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2013 DIGILAW 732 (BOM)

Asiatic Holiday Resorts Pvt. Ltd. v. EDC Limited

2013-04-01

A.P.LAVANDE, U.V.BAKRE

body2013
Judgment :- A.P. Lavande, J. By this petition, the petitioner seeks following reliefs:- “a. a writ of Certiorari or a writ in the nature of Certiorari or any other appropriate writ, direction or order under article 226 of the Constitution of India against the respondents calling for the record of the case and, upon considering the same, quashing the decision of respondent no.1 to accept the offer of respondent no.3 of Rs. 6.66 crores for the purchase of the petitioner's properties mortgaged to respondent no.1 and setting aside the sale of the properties, if any, made to respondent no.3; b. a writ of Mandamus or a writ in the nature of Mandamus or any other appropriate writ, direction or order under article 226 of the Constitution of India canceling the purported acceptance of respondent no.3's offer of Rs. 6.66 crores for the purchase of the petitioner's properties mortgaged to respondent no.1 and setting aside the sale of the said property, if any, executed by respondent no.1 in favour of respondent no.3; b-1. Writ of mandamus or a writ in the nature of mandamus or any other appropriate writ, direction or order under article 226 of the Constitution of India directing the respondent no.1 to accept the offer of Petals Engineers Pvt. Ltd. of Rs. 6.67 crores for the purchase of the petitioner's properties. c) an order and injunction restraining the respondent no.1 from proceeding further against the petitioner's properties mortgaged to it under Section 29 of the State Financial Corporation Act, 1951 or from executing any sale deed conveying petitioner's properties to respondent no.3 or any other party and/or giving possession of the said properties to them pending the hearing and final disposal of the petition;” 2. Briefly, the case of the petitioner is as under:- The petitioner is a company incorporated under the Companies Act, 1956. Respondent no.1 is also a company registered under the Companies Act, 1956 and is a Government of Goa Financial and Investment Corporation and, as such, is an agency/instrumentality of the State of Goa. In the year 1994 respondent no.1 sanctioned and disbursed loan to the petitioner in the sum of Rs.90 lacs repayable with interest against the mortgage of its properties. Respondent no.2 advanced loan of Rs.68 lacs against charge on the petitioner's properties ranking pari passu with respondent no.1's mortgage. In the year 1994 respondent no.1 sanctioned and disbursed loan to the petitioner in the sum of Rs.90 lacs repayable with interest against the mortgage of its properties. Respondent no.2 advanced loan of Rs.68 lacs against charge on the petitioner's properties ranking pari passu with respondent no.1's mortgage. Since the petitioner fell in arrears in repayment of the loan to respondent no.1 and an amount of Rs.4.20 crores was due to respondent no.1 in December, 2004, by letter dated 21.12.2004, respondent no.1 demanded substantial repayment of outstanding dues by 28.12.2004 on pain of take over possession of the properties mortgaged, under Section 29 of the State Financial Corporation Act, 1951( hereinafter referred to as “the SFCA” for short). Respondent no.1 issued public notice in Navhind Times disclosing its decision to take over the possession of the assets of the petitioner any time after 21.1.2005. 3. The petitioner filed Writ Petition No. 39 of 2005 challenging the decision of respondent no.1. By order dated 15.3.2005, this Court allowed the petitioner to withdraw the petition with liberty to file a fresh petition if the same was maintainable under the law. Respondent no.1 held auction of the petitioner's properties on 10.11.2005. However, since highest bid received was Rs.1.37 crores, the same was rejected by respondent no.1. Thereafter, respondent no.1 proposed second auction of the petitioner's properties on 9.1.2006 which was postponed and finally scheduled on 13.2.2006. Respondent no. 3 offered Rs.6.66 crores for the petitioner's properties in the auction held on 13.2.2006. 4. By letter dated 14.3.2006 respondent no.1 called upon the petitioner to give offer better than Rs.6.66 crores backed by Rs.15 lacs EMD within five days of the date of the letter. The petitioner received the said letter on the evening of 17.3.2006. 18.3.2006 was Saturday and 19.3.2006 was Sunday. On 20.3.2006, the petitioner requested respondent no.1 for extension of time by a fortnight to present a better offer backed by EMD. Respondent no.1 did not reply. It is the case of the petitioner that State Bank of India was not transacting any business on account of strike by its employees. 