IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) THURSDAY, THE TWELFTH DAY OF NOVEMBER TWO THOUSAND AND NINE PRESENT HON'BLE SRI JUSTICE R.SUBHASH REDDY WRIT PETITION No.20631 of 2003 Between: B. Ram Mohan Reddy, S/o. B. Bal Reddy, Managing Director, Rajadhani Cements Pvt. Ltd., H.No.104, LIC Colony, Opp: Indira Park, Hyderabad – 500 080 and another … Petitioners And The Managing Director, A.P. State Financial Corporation, Chirag Ali Lane, Hyderabad and Three others … Respondents Counsel for petitioners: Mr. D. Goverdhanachary Counsel for respondents: Mr. T. Durga Reddy, S.C. for APSFC Mr. G. Sudhakar Chowdary for R-4 Order: This writ petition is filed for issuance of Mandamus declaring the sale of land and building of Rajdhani Cements Pvt. Ltd., in favour of respondent No.3 for an amount of Rs.7,66,000/-, the sale of plant and machinery in favour of respondent No.4 for a sale consideration of Rs.1,00,000/- and the notice dated 11-09-2003 issued by the A.P. State Financial Corporation, Nalgonda Branch, in Ref.No.AFC/RRACT/SDT/648197/2003-04/6352, in exercise of powers under Section 52-A of A.P. Revenue Recovery Act, 1864, demanding an amount of Rs.6,39,97,062/-, as illegal and arbitrary. 2. The A.P. State Financial State Corporation sanctioned term loan and additional term loans of Rs.28.00 lakhs, Rs.19.13 lakhs, Rs.2.07 lakhs and a soft loan of Rs.2.00 lakhs in favour of M/s.Rajadhani Cements Pvt. Ltd., during the years 1985-87 for the purpose of acquiring land and buildings, plant and machinery for setting up a mini Portland cement manufacturing unit. The said company was promoted by the petitioners herein. First petitioner was the Managing Director of the company and the second petitioner, the wife of the first petitioner, was the director of the company. The term loans and soft loan were secured by creation of equitable mortgage of freehold interest of land and buildings admeasuring Ac.2.03 guntas situated in Sy.No.83 of Toopranpet village, Choutuppal Mandal. Apart from the said security, plant and machinery was also hypothecated in favour of the respondent-corporation. In addition to the security furnished, petitioners have also executed guarantee agreements in favour of the respondent-corporation. 3. When the petitioner-company committed defaults in paying the loan, a recall-cum-sale notice dated 17-06-1994 was issued and ultimately action was initiated by the respondent-corporation under Section 29 of the State Financial Corporations Act on 25-01-1995 for seizing the assets mortgaged/hypothecated. On the ground that when inspection was made certain plant and machinery which was hypothecated by the petitioner to the respondent-corporation was missing from the premises, criminal proceedings were also initiated. However, the said proceedings are not relevant for the purpose of disposal of this writ petition. In spite of issuing several notices to the petitioner-company demanding for repayment of the loan, the petitioners failed to come forward for settling the loan amount. As such, the unit petitioner was seized on 02-03-1995. Even subsequently, several notices were issued for settling the amount. When there was no response from the petitioners, respondent-corporation proceeded further by taking steps for sale of the unit. Right from 21-06-1995, series of advertisements were issued on 19-09-1995, 25-01-1996, 29-05-1996, 19-07-1996, 02-11-1996, 12-03-1997, 14-08-1997, 02- 02-1998, 10-08-1998, 24-06-1999, 10-02-2000, 10-06-2000 and lastly on 10-02-2002. In response to final advertisement issued on 10-02-2002, there were offers from respondents 3 and 4 for purchase of land and building and plant and machinery for Rs.7,66,000/- and Rs.1,00,000/- respectively, on down payment basis. Accepting the offer made by respondents 3 and 4, sale was finalized in their favour and after executing necessary sale deeds, land and building and plant and machinery were handed over to them. Subsequently, on the ground that even after adjusting the amounts realized from respondents 3 and 4, further principal amount of Rs.41,05,788/- and interest of Rs.5,98,90,932/- and other expenses are due, respondents have invoked provisions under A.P. Revenue Recovery Act, 1864 and issued notice under the provisions of the said Act, demanding an amount of Rs.6,39,97,062/-. 