited by the petitioner, an agreement was executed between the petitioner and the Corporation. This agreement as already stated has been annexed as Annexure-1 to the counter affidavit dated 10th April, 1990 of Sri N.M. Singh. It will be necessary to quote the following passage from the agreement which involves the main controversy in this petition, viz., whether there was any default by the petitioner in the payment of interest to the Corporation in terms of the agreement between the parties or not. The relevant passage reads : "Now This Indenture Wit-Nesseth As Follows: 1. In pursuance of the said Agreement and in consideration of the sum of Rs. 30.70 Lacs (Rupees Thirty Lacs & Seventy Thousand) agreed to be lent and advanced and to be paid by the Corporation to the Company in the event of the Company complying with all its obligations as applicable hereunder, if the said loan is advanced the Company hereby covenants with the Corporation that the Company shall repay to the Corporation at the place where the head office of the Corporation is situate for the time being or such other place as the Corporation may require the said sum of Rs. 30.70 Lacs (Rupees Thirty Lacs & Seventy Thousand only) (hereinafter for brevity's sake called "the Principal sum") by 15 instalments. First instalment of Rs. 35,000/- only. Subsequently, half yearly instalment of Rs. 35,000/-. Subsequently, two equal half yearly instalment of Rs. 1.75 Lacs only. Subsequently, four equal half yearly instalment of Rs. 2.45 Lacs. Subsequently, six equal half yearly instalment of Rs. 2.00 Lacs each. Last half yearly instalment of Rs. 1.10 Lacs. In addition to above, the Company shall make the payment of deferred liability on 14 equal half yearly instalment of Rs. 75,000/- each after the gestation period. The rate of interest on deferred liability will he 19.5%. 2.45 Lacs. Subsequently, six equal half yearly instalment of Rs. 2.00 Lacs each. Last half yearly instalment of Rs. 1.10 Lacs. In addition to above, the Company shall make the payment of deferred liability on 14 equal half yearly instalment of Rs. 75,000/- each after the gestation period. The rate of interest on deferred liability will he 19.5%. or whatever portion of it is advanced by instalments as aforesaid, the balance, if any, being paid as the last instalment; the first of such instalments to fall due for payment after expiry of 24 months from the date of the advance of the first instalment of the loan by the Corporation and every subsequent instalment to be paid half yearly together with interest on the said principal sum or the balance thereof remaining unsaid for the time being rate of 6.5%, per annum above the Industrial Development Bank of India rate subject to a minimum of 15.5% per annum computed on the sum of Rs. 30.70 Lacs (Rupees Thirty Lacs & Seventy Thousand) only from respective dates on which the various instalments of loan shall have been actually lent and advance by the Corporation to the Company, and payable quarterly on the 31st day of March, 30th day of June, 30th Day of September and 31st day of December, each year; the first of such payments to be made on the 30th day of June, 1988 and will, in case and so long as the said principal sum or any part thereof shall remain unpaid pay to the Corporation for the said principal sum or such part thereof as shall for the time being remain unpaid at the rate and place aforesaid by quarterly payments as aforesaid. PrOvided further that if refinance is not sanctioned by IDBI the Corporation shall have the right to charge 1%, additional rate of Interest over and above the interest rate mentioned hereinabove ?" (Underlined by us) It has not been disputed before us that after the agreement the petitioner started the construction work of the building for which the Corporation had also advanced the loan amount to the petitioner. The trouble, however, seems to have cropped up after a short while as the stand of the Corporation was that the petitioner was not paying the dues to the Corporation. The trouble, however, seems to have cropped up after a short while as the stand of the Corporation was that the petitioner was not paying the dues to the Corporation. The Corporation by its registered letter dated 30-10-1989/2-11-1989 wrote to the petitioner to clear off the dues failing which action under S. 29 of State Finance Corporation Act was threatened. This letter reads as follows : U.P. Financial Corporation 14/88, Civil Lines, Kanpur-20800. F. No. 1480 Renoida : REC : VIII : 89-90 1481 Date 3()-10-89/2-x 1-89 M/s. Mangnum Telelink Pvt. Ltd. M-122, Greater Kailash, Part-I, NEW DELHI. Dear Sir, Reg : Payment of dues. Our Head Office vide its letter No. CRMC dated 9-6-87 approved the mutual transfer of the total assets & Liabilities of M/s. Lineer Acoustice India Noida in favour of M/s. Magum Telelink Pvt. Ltd. New Delhi with condition; that transferee will pay a sum of Rs. 2.60 Lacs immediately. In compliance a sum of Rs. 1.00 Lac was deposited by you on 17-8-89 and balance Rs. 1.60 Lacs were deposited on 27-1-88. (?), later on you were advised to clear overdues time to time vide our saving grame dated 9-3-89 & 10-3-89. On the perusal of your account it has been observed that you have persistently defaulted in your account since beginning and it is lapse on your part that inspite of above letters/reminders and personal contacts, you have never made any efforts to clear the liability of loan. The present account position is as tinder: Main Loan Addl. Loan Loan sanctioned 20,00,000/- 5,70,000-00 Loan disbursed 8,01,472-00 3,67,237/- Outstanding 7,69,369-21 2,57,726-79 OVER DUES: Principal as on 15-5-89 5,67,897-21 82,479-79 Intt.(30-9-89) 2,04,427-89 96,817-00 It is very surprising that in past you have neither approached the corporation for clearance of overdues amount nor submitted any concrete proposal.......... You are therefore, requested to clear the above overdues within 10 days of receipt of this letter failing which Corporation will proceed to initiate recovery proceedings by issuing notice under Section 29 of SFC's Act for recovery of dues. Yours faithfully Sd/ (D. K. Mahle) Asstt. General manger. C.C.TO: M/s. Lineer Acoustics (India) Pvt. Ltd. 801, Mcghdoot 94, Nehru Place, New Delhi. Sd/- (D. K. Mahle) Asstt. General Manager. 3. The contention of the petitioner throughout had been that no amount was payable by them as per the terms of the agreement quoted above. Yours faithfully Sd/ (D. K. Mahle) Asstt. General manger. C.C.TO: M/s. Lineer Acoustics (India) Pvt. Ltd. 801, Mcghdoot 94, Nehru Place, New Delhi. Sd/- (D. K. Mahle) Asstt. General Manager. 