18.3.2006 was Saturday and 19.3.2006 was Sunday. On 20.3.2006, the petitioner requested respondent no.1 for extension of time by a fortnight to present a better offer backed by EMD. Respondent no.1 did not reply. It is the case of the petitioner that State Bank of India was not transacting any business on account of strike by its employees. Petals Engineers Private Limited offered to buy the petitioner's properties for Rs.6.67 crores at the instance of the petitioner but it could not obtain demand draft for Rs.15 lacs to back the offer as the only bank i.e, State Bank of India where it banked continued to be closed for business. On 5.4.2006, Petals Engineers Private Limited presented their offer of Rs.6.67 crores to respondent no.1 by enclosing a cheque of State Bank of India for Rs.15 lacs by way of EMD. By letter dated 7.4.2006 respondent no.1 wrote to Petals Engineers Private Limited that it has already accepted the offer of 6.66 crores of respondent no.3 and further that the petitioner had failed to present a better offer within five days. 5. Thereafter on 10.4.2006, Petals Engineers Private Limited arranged to obtain a demand draft for Rs.15 lacs from ICICI Bank and the petitioner forwarded the said demand draft to respondent no.1 on behalf of Petals Engineers Private Limited in replacement of earlier cheque for the same amount. By letter dated 11.4.2006, respondent no.1 informed the petitioner that it had already placed order with highest bidder in auction and returned the demand draft of Rs.15 lacs. The said letter was received by the petitioner on 13.4.2006. By letter dated 10.4.2006, respondent no. 3 had paid to respondent no.1 a sum of Rs.1,84,80,000/-(Rupees one crore eighty four lacs eighty thousand only) being 30% of the bid amount after adjusting the EMD of Rs.15 lacs. 6. It is further the case of the petitioner that the decision to accept respondent no.3's offer was not accepted by Board of Directors of respondent no.1; respondent no. 3 had not paid the amount of the offer till filing of the petition in the manner required by the terms and conditions of the tender and the properties have not been conveyed to respondent no. 3. 7. It is further case of the petitioner that no reasonable opportunity was given by respondent no.1 to the petitioner to make offer better than that of respondent no. 3. 7. It is further case of the petitioner that no reasonable opportunity was given by respondent no.1 to the petitioner to make offer better than that of respondent no. 3 and in fact respondent no.1 ought to have called upon the petitioner to give a matching offer and not a better offer. It is further case of the petitioner that the sale of the petitioner's properties was rushed through with indecent haste deliberately in an attempt to prevent the enforcement of equity of redemption vested in the petitioner as mortgagor. With the above pleadings the petitioner sought reliefs mentioned in prayers (a) to (c). 8. On behalf of respondent.1, affidavit of one Shri A. J. Ghatkar, General Manager (Engineering) of respondent no.1 has been filed, in which it has been contended that the petition is aimed at stalling the amount of almost 7.00 crores due by the petitioner to respondent nos. 1 and 2; the petition is barred by laches; the conduct of the petitioner disentitles the petitioner to any equitable relief. It is further case of respondent no.1 that the petitioner was always irregular in the matter of loan amount. As on December, 2004 an amount of Rs.4.20 crores was due in respect of term loan of Rs.90 lacs sanctioned and disbursed by respondent no.1 and a term loan of Rs.68 lacs sanctioned and disbursed by respondent no. 2. It has been further stated that the petitioner had assured that substantial repayment could have been effected and on the basis of the said assurance the possession of the attached properties was handed over to the petitioner on a down payment of Rs.9 lacs. However, the petitioner failed to make payment of even Rs.6 lacks by 31.3.2005 and, as such, respondent no.1 was constrained to take back the possession of mortgaged properties on 9.5.2005. Between March and May 2005, the Managing Director of the petitioner's company transferred major share holdings in favour of one Mr. Harcharan Singh Maini in a bid to create third party right and to frustrate recoveries. Such transfer of shares without approval from the respondent nos. 1 and 2 was patently in breach of agreements entered into between the petitioner and respondent no.1. It is further case of respondent no.1 that as on date of the auction an amount of Rs.7.00 crores was due by the petitioner to respondent nos.1 and 2. Such transfer of shares without approval from the respondent nos. 1 and 2 was patently in breach of agreements entered into between the petitioner and respondent no.1. It is further case of respondent no.1 that as on date of the auction an amount of Rs.7.00 crores was due by the petitioner to respondent nos.1 and 2. It is further case of respondent no.1 that Tender Acceptance