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Rajasthan High Court · body

2004 DIGILAW 1132 (RAJ)

G. K. Purohit v. Rajasthan Financial Corporation

2004-08-06

K.S.RATHORE

body2004
Honble RATHORE, J.–This is second round of litigation. Earlier also the petitioner preferred a writ petition, which is registered as S.B. Civil Writ Petition No. 1418/1991 before this Court and was disposed of by this Court vide order dated 13.9.94. While disposing of the writ petition this Court observed as under: ``I have considered over the matter. The facts involved in the present case are disputed questions facts and cannot be adjudicated under Art. 226 of the Constitution of India. The petitioner has a remedy of filing a civil suit. The only observation which can be made in the present case is that for the settlement of the accounts, the petitioner has to approach the respondents along with the statement of accounts and if any error is pointed out they would immediately correct the same. The question of waiving interest is on the basis of certain norms which are already settled and the directions cannot be given by this court. If the petitioner is able to satisfy the respondents within 15 days from today with regard to non- adjustment/correction of mistakes/etc. the respondents would within 10 days thereafter decide the same and the amount could be reduced accordingly. Consequently, the writ petition stands disposed of with the above directions. (2). The case of the petitioner is that pursuant to the direction issued by this Court vide judgment dated 13.9.94 the petitioner filed a representation on 28.9.94 before respondent No. 1 by which submitted the statement of accounts and claimed a sum of Rs. 17,37,000/- from R.F.C. (3). The respondent No. 2 vide its letter dated 22.1.98 informed the petitioner regarding outstanding amount of Rs. 5,78,833/- against the petitioner and Rs. 2,42,148/- was shown outstanding against the M/s Hotel Gopi Kishan & Annapurna Restaurant and thus the total amount outstanding against the petitioner was shown as Rs. 8,20,981/-. (4). The case of the petitioner is that since against the amount of Rs. 8,20,981/- the petitioner has deposited more than Rs. 4 lacs and only Rs. 4,50,000/- remains outstanding against the petitioner. Therefore, after adjusting the outstanding amount of Rs. 4,50,000 the respondent RFC should be directed to make the balance payment out of Rs. 17,37,000/- as claimed by the petitioner. (5). The petitioner at the time of oral submissions has formulated own style certain questions for determination. 4 lacs and only Rs. 4,50,000/- remains outstanding against the petitioner. Therefore, after adjusting the outstanding amount of Rs. 4,50,000 the respondent RFC should be directed to make the balance payment out of Rs. 17,37,000/- as claimed by the petitioner. (5). The petitioner at the time of oral submissions has formulated own style certain questions for determination. The first question is that whether the agreement to sale by which a part consideration of Rs. 4 lacs was received by the Corporation on 1.3.84 and the remaining amount of Rs. 4,50,000/- withheld by the petitioner on account of defective title of RFC would amount to be termed as loan by the RFC would amount to be termed as loan by the RFC and hence liable to compound interest upon interest @ 22.5% p.a., if so, what will be effect of it on the said controversy. (6). To elaborate this question learned senior counsel for the petitioner Mr. G.G. Sharma submits that the petitioner cannot be termed as a borrower as he is purchaser since he has purchased the hotel in open auction, therefore, provisions of the State Financial Corporations Act, 1951 are not applicable and at the most the case fall under the provisions of Transfer of Property Act, 1982. Learned counsel for the petitioner more particularly referred Section 55 of the Transfer of Property Act, which deals with the rights and liabilities of buyer and seller. (7). To show that the petitioner is not a borrower but a purchaser he referred para 2 of the agreement wherein the petitioner has been referred as purchaser. In view of this fact he tried to impress the Court that since he is purchaser, therefore, notice for recovery of the outstanding amount issued under the Rajasthan Financial Corporation Act 1951 is without jurisdiction. (8). He further submits that RFC committed mistake and acted malafidely not considering any claim of the petitioner dated 28.9.94, which was filed as per the direction of this Court and action of recovering the amount without considering the claim of the petitioner is unreasonable, malafide and arbitrary. (9). He read out the judgment dated 13.9.94 passed in the earlier writ petition filed by the petitioner. (9). He read out the judgment dated 13.9.94 passed in the earlier writ petition filed by the petitioner. He gave much emphasis in the observation made in para 2 of the judgment wherein the Court observed that for the settlement of account petitioner has to approach the respondents along with the statement of account and if any error is pointed out they would immediately correct the same. (10). As per the learned counsel for the petitioner that the representation so filed by the petitioner is till date not decided by the respondents, thus, they have not only flouted the direction issued by this Court vide judgment dated 13.9.94 but also acted arbitrarily not to settle statement of account of