Appeal No 830 of 1993
From the Judgment and Order dated 6487 of the Allahabad High Court in Civil Misc
WP No 20544 of 1986
section Markandeya for the Appellant 152 Pankaj Kalra for the Respondents
The Judgment of the Court was delivered by BP JEEVAN REDDY J
The appeal is directed against the judgment and order of a Division Bench of the Allahabad High Court allowing Writ Petition 20544 of 1986 with certain directions
The first respondent Gem Cap India Pvt Ltd is a private limited company
Second respondment is its Managing Director
At the request of the respondents the appellant UP Financial Corporation sanctioned a loan of Rs 2970 lakhs
The terms and conditions of loan and the manner of repayment of the loan are contained in the agreement and hypothecation deeds executed in 1981
Suffice it to note that loan was repayable in certain specified instalments alongwith interest
A sum of Rs 26 29 578 was released to the respondents
The first respondent went into production in December 1982
Within a few months ie in March 1983 its operations ceased
By an order dated February 21 1984 the first respondent unit was declared a sick unit
The respondents did not make any repayment as stipulated in the agreement and hypothecation deeds whereupon the Corporation took steps to take over the unit under Section 29 of the for recovering an amount of Rs 3857 lakhs due to it by that date vide notice dated July 10 1984
Then started a series of Writ Petitions by the respondents all designed to stall the appellant from taking over andor recovering the amount due to it
It is not necessary to trace the course of the several writ petitions except the one from which the present appeal arises
Writ Petition 20544 of 1986 was filed questioning the taking over of the first respondent unit by the appellant Corporation under Section 29 of the Act and for a direction to the appellant to reschedule the repayment of debt in accordance with the earlier orders of the High Court
The writ petition has been allowed with the following directions  1 Having regard to the discussion made above we direct the UP Financial Corporation  1 to consider expeditiously the resolution dated 2911986aimed at the rehabilitation of the industrial concern in question in the light of the feasibility report of the UP Industrial Consultants Ltd the Financial aid 153 forthcoming from the Bank of Baroda and other financial institutions and the reports of the managing director of the corporation dated 181285 and 2911986 2 to restore back possession of the unit to the petition No 1 forthwith
The notice dated 1161986 issued by the Corporation under Section 29 of the State Financial Corporation Act 1951 shall however remain alive it being open to the Corporation to proceed further in pursuance thereof in case the rehabilitation deal is given a fair trial but does not bear fruit
The petition is allowed accordingly with no order however as to costs With great respect to the Learned Judges who allowed the writ petition we feel constrained to say this  a reading of the judgment shows that they have not kept in mind the well recognised limitations of their jurisdiction under Article 226 of the Constitution
The judgment reads as If they were setting as an Appellate Authority over the appellate Corporation
Not a single provision of law is said to have been violated
The exclusive concern of the court appears to be to revive and resurrect the respondent Company with the aid of public funds without giving any thought to the interest of public financial institutions
The approach is  the Corporafion is supposed to act in the best interest of the industrial concern with the object primarily to promote and advance the industrial activity without of course undue involvement or risk of its financial commitment section 
It needs no emphasis to say that the Corporation is conceived Regional Development Bank with the principal object to accelerate the industrial growth in the State by providing financial assistance mainly to small and smaller of the medium scale industries
The approach has to be business like in conformity with the declared policy of the State Govt
If the unit is potentially viable or such as maY be capable of being rehabilitated it would deserve being administered proper treatment and not lead to its liquidation
 Here was a company which drew substantial public funds and became sick within three months of its going into production
One of the main reasons for its sickness appears to be the inter necine fight between the two groups controlling the Company
The 154 unit was closed
It was not paying a single pie in repayment of the loan neither the principal nor the interest
Already a huge amount was due to the appellant
There was no prospect of its recovery
And yet other financial corporations were being asked by the court four years after its closure to sink more money into the sick unit
Though a passing reference is made to the financial risk of appellant
this concern was not translated into appropriate directions
The Corporation was not allowed to sell the unit when it wanted to in 1984 85
Now it is difficult to sell it because it has been lying closed for about 8 years and more
The machinery must have become junk
While the Company could not be revived the appellant corporation now stands to lose more than a crore of rupees all public money in this one instance
To continue the factual narration against the judgment of the Allahabad High Court aforesaid dated April 6 1987 the appellant filed this appeal and on May 8 1987 this Court while issuing notice on the SLP directed stay of operation of the judgment of the High court
After the respondents filed a counter affidavit this Court made the following order on September 18 1987  Stay made absolute with the direction that there shall be no sale of the industrial unit
Hearing expedited
To be heard alongwith Civil Appeal No 568 of 1987
 The SLP could not be heard finally though it was posted for hearing on certain dates
On November 13 1991 the counsel for the respondents made an offer which is recorded in the order of that date
It reads This matter is adjourned for 111291
Mr Shanti Bhushan Sr
Adv suggests that in view of the lapse of time of more than 5 years the position has changed and the Corporation should now consider the feasibility of taking over the assets in liquidation of the dues by making an assessment and consider relieving the directors from their personal responsibilities to the corporation and the other creditors
 The subsequent order dated December 12 1991 however shows that the appellant corporation refused to bite the bait