Committee has been authorised to accept the bid and the Tender Acceptance Committee comprises of Chairman, EDC Shri I. K. Kazi, Director and the Managing Director of respondent no.1. The decision to accept the higher bid of Rs.6.66 crores was taken by the said committee after taking into consideration the relevant matters. It is further case of respondent no.1 that respondent no. 2 by communication dated 16.3.2006 had given concurrence for acceptance of the offer for Rs.6.66 crores. It is further case of respondent no.1 that the offer of respondent no. 3 for Rs.6.66 crores was already accepted and by another communication dated 11.4.2006 the petitioner was informed that demand draft belatedly issued could not be accepted and same was returned to the petitioner. The amount of Rs.1,84,80,000/-(Rupees one crore eighty four lakhs eighty thousand only) was paid by respondent no. 3 to respondent no.1 towards 30% of bid price after adjusting EMD of Rs.15 lacs. Thereafter on 27.4.2006 respondent no. 3 paid entire balance amount. It has been further stated that at the time of two auctions held by respondent no.1 Managing Director of the petitioner was present and, as such, the petitioner had ample opportunity to bring bidders. Respondent no.1 has denied all other contentions taken in the petition. 9. We have heard Mr. Anil Anturkar learned counsel for the petitioner, Mr. M. S. Sonak, learned counsel for respondent no. 1 and Mr. A. Kamat, learned counsel for respondent no.3. 10. Mr. Anil Anturkar learned counsel for the petitioner submitted that there was no fairness in action of respondent no.1 in accepting the offer of Rs.6.66 crores made by respondent no. 3 without giving reasonable opportunity to the petitioner to match the offer in terms of terms and conditions dated 13.2.2006 on the basis of which offers were invited for the purpose of the properties of the petitioner. 3 without giving reasonable opportunity to the petitioner to match the offer in terms of terms and conditions dated 13.2.2006 on the basis of which offers were invited for the purpose of the properties of the petitioner. Learned counsel further submitted that the petitioner was not given reasonable opportunity either for giving matching offer or higher offer and the sale in favour of respondent no. 3 was rushed through and in any case no opportunity was given to the Directors/promoters or guarantors of the petitioner. Learned counsel further submitted that the communication dated 14.3.2006 issued by respondent no.1 was received by the petitioner on 17.3.2006 and the petitioner was only given five days to give better offer and considering that 18.3.2006 and 19.3.2006 were holidays, the opportunity given to the petitioner cannot be termed as reasonable opportunity. Learned counsel further submitted that respondent no.1 did not act fairly in not giving additional time as sought by the petitioner to give a better offer. According to learned counsel, it was only Board of Directors of respondent no.1 could have accepted the offer given by respondent no. 3 and Tender Acceptance Committee had no authority to take any decision on the offer given by respondent no.3. Learned counsel further submitted that grave injustice has been caused to the petitioner by the action of respondent no.1 in not giving reasonable opportunity to the petitioner, as well as to Petals Engineers Private Limited to give either a matching or a better offer. 11. Learned counsel, therefore, submitted that the sale of the petitioner's properties in favour of respondent no. 3 deserves to be quashed and set aside and the petitioner ought to be given an opportunity to pay the said amount with reasonable interest in view of passage of time. 12. Per contra,Mr. M. Sonak, learned counsel for respondent no.1 invited our attention to the interim order passed by this Court refusing interim relief, observing that any sale made in favour of respondent no. 3 would be subject to the result of the petition. Mr. Sonak further submitted that Petals Engineers Private Limited, in whose favour reference is made by the petitioner, has not been made a party and, as such, the petitioner is not entitled to the reliefs sought for in the petition. Mr. 3 would be subject to the result of the petition. Mr. Sonak further submitted that Petals Engineers Private Limited, in whose favour reference is made by the petitioner, has not been made a party and, as such, the petitioner is not entitled to the reliefs sought for in the petition. Mr. Sonak further submitted that there is absolutely no averment made in the petition that the petitioner is in a position to match the offer given by respondent no. 3. Learned counsel further submitted that the reasonable opportunity has been given by respondent no.1 to the petitioner to repay the loan which was not paid by the petitioner for a considerable length of time, and as such, the action