3. The contention of the petitioner throughout had been that no amount was payable by them as per the terms of the agreement quoted above. There was at one point of time a dispute between the parties whether the payment of interest on the principal sum had also been deferred during the gestation period of 24 months or not. However, the clear recital in the agreement to the effect "together with interest on the said principal sum or the balance thereof remaining unpaid....... and payable quarterly on the 31st clay of March, 30th day of June, 30th day of September and 31st day of December of each year; the first of such payments to he made on 30th day of June, 1988........." leaves no room for doubt that interest on the principal sum had to be paid quarterly and the first of such payments had become due on 30th June, 1988. However, the parties also did not, as they possibly could not dispute the fact that this interest on the principal sum was being deducted by the Corporation from the instalments of the term loan which were to he paid by the Corporation to the petitioner's Company from time to time. It will he relevant to quote paragraph 2 of the counter affidavit dated 9-5-1990 of Sri L.K. Gupta, Senior Manager (finance) U.P.C.: "That the total disbursement was made to the petitioner to the extent of Rs. 897300/- (Rs. Eight Lacs ninety seven thousand and three hundred) out of which a sum of Rs. 7,58,000-04 was paid by cheques, a sum of Rs. 2243.87 was adjusted towards interest which was lobe paid by the petitioner as per provisions made in the appraisal note, The chart showing details of disbursements and adjustments is enclosed as counter affidavit I." 4. A perusal of the aforesaid chart mentioned above clearly shows that interest in the principal sum had been adjusted by the Corporation from the loan amount disbursed to the petitioner on each and every occasion. The interest was deducted as per the annexure to the said counter affidavit on 18-6-1988, 13-9-1988, 30-9-1988, 19-12-1988, 31-12-1988, 30-6-1989 and 30-9-1989. The total interest of Rs. 1,37,056-09P. and incidental expenses of Rs. The interest was deducted as per the annexure to the said counter affidavit on 18-6-1988, 13-9-1988, 30-9-1988, 19-12-1988, 31-12-1988, 30-6-1989 and 30-9-1989. The total interest of Rs. 1,37,056-09P. and incidental expenses of Rs. 2.243-87 P. was deducted from the sum of Rs. 8,97,300/- and actual amount of Rs. 7,58,000-04 P. alone was paid to the petitioner Consequently the contention of the Corporation that the amount of interest on the principal sum had not been paid by the petitioner, stands falsified by the affidavit and the statement furnished by the Corporation itself. In this connection it will he also relevant to quote the following passage from the paragraph 5 of the agreement between the petitioner and the Corporation "Provided Always and it is hereby agreed and declared that it shall be lawful for the Corporation to deduct from any moneys to he lent and advanced by it to the Company, as aforesaid, arrears of interest or instalment or other moneys then remaining due and payable by the Company to the Corporation." 5. It thus seems that the interest on the principal sum always stood adjusted as and when the Corporation advanced the instalments of loan to the petitioner's Company. It has been rightly contended by the learned counsel for the petitioner that the pay back instalments of the principal sum of the loan of Rs. 30.70 Lacs and Rs. 10.50 Lacs of the deferred liability had to commence only after 24 months from the date of the agreement, which was treated as a gestation period in the agreement. It therefore, stands established that the demand made by the Corporation by its letter dated 30-10-89/2-11-1989 was wholly misconceived and arbitrary. 6. However, the learned counsel for the Corporation contended that the petitioner had admittedly not made any payment of interest on the deferred liability, which was the specified sum of Rs. 10.50 lacs by way of liability of M/s. Lineer Accoustics (India) Pvt. Ltd. The learned counsel for the petitioner contended that the agreement mentioned the payment of interest during the gestation period, only on the principal sum and that no interest was shown payable by the petitioner on the deferred liability during the period of gestation. 10.50 lacs by way of liability of M/s. Lineer Accoustics (India) Pvt. Ltd. The learned counsel for the petitioner contended that the agreement mentioned the payment of interest during the gestation period, only on the principal sum and that no interest was shown payable by the petitioner on the deferred liability during the period of gestation. Accounting to him the agreement clearly mentioned that the loan amount and the deferred liability were to he paid back after the expiry of 24 months (gestation period); and the condition of payment of quarterly interest on the principal sum alone, at the rate of 15.5%, per annum above the Industrial Development Bank of India rate subject to minimum of 15.5% per annum, payable quarterly from 30th June, 1968 was an exception which had been specifically recorded: and since the agreement in that regard always mentioned interest only on the principal sum, it could not he read as laying clown it schedule for the payment of interest on the deferred liability also. However, learned counsel for the Corporation vehemently contended that in the absence of any other schedule for payment of interest on the deferred liability the clause pertaining to the payment of interest should he read to he applicable on the deferred liability too. 7. We are unable to agree. It is significant that while the clause relating to the payment of interest specifically referred to principal sum, reference to `defected liability' is conspicuous by its absence in the agreement. It seems that the parties themselves were in doubt whether the petitioner was bound to pay the interest even on the deferred liability on quarterly basis beginning from 30th June, 1988. It was rightly contended by learned counsel for the petitioner that even before getting the letter dated 30-10-89/2-11-89 the Corporation appears to have attempted to adjust the amount of interest on the deferred liability against disbursement of the loan instalments. Consequently on coming to know of this move the Director of the petitioner's company met the officials of the Corporation and requested the Corporation not to deduct the interest on the deferred liability