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2012 DIGILAW 1217 (JHR)

Anupam Food Private Limited v. State of Bihar

2012-08-14

JAYA ROY, PRAKASH TATIA

body2012
JUDGMENT By Court – Heard learned counsel for the parties. 2. The petitioner appellant is aggrieved against the judgment dated 5th July, 2002 passed by the learned Single Judge, by which the writ petition W.P.(C)No.1777 of 2002 challenging the notice under Section 29 of the State Financial Corporation Act, 1951 dated 4th February, 2002 issued by BICICO, has been dismissed. 3. It appears from the impugned judgment that several questions were raised before the learned Single Judge but, according to the learned counsel for the appellant, those questions were not relevant and, therefore, the learned Single Judge could not appreciate the facts and the issues involved in the writ petition of the petitioner and, therefore, could not address to the issues which are, in fact, involved in the writ petition and which have been raised by the writ petitioner. 4. According to the learned counsel for the appellant, the petitioner's industrial unit was established by incorporating a Company and getting it registered under the Indian Companies Act on 21st January, 1983. On 30th November, 1986 the petitioner Company applied for the financial assistance from the Bihar State Financial Corporation (in short 'BSFC') for a loan of Rs.60.00 Lakh. However, the BSFC sanctioned term loan of Rs.53.40 Lakh only vide communication dated 12th January, 1987. The petitioner also applied for financial assistance from Bihar State Credit & Investment Corporation (in short ' BICICO'). The BICICO sanctioned term loan of Rs.20.64 Lakh on 10th October, 1988 but disbursed the said amount of Rs.20.64 Lakh in two installments of Rs.16.51 Lakh and Rs.4.13 Lakh respectively on 25.5.1989 after eights months from the date of sanction. According to the petitioner, because of delay in disbursement of the loan amount, the petitioner-unit suffered heavy loss and that it's losses are directly attributable to BICICO, because of inaction of the BICICO the petitioner-unit became sick unit. The petitioner, therefore, applied to the Directorate of Industries, Government of Bihar for declaration that petitioner-company is a sick unit. On 7th June, 1999, the petitioner Company was declared a sick unit. The petitioner, therefore, applied to the Directorate of Industries, Government of Bihar for declaration that petitioner-company is a sick unit. On 7th June, 1999, the petitioner Company was declared a sick unit. The petitioner submitted a Scheme for rehabilitation and the Board of BICICO in it's meeting held on 16th March, 1998 approved the proposal of the petitioner and resolved that a rehabilitation term loan of Rs.41.00 Lakh be sanctioned which was to be provided by the State Bank of India, however, upon condition of induction of a suitable person with adequate financial background into the management of the company and bringing matching contribution for margin money. This Resolution was communicated to the petitioner vide letter of the Managing Director, BICICO dated 7th April, 1998. However, this Resolution was not given effect to and loan of Rs.41.00 Lakh was not disbursed to the petitioner by the SBI and, therefore, petitioner could not rehabilitate. 5. Be that as it may, according to the writ petition, inspite of declaring petitioner Company, a sick unit by the erstwhile State of Bihar, the petitioner-unit was not rehabilitated and in terms of Rehabilitation Scheme, financial assistance was not given to the petitioner Company and ultimately State of Jharkhand was carved out from the State of Bihar by the Bihar Reorganization Act, 2000. After the Act of 2000, the petitioner applied before the State of Jharkhand for getting approval of the Rehabilitation programme from the competent committee of the State of Jharkhand. When petitioner's matter was under consideration before the State of Jharkhand, the respondent-BICICO served a notice upon the petitioner under Section 29 and 30 of the State Financial Act, 1951 and then put the petitioner's industrial unit for auction by issuing a public notice dated 4th February, 2002 and auctioned the petitioner's unit on 11th March, 2002 for a consideration of Rs.1,21,00,101/. The petitioner's unit approached this Court by filing the present writ petition being W.P.(C) No. 1777 of 2002, wherein interim order was passed, but it has been stated by BICICO that the possession of the unit was handed over to the auction purchaser on 15th March, 2002. The auction purchaser is respondent no.8 in the writ petition as well as in the Letters Patent Appeal. 6. The auction purchaser is respondent no.8 in the writ petition as well as in the Letters Patent Appeal. 