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2003 DIGILAW 197 (PAT)

Choudhary Kumar Consultants v. State Of Bihar

2003-02-20

AFTAB ALAM

body2003
Judgment 1. Heard Mr. Sukumar Sinha, counsel appearing for the petitioner and Mr. R.K. Dutta appearing on behalf of Bihar State Credit & Investment Corporation (BiCICo, for short). 2. In response to a notice for the sale of the properties of M/s Neeraj Newspaper Associates Pvt. Ltd., a defaulting unit, issued by BICICO under Section 29 of the Bihar State Financial Corporation Act, 1951, the petitioner made the highest offer. But eventually the unit was sold by BICICO, not to the petitioner, but on the basis of a fourparty agreement to another buyer, namely, M/s Pine Builders Pvt. Ltd. The petitioner seeks a direction from this Court to BICICO to accept its offer and to hand over the unit to it. 3. The writ petition was submitted in the Centralised Filing Section on 17.9.2002. The order sheet shows its date of filing as 30.9.2002. Though the sate of the unit in favour of M/s Pine Builder on the basis of the fourt-party agreement was made earlier on 31.7.2002, the petitioner was evidently unaware of this development. In the main writ petition, therefore, the relief prayed for was confined to a direction to BICICO to execute the sale of the unit in favour of the petitioner on the offer made on its behalf. The petitioner came to learn about the sale of the unit having been made in favour of M/s Pine Builders Pvt. Ltd. from the counter affidavit filed on behalf of BICICO and then an amendment petition was filed in this case praying for the impleadment of other parties and seeking a further direction to annul the sale made in favour of M/s Pine Builders. 4. The parties were heard at length on the merits of the case as also on the amendment petition. 5. The facts of the case are simple and without controversy and the material facts can be stated thus. A loan of Rs. 32.44 lacs was advanced to M/s Neeraj Newspaper and Associates Pvt. Ltd. in the year, 1982-83. The unit defaulted on repayment of loan and as the result of accumulation of interest the outstanding balance as on 31.1.2002 was Rs. 399.88 lacs. In order to realise its loan BICICO issued a sale notice published in the Dainik Jagran of April 10, 2002 tor the sale of the unit in terms of section 29 of the Act. The unit defaulted on repayment of loan and as the result of accumulation of interest the outstanding balance as on 31.1.2002 was Rs. 399.88 lacs. In order to realise its loan BICICO issued a sale notice published in the Dainik Jagran of April 10, 2002 tor the sale of the unit in terms of section 29 of the Act. On 20.4.2002 the petitioner made an offer of Rs. 78 lacs and enhanced it to Rs. 84 lacs in course of negotiations with BICICO. The petitioner also deposited the entire amount offered by it through different cheques. Following the deposit of the amount BICICO issued a letter of offer, dated 26.4.2002. By this letter, the petitioner was intimated that its offer for the purchase of the unit was tentatively accepted by BICICO subject to the following conditions : This acceptance of the offer is subject to the right of the original promoter/company as laid down by Honble Supreme Court in case of Mahesh Chandra V/s. UPFC (1993 2 SCC). This sale shall be finalized in terms of the guideline laid down by the Honble Supreme Court in the above case. "(b) This acceptance is also subject to the final approval of sale by the Board of Directors of BICICO and/or other condition/conditions that may be imposed by the Board of Directors." 6. On 2.5.2002 a memorandum of understanding was also executed between BICICO and the petitioner. A copy of the memo of understanding is at Annexure-C to the counter affidavit from which it appears that the letter of offer along with its annexures formed an integral part of the M.O.U. The matter was at this stage when the Corporation returned the entire sum of Rs. 84 lacs deposited by the petitioner under eight cheques along with its letter, dated 17.5.2002 (Annexure-5). In this letter, it was stated as follows : "This is to bring to your kind notice that our offer letter was subject to the approval of the Board of Directors. It seems that the approval of our Board of Directors may take longer time and as such we do not intend to keep your payment till such time the Boards approval is obtained. In light of this fact, we are returning the consideration amount of Rs. 84 lacs given by you. Following cheques are enclosed towards above refund." 7. It seems that the approval of our Board of Directors may take longer time and as such we do not intend to keep your payment till such time the Boards approval is obtained. In light of this fact, we are returning the consideration amount of Rs. 84 lacs given by you. Following cheques are enclosed towards above refund." 