from the principal loan instalment which was going to be disburser) to the petitioner in September, 1988. Consequently on coming to know of this move the Director of the petitioner's company met the officials of the Corporation and requested the Corporation not to deduct the interest on the deferred liability from the principal loan instalment which was going to be disburser) to the petitioner in September, 1988. This contention of the petitioner is borne out from the photostat copy of the letter dated 13th September, 1988 of Somesh Prasad, one of the Directors of the petitioner's Company, which has been filed by the Corporation itself along with the supplementary counter affidavit dated 1-9-90 of Sri D.S. Lal, Deputy Senior Manager(Law) of U.P.F.G. it will be useful to quote the said letter here : "Regional Manager 13th September, 88. U.P.F.C. NOIDA Dear Sir, Interest due on Deferred Liability We shall be obliged if the above interest dues may kindly he deducted from our final disbursments. We are correctly in the final stage of completion of the factory building and hence all our resources have been utilised towards the completion of the building. Thanking you. Illegible Do not adjust the dues this For Magnum Telelink (P) Ltd. time Yours faithfully' Sd/- Illegible (Somesh Prasad) Sd/- 13.9 8. A perusal of the statement of the account which has been furnished with the counter affidavit dated 9-5-90 of Sri A.K. Gupta, Senior Manager Finance, U.P.F.C. quoted above, also shows that no amount of interest on the deferred liability was adjusted, while releasing the cheques for the overdue instalments, Similarly we find yet another letter dated 17th December, 1988 of Rashmi Prasad, one of the Directors of the petitioner's Company, the photostat copy whereof has been appended with the supplementary counter affidavit of Sri V. K. Asthana, Deputy Senior Manager, U.P.F.C. in which she said that with reference to her discussion with the Regional Manager in his office she was appending a chart showing how she proposed to pay interest on the deferred liability in the quarterly instalment of Rs. 20,000/- each which was to start from 31st March, 1989 and was to continue upto 30th June, 1993. In this letter also, a request was made not to deduct any interest from the building disbursement account. The said letter reads as follows "Magnum Telelink Private Limited 17 December, 1988 To The Regional Manager U.P.F.C. Noida. Sub : Disbursement of loan W-48 Section 11 Noida. In this letter also, a request was made not to deduct any interest from the building disbursement account. The said letter reads as follows "Magnum Telelink Private Limited 17 December, 1988 To The Regional Manager U.P.F.C. Noida. Sub : Disbursement of loan W-48 Section 11 Noida. Dear Sir, In reference to our discussion we had with you in your office regarding the payment of interest amount on deferred liabilities, we enclose herewith the detail schedule of payment of interest amount. The amount of interest title on deferred liabilities upto 31st March, 1989 will be paid quarterly at the rate of Rs. 20,000/- quarter starting from 31st March, 89 till 30th June, 93 including cumulative interest thereon inclusive of the above interest, any other interest liability due after 31st March, 1989 will he paid on time. We therefore, request you, not to deduct any interest from our building disbursement account as our project will suffer considerably. Thanking you Yours faithfully Rashmi Parad (For Magnum Telelink Pvt. Ltd.,)" 9. The account furnished along with the counter affidavit of Sri A. K. Gupta, mentioned above again shows that the interest on the deferred liability was not adjusted when the cheque of the next instalment of loan was handed over to the petitioner. These letters support the contention of the learned counsel for the petitioner that the parties themselves were in doubt as to time schedule for the payment of the interest on the referred liability. Once it is found that the question of payment of interest on deferred liability was still in the process of being settled, it could not be said that the petitioner had committed any default in the payment of instalments of interest on the deferred liability to the Corporation so as to attract the application of Section 29 of the State Financial Corporation Act. Learned counsel for the petitioner further contended that the Corporation has all along been labouring under it wrong notion that the petitioners' company was liable to liquidate the entire liabilities of M/s. Lineer Accoustics (P) Ltd. in instalments from the date of the Agreement itself ignoring that the liabilities of M/s. Lineer Acoustics (P) Ltd. had been quantified in the agreement and was put at Rs. 13.10 Lacs. After the Corporation accepted a sum of Rs. 2.60 Lacs towards the liabilities before the signing of the agreement, the balance amount was stated to be Rs. 13.10 Lacs. After the Corporation accepted a sum of Rs. 2.60 Lacs towards the liabilities before the signing of the agreement, the balance amount was stated to be Rs. 10.50 Lacs and it was this amount which was described as the deferred liability of the petitioner towards the dues of M/s. Lineer Acoutics (P) Ltd. and the deferred liability was agreed to be paid in instalments after the gestation period. 10. Learned counsel for the petitioner states that repeated assertions and requests were made by the petitioner to the Corporation to indicate how despite the clear terms of the agreement it was demanding payment of instalments whether of the principal sum or the deferred liability even before the gestation period. The protests fell on Beat ears. 11. In this connection, the petitioner invited our attention to the notices dated 9-3-1989 and 18-3-1989, which have been mentioned as 'saving gram' in the registered letter dated 30-10-89/2-11-89 to the petitioner quoted above, which have been filed as Annexure-4 and Annexure-5 to the plemetary counter affidavit dated 21-4-90 of Sri D.S. Lal the U. P.F.C. which reads as follows : "Uttar Pradesh Financial Corporation R. O. Sector VI: NOIDA : Ghaziabad, Ref. No. 22030/FC/REC/Noida-88-89 dated 9-3 M/s. Lineer Accoustics (India) W-48 Sec. XI, NIODA. You are finally advised to clear the overdues immediately falling which possession of the unit may be taken under S. 29 of SFC's Act(.) Sd/- (A. K. Gupta) Sr. Manager (Tech). Uttar Pradesh Financial Corporation R. O. Sector VI : NOIDA : Ghaziabad Ref. No.234(i(0.FC/REC/Noida-88-89 dated 18-3- M/s. Lineer Accoustics (India) Pvt. Ltd. 801, Meghdoot 94, Nehru Palance, New Delhi. You are finally advised to clear the overdoes immediately failing which possession of the unit may be taken under S. 29 of SFC's S Act (.) Sd/- (A. K. Gupta) Sr. Manager. (Fin). 