the petitioner. (11). Mr. Sharma further tried to formulate the case in his favour that the RFC is not entitled to ask any money from the petitioner, on the contrary the petitioner is entitled to received the amount of Rs. 17 lacs or so from the RFC as the petitioner has invested huge amount for settle the litigation pending between the private parties and he also paid the handsome amount to those parties to relinquish their rights. (12). Mr. Sharma after making detailed submissions further submits that the notice dated 8.3.2001, which was issued by the respondents under Section 30 of the State Financial Corporations Act deserves to be quashed and set aside and the RFC should be further directed to make the payment of Rs. 13,52,000/- along with the interest. (13). Per contra learned counsel for RFC Mr. Soral has vehemently denied all the submissions made on behalf of the petitioner. It is not disputed by learned counsel for RFC that the petitioner executed two agreements with the respondent Corporation. One agreement was executed on 12.4.84 whereby the petitioner took loan of Rs. 2 lacs from the respondent Corporation. Rs. 1 lac for construction of building for Hotel industry and Rs. 1 lac for purchase of plant and machinery. (14). The aforesaid loan to be repaid by the petitioner within a period of 5 years in 17 quarterly installments, 16 installments were to be of Rs. 12,000/- each and 17th installment was to be of Rs. 8000/- and each installment was to be paid on Ist day of every quarter. (15). The petitioner hypothecated the aforesaid hotel building and plant and machinery in favour of the R.F.C. (16). 12,000/- each and 17th installment was to be of Rs. 8000/- and each installment was to be paid on Ist day of every quarter. (15). The petitioner hypothecated the aforesaid hotel building and plant and machinery in favour of the R.F.C. (16). It is given out by learned counsel appearing on behalf of RFC that not a single installment of principal sum has been paid by the petitioner. (17). The second agreement was executed between the petitioner and the RFC for the purchase of hotel premises M/s Parmar Hotels & Restaurant, from the respondent corporation for a sum of Rs. 8.50 lacs. It is also not disputed that the petitioner has deposited a sum of Rs. 4 lacs against the aforesaid amount and agreed to pay the remaining amount of Rs. 4,50,000/- as follows: To pay on 26.03.1984 Rs. 2 lacs To pay on 26.03.1985 Rs. 1.50 lacs To pay on 26.03.1986 Rs. 1.50 lacs But the petitioner did not deposited the same. (18). It is also not disputed that the petitioner and the RFC has executed the deed of modification on 26.6.86. Even after executing the deed of modification the petitioner did not pay a single quarterly installment enumerated in the deed of modification. (19). Since the petitioner has defaulted to repay the loan amount as well as the installment against the sale price the respondents have no other option except to initiate action under Section 30 of State Financial Corporations Act 1951. (20). Mr. Soral further vehemently disputed this fact that the representation is still pending. He referred the representation submitted by the petitioner and submits that nowhere in the representation filed by the petitioner has been pointed out mistake in the statement of account, which requires any correction but raised other issues, which are not necessarily be answered and no direction whatsoever to this effect was issued by this Court vide order dated 13.9.94. (21). On the contrary learned counsel for the respondents demonstrated before this Court that immediately after they came to know any mistake in the statement of account, the same was corrected immediately. To this effect the petitioner has also not raised any grievance that the respondents have defaulted to correct the statement of account. The petitioner made out new case for asking the amount of Rs. To this effect the petitioner has also not raised any grievance that the respondents have defaulted to correct the statement of account. The petitioner made out new case for asking the amount of Rs. 17 lacs from the RFC instead of repaying the loan and pay the installment due against the petitioner. (22). Mr. Soral also referred the provisions of Section 29 of the State Financial Corporation Act, 1951, which deals with the rights of Financial Corporation in case of default. He further submits that Section 55 as referred by learned counsel for the petitioner is not applicable to the instant case. (23). Mr. Soral in support of his submissions placed reliance on the judgment The State Financial Corporation and Anr. vs. M/s. Jagdamba Oil Mills and Anr. (1), wherein the Honble Supreme Court has held that the writ cannot be issued until unless there is statutory violation or Corporation acts unfairly, mala fide. (24). He also referred the judgment U.P. Financial Corporation vs. M/s. Gem Cap (India) Pvt. Ltd. & Ors. (2), wherein the Honble Supreme Court has held that recovery of loan-Decision of Corporation to initiate recovery proceedings against its debtor- High Court cannot review it as an appellate authority. (25). By placing reliance on the aforesaid judgments Mr. Soral submits that it is not such case where this Court requires to invoke the extraordinary jurisdiction under Art. 226 of the Constitution of India. He further submits that the petitioner has utterly failed to establish his case in his favour and tried to escape from the