of respondent no.1 inviting offer in respect of the petitioner's properties and selling them to respondent no. 3 for Rs.6.66 crores cannot be faulted. Learned counsel further submitted that the petitioner has not challenged taking over possession of the petitioner's properties by respondent no.1. According to learned counsel, action of respondent no.1 has been fair, and, in any case, having regard to the law laid down by the Apex Court, no interference is warranted with the action of respondent no.1 in inviting offer for the petitioner's properties and effecting sale of the said properties in favour of respondent no. 3. Learned counsel further submitted that the terms and conditions, pursuant to which sale has been effected in favour of respondent no. 3, are not statutory and in any case, the said terms and conditions have been substantially complied with by respondent no.1. According to learned counsel, the petitioner having availed loan from respondent no.1, it is also expected to be fair to repay the loan amount and the petitioner having been consistent defaulter, is not entitled to any relief from this Court. According to learned Counsel, the petitioner has not disclosed its arrangements with Petals Engineers Private Limited. Placing reliance upon notification dated 30.4.1993 published in official Gazette dated 10.6.1993, Mr. Sonak submitted that all the provisions of State Financial Corporation Act, 1951 are not applicable to respondent no. 2, but only the provisions of Sections 29, 30 and 31 are applicable. Mr. Sonak submitted that the action of respondent no.1 has been fair and reasonable and the objections taken by the petitioner to the sale in favour of respondent no. Sonak submitted that all the provisions of State Financial Corporation Act, 1951 are not applicable to respondent no. 2, but only the provisions of Sections 29, 30 and 31 are applicable. Mr. Sonak submitted that the action of respondent no.1 has been fair and reasonable and the objections taken by the petitioner to the sale in favour of respondent no. 3 are hypothetical and as such, are liable to be rejected. In support of his submissions, learned counsel placed reliance upon following judgments:- i. Haryana Financial Corporation and anr. Vs. Jagdamba Oil Mills and anr.; (2002) 3 SCC 496 . ii. Punjab Financial Corporation Vs. Surya Auto Industries, (2010)1 SCC 297 . 13. Mr. Kamat, learned counsel for respondent no. 3 submitted that the petitioner is not entitled to any equitable relief from this Court having regard to its conduct. According to learned counsel, the terms and conditions have been complied with by the respondents and Petals Engineers Private Limited are not entitled for any relief, more particularly having regard to the fact that it is not before the Court. Learned Counsel further submitted that petition lacks bonafides. Learned counsel further submitted that the action of respondent no.1 in selling the properties in favour of respondent no. 3 cannot be faulted. Lastly learned counsel submitted that respondent no. 1 cannot be said to have acted unfairly nor there is any statutory violation on the part of respondent no.1 and as such, the petitioner is not entitled to any relief from this Court. In support of his submission, learned counsel relied upon the judgment of the Apex Court in the case of U. P. Financial Corporation Vs. M/s Gem Cap (India) Pvt. Ltd, AIR 1993 SC 1435 . 14. We have carefully considered the rival submissions, perused the record and the judgments relied upon. 15. Before we deal with the submissions of the learned Counsel for the parties on merits, we deem it appropriate to refer to the judgments relied upon on behalf of the respondents. 16. In the case of Haryana Financial Corporation (supra), the Apex Court held that the State Financial Corporation, as an instrumentality of the State, deals with public money and its approach has to be public oriented. It can operate effectively if there is regular realisation of the instalments. 16. In the case of Haryana Financial Corporation (supra), the Apex Court held that the State Financial Corporation, as an instrumentality of the State, deals with public money and its approach has to be public oriented. It can operate effectively if there is regular realisation of the instalments. While the Corporation is expected to act fairly in the matter of disbursement of the loans, there is corresponding duty cast upon the borrowers to repay the instalment in time, unless prevented by insurmountable difficulties. If the repayments are not received as per the scheduled time frame, it will disturb the equilibrium of the financial arrangements of the Corporations. They do not have at their disposal unlimited funds. They have to cater to the needs of the intended borrowers with the available finance. Non-payment of the instalments by a defaulter may stand in the way of a deserving