12. For a reading of all these notices dated 9-3-1989, 18-3.1989 and 30-10-1989/2-11-1989 it is clear that the Corporation was asking the petitioner to pay the instalments of the loan advanced to M/s. Lineer Acoustics (India) Pt. Ltd. when under the registered agreement the liabilities of M/s. Lineer Acoustics (India) Pvt. Ltd. had been quantified at Rs. 10.50 lacs payable in 14 half yearly instalments of Rs. Ltd. when under the registered agreement the liabilities of M/s. Lineer Acoustics (India) Pvt. Ltd. had been quantified at Rs. 10.50 lacs payable in 14 half yearly instalments of Rs. 75000/- each after the gestation period, which admittedly was to expire on the 27th day of April, 1990 in view of the fact that the first instalment of the term loan was given to the petitioner on 27th April, 1988. 13. It thus becomes clear that the only amount about which there could be some dispute as to the date from which it became payable was the amount of interest on the deferred liability. Upon the plain terms of the agreement no other amount what-so-ever could by any stretch be said to be outstanding, as the interest on the principal was admittedly being adjusted while disbursing the instalments by the Corporation to the petitioner and as the instalments in respect of the principal sum and the deferred liability were payable only after the gestation period which was upto the 27th April, 1990. 14. The petitioner was therefore, justified in enquiring from the Corporation as to how it was asking them to pay the huge amount of more than Rs. 9,00 lacs, Rs. 7,72,325-10 p. as everdues towards the main loan and Rs. 79,296.79 p. as overdues towards the additional loan as per its notice dated 30-10-1989/2-11-1989 (Annexure-6) to the supplementary counter-affidavit dated 21-4- 1(M of Sri D.S. Lal). There is correspondence on the record exchanged between the parties which indicates that some meetings were held to sort out this matter between the parties. But no satisfactory or clear cut reply was forthcoming from the Corporation indicating how they had arrived at the figure which they claimed, were dues to be paid by the petitioner. 15. It was in this background that the impugned notice dated 6-12-1989 under Section 29 of the State Financial Corporation Act was served on the petitioner which has been annexed as Annexure-4 to the writ petition. In this notice also the Corporation said that a total sum of Rs. 9,10,837.12 p. towards the principal sum and Rs. 10,16,752.21 p. and Rs. 3,48,544.63 p. towards some other amount was payable by the petitioner to the Corporation. It will be useful to quote the said notice : UTTAR PRADESH FINANCIAL CORPORATION cum office Building. Sector VI, Noida-2101301 Distt. In this notice also the Corporation said that a total sum of Rs. 9,10,837.12 p. towards the principal sum and Rs. 10,16,752.21 p. and Rs. 3,48,544.63 p. towards some other amount was payable by the petitioner to the Corporation. It will be useful to quote the said notice : UTTAR PRADESH FINANCIAL CORPORATION cum office Building. Sector VI, Noida-2101301 Distt. Ghaziabad (U.P.) Phone : 33433, 22766 Gram : UP INCO Ref. No. /YC/REF/Noida-F-No. 89-90 dated 6-12-89. REGISTERED M/s. Magnum Telelink (P) Ltd. W-48, Sec. XI Noida. Dear Sir, Ref. Taking over the physical possession of M/s. Magnum telelink (P) Ltd. at W-48- XI Noida. By U.P. Financial Corporation 14/88 Civil Lines, Kanpur in exercise of the State Financial Corporation's Act No. 63 of 1951 (Central Act) We write to inform you that a loan Rs. 30,70,00.00, Rs. 20,00,00/- 5,70,000/- was sanctioned out of which a sum of Rs. 8,97,300.00/-, 9.01,472/-, 3,67,237/- was advanced to M/s Magnum Telelink (P) Ltd. W-48, Sec. XI Noida by the U.P. Financial Corporation for manufacture of electronic items on the terms and condition mentioned in the Hypothecation deed and agreement both dated 16-4-1988 and equitable mortgage created by you in favour of U.P. Financial Corporation. 2. That in contravention of the terms of the said deed of mortgage several defaults have been committee by you and in spite of various letters, you have not remitted the amount to the Corporation as per the repayment schedule and the following amount is still outstanding against you. Principal Rs. 8,98,300-00 7,69,369-00 2,75,726-75 Interest up to 30-9-1989 Rs. 17,537-14 2,47,383-00 90,817-88 Expenses Nil Nil Nil Total Rs. 9,10,837-12 10,16,752-21 3,48,544-67 3. That you are hereby called upon to pay the aforesaid amount within (seven) days and you will also be liable to pay interest till the recovery of the total dues of the Corporation at Head Office of the Corporation at 14/88 Civil Lines, Kanpur of its Regional Office U.P. Financial Corporation, Sector VI Noida by bank draft payable to U.P. Financial Corporation. 4. That if you will fail to make payment of the aforesaid amount within the specified time as mentioned in para 3 above the Corporation in exercise of the power vested in under Section 29 of SPC's Act No. 63 of 1951(Central Act) shall take over the physical possession of M/s. Magnum Telelink (P) Ltd., at W-48 Sec. 11 Noida. 4. That if you will fail to make payment of the aforesaid amount within the specified time as mentioned in para 3 above the Corporation in exercise of the power vested in under Section 29 of SPC's Act No. 63 of 1951(Central Act) shall take over the physical possession of M/s. Magnum Telelink (P) Ltd., at W-48 Sec. 11 Noida. and take further action for the transfer of the assets of the Unit mortgaged to the Corporation. 5. That Corporation shall also be at liberty to exercise otherwise rights vested in under Section 29 of SFC's Act No. 65 of 1951 (Central Act) if it consider necessary to do so. 6. That the-Corporation reserves the right for the transfer of the unit interest. Yours faithfully, (Anand Misra) General Manager Copy Forward For Information And Necessary Action : 1. Legal Deptt. U.P. F.C. Noida. 2. RAH Deptt. do 3. Insurance Deptt. do 4. The Manager's Central Bank of India Nehru 5. Development Manager Noida-Noida. place New Delhi. 