The amount due to it had risen to over a crore of rupees by now
Whereupon this Court passed 155 the following order  The appellant in consultation with the other creditors is permitted to put up the industrial undertaking of the firstrespondent for sale
It may do so either by public auction or by inviting tenders or by an combination of both
It may proceed to do so within a period of two months from today
While permitting the appellant to take steps for the sale we make it clear that before accepting the offers the appellant should obtain prior permission of this Court
List this matter after 10 weeks ie in the first week of March 92
 It is clear as to why the unit could not be sold 
On March 13 1992 this Court passed the following further order We have heard learned counsel on both sides
Apart from the merits of the issues raised it appears to us that the present impasse is to nobody s advantage
The dispute has to be resolved in some meaningful way
We accordingly direct the respondent Company and Sri KP Chaturvedi who claims to be in charge of the affairs of the Company to confirm in writing to the petitioner Cor poration within three weeks from today that they unconditionally agree to settle the claims of the
Financial Corporation at a figure which would represent the principal amount said to be Rs 2630 lacs and interest thereon from the inception at 135 per year with half yearly rests calculated upto 2571986
If such an offer is made the Financial Corporation will assess the merit and acceptability of that offer and take within six weeks thereafter an appropriate decision including the manner in which and the period over which the payment should be completed and if the Financial Corporation agrees to grant time for payment the rate of interest for the deferred period
The decision taken by the Corporation will be placed before this Court
156 If however any offer as indicated above is not communicated by the company or Sri Chaturvedi within a period of three weeks from today then the Financial Corporation shall be at liberty to initiate with notice to the respondents steps for the sale by public auction of the subjectmatter of the security in its favour and to treat and hold the proceeds of sale as substituted security in the place of the subject matter of the security subject to the final result of this SLP Call this matter in the 3rd week of May 1992
 Pursuant to the said order the second respondent Managing Director of the first respondent Company merely wrote a letter addressed to the appellant Corporation to the following effect  We herewith attach a photo copy of the captioned order which is self explicit
We however unconditionally agree to abide with the directions given to us by the Hon ble Supreme Court
Further as the Corporation is aware that the Unit Company as well as The Registered Office of the Company both are in possession of the Corporation we shall feel obliged if you kindly communicate your views to us at the below given address
 It is evident that the letter written by the second respondent is not in terms of the order to this Court dated March 13 1992
No figure is mentioned nor is it mentioned as to how and in what manner the said huge debt is sought to be repaid by the respondents
Evidently the appellant corporation could not pay any heed to such a letter
When the matter came before this Court the second respondent appeared in person stating that he has discharged his advocate and that he will argue the matter himself
The matter again came up before us on 1921993 when we heard the appellant s counsel and the second respondent in person
We allowed the appeal stating that the reasons would follow
There are the reasons for the order
It is true that the appellant Corporation is an instrumentality of the 157 State created under the State Finance Corporation Act 1951
The said Act was made by the Parliament with a view to promote industrialisation of the States by encouraging small and medium industries by giving financial assistance in the shape of loans and advances repayable within a period not exceeding 20 years from the date of loan
We agree that the Corporation is not like an ordinary money lender or a Bank which lends money
It is a lender with a purpose the purpose being promoting the small and medium industries
At the same time it is necessary to keep certain basic facts in view
The relationship between the Corporation and the borrower is that of creditor and debtor
The corporation is not supposed to give loans once and go out of business
It has also to recover them so that it can give fresh loans to others
The Corporation no doubt has to act within the four corners of the Act and in furtherance of the object underlying the Act
But this factor cannot be carried to the extent of obligating the Corporation to revive and resurrect every sick industry irrespective of the cost involved
Promoting industrialisation at the cost of public funds does not serve the public interest it merely amounts to transferring public money to private account
The fairness required of the Corporation cannot be carried to the extent of disabling it from recovering what is due to it
While not insisting upon the borrower to honour the commitments undertaken by him the Corporation alone cannot be shackled hand and foot in the name of fairness
Fairness is not a one way street mote particularly it matters like the present one
The above narration of facts shows that the respondents have no intention of repaying any part of the debt
They are merely putting forward one or other ploy to keep the Corporation at bay
Approaching the Courts through successive writ petitions is but a part of this game
Another circumstance
These Corporation are not sitting on King Solomon s mines
They too borrow monies from Government or other financial corporation
They too have to pay interest thereon
The fairness required of it must be tempered nay determined in the light of all these circumstances
Indeed in a matter between the Corporation and its debtor a writ court has no say except in two situation  1 there is a statutory violation on the part of the Corporation or 21 Where the Corporation acts unfairly ie unreasonably
While the former does not present any difficulty the latter needs a little reiteration of its precise meaning
What does acting unfairly or unreasonably mean Does it mean that the High Court exercising its jurisdiction under Article 226 of the Constitution can sit as an Appellate Authority over the acts and deeds of the corporation and seek 158 to correct them  Surely it cannot be
That is not the function of the High Court under Article 226
