*The Hon’ble Sri Justice V.V.S.RAO +Writ Petition No.189 of 1999 %22.9.2004 £ Dr.J.Ramachandra Rao …Petitioner Vs. $ Andhra Pradesh State Civil Supplies Corporation, and five others. … Respondents !For the petitioner …Mr.Movva Chandrasekhar Rao ^For the Respondent No.1 …Mr.M.Anil Kumar For the Respondent No.2 …Mr. Y. Vivekananda For the Respondent No.3 … For the Respondent No.4 … For the Respondent No.5 …Mr. B.V.Rama Rao For the Respondent No.6 … <Gist: >Head Notes: ? Cases Referred 1. (2001) 8 SCC 151 2. (2002) 10 SCC 487 3. (2004) 3 SCC 553 4. 1959 (1) AnWR 239 (DB) 5. AIR 1965 AP 177 (FB) 6. AIR 1967 All 423 7. AIR 1985 SC 1096 8. AIR 1965 SC 1740 9. (2001) 2 SCC 549 10. (2001) 2 SCC 549 11. (1998) 8 SCC 1 12. (1994) 4 SCC 104 13. AIR 1989 SC 1642 = (1989) 3 SCC 293 14. (2003) 10 SCC 261 IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) WEDNESDAY, THE TWENTY SECOND DAY OF SEPTEMBER TWO THOUSAND AND FOUR PRESENT THE HON'BLE MR JUSTICE V.V.S.RAO WRIT PETITION NO : 189 of 1999 Between: 1 Dr.J.Ramachandra Rao son of Satyanarayana Sri Balaji Nursing Home, Tanuku, West Godavari Dist 2 Dr.J. Lakshmi W/o J. Ramachandra Rao Medical Practitioner, Tanuku, D.M.C. West Godavari Dist 3 J.Bhaskara Rao, S/o. J. Satyanarayana H.No.6-3-456/22, Dwarakapuri Colony hyderabad ..... PETITIONERS AND 1 Andhra Pradesh State Civil Supplies Corporation, rep. by the Chairman and Managing Director, Civil Supplies Bhavan, Somajiguda, Hyderabad. 2 A.P.State Financial Corporation, rep. by the Managing Director Chirag-ali-lane, Hyderabad 3 State Bank of India, rep. by its Branch Manager, Tadepalligudem , West Godavari District 4 M/S Delta Oil and Fats Limited Prattipuadu, Tadepalligudem Tq., W.G. Dist 5 B.V. Rama Rao wine Merchant, Tadepalligudem, West Godavari Dist 6 M/s. Sri Durga Egg Pack Industries, Godala Village, Korukonda Mandal, East Godavari District. (Sixth respondent is impleaded as per Court Order dt.20.7.2000 in W.P.M.P.No.15911 of 1999.) .....RESPONDENTS Petition under Article 226 of the constitution of India praying that in the circumstances stated in the Affidavit filed herein the High Court may be pleased to issue an appropriate of writ of Mandamus directing respondents 1, 2, and 5 to pay the sum of Rs. 1,29,19,683-00 i.e., Principle sum of Rs. 52.00 lakhs with 19.5% interest with quarterly rests from 28.2.1993 upto 31.12.1998 and subsequent interest at the same rate till the date of payment to the 3rd respondent Bank towards the loan payable by 4th respondent to 3rd respondent Bank in O.A.N.58/97 on the file of the Debt Recovery Tribunal, Bangalore which sum is payable as a direct result for violating the directions of this Hon'ble court in WP.No.7385/93 and review WPMP.No.4605/94 arbitrarily. Counsel for the Petitioner:MR.MOVVA.CHANDRASHEKAR RAO Counsel for the Respondent No.1:MR. ANIL KUMAR Counsel for the Respondent No.2:MR. Y. VIVEKANANDA Counsel for the Respondent Nos.3: Counsel for the Respondent No.4: Counsel for the Respondent No.5:MR. B.V.RAMA RAO Counsel for the Respondent No.6 The Court made the following : THE HON’BLE SRI JUSTICE V.V.S.RAO WRIT PETITION NO.189 OF 1999 ORDER: In this Writ Petition the three petitioners are praying this Court to issue a Writ in the nature of Writ of Mandamus directing respondents 1, 2 and 5 to pay a sum of Rs.1,29,19,683.00 (Rupees one crore twenty nine lakhs nineteen thousand six hundred and eighty three only), i.e., principal sum of Rs.52,00,000 (Rupees fifty two lakhs) with interest at 19.5% with quarterly rests from 28.2.1993 to 31.12.1998 and subsequent interest at the same rate till the date of payment to the third respondent bank towards the loan payable by the fourth respondent company to third respondent bank in Original Application No.58 of 1997 before the Debts Recovery Tribunal (DRT), Bangalore. The second petitioner is wife and third petitioner is brother of first petitioner. First petitioner is Managing Director and petitioners 2 and 3 are Directors of fourth respondent – M/s.Delta Oil and Fats Limited (hereafter called, the Company), which was promoted as joint venture with A.P.Civil Supplies Corporation, first respondent herein. First respondent holds 50% of the shares and petitioners jointly hold 35% of the shares and the remaining 15% are held by third parties. Fourth respondent availed a term loan of Rs.28.5 lakhs from A.P.State Financial Corporation (APSFC), second respondent herein, and a sum of Rs.48.5 lakhs from State bank of India, Tadepalligudem Branch, third respondent herein towards working capital and the bridge loan of Rs.10 lakhs from the first respondent. APSFC has first charge and SBI has second charge over the unit of fourth respondent which was established at Prattipadu, West Godavari District. Fourth respondent unit started production in 1983 and was allegedly making profits upto 1989. It paid back the bridge loan amount of Rs.10,00,000/- (Rupees ten lakhs only) with