6. Dy. General Manager, U.P. Financial Corporation, 4/88 Civil Lines, Kanpur. (Anand Misra) General Manager 16. We asked the learned counsel for the Corporation to explain how the figure in the notice had been worked out by the Corporation. Apart from stating that once 'the petitioner had defaulted in making the payment of the interest on the deffered liability, the petitioner had also become liable to pay the entire amount of the principal sum of the loan-amount paid to the petitioner, the amount of deferred liability and the interest, he could not substantiate how the figures mentioned in the notice had been arrived at. As we have already discussed above the Corporation could, if at all, have asked the petitioner to pay the interest on the deferred liability, but that too only after the parties had mutually settled the programme of payment of interest on the deferred liability. It is apparent that in the absence of any clear cut agreement as to the date of payment of the amount of interest, the Corporation was wholly unjustified in insisting on the payment of the entire amount of the principal sum and deferred liability vide their registered notice dated 30-10-1989/2-11-1989 and thereafter in making the supposed failure to comply with such grossly illegal demand a ground for initiating action against the petitioner under Section 29 of the State Financial Corporation Act dated 6th December, 1989. 17. 17. The stand taken by the Corporation was, therefore, wholly unjust and arbitrary. Asking the petitioner to pay the amount which had upon the plain terms of the agreement not become due under threat of coercive and extreme step of takeover of the unit unmistakebly betrayed an intention and design to oust the petitioner by hook or by cook under the cover of Section 29 of the State Financial Corporation Act. 18. The learned counsel for the Corporation laid great stress and emphasis on the letter dated 17th December, 1988 written by Mrs. Rashmi Prasad by which she had undertaken to pay the interest on the deferred liability i.e. instalments of Rs. 20,000/- each, as had been mentioned by her in the plan schedule attached to the said letter, and contended that since the petitioner did not pay even the said amount in the instalments of Rs. 20,000/- each, the petitioner would be clearly found to be a defaulter, which would justify the notice under Section 29 of the State Financial Corporation act to the petitioner's Company, In the supplementary rejoinder affidavit filed in reply to the above supplementary counter affidavit, it has been stated that offer to pay the interest on the deferred liability was made under compelling on circumstances as the respondents were arbitrarily and unilaterally threatening to adjust the same against the unpaid instalment at a time when Construction work was in progress. In any case, the offer of Snit. Rashmi Prasad could not become effective as the Corporation was not agreeable to the proposal made in the said letter of Mrs. Rashmi Prasad. No such letter has been filed by the Corporation which may indicate that the offer to pay the interest on the deferred liability as per proposal contained in the letter dated 17th December, 1988 of Mrs. Rashmi Prasad had been accepted by the Corporation. The Corporation, therefore, cannot legitimately say that the payments as per schedule contained in the letter dated 17th December 1988 were not made. That being so, the takeover of the petitioner's unit under Section 29 must be held to he wholly illegal and unsustainable in law. 19. We next turn to the validity of the transfer of the unit in favour of M/s. Balaji Motors Private Limited in consequence of the takeover under Section 29. That being so, the takeover of the petitioner's unit under Section 29 must be held to he wholly illegal and unsustainable in law. 19. We next turn to the validity of the transfer of the unit in favour of M/s. Balaji Motors Private Limited in consequence of the takeover under Section 29. Learned counsel for the petitioner stressed the fact that the petitioner had all along been requesting the official of the Corporation to examine the matter carefully and with an unbiased mind even after the registered notices including the notice under Section 29 of the State Financial Corporation Act had been served upon them. It was further contended that the officials had no plausible answer to the objection raised by the petitioner against the wholly untenable demand of the Corporation asking the petitioner to pay the instalments of dues even before the gestation period was over, but to no avail. The Corporation did not inform the petitioner that their representation action was not acceptable to them or that the petitioner must pay the amount demanded within a specified time. The contention of the learned counsel was that the petitioner had thus been denied any opportunity even to make payment for the demand which was not legally justifiable. In this connection the learned counsel for the petitioner has invited our attention to the letters dated 19/20-3-1990 (Annexure-3) and Annexure-5 respectively to the writ petition) addressed to the Managing Director. U.P.F.C. Kanpur which was byway of a representation, asking the Corporation not to proceed tinder Section 29 of the State Financial Corporation Act as there was hardly any occasion for invoking the provision under that section. In reply to the representation dated 19/20-3-90 a letter dated 24-3-1990 (Annexure 4 to the writ petition) was sent by Sri M.J. Khan Manager, U.P.F.C. saying that with reference to the detailed discussion, the position regarding the overdues had been explained to the petitioner in detail and the petitioner, was satisfied. The letter went onto the say, that a total sum of Rs. 5,84 lacs was due against the unit upto March, 1990, but if the petitioner could make the payment in the financial year period to 31-3-1990, they had to pay the sum of Rs. 4.82 lacs only. The letter advised the petitioner to pay the said sum of Rs. The letter went onto the say, that a total sum of Rs. 5,84 lacs was due against the unit upto March, 1990, but if the petitioner could make the payment in the financial year period to 31-3-1990, they had to pay the sum of Rs. 4.82 lacs only. The letter advised the petitioner to pay the said sum of Rs. 4.82 lacs positively by 30th March, 1990, failing which the Corporation would take necessary steps for the sale of the unit. On getting this letter the petitioner made another representation to the Managing Director, U.P.F.C. on 26-3-1990 stating therein that the contents of the letter dated 24th March, 1990 by the Manager (Finance) were entirely at variance with that was discussed at the meeting which the Director of the petitioner's company had with the Managing Director. It was also said that the letter contained an illegal demand based on non- existent liability. The