4. The said sale of land and building and plant and machinery and the consequential notice issued for recovery of the balance amount from the petitioners are questioned mainly on the ground that respondents have not followed the procedure while selling the land and building and plant and machinery in favour of respondents 3 and 4 respectively. It is the case of the petitioners that the demand made by the respondents under the provisions of A.P. Revenue Recovery Act, 1864, too, is barred by limitation. 5. The Senior Branch Manager, Nalgonda Branch of the respondent-corporation has filed detailed counter affidavit on behalf of the corporation. While, generally, denying various allegations made by the petitioners, it is stated therein that as the petitioners committed defaults, recall- cum-sale notice was issued on 17-06-1994 and further consequential action was taken by invoking provisions under Section 29 of the State Financial Corporations Act and the assets mortgaged and hypothecated in favour of the corporation were seized. It is further stated that during seizure, the corporation found some items missing from the premises of the unit; as such, criminal proceedings were also initiated. In the counter affidavit, it is categorically stated that the assets were advertised for sale as many as on 14 occasions in various newspapers and in spite of sufficient opportunity to the petitioners, they failed to come forward for settling the loan. It is further stated that a letter dated 05-07- 2000 was addressed to the petitioners under certificate of posting calling upon for settlement of loan and the same was followed by letters dated 08-11-2000 and 15-11-2000. It is stated that though several opportunities were given to the petitioners, they failed to utilize the same. Thereafter, by further addressing letters dated 28-03-2002, 01-02-2002, 02-02-2002 and 03-02-2002, sale was finalized on 27-06-2002. It is stated that land and building was duly finalized for sale in favour of third respondent for a consideration of Rs.7,66,000/- on 100% down payment basis and an approval letter was given on 27-06-2002 and after entire sale consideration was paid by the third respondent, sale was duly registered in his favour during March, 2003. While pleading that the consequential notice issued to recover the balance amount from the petitioners is not time-barred, respondents sought dismissal of the writ petition. 6. Heard Sri D. Goverdanachary, learned counsel for the petitioners and Sri T. Durga Reddy, learned standing counsel appearing on behalf of the A.P. State Financial Corporation. 7. The submissions made by the learned counsel for petitioners are twofold. The first submission is that though even as per the notice dated 04-08-1999 the petitioner was called upon to deposit the highest bid amount of Rs.13.50 lakhs, in spite of the same, land and building and plant and machinery were sold in favour of respondents 3 and 4 for a consideration of Rs.7.66 lakhs and Rs.1.00 lakh respectively, which is far less than the highest bid referred to in the notice dated 04-08-1999. It is stated that after issuance of notice dated 04-08-1999, no further action was notified at any point of time and without giving any further notice, sale has taken place for far lesser price than the highest bid. It is submitted that the same is detrimental to the interests of the company and the promoters. The second submission is that, added to the same, further notice under Section 52-A of A.P. Revenue Recovery Act, 1864, is issued demanding an amount of Rs.6,39,97,062/-, which is barred by limitation. 