Doctrine of fairness evolved in administrative law was not supposed to convert the writ courts into appellate authorities over administrative authorities
The constraints self imposed undoubtedly of writ jurisdiction still remain
Ignoring them would lead to confusion and uncertainty
The jurisdiction may become rudderless
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
It is true that the distinction between a quasi judicial and the administrative action has become thin as pointed out by this Court as far back as 1970 in AK Kraipak  Ors
vs Union of India  Ors AIR 1970 SC 150
Even so the extent of judicial scrutinyjudicial review in the case of administrative action cannot be larger than in the case of quasi judicial action
If the High Court cannot sit as an appellate authority over the decisions and orders of quasi judicial authorities it follows equally that it cannot do so in the case of administrative authorities
In the matter of administrative action it is well known more than one choice is available to the administrative authorities they have a certain amount of discretion available to them
They have a right to choose between more than one possible course of action upon which there is room for reasonable people to hold differing opinions as to which is to be preferred  Lord Diplock in Secretary of State for Education vs Tameside Metropolitan Borough Counsel  at 1064
The Court cannot substitute its judgment for the judgment of administrative authorities in such cases
Only when the action of the administrative authority is so unfair or unreasonable that no reasonable person would have taken that action can the Court intervene
To quote the classic passage from the judgment of Lord Greene MR in Associated Provincial Picture Houses Ltd vs Wednesbury Corporation 1948 1 KB at 229
It is true the discretion must be exercised reasonably
Now what does than mean  Lawyers familiar with the phraseology commonly used in relation to exercise of statutory discretions often use the word unreasonable in a rather comprehensive sense
It has frequently been used and is frequently used as a general description of the 159 things that must not be done
For instance a person entrusted with the discretion must so to speak direct himself properly in law
He must call his own attention to the matters which he is bound to consider
He must exclude from his consideration matters which are irrelevant to what he has to consider
If he does not obey those rules he may truly be said and often is said to be acting unreasonably 
Similarly there may be something so absurd that no sensible person could ever dream that it lay within the powers of the authority  While this is not the occasion to examine the content and contours of the doctrine of fairness it is enough to reiterate for the purpose of this case that the power of the High Court while reviewing the administrative action is not that of an appellate court
The judgment under appeal precisely does that and for that reason is liable to be and is herewith set aside
On behalf of the appellant reliance has been placed upon the decision of this court in Mahesh Chandra vs Regional Manager UP Financial Corporation  Ors 1992 2 JT 326
We have perused the decision
That was a case where the debtor was anxious to pay off the debt and had been taking several steps to discharge his obligation
On the facts of that particular case it was found that the corporation was acting reasonably
In that context certain observations were made
The decision also deals with the procedure to be adopted by the Corporation while selling the units taken over under Section 29
That aspect is not relevant in this case
We are therefore of the opinion that the said decision is of no help to the appellant herein
The appeal is accordingly allowed
The respondents shall pay the costs of the appellant assessed at Rs 10000 consolidated
TNA Appeal allowed


Summary:
By sub section
6 of section 10 of the Indian Income tax Act 1922 A trade professional or similar association performing specific services for its members for remuneration definitely related to those services shall be deemed for the purpose of this section to carry on business in respect of those services and the profits and gains therefrom shall be liable to tax accordingly
 The members of the respondent company whose principal object was to facilitate the transaction of business on the Stock Exchange were enabled under the by laws to have a certain number of Authorised Assistants so that the latter could use the premises of the company and transact business therein in the names and on behalf of the members who for that purpose were required to pay admission fees and monthly subscriptions in respect of each of them
The by laws of the company also provided that no dealings in respect of the shares of any particular company should be permitted on the Stock Exchange unless an application made by a member of the respondent company and accompanied by a fee of Rs 1000 for putting the name of that company on the Quotations List was approved by the prescribed Authority of the respondent company
During the accounting year in question the company received from its members admission fees and subscriptions in respect of the Authorized Assistants and fees for putting the names of companies on the Quotations List
The question was whether the aforesaid amount was liable to be taxed under section 106 of the Indian Income tax Act 1922
Held that with reference to a trade professional or similar association the performing of specific services under section 106 of the Indian Income tax Act 1922 mean conferring on its members some tangible benefit which otherwise would not be available to them as such except for payment received by the association in respect of those services
460 Accordingly the income received by the respondent company towards the admission fees and the subscriptions in respect of the Authorized Assistants being the price paid for the services of the respondent company in making suitable arrangements for an absentee member to transact business on his behalf and in his name by his representative or agent within the Stock Exchange as well as the fees received from members for enlisting the names of companies not already on the Quotations List so as to permit transactions in respect of the shares of the companies concerned was remuneration definitely related to specific services performed by the respondent for its members within the meaning of s106 of the Indian Income tax Act 1922 and was assessable to income tax
Native Share and Stock Brokers  Association vs The Commissioner of Income tax Bombay  approved