latter requested the Managing Director to do the needful in the over all interest of the unit and asked the Corporation to be just and fair. Apprehending that the petitioner could not receive any justice from the Corporation, the petitioner approached this Court and filed a writ petition which was finally disposed of on 28-3-1990. The order reads as follows : "Heard the learned counsel for the petitioner and Sri V.M. Sahai who appeared for the respondents. The petitioner has come up to this court against the notice dated 6-12-1989. Admittedly, the petitioner has filed representations to the Managing Director, U.P. Financial Corporation, Kanpur which are still pending. Since the representations of the petitioner are still pending we decline to interfere in the matter of this stage. However, we direct the Managing Directors/General Manager, U.P. Financial Corporation to decide the representations of the petitioner. Sri V.M. Sahai states that till the representation of the petitioner is decided, the property of the petitioner shall not be sold. With the above direction the writ petition is disposed off. Let a copy of this order be issued to the learned counsel for the petitioner on payment of usual charges if possible within three days. Sri V.M. Sahai states that till the representation of the petitioner is decided, the property of the petitioner shall not be sold. With the above direction the writ petition is disposed off. Let a copy of this order be issued to the learned counsel for the petitioner on payment of usual charges if possible within three days. Dated 28-3-90 Sd/- V.N.K. Sd/- H.C.M."" The contention of the petitioner is that the certified copy of the order of the High Court dated 28-31990 which had been passed in presence of the parties and their counsel, was sought to be handed over at the Head Office of the U.P.F.C., but the Head Office directed the copy to be delivered at its Ghazibad Office. Ultimately the copy is alleged to have been severed on the Assistant General Manager, U.P.F.C. Noida, Ghaziabad on 3-3-1990. The petitioner contends that despite the representation dated 26-3-1990 and the order of the High Court dated 28th March, 1990, the Corporation never disclosed what orders had been passed by them on the said representation and in utter disregard of the order of the High Court, the Corporation surreptitiously and in hot haste accepted the offer of M/s. Balaji Motors (P) Ltd. even before the communication of the order regarding the petitioner's representation, and, after receiving a cheque from M/s. Balaji Motors (P) Ltd. on 31-3-1990 accepted the offer of M/s. Balaji Motors (P) Ltd. on 1st day of April, 1990 which happened to be a Sunday and a holiday. Possession too is stated to have been handed over to M/s. Balaji Motors (P) Ltd. on 2-4-1990. The learned counsel for the petitioner rightly submitted that all this shows a pre-planned and converted move on the part of the U.P. Financial Corporation, to somehow usurp the property from the petitioner and had it over to M/s. Balaji Motors (P) Ltd. The learned counsel contends that the entire action of the Corporation, viz., accepting the offer and handing over the possession to M/s. Balaji Motors (P) Ltd. in unseemly haste without even serving any letter on the petitioner disclosing the outcome of his representation smacks of mala fides on the part of the Corporation. The learned counsel for the petitioner also emphasised that on their own showing the officials of Corporation had accepted the cheque of M/s. Balaji Motors (P) Ltd. on 31-3-1990 even before the Corporation had formally accepted the offer of M/s. Balaji Motors (P) Ltd. on 1-4-1990 According to the learned counsel all these were a mere paper transaction with a view to forestall any order which might be passed by the High Court as the petitioner was bound to come to the High Court against the arbitrary, high handed and illegal action of the Corporation. These contentions do seem to carry conviction in view of the entire background in which the action was taken. We accept the same. 20. The learned counsel for the Corporation, however, contended that the representation dated 26th March, 1990 made by the petitioner had already been rejected by the Managing Director of the Corporation on 28-3-1990, even before the orders had been passed by the High Court in the above mentioned writ petition. The stand of the Corporation is that this rejection order dated 28th March, 1990 which has been annexed as Annexure-8 to the counter affidavit dated 10-4-1990 of Sri N.M. Singh was sent to the petitioner on 29-3-1990. It is alleged that by this letter the petitioner was informed that if the petitioner did not pay the amount of interest as intimated to him by the letter dated 24-3-90, the Corporation would take necessary steps for the sale of the unit. 21. Along with the counter-affidavit two reports dated 29-3-90 submitted by one Sri Subhash to the Asstt. General Manager F.C.I. have been appended as Annexure 9 and Annexure 10 respectively stating that he went to deliver the letter dated 28-3-90 at M-122, Greater Kailash-1, New Delhi but was informed that the petitioner's office had been shifted to some other place, exact address whereof was not known. However, in the next report dated 30-3-1990 by the same person he said that the person taking the letter had found that the petitioner had shifted its office to M-24 Greater Kailash-1, New Delhi, where the letter was delivered to Sri N.U. Khan. A receipt dated 30-3-1990 of Sri N.U. Khan was annexed as Annexure 12 to the counter affidavit. However, in the next report dated 30-3-1990 by the same person he said that the person taking the letter had found that the petitioner had shifted its office to M-24 Greater Kailash-1, New Delhi, where the letter was delivered to Sri N.U. Khan. A receipt dated 30-3-1990 of Sri N.U. Khan was annexed as Annexure 12 to the counter affidavit. Annexure 13 to the counter-affidavit showed that the possession of the property in pursuance of the order dated 1-4-90 had been delivered to Sri Vivek B. Jain of M/s. Balaji Motors (P) Ltd. in presence office officers on 2-4-1990. 