6. According to the learned counsel for the petitioner-appellant, firstly the BICICO is a registered Company under the Companies Act, 1951 and is not a 'State' and, therefore, the assets and liabilities of the said Company are not the assets and liabilities of the State of Bihar. For the loan and advance made by the existing State of Bihar, the recovery could have been started by the State of Bihar by exercising power under Section 45 of the Act of 2000. But, according to the learned counsel for the appellant, since BICICO is not a 'State' and, therefore, has no right to invoke power under Section 45 of the Act of 2000, therefore, the learned Single Judge has committed error in considering this aspect of the matter, in the manner in which it has been considered. Learned counsel for the appellant also submitted that, in fact, the State of Bihar moved before the Central Government for giving power under Section 29 and 30 to the BICICO, obviously so as to enable the BICICO to recover it's loan by exercising power under Section 29 and 30 of the State Financial Act, 1951. But this power could have been exercised within the territory of the State of Bihar. However, subsequently learned counsel for the appellant submitted that even if, the power conferred upon the BICICO by the Central Government under Section 29 and 30 of the SFC Act has been lawfully conferred, then only contention of the writ petitioner-appellant is that in view of Section 22 of the Sick Industrial Companies(Special Provisions)Act, 1985, after declaration of the sick unit, no proceeding could have been commenced and, if commenced could not have been proceeded for recovery of any loan amount. Therefore, merely on this ground alone, the proceeding initiated by BICICO under Section 29 and 30 of the SFC Act was absolutely illegal. It is also stated that even otherwise, in view of the Industrial Policy of 1995, of the erstwhile State of Bihar and which has been adopted by the State of Jharkhand, then during pendency of the consideration of any unit for it's viability, technically and economically, the properties of that unit could not have been auctioned. It is also stated that even otherwise, in view of the Industrial Policy of 1995, of the erstwhile State of Bihar and which has been adopted by the State of Jharkhand, then during pendency of the consideration of any unit for it's viability, technically and economically, the properties of that unit could not have been auctioned. However, petitioner's case is in better footing because of the reason that petitioner industry was twice declared sick unit when it was falling within the territorial jurisdiction of the State of Bihar. Not only this, even after alleged proceeding under Section 29 and 30 of the SFC Act and even after auction of the Unit, the State of Jharkhand vide it's order dated 19th April, 2002 (Annexure22) declared the petitioner-unit as a sick unit. The declaration of the petitioner's industry as a sick unit on 19th April, 2002, clearly demonstrates that the matter was under consideration before the State Government with respect to the petitioner's proposal for revival of it's unit. In that fact situation, the BICICO could not have auctioned the petitioner-unit. It is also submitted that during all proceedings undertaken for declaration of petitioner-unit a sick unit, the BICICO was a party. In view of the above reasons, the BICICO was bound by it's own decision taken in the meetings, wherein Resolutions were passed with the consent of BICICO. 7. Learned counsel for the respondent-BICICO submitted that, in fact, at the time of erstwhile Bihar, the petitioner's case was considered for rehabilitation and for that purpose a decision was taken but so far it's implementation is concerned the decisions were not implemented because of the non cooperation of the writ petitioner-appellant. It is also submitted that with all fairness the BICICO in the advertised auction notice itself clearly indicated that at the time of finalization of the bids and the offers for the petitioner-unit, the petitioner may give its own bid or may give a good buyer for purchase of the unit, wherein petitioner did not take any part and did not offer for purchase of the unit or brought forward any other buyer. Learned counsel for the respondent-BICICO further submitted that, in fact, the petitioner was a defaulter and against the huge amount, the petitioner could pay only an amount of less than 5%, therefore, in that situation BICICO had no option but to auction the unit of the writ petitioner, when petitioner failed even to comply with the condition of rehabilitation package. Learned counsel for the respondent BICICO further submitted that so far as the proceedings taken before the Jharkhand Government is concerned, it was not in the presence of BICICO and BICICO never agreed for any proposal for declaring petitioner-unit as a sick unit. It is also submitted that the petitioner never brought to the knowledge of the BICICO that the petitioner is pursuing his matter before the State of Jharkhand and that fact is apparent from the petitioner's own communication given to the BICICO, at the time and before auction of the Unit and thereafter also, and during pendency of the writ petition also, wherein he did not mention that petitioner is pursuing his case before the State of Jharkhand for getting approval of the State of Jharkhand about it's declaration of sick unit. Therefore, the order of the State Government on 19th April, 2002 is absolutely irrelevant, so far auction by the respondent-BICICO is concerned. 