Judgment U.P.Singh, J. 1. In the present writ application under Articles 226 and 227 of the Constitution, the petitioner has prayed fore writ of mandamus to be issued to the respondents commanding them to show cause as to how they are entitled to charge interest on the loan amount granted to the petitioner and as to whether they are not liable to pay damages to the petitioner for non-disbursement of the loan amount in time. 2. The petitioner is a private limited liability company. For the purpose of selling up a factory at Tupudana for manufacturing Alloys Steal item in the said factory he applied for a term loan from the respondent Bihar State Finance Corporation. A term loan of Rs. 37 lacs was sanctioned to the petitioner on 16-3-88. Pursuant thereof he entered into an agreement with the respondents and in accordance with the agreement respondents were bound to disburse the term loan of Rs. 37 lacs, as and when required by the petitioner. After obtaining the term loan, the unit of the petitioner was being inspected by the officials of the Corporation and periodic release of the term loan was being made by the respondents. However, after 11/2 years of the sanction of the term loan, the petitioner was granted only a sum of Rs. 24.93 lacs and the balance amount of Rs. 12.07 lacs was not released on the ground that they did not have sufficient funds. On account of this, the project of the petitioner came to a standstill and no progress could be made in absence of the aforesaid fund not being released in time. In the absence of the full amount not released to the petitioner, the paid amount released so far was of no use. According to the agreement the term loan was to lapse in March 1989. in spite of best efforts put by the petitioner, the said loan lapsed on 27-3-89 due to negligence and inaction on the part of the respondent Corporation. It was revalidated on 21-4-89 only for four days i.e. untill 25-4-89 and it was communicated to the petitioner on 2-5-89 after the loan automatically lapsed. It was highly improbable that within four days balance amount of Rs. 12.7 lacs could have immediately been utilised by the petitioner. 3. It was revalidated on 21-4-89 only for four days i.e. untill 25-4-89 and it was communicated to the petitioner on 2-5-89 after the loan automatically lapsed. It was highly improbable that within four days balance amount of Rs. 12.7 lacs could have immediately been utilised by the petitioner. 3. The petitioner, therefore, again applied for revalidation of the term loan and the respondents revalidated it on 15-6-89 and the petitioner again requested the Corporation for release of the balance amount of Rs. 12.7 lacs. Unfortunately, the processing took time and once again the loan lapsed on 24-7-89, but the Corporation went on charging the interest over the part amount disbursed to the petitioner. By reasons of unforeseen delay in availability of fund in time, not only the cost of the project mounted high due to inflation, but, the target set up by the petitioner also severely suffered. The term loan having not been disbursed in time and only a part amount being released, the same could not be properly utilised and the project could not be completed in time. The cost of all the materials increased and left with no alternative, the petitioner applied for additional term loan on 25-7-89. After several reminders for the additional terms loan, the Regional Manager of the Corporation was directed to make enquiries and submit his views. This, according to the petitioner, was wholly unnecessary since the entire background and the history or the unit was available in the files of the Head Office of the respondents. However, the Regional Manager recommended that the proposal for additional term loan should be accepted. Even though all the papers were available with the respondents, on 1-6-90 certain queries were raised and the petitioner was asked to submit certain documents. The petitioner even then submitted those necessary documents. Although on 20-6-90 the petitioner was intimated that the unit will be inspected, but the Branch Manager did not turn up. Without any reason, whatsoever, the respondents took six months in inspecting the factory premises. 4. It may be stated that for the purpose of additional loan, although the Small Industries Development Bank of India (in short SIOBI) had sanctioned an amount of Rs. 11, 38, 500 for the very unit of the petitioner, but for the reasons best known to them the respondents did not inform the petitioner and no intimation was sent whatsoever. 4. It may be stated that for the purpose of additional loan, although the Small Industries Development Bank of India (in short SIOBI) had sanctioned an amount of Rs. 11, 38, 500 for the very unit of the petitioner, but for the reasons best known to them the respondents did not inform the petitioner and no intimation was sent whatsoever. When the petitioner wrote a letter to the Small Industries Development Bank of India (SIDBI), only then he learnt that they had already sanctioned the said amount. For nearly two years, the petitioner had to run from pillar to post for the purposes of additional loan only due to negligence and larches on the part of the respondent Corporation. It has thus been demonstrated that the only reason in delaying the disbursement of the loan to the petitioner was the ulterior motive. In fact, out of the total sanctioned loan of Rs. 37 lacs, the petitioner has been paid only about 31 lacs and the rest 6 lacs and odd have never been paid to the petitioner and the said amount lapsed due to negligence and latches on the part of the respondent. Whenever the petitioner approached any bank for the working a capital, the Banks did not agree for giving any working capital to the petitioners unit in view of the fact that the respondents have themselves not disbursed the entire amount to the petitioner. 