8. On the other hand, it is submitted by the learned standing counsel appearing for the respondent-corporation that though an offer was made at Rs.13.50 lakhs by one Sri G. Krishna Rao, M/s.Pokarna Granites Ltd., for purchase of land and building and plant and machinery, but, however, the said person failed to deposit the amount as per the terms and conditions; as such, EMD which was furnished by him was forfeited and there were no further offers. It is stated that even thereafter, by issuing further advertisement in newspapers; sale is effected in favour of respondents 3 and 4. It is submitted that, having failed to respond to number of opportunities afforded to the petitioners, it is not open to them to challenge the sale in favour of respondents 3 and 4. It is further submitted by the learned counsel that sale of the unit has taken place in the month of March, 2003 and immediately thereafter, notice is issued by invoking the provisions of A.P. Revenue Recovery Act, 1864, demanding an amount of Rs.6,39,97,062/-, being the balance amount payable, and the same is not barred by limitation. 9. Having regard to the submissions made on either side, in this case, it is evident from the counter affidavit filed on behalf of the respondent-corporation that after recall-cum-sale notice was issued demanding repayment of the loan amount, petitioners did not respond to the same; as such the unit was seized on 02-03-1995 and thereafter steps were taken for sale of the unit by issuing advertisement several times. Details of the advertisements and the list of responses received, as furnished in the annexure to the counter affidavit, read as hereunder: dvt. Date Name of the daily & Edition Name of the bidder & bid amount Down payment offered Remarks/Reasons for rejection 1.06.95 Eenadu, Hyderabad No offers received 9.09.95 Eenadu, Hyderabad No offers received 5.01.96 Eenadu, Hyderabad M/s. Prasuna Electricals for Rs.6.00 lakhs for all assets 100% T h e offer was rejected as it was very low dvt. Date Name of the daily & Edition Name of the bidder & bid amount Down payment offered Remarks/Reasons for rejection 9.05.96 Eenadu, Hyderabad S r i Mallikarjuna Rao for Rs.5.25 lakhs for all assets 35% T h e offer was rejected as it was very low 9.07.96 Eenadu, Hyderabad -do- For Rs.6.00 lakhs for all assets 35% Rejected as it was very low 2.11.96 Eenadu, Hyderabad M . Haripriya for Rs.5.25 lacs for all assets 35% Rejected as it was very low 2.03.97 Eenadu, Hyderabad S r i T. Satyanarayana for Rs.7,29,999.99 for all assets. Later enhanced to Rs.8.00 lacs 35% Rejected as it was very low 4.08.97 E e n a d u & Deccan Chronicle, Hyderabad Editions M . Haripriya Rs.7.50 lakhs for all assets. Later enhanced to Rs.10.00 lacs. 35% Rejected by HO level Sale Negotiations Committee on 17.10.97 2.02.98 Eenadu, Suryapet 1. Sri P. Srinivas for Rs.10,01,116 for all assets 2. Sri G. Venkateshwara Rao for Rs.9,99,999/- for all assets 35% 35% HO Sale Negotiation Committee rejected The offer on 02.04.98 0.08.98 Eenadu, Suryapet Edition and Deccan Chronicle, Hyderabad Edition Sri K. Laxmaiah for Rs.6.00 lacs 100% Rejected 4.06.99 Deccan Chronicle S a l e approval for Rs.13.50 lakhs in favour of Sri G. Krishna Rao, M/s.Pokarna Granites Ltd., on down payment basis for purchase of Land, Buildings & Machinery. 100% P a r t y has not responded and EMD was forfeited 0.12.2K Deccan Chronicle - No offers received - 0.06.01 1.06.01 2.06.01 Deccan Chronicle Economic Times Eenadu - No offers received - 1.02.02 2.02.02 3.02.02 Economic Times Eenadu Deccan Chronicle 1 . Sri Ch. Raitu Babu for purchase of plant and machinery 2. Sri P. Rakesh R e d d y for purchase of land and building 100% 100% Accepted @ Rs.1.00 lakh Accepted @ Rs.7.66 lakhs 10. Though pursuant to advertisement dated 24-06-1999 sale was approved for an amount of Rs.13.50 lakhs in favour of M/s.Pokarna Granites Ltd., on 100% down payment basis, but, it is stated in the counter affidavit that the said bidder has not paid the amount as per the conditions advertised. It is also stated in the counter affidavit that the E.M.D. deposited by the said bidder was forfeited; as such sale could not be finalized. Though the offer of Rs.13.50 lakhs for purchase of land and buildings and plant and machinery is pursuant to advertisement dated 24-06-1999, but, further