8. Learned counsel for the private respondent-purchaser of the Unit supported the argument advanced by the learned counsel for the BICICO. 9. We have considered the submissions of the learned counsel for the parties and perused the reasons given in the impugned judgment. 8. Learned counsel for the private respondent-purchaser of the Unit supported the argument advanced by the learned counsel for the BICICO. 9. We have considered the submissions of the learned counsel for the parties and perused the reasons given in the impugned judgment. It appears from the impugned judgment that before the learned Single Judge several issues were raised which were based on Section 45 of the Reorganization Act, 2000 as well as Section 46 of the State Financial Corporation Act, 1951 and it appears that question raised before the learned Single Judge was with respect to the status of the BICICO to find out whether BICICO is 'State' or BICICO is an instrumentality of the State or BICICO is the other authority in the definition, so as to cover it under Article 12 of the Constitution of India and whether request to the Central Government for declaring the BICICO as financial institution under the SFC Act was valid and if the order of the Central Government declaring the BICICO as a financial institution under the SFC Act was valid then whether BICICO can exercise power beyond the territorial jurisdiction of the State of Bihar or not, were the major issues, which were decided by the learned Single Judge. There is no reason to accept the argument of learned counsel for the appellant that before the learned Single Judge such issues were not raised. The pleadings fully indicate that such were the pleas taken by the petitioner before the learned Single Judge. Further, petitioner's this contention cannot be accepted as such contention could have been submitted before the learned Single Judge by filing review petition, before taking this plea in Letters Patent Appeal. But, since before us it has been argued that BICICO may have been vested with the power under Section 29 and 30 of the SFC Act by the Central Government lawfully and BICICO by virtue of that power may exercise it's power for the properties situated beyond the territory of the State of Bihar then, according to learned counsel for the petitioner-appellant, the BICICO was not legally entitled to take proceeding against the writ petitioner, in view of the fact that in the presence of the BICICO the petitioner-unit was declared a sick unit and under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985, the petitioner was protected by Section 22. Not only this, the petitioner was entitled to get benefit under the State Industrial Policy as well as under the package which was duly approved by the Apex Body. 10. At the outset, we may observe here that Section 45 of the Bihar Reorganization Act, 2000 clearly provides that right of the existing State of Bihar to recover any loans or advances made before the appointed day to any local body, society, agriculturist or other person in an area within that State shall belong to the successor State in which that area is included on that day and as per subsection(2) of Section 45, the right to the existing State of Bihar to recover any loans or advances made before the appointed day to any person or institution outside that State shall belong to the State of Bihar. Therefore, Section 45 deals with only the loans and advances made by the State of Bihar and not by the Companies like BICICO. Section 47 of the Bihar Reorganization Act, 2000 also deals with assets and liabilities of the existing State of Bihar and, therefore, this provision of Section 47 also is of no relevance for deciding the controversy. Section 65 of the Act of 2000 provides that the Company specified in the Ninth Schedule to the Act of 2000 shall continue to function in the areas in which it was functioning immediately before the cut off date i.e., 15th November, 2000. In the Ninth Schedule, the BICICO name is at Entry no.45. Therefore, the BICICO can continue it's activities by virtue of Section 65(1) read with Ninth Schedule in the area where it was functioning. However, that is also not very much relevant for our purpose. 