5. In the background of these facts, it has been contended on behalf of the petitioner that on account of the proved negligence and latches on the part of the concerned respondents, they are not entitled to charge any interest and/ or penal interest from the petitioner. From time to time the respondents have increased the rate of interest. It was further contended that since the respondents have not discharged their own (obligation, which was a condition precedent for realising interest on the loan amount, they are not authorised to charge or realise any interest on the loan amount. Non-disbursement of full term loan made the petitioner to suffer heavily to the extent that he could not utilise the amount for the purpose of starting the unit and had to suffer inflation of cost and delayed production causing severe loss. Therefore, it has been contended that the respondents are liable to pay damages to the petitioner. 6. Non-disbursement of full term loan made the petitioner to suffer heavily to the extent that he could not utilise the amount for the purpose of starting the unit and had to suffer inflation of cost and delayed production causing severe loss. Therefore, it has been contended that the respondents are liable to pay damages to the petitioner. 6. The project could not be completed within time in view of the fact that since 19-7-88 the respondents have not disbursed the loan amount according to the schedule. Till 19-7-88 the respondents had only disbursed an amount of Rs. 18, 25, 533.29 paise. Out of the aforesaid amount the respondents had also adjusted interest which the petitioner was liable to pay. At the initial stage the cost of the project was Rs. 61.52 lacs and now in view of the delay in disbursement of the loan, the total cost of the project has gone up to Rs. 80.83 lacs, which has been confirmed by the respondents themselves. Although, an additional loan of Rs. 15.18 lacs was sanctioned to be paid by the respondents, which includes the sum of Rs. 11.38 lacs sanctioned by the Small Industries Development Bank (SIDBI), but till today nothing has been paid to the petitioner. The act of mala fide has been demonstrated by stating the fact that although the bank draft dated 27-3-89 was to be handed over to the petitioner for the purpose of purchasing certain equipments, the same was handed over just before expiry of six months i. e. on 21-9-1989. There was no, reason whatsoever to withhold the said bank draft. 7. The counter affidavit filed by the Branch Manager of the Corporation contains general denial without specific denial being made in regard to the latches on the part of the Corporation leading to heavy loss sustained by the petitioner. It has been stated that the balance amount could not be released due to deviation in purchasing unapproved and old machines. In reply, the petitioner has categorically stated that 18 KVA D.G. Set had been purchased at that stage only to meet the requirement of the petitioner. The loan was revalidated only for four days on 21-4-89 and communicated to the petitioner on 2-5-89 after the loan automatically lapsed and thus it was highly improbable that within these four days the balance amount of Rs. The loan was revalidated only for four days on 21-4-89 and communicated to the petitioner on 2-5-89 after the loan automatically lapsed and thus it was highly improbable that within these four days the balance amount of Rs. 12, 7 lacs could have been immediately utilised by the petitioner. 8. The only deviation pointed out is the purchase of 18 KVA, Diesel Generating Set, instead of a sanctioned 200 KVA. In reply thereto, it has been affirmatively asserted that there was no deviation whatsoever in purchase of the sanctioned machine and, in fact, whatever machines were purchased, by now, were all sanctioned machines purchased from the approved suppliers. Thus, there was no complain of purchase of any real machines. In so far as the only purchase of the Diesel Generating Set is concerned, due to lack of fund, for the time being this 18 KVA D.G. Set was purchased in place of 200 KVA, only for lighting purposes, to start with, since full finance was not available and the unit bad not yet come into commercial operation. This was purchased only for lighting purposes. In the counter affidavit no evidence of any such deviation has been placed on record except a bald and general statement. 