borrower getting financial assistance. A Corporation is not supposed to give loan and then to write it off as a bad debt and ultimately to go out of business. Referring to its earlier Judgment in the case of U.P. Financial Corpn. Vs. Gem Cap (India) (P) Ltd . (supra), the Apex Court observed that promoting industrialization does not serve public interest if it is at the cost of public funds. It may amount to transferring public money to private account. The Apex Court further held that fairness cannot be a oneway street and where the borrower has no genuine intention to repay and adopts pretexts and ploys to avoid payment, he cannot make the grievance that the Corporation was not acting fairly, even if requisite procedures have been followed. The Apex Court further held that the obligation to act fairly on the part of the administrative authorities was evolved to ensure the rule of law and to prevent failure of justice. This doctrine is complementary to the principles of natural justice which the quasi-judicial authorities are bound to observe. The Apex Court further held that distinction between a quasijudicial and administrative action has become thin as pointed out by the Apex Court as far back as in 1970 in A.K. Kraipak v. Union of India, (1969) 2 SCC 262 . The Apex Court further held that the fairness required of the Corporations cannot be carried to the extent of disabling them from recovering what is due to them. The Apex Court further held that the fairness required of the Corporations cannot be carried to the extent of disabling them from recovering what is due to them. The Apex Court further held that unless its action is mala fide, even a wrong decision by it is not open to challenge. It is not for the Court or a third party to substitute its decision, however, more prudent, commercial or businesslike it may be, for the decision of the Corporation. Referring to its earlier Judgment in the case U.P. Financial Corpn. Vs. Naini Oxygen & Acetylene Gas Ltd., (1995) 2 SCC 754 , it was observed that in commercial matters the Court should not risk their judgments for the judgments of the bodies to whom that task is assigned. Further referring to its earlier judgment in Karnataka State Financial Corpn. vs. Micro Cast Rubber & Allied Products (P) Ltd., (1996) 5 SCC 65 , the Apex Court held that in the matter of action by the Corporation in exercise of the powers conferred on it under Section 29 of the Corporation Act, the scope of judicial review is confined to two circumstances, i.e. (a) where there is statutory violation on the part of State Financial Corporation, or (b) where State Financial Corporation acts unfairly i.e. unreasonably. It further observed that while exercising its jurisdiction under Article 226 of the Constitution of India, 1950, the High Court does not sit as an appellate Authority over the acts and deeds of the Corporation. 17. In the case of Punjab Financial Corporation (supra), the Supreme Court set aside the order passed by the High Court quashing the action taken by the appellant Corporation under Section 29 of the State Financial Corporation Act, 1951, holding that the said order did not stand the test laid down by the Apex Court in Haryana Financial Corp. vs. Jagadamba Oil Mills, (supra). 18. If the action of respondent No.1 is tested on the touchstone of the principles laid down by the Apex Court in the aforesaid judgments, we do not find any merit in the submissions made on behalf of the petitioners that the action of respondent No.1 has been unfair or that no reasonable opportunity was given to the petitioner either to give matching offer or higher offer. The stand of respondent No.1 that the petitioner was consistent defaulter has not been seriously disputed by the petitioner. Moreover, prior to holding the auction of the properties of the petitioner, respondent No.1 had taken over possession of the mortgaged property in exercise of the powers vested in it under Section 29 of the Act and on the assurance given by the petitioner that it would repay the loan amount, the respondent no.1 handed over possession of the said properties to the petitioner. But the petitioner did not honour its commitment. 19. It is not the case of the petitioner in the petition that it was ready and willing to match the offer given by respondent No.3 of Rs.6.66 crores. It is also pertinent to note that even at the time of hearing of the petition, the petitioner has not showed its willingness to buy the properties at Rs.6.66 crores, but expressed its willingness to buy the properties for Rs.6.66 crores, along with reasonable interest, within a reasonable time as may be fixed by the Court. In other words, right from the time the properties were put to auction in the year 2006, till date, the petitioner has not given the matching offer or higher offer. Therefore, we find merit in the submission of Mr. Sonak that the petitioner is only interested in setting aside the sale of the mortgaged properties in favour of respondent No.3. 