7. It is to be noted here that till this stage the petitioner did not raise any protest or objection either with regard to the conditions subject to which its offer was tentatively accepted by BICICO or against the return of the money deposited by him. 8. While BICICO was dealing with the sale of the unit, another development took place which seems to have affected the course of the sale of this unit in a basic way. A new one Time Settlement scheme came into operation on 15.7.2002. According to this scheme a loanee could make settlement of the entire loan, regardless of the amount outstanding by making payment of a sum equal to two times of the amount disbursed in his favour as loan in case of loans that were ten years old and two and half time of the amount in case of loans that were granted more than twelve years ago. 9. From this stage the proceedings with regard to the unit in question seem to have taken to slightly divergent courses. 10. On the one hand BICICO was taking steps for the sale of this unit and was having negotiations with the petitioner. On the other hand the original promoter, M/s Neeraj Newpaper & Associates Pvt. Ltd. took advantage of the One Time Settlement Scheme and approached BICICO for settlement of its loan in terms of that scheme. 11. On 16.7.2002 BICICO wrote to the petitioner stating that the original promoter did not appear to be interested in making a matching offer and since the petitioner was the highest bidder in response to the advertisement, dated 10.4.2002, it may redeposit the amount of Rs. 84 facs offered by it. This time the petitioner did not make the deposit immediately but by letter, dated 19.7.2002 asked for several clarifications. The BICICO seems to have taken the view that it may get a better offer by re-advertising the sale notice and accordingly on 22.7.2002 another advertisement was issued. 84 facs offered by it. This time the petitioner did not make the deposit immediately but by letter, dated 19.7.2002 asked for several clarifications. The BICICO seems to have taken the view that it may get a better offer by re-advertising the sale notice and accordingly on 22.7.2002 another advertisement was issued. At this stage the petitioner came to this court challenging the action of the BICICO in issuing a fresh advertisement disregarding the offer made by the petitioner in response to the earlier advertisement. 12. In the mean while, however, the original promoter had already approached BICICO for a final settlement under the One Time Settlement Scheme effective from 15.7.2002. During the past twenty two years, M/s. Neeraj Newspaper and Associates had gone in the hands of M/s Badrika Construction Limited and both these parties brought another party, namely, M/s Pine Builders Pvt. Ltd. before BICICO. 13. As noted above, the loan advanced to the unit was a sum of Rs. 32.44 lacs. On being multiplied by 2.5, the product would be Rs. 81.10 lacs. This is without taking into consideration the payments made by the unit towards the liquidation of the loan and if those payments are to be taken into account, (being permissible under the scheme) the resultant product would be even lesser than Rs. 81 lacs. In terms of the One Time Settlement Scheme, therefore, the promoter was entitled to settle the entire loan on payment of Rs. 81.10 lacs. But, this was not acceptable to BICICO because it had already received an offer of Rs. 84 lacs for the unit from the petitioner, BICICO, therefore, insisted for a sum higher than Rs. 84 lacs for the settlement of the loan account. The parties accepted the proposition and consequently an agreement for sale was executed on 31.7.2002 between BICICO on the one side and M/s Neeraj Newspaper and Associates Private Limited, M/s Badrika Construction Limited and M/s Pine Builders Limited on the other side. In terms of this agreement BICICO , received a bank draft, dated 30.7.2002 for a sum of Rs. 15 lacs and two cheques, each of Rs. 35 lacs, one, post-dated 12.8.2002 and the other, post dated 15.9.2002. B/CfCO received the entire sum of Rs. 85 lacs under the three cheques and only then it handed over the possession of the unit to M/s Pine Builders on 23.9.2002. 14. Mr. 15 lacs and two cheques, each of Rs. 35 lacs, one, post-dated 12.8.2002 and the other, post dated 15.9.2002. B/CfCO received the entire sum of Rs. 85 lacs under the three cheques and only then it handed over the possession of the unit to M/s Pine Builders on 23.9.2002. 14. Mr. Sukumar Sinha strongly argued that the action of BICICO in accepting its offer only tentatively "and subject to the right of the original promoter/company as laid down by the Honble Supreme Court in case of Mahesh Chandra V/s. U.P.F.C." ( AIR 1993 SC 935 ) was quite unreasonable, bad and illegal. Mr. Sinha submitted that the decision in Mahesh Chandra was over ruled by a later Supreme Court decision in State Financial Corporation V/s. M/s Jagdamba Oil Mills, AIR 2002 SC 834 . Placing heavy reliance on the decision in M/s Jagdamba Oil Mills, Mr.Sinha submitted that it was no longer open to BICICO to ask the original promoter or to give him an opportunity to make a matching offer and once the petitioner had made the highest bid in response to the sale notice issued by it under section 29 of the Act, the only course open to BICICO was to accept the offer and to execute the sale in favour of the petitioner. 