9. Till date, the Corporation has disbursed an amount of Rs. 29, 61, 433-29 and not Rs. 31, 09, 000.00. In court, the Corporation admitted the disbursement of the said amount of Rs. 29 lacs and odd. Out of this amount, a sum of Rs. 3, 79, 433-20 paise have been released and adjusted against interest. Therefore, the actual amount disbursed is Rs. 25, 82, 00000 paise. Besides this, the promoters have also paid Rs. 1, 32, 30736 paise as against margin to meet the interest due. 10. It is evident from the sanction letter of the Corporation that before sanction of the additional term loan, the promoters had created assets of Rs. 8.74 lacs more then the original ; Rs. 1.76-Building Rs. 0.33-Plant and Machinery. Rs. 6.65-Electric, Tools and Implements ______________ Total Rs. 8.74 lacs. ________________ As against the promoters contribution of 35%, to the tune of Rs. 15.70 lacs, an amount of Rs. 20.30 lacs plus seed money which is also a part of the promoters contribution i. e. Rs. ?0.30 lacs + Rs. 1.13 lacs (Rs. 1.76-Building Rs. 0.33-Plant and Machinery. Rs. 6.65-Electric, Tools and Implements ______________ Total Rs. 8.74 lacs. ________________ As against the promoters contribution of 35%, to the tune of Rs. 15.70 lacs, an amount of Rs. 20.30 lacs plus seed money which is also a part of the promoters contribution i. e. Rs. ?0.30 lacs + Rs. 1.13 lacs (Rs. 21.43 lacs) has already been invested and accepted by the Corporation ; 21.43 - 15.70 ________ 5.73 _______ 11 As it appears from Annexure 5 to the Corporation has to disburse a total amount of Rs. 47 lacs as against term loan: Term loan ... Rs. 47, 00, 000-00 Less disbursed ... (-) Rs. 25, 82, 000-00 ________________ To be disbursed Rs. 21, 18, 000-00 ________________ Thus the Corporation has to disburse 21, 18, 000-00. Less 3.18 lacs i. e. Building Rs. 1 lacs, Machine Rs. 2.18 lacs. Thus, is all, Rs. 18 lacs is due to be paid to the petitioner by the Corporation. 12. Due to delay in disbursement of the said amount, the Project got delayed, prices escalated, interests accumulated. From the sanction letter annexure 5/1, it appears, that the Corporation in order to realise its interests and penal interests had made ample provisions under the head of pre-operative expenses i e. Rs. 12.68. This proves that their intention was to realise their dues with no concern for the unit whether it will run or no:. Even then the petitioner had cleared the interest up to 8-9§9 and on account of this, he has contended that from the cut off date i.e. 19-7-88 the Corporation should not charge interest on account of irregular payments, which started from that date and non disbursement of the total term loan. It has been further asserted that on account of such default of the Corporation, the Bank is not paying the working capital and the Corporation should not withhold the payment of term loan on this account as a condition. This is most unreasonable approach on the part of the Corporation. 13. At times, complete lack of awareness of principles on which these institutions are required to function, is a most disturbing state of affairs. To accelerate economic development, the fiscal resources, human resource, their abilities and expertise need harness, In the mixed economy the public undertakings as well as private sector need necessary assistance and encouragement. 13. At times, complete lack of awareness of principles on which these institutions are required to function, is a most disturbing state of affairs. To accelerate economic development, the fiscal resources, human resource, their abilities and expertise need harness, In the mixed economy the public undertakings as well as private sector need necessary assistance and encouragement. The growth of the private sector should not be stifled, cribbed or crabbed. The Corporation should adopt positive approach to stimulate production and productivity in every sector of economy, 14. While stating the object of the State Financial Act, the Supreme Court, in the case of Mahesh Chandra V/s. Regional Manager, U. P. Financial Corporation and Ors. 1992 BBCJ-220 : (1992) 2 BLJR 1365 (SC), held: The Financial Corporation under the Act were visualised not as a profit earning concerns but an extended arm of a welfare state to harness business potential of the country to benefit the common man. Resources allocation in a market economy, thus, primarily is a matter of relative priority to different activities. The very process of economic growth implies continuous re-allocation of resources to generate income to plough it back and earn profit. Ones of major causes to incur Joss is the erosion of working capital fund which affects the day-to-day working of the unit. Unless working capital is provided for, the industry is bound to get closed due to accumulated losses year after year. The terms of loans are mainly to repay immediately after disbursement with commercial rate of interest together with annual or half yearly interests. Unless the unit starts generating internal resources and earn profit, running the unit or industrial concern in itself becomes difficult and the ability to reply principal or interest get impeded. The result, therefore, is that it would commit default or breach of contract by default attracting penal interest for the period in default. The industrial concern or unit, thereby, would be further burdened with additional cost of interest, penal interest over interest. With the result, they cannot come out from the red, nor generate internal resources. 15. Having laid down this principle, the Supreme Court directed that: The Corporation as a policy of wise investment should map out payment schedule in disbursing the loan to see that the unit starts functioning and its working capital is maintained. With the result, they cannot come out from the red, nor generate internal resources. 