responsibility/liability to repay the loan and repay the installment due against him. (26). The rejoinder learned senior counsel for the petitioner Mr. G.G. Sharma again reiterated that Section 55 of the Transfer of Property Act is applicable to the instant case. Sine the petitioner has purchased the hotel through an agreement to sale, therefore, the case of the petitioner is covered under the Provisions of Section 55 of the Transfer of Property Act and the RFC had issued the notice under Section 30 of the State Financial Corporation Act 1951, which is without jurisdiction. In support of his submissions he placed reliance on the judgments in Mt. Nanhi vs. Mt. Ketki (3), and Harcharan Lal vs. Nurul Hasan Khan & Ors. (4). (27). In support of his submissions he placed reliance on the judgments in Mt. Nanhi vs. Mt. Ketki (3), and Harcharan Lal vs. Nurul Hasan Khan & Ors. (4). (27). Heard rival submissions of the respective parties and carefully perused the relevant provisions of State Financial Corporations Act 1951 and Transfer of Property Act, 1882. I also carefully gone through the judgments referred by the respective parties. (28). First of all I like to refer the judgment dated 13.9.94 earlier passed by this Court in the writ petition filed by the petitioner. Upon perusal of the observations made by this Court it reveals that the Court has categorically observed that the facts involved in the present case are disputed questions of facts and cannot be adjudicated under Art. 226 of the Constitution of India. It was also observed that the petitioner has a remedy of filing a civil suit. By the aforesaid observations two things were made clear in the earlier writ petition. First the Court has declined to entertain the petition and also declined to issue any writ, order or direction as the petition involves several disputed questions of facts and this termed as a refusal to entertain the writ petition. (29). The second observation is with regard to the alternative efficacious remedy, which is a available with the petitioner by way of filing a civil suit as the Court has observed that the petitioner has a remedy of filing a civil suit. (30). Now the observation remains with regard to the settlement of accounts. As observed by this Court in the earlier judgment with the clear observation that the ``only observation which can be made in the present case is that for the settlement of account the petitioner has to approach the respondents and further observed that the petitioner has to approach the respondents along with the statement of account and if any error is pointed out they would immediately correct the same. Meaning thereby the Court has observed that only observation which can only be made is with regard to the settlement of account and that too is also to the extent of correction of statement of account and only when the petitioner approaches the respondents along with the statement of account and wherein the petitioner has to point out the error in the statement of account, in such eventuality the respondents have to immediately correct the same. (31). But in the instant case it appears by bare perusal of the so called representation filed by the petitioner, which is not with regard to the correction of statement of account but with regard to so many new issues like the payment of Rs. 17 lacs to the petitioner. In the representation the petitioner has set up a new case that he is not responsible to make any payment against the outstanding loan or against the purchase as he defaulted to make the installment due. (32). Lastly the observation made by the Court in the aforesaid judgment is the question of waiving of interest. The Court only observed that it is on the basis of certain norms, which is already settled and direction cannot be given by this Court meaning thereby regarding waiving of interest no direction was issued. By bare perusal of the observations made by the Court in the aforesaid judgment in para No. 2 it reveals that the Court has only given liberty/opportunity to the petitioner to point out the error committed by the respondents in the statement of account. But no direction whatsoever has been issued by this Court to decide the representation. Learned counsel for the RFC Mr. Soral is able to make out the case that the petitioner has failed to point out any error in the statement of account. On the contrary immediately when the RFC came to know about the error about adjusting the amount of Rs. 1,94,459/-, which was credited in favour of the petitioner and immediately after the mistake was noticed it was corrected on 30.8.88. He referred the statement of account R-5, which is submitted along with the reply to the writ petition. (33). Now to resolve the controversy whether the RFC is competent to issue notice under Section 30 of State Financial Corporation Act 1951 or not, it is necessary first to deal with the Section 29 of the State Financial Corporations Act 1951. He referred the statement of account R-5, which is submitted along with the reply to the writ petition. (33). Now to resolve the controversy whether the RFC is competent to issue notice under Section 30 of State Financial Corporation Act 1951 or not, it is necessary first to deal with the Section 29 of the State Financial Corporations Act 1951. Section 29 reads as under: Rights of Financial Corporation in case of default-(1) Where any industrial concern, which is under a liability to the Financial