advertisements are issued on 10-12-2000, 10-06-2001, and 01-08-2002. As evident from the annexure to the counter affidavit, pursuant to advertisements issued on 10-02-2000 and 10-06- 2001, there were no offers though advertisements were published in leading newspapers like Deccan Chronicle and Eenadu. Offers were made by intending purchasers pursuant to advertisements of sale published on 01-02-2002, 02-02-2002 and 03-02-2002. When there was an offer for purchase at Rs.13.05 lakhs pursuant to advertisement dated 24-06-1999, petitioners were addressed letter dated 04-08-1999 offering the unit to be sold to them at the very same price. Even then the petitioners did not respond to the offer and did not deposit any amount. When the highest bidder who quoted Rs.13.50 lakhs did not come forward and deposit the amount on down payment basis as per the advertisement, as such, respondents had to take further steps for giving fresh advertisements. In that view of the matter, it cannot be said that respondents have not followed the procedure while putting the sale of the unit in question in favour of respondents 3 and 4. Though it is pleaded by the petitioners that they were not put on notice, but, in the counter affidavit filed on behalf of the respondents, it is categorically stated that notices were issued to the petitioners on 08-11-2000 and 15-11-2000. Though it is submitted by learned counsel for petitioners that no such notices were received by the petitioners, but, however, no affidavit is filed in this regard. Hence, there is no reason to disbelieve the averments made in the counter affidavit. Further, in the case of Haryana Financial Corporation and another v. Jagdamba Oil Mills and another[1], while overruling the ratio laid down in the case of Mahesh Chandra v. Regional Manager, U.P. Financial Corpn. {(1993) 2 SCC 279}, the Hon’ble Supreme Court held as follows: “The aforesaid guidelines issued in Mahesh Chandra Case place unnecessary restrictions on the exercise of power by Financial Corporation contained in Section 29 of the Act by requiring the defaulting unit-holder to be associated or consulted at every stage in the sale of the property. A person who has defaulted is hardly ever likely to cooperate in the sale of his assets. The procedure indicated in Mahesh Chandra case will only lead to further delay in realization of the dues by the Corporation by sale of assets. It is always expected that the Corporation will try and realize the maximum sale price by selling the assets by following a procedure which is transparent and acceptable, after due publicity, wherever possible.” 11. In view of the aforesaid ratio laid down by the Hon’ble Supreme Court and in view of the fact that the sale of the unit in question is effected pursuant to advertisements published in leading newspapers on 10-02-2000, 10-06-2000 and lastly on 10-02-2002, it cannot be said that the unit was sold without giving opportunity to the petitioners. Though it is pleaded that further notice issued under Section 52-A of A.P. Revenue Recovery Act, 1864, demanding an amount of Rs.6,39,97,062/-, is barred by limitation, but, no attempt is made to demonstrate that the claim made in the impugned notice is barred by limitation. It is also to be noted that pursuant to steps taken under Section 29 of the State Financial Corporations Act, the unit was sold in the month of March, 2003 and thereafter, within a short span of time, the impugned notice is issued under Section 52-A of A.P. Revenue Recovery Act, 1864, to recover the balance amount due from the petitioners. In that view of the matter, in absence of any attempt to demonstrate that the impugned demand is barred by limitation, no grounds are made out to invalidate the notice on the said ground. 12. As no other arguments are advanced, I do not find any merit in this writ petition for grant of relief as prayed for. 13. The writ petition is accordingly dismissed, however, in the circumstances, without any order as to costs. ____________________ R. SUBHASH REDDY, J. November 12, 2009 MRR [1] (2002) 3 SCC 496