20. So far as the offer made by Petals Engineers Private Limited is concerned, it is to be noted that the same was made only after respondent No.3 offered Rs.6.66 crores pursuant to the auction held in February, 2006 and it offered Rs.6.67 crores i.e. just rupees one lakh more than what was offered by respondent No.3. Be that as it may, Petals Engineers Private Limited is not a party to the petition and we are not sure as to whether, as on date, Petals Engineers Private Limited is still interested in the offer given by it in the year 2006. 21. Another submission made on behalf of the petitioner is that respondent No.1 did not give an opportunity of giving matching offer to the petitioner, after respondent No.3 offered Rs.6.66 crores in respect of the mortgaged property. 21. Another submission made on behalf of the petitioner is that respondent No.1 did not give an opportunity of giving matching offer to the petitioner, after respondent No.3 offered Rs.6.66 crores in respect of the mortgaged property. From a perusal of the terms and conditions dated 13.2.2006, it is clear that respondent No.3 had an option of giving either matching offer or higher offer and therefore, no fault can be found with the respondent No.1 in not calling upon the petitioner to give higher offer. Similarly from a bare perusal of the terms and conditions dated 13.2.2006, it is evident that respondent No.1 could have called upon either the petitioner or its directors/promoters/guarantors to give either matching or higher offer and it is not necessary for respondent No.1 to give such offers to all of them. It is not disputed that the petitioner was given an opportunity of giving higher offer after respondent No.3 offered Rs. 6.66 crores. Therefore, we do not find any merit in the submission of Mr. Anturkar that the sale in favour of respondent No.3 is liable to be set aside on the ground of breach of the terms and conditions dated 13.2.2006. Moreover, as rightly submitted by Mr. Sonak, the terms and conditions dated 13.2.2006 are not statutory in nature. The Apex Court in the case of U. P. Financial Corporation Vs. M/s Gem Cap (India) Pvt. Ltd, (supra), held that in a matter between the Corporation and its debtor, a writ Court has no say except where there is statutory violation on the part of the Corporation or where the Corporation has acted unfairly i.e. unreasonably. The action of respondent No.1 cannot be said to be in violation of the statutory provisions or unfair. Respondent No.1 had given enough opportunities to the petitioner to repay the loan amount which had gone upto Rs.7.00 crores, but the petitioner instead of repaying the loan, even got the possession of the mortgaged properties back, but it did not honour the commitment. As rightly submitted by Mr. Sonak, not only respondent No.1, but the petitioner is also expected to act fairly and repay the loan inasmuch as respondent No.1 is admittedly dealing with public funds. As rightly submitted by Mr. Sonak, not only respondent No.1, but the petitioner is also expected to act fairly and repay the loan inasmuch as respondent No.1 is admittedly dealing with public funds. If the action of respondent No.1 is tested on the touchstone of the principles laid down by the Apex Court in the aforesaid judgments, the same cannot be termed either as mala fide or in violation of any statutory provision. It cannot be said that respondent No.1 did not give reasonable opportunity to the petitioner to repay the loan. Therefore, in our view, no interference is warranted with the action of respondent No.1 in selling the mortgaged property in favour of respondent No.3 for an amount of Rs.6.66 crores. 22. In so far as the submission made on behalf of the petitioner that the Tender Acceptance Committee had no authority to accept the offer given by respondent No.3 is concerned, we do not find any merit. In the affidavit-in-reply filed on behalf of the respondent No.1, it has been specifically stated that the Tender Acceptance Committee was authorised to accept the bids. Moreover, the said Committee consisted of the Chairman, EDC.; Shri S.I. Kazi, Director and the Managing Director of EDC.. As such, the Managing Director was a part of the Tender Acceptance Committee and in any case, the Managing Director was entitled to accept the offer on behalf of respondent No.1. Therefore, we do not find any merit whatsoever in the submission made on behalf of the petitioner that the Tender Acceptance Committee did not have any authority to accept the offer given by respondent No.3. 23. For the reasons aforesaid, we do not find any merit in the petition. Hence the petition is dismissed. Rule is discharged. Having regard to the facts and circumstances of the case, parties are directed to bear their own costs.