22. On the strength of these annexures the learned counsel for the Corporation contended that the petitioner has been intimated on 30-3-1990 that if it did not make the payment of the sum indicated in their letter dated 24-3-90 by 30-3-90, steps for sale of the unit would necessarily be taken. The learned counsel for the Corporation argued that since despite the service of this letter neither the payment was made on 30th March, 1990 nor any request for further time to enable the petitioner to make the payment was made by them, cheque from M/s. Balaji Motors (P) Ltd. had been accepted by the Corporation on 31-3-1990. The proposal of M/s. Balaji Motors was formally accepted on 1-4-1990 and the possession was delivered to M/s. Balaji Motors on 2-4-1990. Thus according to the learned counsel for the Corporation, the Corporation had acted fairly and bona fide to transfer the unit to M/s. Balaji Motors (P) Ltd. as it had no option but to proceed under Section 29 of the State Financial Corporation Act, since the petitioner had defaulted in making payment of interest as claimed by the Corporation. 23. In reply the learned counsel for the petitioner has invited our attention to the counter affidavit dated 21-4-1990 of Sri D.S.I of U.P.F.C. Annexure 2 and 3 to the Antar affidavit shows that U.P.F.C. had advertised in the Newspapers calling offers for sale of land, buildings, plants and machinery of a number of units including that of the petitioner. Offers were invited along with a Bank Draft of Rs. 20,000/- on or before 14-3-1990. Offers were invited along with a Bank Draft of Rs. 20,000/- on or before 14-3-1990. However, before the said advertisement was printed, a letter dated 9th February, 1990 by one Sri N.U. Khan claiming himself to be a representative of M/s. Magnum Telelink (P) Ltd. with its office at M-24, Greater Kailash, New Delhi was sent to the Corporation in which Sri Khan asserted that N.R.I.S. who had invested in M/s. Magnum Telelink (P) Ltd., had reposed faith in Mr. S. Prasad and Rashmi Prasad as Trustees hoping that these people would protect their interests. However, as Mr. and Mrs. Prasad had mismanaged the affairs and were not available, some time might be granted to enable the N.R.I. investors to pay off the dues. Annexure 8 to the said counter affidavit shows that in pursuance of the advertisment three offers had been received by the Corporation. The third offer was by one Sri M.G. Ethirajan of M-24 Greater Kailash, New Delhi. Annexure 9 to the counter affidavit dated 3-4-1990 of Sri N.M. Singh is the third offer of Sri M.G. Ethirjan to purchase the unit of the petitioner. Significantly this offer was made from the same premises namely M- 24, Greater Kailash-I, New Delhi and it specifically mentions about "our letter dated 9-2-90 copy attached" the letter by Sri N.U. Khan by which the Corporation was informed about the gross mis-management by Mr. and Mrs. Prasad the Directors of the petitioners Company. The learned counsel for the petitioner, therefore, submitted that the purported letter date 28th March by which the petitioners representation dated 26-3-90 was alleged to have been rejected, was intentionally delivered to Sri N.U. Khan, an agent of Mr. M.G. Ethirajan who was one of the rival bidders for purchasing the unit. 24. In the rejoinder affidavit it has been clearly asserted that the petitioner had turned out Sri N.U. Khan from service who was a former employee of the unit and since long he was not in service of the petitioner. It was further asserted in the rejoinder affidavit that the office of the petitioner had never been shifted from M-122, Greater Kailash, New Delhi and even on the date of swearing the rejoinder affidavit, it was at M- 122, Greater Kailash. It was further asserted in the rejoinder affidavit that the office of the petitioner had never been shifted from M-122, Greater Kailash, New Delhi and even on the date of swearing the rejoinder affidavit, it was at M- 122, Greater Kailash. In view of these assertions it must be held that the alleged delivery of the letter dated 28-3-90 by the Corporation to the petitioner was sham and a mere pretence. Our conclusion, therefore, is that the petitioners were deprived of the right to save their unit from sale or at least the sale to M/s. Balaji Motors (P) Ltd. at the price at which the latter purchased the unit. 25. We also accept the contention of the petitioner that as the petitioner was due to receive further instalments of the loan amount, and as the Corporation itself was adjusting to the loan amount from the future disbursement of loan vide letter dated 13-9-1988 and 17-12-1988 of Somesh Prasad and Rashmi Prasad, the petitioner could very well have requested the Corporation to adjust the so-called dues from the future instalments; or in the alternative the petitioner could have paid up the amount of interest on the deferred liability to save the unit from being sold to a third party. 26. Elaborating the point that the Corporation acted arbitrarily and unfairly in taking action under Section 29 of the State Financial Corporation Act, learned counsel for the petitioner contended that the directions issued by the Corporation in regard to circumstances in which action should be taken, are also very clear. The directions provide that action under Section 29 of the State Financial Corporation Act should be taken only if there,is a default in payment of more than one instalment of the principal sum advanced and that too only after the gestation period. The petitioner rightly contends that in the instant case not a single instalment of the principal loan amount had become due. The gestation period was admittedly in force. Apart from the fact that the interest on the loan amount was being adjusted by the Corporation, more non- payment of interest on the deferred liability, in the normal course could not in view of the directions issued by the Corporation be considered as a ground by the Corporation to initiate proceedings under Section 29 of the State Financial Corporation Act. The learned counsel for the petitioner also invited our attention to the Circular approved by the Board under Section 43 of the State Financial Corporation Act which is Annexure 4 to the supplementary counter affidavit dated 30-4-1990 of Sri N.M. Singh, which reads as follows : "EXTRACT OF THE MINUTES OF THE BOARD MEETING HELD ON 30-5-1988 REGARDING CONSIDERATION OF REVISED POLICY NOT FOR RECOVERY OF DUES OF CORPORATION. ITEM XXXXII OF VOLUME V. "DEFERRED" EXTRACT OF THE MINUTES OF THE BOARD MEETING HELD ON 29-6-1988 REGARDING CONSIDERATION OF REVISED POLICY NOT FOR RCOVERY OF DUES OF THE CORPORATION. ITEM XIV OF THE AGENDA OF 'VOLUME II. The Board considered the note of the Managing Director dated 21-6-1988 on the above item and approved the recommendations made therein." 