11. The question for consideration is that whether in the facts and circumstances, BICICO could not have proceeded to sell the properties of the petitioner-Company. As per the facts placed on record, it is clear that petitioner-unit applied for the loan from the BSFC of Rs.60.00 Lakh against which it was sanctioned Rs. 53.40 Lakh on 12th January, 1987. So far BICICO, at whose instance petitioner's unit was auctioned is concerned, before it petitioner applied for loan of Rs.20.64 Lakh, which was duly sanctioned on 10th October, 1988 and it was, in fact, paid to the petitioner in two installments of Rs.16.51 and Rs. 4.13 Lakh. 53.40 Lakh on 12th January, 1987. So far BICICO, at whose instance petitioner's unit was auctioned is concerned, before it petitioner applied for loan of Rs.20.64 Lakh, which was duly sanctioned on 10th October, 1988 and it was, in fact, paid to the petitioner in two installments of Rs.16.51 and Rs. 4.13 Lakh. Therefore, there is no allegation that BICICO did not disburse the entire loan amount to the petitioner-appellant. The total dues of the petitioner, as noticed in the impugned judgment and has been shown in the notice dated 4th February, 2002 issued by the BICICO is amounting to Rs.115.20 Lakh. That was the financial liability of the writ petitioner. The petitioner's case was duly considered by the all concerned party, including BICICO so that petitioner-unit may be rehabilitated and huge financial benefits were offered to the petitioner by the decision taken by the Apex Body, however with condition that for that purpose the petitioner will have to induct a suitable person with adequate financial background who can invest adequate fund and who can assist petitioner in surviving unit and may bring the matching amount. The petitioner accepted that proposal in toto and communicated it's consent vide letter dated 1st June, 2000, copy of which has been submitted in the present Letters Patent Appeal by the writ petitioner along with affidavit filed on 7th May, 2003. However, there is nothing on record to show that, in fact, petitioner acted on it's commitment given in letter dated 1st June, 2000 and offered the financial matching contribution or he brought any Co-Promoter to the satisfaction of the Apex Committee. In that fact situation, if the respondent-BICICO proceeded to auction the industrial unit of the petitioner's property, the BICICO has not committed any wrong because before taking stern action against the writ petitioner, the respondent-BICICO waited for two years as the auction notice was issued only on 2nd February, 2002. 12. So far as declaration of the petitioner-unit as a sick unit vide order dated 19th April, 2002 is concerned, that order was passed by the State of Jharkhand, wherein, according to BICICO, the BICICO was not a party. 12. So far as declaration of the petitioner-unit as a sick unit vide order dated 19th April, 2002 is concerned, that order was passed by the State of Jharkhand, wherein, according to BICICO, the BICICO was not a party. The order dated 19th April, 2002 is a strange order, inasmuch as before 19th April, 2002 the petitioner-unit was already put to auction by a public notice dated 2nd February, 2002 and it was, in fact, auctioned on 11th March, 2002 for a consideration of rupees more than 121.00 Lakhs and possession was already taken over by the respondent-BICICO by putting locks over the petitioner-unit and that fact has been admitted by the writ petitioner in it's writ petition by stating that only symbolic possession was taken by the BICICO. The symbolic possession is also one of the mode of taking possession but here in the present case it was, in fact, actual taking over of possession by putting locks over the petitioner-unit. These facts were not brought in the knowledge of the State of Jharkhand and concerned Department and, therefore, order may have been issued by the State of Jharkhand on 19th April, 2002. Therefore, the order dated 19th April, 2002 is of no consequence and rather say, it cannot be used against the BICICO for any purpose, as when the creditor has already taken possession of the Unit and put it on auction and handed over the possession to a third party by exercising power under Section 29 and 30 of the SFC Act, 1951, the State Government could not have declared the petitioner-unit to be a sick unit. 13. Learned counsel for the appellant, at this stage, submitted that it was in the knowledge of the State Government that the petitioner-unit was already put in auction on 2nd February, 2002 by the BICICO and it was auctioned on 11th March, 2002 and it's possession was handed over to the auction purchaser on 15th March, 2002. 13. Learned counsel for the appellant, at this stage, submitted that it was in the knowledge of the State Government that the petitioner-unit was already put in auction on 2nd February, 2002 by the BICICO and it was auctioned on 11th March, 2002 and it's possession was handed over to the auction purchaser on 15th March, 2002. If it is correct, then we are of the considered opinion that the order dated 19th April, 2004 is absolutely void, because of the simple reason that when the Creditor has already initiated a proceeding for taking over possession lawfully under statutory provisions of Section 29 and 30 of the SFC Act, 1951 and has taken over possession of the unit and also gave offer to the petitioner to bring it's offer or to bring any suitable buyer then in that situation the State Government could not have acted detrimental to the interest of such creditor, which has been vested with power to take possession and management and has given right to auction the property. 14. In view of the above reasons, we are of the considered opinion that on the issue raised before us also there is no merit and therefore, this Letters Patent Appeal is dismissed.