15. I am unable to accept the submission and to my mind the reliance placed by Mr. Sinha on the decision in M/s Jadgamba Oil Mills is misconceived for more reasons than one. First, the decision in M/s Jagdamba Oil Mills does not over rule the decision in Mahesh Chandra in the sense that it does not create a bar against the financial institution from giving an opportunity to a deserving first promoter/loanee to make a matching offer. To my mind the decision in M/s Jagdamba Oil Mills merely relaxes the rigours of the earlier decision in Mahesh Chandra and rescues and relieves the Financial Corporation from the straight jacket put over it by earlier decision. The decision of M/s Jagdamba Oil Mills simply says that the financial institutions would not be rigidly bound to give an opportunity to make a matching offer to the original promoter in each case regardless of the past conduct of the promoter and other material facts and circumstances of the case. The decision of M/s Jagdamba Oil Mills simply says that the financial institutions would not be rigidly bound to give an opportunity to make a matching offer to the original promoter in each case regardless of the past conduct of the promoter and other material facts and circumstances of the case. Therefore, on the basis of the decision in M/s Jagdamba Oil Mills, it cannot be held that BICICO had committed any irregularity, much less, any illegality in accepting the offer made by the petitioner conditionally and subject to the right of the original promoter to make a matching offer. 16. Secondly the appropriate stage to raise this objection was when the conditional offer was made to the petitioner by letter, dated 26.4.2002 or at any rate when the money deposited by it was returned by letter, dated 19.7.2002. At that stage the petitioner did not raise any objection or protest against the conditional acceptance of its offer by BICICO. It may be noted that there was a gap of two months when the BICICO wrote again to the petitioner asking it to redeposit the money. During this period of two months, there was ample opportunity for the petitioner to raise objection or protest against the return of its money because BICICO wanted to give an opportunity to the original promoter. But the petitioner did not do so. 17. Thirdly, the decision in M/s Jagdamba Oil Mills has no direct bearing to the facts of this case because in this case the settlement in favour of the original promoter M/s Pine Builders was not made on the basis of any matching or competing offer made by them in response to the offer by the petitioner. The basis on which the unit was sold in favour of M/s Pine Builders is entirely different and the loan was settled and the sale was made in terms of the One Time Settlement Scheme coming into operation w.e.f. 15.7.2002. Once the scheme had come into operation, the loanee in this case, like any other loanee, was free to take advantage of the scheme and to get its loan settled under that scheme. 18. Mr. Sinha submitted that the entire transaction in favour of the original promoter and M/s Pine Builders was tainted and malafide. In this regard Mr. Sinha submitted that the outstanding balance as on 31.10.1996 was slightly over Rs. 18. Mr. Sinha submitted that the entire transaction in favour of the original promoter and M/s Pine Builders was tainted and malafide. In this regard Mr. Sinha submitted that the outstanding balance as on 31.10.1996 was slightly over Rs. 190 lacs but at that stage BICICO had not accepted the offer of Rs. 113 lacs for the settlement of the loan. But when the outstanding dues swelled upto Rs. 399.83 lacs as on 31.1.2002, BICICO settled for the paltry sum of Rs. 85 lacs for the settlement of the loan.The submission once again over looks the fact that the settlement was made under the One Time Settlement Scheme. In terms of the formula under the Scheme the original promoter could have settled the entire loan on payment of a sum of iess than Rs. 81.1 lacs. But the settlement was made for Rs. 85 lacs for reasons already noted above. 19. Mr. Sinha further submitted that the settlement in this case was in fact not made under the One Time Settlement Scheme and the learned counsel pointed out that the payments were made in three instalments from 30.7.2002 to 15.9.2002 which was evidently contrary to a one time settlement as the name of the scheme suggested. I do not see any force in this submission either. It is correct that payments were made in instalments through post-dated cheques, the last of which was, dated 15.9.2002 but the unit was handed over to the purchasers on 23.9.2002 only after the entire payment was received by BICICO. 20. In these facts and circumstances, I am satisfied that the petitioner has not been able to make out a case for any interference in this matter by this Court. The amendment petition in so far as it relates to impleadment of private parties in this writ petition is rejected and the main writ petition also fails. It is accordingly dismissed but without any order as to costs.