27. The circular dated 14th July, 1988 Annexure-4 mentions the procedure for recovery action, viz. issue withdrawal of recall notice/recovery certificate/notice under Section 29 of the State Financial Corporation Act, mutual transfer of the unit, etc. This circular superseded all the previous orders of the Board in that regard. Item No. A(1) of the circular indicates that the recall notices were invariably to be issued in cases where the units were in default for a period of six months after the expiry of the gestation period and that such recall notices were normally to be issued only where the principal amount was outstanding. Item No. B(1) of the circular_ states that the recovery certificate or notice under Section 29 of the State Financial Corporation Act was to be issued when the units were in default for a period of one year after the expiry of the gestation period. The learned counsel for the petitioner rightly contended that the officers of the Corporation were bound by these directions. Instead the Officers of the Corporation gave a complete go bye to these instructions particularly when these directions have statutory force. There is some force in the petitioner's submissions supported as they are by the circulars of the Board as well as evidence of unimpeachable character. The documents have been discussed by us extensively already hereinabove. The facts emerging from these documents lead irresistibly to the conclusion that the Corporation was biased against the petitioner and had made up its mind in December 1989 itself to take over the petitioner's unit, default or no default. The documents have been discussed by us extensively already hereinabove. The facts emerging from these documents lead irresistibly to the conclusion that the Corporation was biased against the petitioner and had made up its mind in December 1989 itself to take over the petitioner's unit, default or no default. The subsequent events confirmed that the underlying goal was to somehow pass on the property to M/s. Balaji Motors (P) Ltd. 28. The contention of the learned counsel for Balaji Motors was that the possession of the unit of M/s. Mangum Telelink (P) Ltd. having been taken by the Corporation on 24-2-1990 vide Annexure 6 to the counter affidavit dated 10-4-1990 of Sri N.M. Singh and thereafter handed over to M/s. Balaji Motors (P) Ltd. as per Annexure 13 to the said counter affidavit, this court could not direct Balaji Motors to be dispossessed in these proceedings. The proper remedy, it was urged, would be a civil suit. The learned counsel for the respondents relied on the case of Sohan Lal v. Union of India reported in AIR 1957 SC 529 in that connection. However, learned counsel for the petitioner invited our attention to the case of Swastik Automobile v. Bihar State Financial Corporation reported in AIR 1989 SC 1551 , wherein the Supreme Court has issued a direction that possession of the property in dispute be delivered to the appellant or respondents No. 6 and 7 through the District Judge Dhanbad. The learned counsel also relied on the case of Gujarat State Financial Corpn. v. Lotus Hotel Pvt. Ltd. reported in AIR 1982 Guj 198 . The learned counsel further placed reliance on the case of Kheravela Industries (P) Ltd. v. Orissa State Financial Corpn. reported in AIR 1985 Orissa 153 and on the case of Uptron Anand Ltd. v. U.P. Financial Corpn. Ltd. reported in 1987 All U 651. These decisions do support the petitioners contention that in suitable cases the High Court under Article 226 of the constitution can grant the relief of possession as a consequential relief, that is, consequent upon setting aside of actions of the State and its instrumentality. 29. To sum up, we have not the least doubt that the entire action initiated by the U.P.F.C. under Section 39 of the State Financial Corporation Act was right from the inception vitiated in law and mala fides apart from being manifestly unjust and unfair. 29. To sum up, we have not the least doubt that the entire action initiated by the U.P.F.C. under Section 39 of the State Financial Corporation Act was right from the inception vitiated in law and mala fides apart from being manifestly unjust and unfair. We have also held that the action was collusive and designed to pass on the unit to Balaji Motors somehow, default or no default. We further held that in the facts of the present case we can grant the%relief by way of a direction to the respondents to restore possession of the unit to the petitioners as a direct consequence to the quashing of the impugned order. 30. However, we cannot lose sight of the fact that there has been interregnum of the agreement entered between the parties as the petitioner has been illegally and unjustly put off the possession from the property in dispute with effect from February 24, 1990. Consequently, while directing the respondents Nos. 1, 2 and 3 to put back the petitioner in possession over the property situate at W-48, Sector XI, Noida within two weeks of the date on which a certified copy of this order is placed before any of the respondents the time schedule fixed in the agreement dated April 16, 1988 for payment of principal sum and deferred liability as well as interest on the principal sum shall stand extended with respect to all material dates by the period beginning from the date of dispossession to the date on which the unit is restored to the petitioner. 31. We, however, have no doubt that the petitioner must be required to pay interest on the deferred liability at the rate of 19.5 per cent as was clearly set out in the registered agreement between the parties. It will, therefore, be open to the Corporation to adjust the said amount of interest on the deferred liability according to a mutually agreed time schedule, and failing that, in the same manner as in regard to interest due on the principal sum. 32. In the result, the petition succeeds and is accordingly allowed. The notice dated 6-12-1989 under Section 29 of the State Financial Corporation Act issued to the petitioner as well as all proceedings consequent thereto are quashed. 32. In the result, the petition succeeds and is accordingly allowed. The notice dated 6-12-1989 under Section 29 of the State Financial Corporation Act issued to the petitioner as well as all proceedings consequent thereto are quashed. The respondents are directed to put hack the petitioner in possession over the unit situate at W-4 Sector XI Noida thin two weeks from the date on which a certified copy of this order is placed before any of the respondents and thereafter to proceed in the matter in accordance with the directions contained in the judgment hereinbefore. The petitioner is entitled to his costs.