15. Having laid down this principle, the Supreme Court directed that: The Corporation as a policy of wise investment should map out payment schedule in disbursing the loan to see that the unit starts functioning and its working capital is maintained. It is common knowledge that due to apathy or indifference or for reasons best known or hidden that the disbursements would be delayed resulting in delay in completion of the projector to start working or loss of running capital, which would give cause for default in payment of the instalments accumulation of the liabilities and the ultimate, closure of the unit or the industrial concern, defeating the objectives of the Act and the constitution. 16. The facts of this case has demonstrated that due to lack of working capital the petitioner was unable to run the commercial unit. The Corporation did not release the balance loan and no explanation has come forth. Thus, the proposed unit could not get established and start yielding returns for repayment of principal amount and interest payable thereon. It need not be emphasised that Corporation being an instrumentality of the State has to exercise the power or discretion in its dealing subject to the same constitutional or public law limitation as the Government. The Corporation also equally must conform its action to the same standard that meet the test of justness, fairness, reasonableness and relevance. When any governments action fails to satisfy the test of reasonableness and public interests are found to be wanting in quality of reasonableness or lacking in the quality of public interest it would be liable to be struct down as invalid. In legislations enacted for general benefit and common good the responsibility is far graver. It demands purposeful approach. The exercise of discretion should be objective. Test of reasonableness is more strict. The public fuacionaries should be duty conscious rather than power charged. Its actions and decisions which touch the common man have to be tested on the touchstone of fairness and justice. That which is not fair and just is unreasonable. And what is unreasonable is arbitrary. An arbitrary action is ultra vires. 17. What has happened in the present case is that the Corporation did not honour their commitments of releasing entire loan timely. That which is not fair and just is unreasonable. And what is unreasonable is arbitrary. An arbitrary action is ultra vires. 17. What has happened in the present case is that the Corporation did not honour their commitments of releasing entire loan timely. No good reasons were intimated before hand in order to enable the unit holder to comply with the short coming, if any. On account of such arbitrary action and unreasonable approach of the Corporation is not disbursing the entire loan in time the petitioners unit could not be started. Prices increased ; interests multiplied. The petitioner suffered damages on account of interest on the promoters money, payment of electric bills, salary, wages etc. Instead of making every endeavour to make the unit run and put on working condition, it was rendered unworkable, the growth of the petitioners unit was virtually stiffled, cribbed and crabbed. On account of such long delay in payment of term loan in time and on account of non-disbursement of the term loan the commercial unit never came into operation and the part payment of the term loan was of no use and by the time the full term loan would be paid after lapse of long years, the interest and the penal interest would be peculated on the part payment and by the time the balance amount is paid the interest would mount so high that the commercial unit would never come into operation and bear the burden and at last the borrower is informed on papers that the interest to be paid by him is higher than the balance term loan required to be paid. This frustrates the very objective of the Corporation. It is certainly not the helping attitude which could subserve the purpose 01 the loan and the object of the Act as also the constitutional objective of economic justice to the needy. The delayed disbursement result in delay of completion of the project which would cause default in payment of instalments and interest and accumulation of liabilities and ultimate closure of the unit. 18. In this view, I have no option but to direct that the Corporation shall disburse the term loan of Rs. 18 lacs which has remained to be paid to the petitioner within six weeks from the date of receipt of a copy of this order. 18. In this view, I have no option but to direct that the Corporation shall disburse the term loan of Rs. 18 lacs which has remained to be paid to the petitioner within six weeks from the date of receipt of a copy of this order. From the cut off date i.e. 19-7-88 when the disbursement were not being made timely till the date of full and final disbursement of the sanctioned term loan the interest and penal interest are waived. The interest shall be chargeable only on this amount of Rs. 18 lacs according to the terms and conditions of the Corporation. As per the practise of the Corporation for units seeking term loan, the morotorium which is normally two years is further extended. 19. For the reasons stated above the writ application is allowed with the directions indicated above but without any order as to cost.