Corporation under an agreement, makes any default in repayment of any loan or advance or any installment thereof [or in meeting its obligations in relation to any guarantee given by the Corporation] or otherwise fails to comply with the terms of its agreement with the Financial Corporation, the Financial Corporation shall have the [right to take over the management or possession or both of the industrial concerns], as well as the [right to transfer by way of lease or sale] and realise the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation. (2) Any transfer of property made by the Financial Corporation, in exercise of its powers [***] under sub-section (1), shall vest in the transferee all rights in or to the property transferred [as if the transfer] had been made by the owner of the property. (3) The Financial Corporation shall have the same rights and powers with respect to goods manufactured or produced wholly or partly from goods forming part of the security held by it as it had with respect to the original goods. (3) The Financial Corporation shall have the same rights and powers with respect to goods manufactured or produced wholly or partly from goods forming part of the security held by it as it had with respect to the original goods. (4) [Where any action has been taken against an industrial concern] under the provisions of sub-section (1), all costs, [charges and expenses which in the opinion of the Financial Corporation have been properly incurred] by it [as incidental thereto] shall be recoverable from the industrial concern and the money which is received by it [***] shall, in the absence of any contract to the contrary, be held by it in trust to be applied firstly, in payment of such costs, charges and expenses and, secondly, in discharge of the debt due to the Financial Corporation, and the residue of the money so received shall be paid to the person entitled thereto.] (5) [Where the Financial Corporation has taken any action against an industrial concern] under the provisions of sub- section (1), the Financial corporation shall be deemed to be the owner of such concern, for the purposes of suits by or against the concern, and shall sue and be sued in the name of [the concern]. (34). By bare perusal of Section 29 it reveals that any industrial concern under liability to the Financial Corporation under an agreement makes any default in repayment of any loan or advance on any installment, the Financial Corporation is entitled to take steps under the Act. (35). Considering the submissions of the petitioner that he is not borrower but a purchaser, even otherwise also as stipulated in the agreement itself and in the modification deed that in any case the petitioner defaults to make the payment of installment and which covers under Section 29 wherein it was clearly stated ``or any installment thereof, in view of this fact the respondent RFC is competent to issue notice under Section 30. (36). Having gone through the provisions of Section 55 of the Transfer of Property Act 1882, which speaks about the rights and liability of buyer and seller, it is no doubt that under the provisions of Transfer of Property Act the transaction sale and purchase is covered under the Transfer of Property Act 1882. (36). Having gone through the provisions of Section 55 of the Transfer of Property Act 1882, which speaks about the rights and liability of buyer and seller, it is no doubt that under the provisions of Transfer of Property Act the transaction sale and purchase is covered under the Transfer of Property Act 1882. But since the special act like the State Financial Corporation Act 1951, which is enacted with the object that the Corporation will have special privileges in the matter of enforcement of its claims and as per the Section 29, it given right to the Financial Corporation to take appropriate steps in case any person is defaulted to make the payment of installment. (37). Herein the instant case also the respondents have fixed the installment of the outstanding sale price and on account of default the RFC is competent to act in accordance with the provisions of law as stipulated under the State Financial Corporation Act 1951. (38). The judgments of the Honble Supreme Court referred by learned counsel for the respondents reveals that the writ Court has no jurisdiction except two situations, one there is statutory violation on the part of the Corporation or second where the Corporation acts unfairly and unreasonably. (39). Herein the instant case the petitioner has not able to point out and make out his case as to how the RFC has violated the statutory provisions and has acted unfairly. On the contrary the petitioner escaped from the responsibility by trying to make out the case that after making a part payment of the amount against the purchase of hotel and for remaining balance he raised new pleas and back out from making the payment of balance amount and on the contrary asked for refund of the amount of Rs. 17 lacs to the petitioner. (40). This Court is of the firm opinion that since this matter involves several disputed questions of facts and as held earlier in the writ petition this Court also does not want to issue any writ, order or direction while exercising power under Art. 226 of the Constitution of India. (41). In view of the observations made herein above, the writ petition fails being devoid of merit and is herewith dismissed with no order as to costs.