interest to first respondent and also declared dividends during that period. However, due to adverse market forces the company started incurring losses from 1990 onwards. In extraordinary General Body meeting of the Company held on 12.8.1991 it was resolved to remove first petitioner as Managing Director and petitioners 2 and 3 as Directors. They intimated alleged withdrawal of personal guarantee bonds executed by them at the time of borrowing loans from respondents 2 and 3. First respondent Corporation represented by its District Manager was made Managing Director of the Company. It was also resolved to lease out the unit and when bids were invited, a prospective bidder offered a lease amount of Rs.19,00,000 (Rupees nineteen lakhs only) per year for a period of three years. If it was finalised, the company would have got Rs.57,00,000/- (Rupees fifty seven lakhs only) by way of lease amount. But, first respondent did not finalise the lease nor took any steps for reviving the unit. The unit was kept idle since 12.8.1991. At that stage, first petitioner offered to buy 12,000 shares held by first respondent at Rs.102/- per share whereas the book value was only Rs.40/-. An amount of Rs.3.6 lakhs was paid, but first respondent did not consider the matter nor refunded the amount of Rs.3.6 lakhs. Therefore, first petitioner filed a suit being O.S.No.105 of 1992 on the file of the Court of Senior Civil Judge, Tadepalligudem which was later transferred to DRT and marked as O.A.No.58 of 1997 for recovery of the said amount. As the loan taken from respondents 2 and 3 was not discharged in time, there was continuing accumulation of interest on the principal. APSFC in exercise of their powers seized the unit of the Company in January 1993 and issued notification inviting bids for selling the unit by auction. The auction was held on 28.2.1993. One Sri G.K.B.Choudary offered maximum offer of Rs.54,00,000/- (Rupees fifty four lakhs only), which according to the petitioners is fair and reasonable and second respondent was also satisfied with the offer received. APSFC did not finalise sale due to interference by the Government of Andhra Pradesh in GAD Department, who advised the second respondent to finalise the sale only after consultation with the first respondent. Aggrieved by the same, first petitioner filed a writ petition being W.P.No.7385 of 1993 for a direction to APSFC to confirm the sale in favour of highest bidder and discharge the loan payable by the company. This Court disposed of the said Writ Petition on 8.10.1993 directing the APSFC to take a decision with regard to sale within a period of one month or go in for fresh auction within a period of two months. As the APSFC did not take any action as directed by this Court, first petitioner filed a review petition being Rev.W.P.M.P.No.4605 of 1994 praying this Court to direct first respondent to release the personal guarantee furnished by petitioners. This Court disposed of the said application by order dt.20.1.1995 holding that second respondent grossly disobeyed the directions of this Court in Writ Petition No.7385 of 1993. In spite of the directions, second respondent did not take action for confirmation of sale for Rs.54,00,000/- but in collusion with first respondent lifted the seizure after receiving a sum of Rs.2.5 lakhs in partial discharge of the sum duly cancelling the auction held on 28.2.2003. It is alleged that due to disobedience on the part of second respondent in complying with the orders of this Court and also due to gross negligence and collusion with first respondent, second respondent lost the right of enforcing personal guarantee bonds executed by the petitioners. First respondent did not operate the unit and it was kept idle. APSFC seized the unit and re-advertised the sale on 13.11.1998. This time fifth respondent offered to buy the unit for Rs.50,00,000/- (Rupees fifty lakhs only) payable in instalments without interest. Due to negligence on the part of APSFC in selling the unit, the petitioners suffered heavy loss for no fault of their own. Second respondent and first respondent colluded with each other in defeating the rights of petitioners and if only they had acted diligently fourth respondent company would have discharged all its loans, because by the time they conducted second auction, the arrears mounted up. Second respondent failed to discharge its legal duty cast on them under Section 29 of the State Financial Corporations Act, 1951 (for short, the SFC Act) and hence it is guilty of misconduct in not taking timely decision for confirmation of sale. Thereafter, after adjusting Rs.2,00,000/- (Rupees two lakhs only) paid by first respondent to second respondent, second respondent is liable to pay balance of Rs.52,00,000/- (Rupees fifty two lakhs only) with interest at 19.5 % (rate of interest chargeable by the APSFC) from 28.2.1993 to 31.12.1998 which comes to Rs.1,29,19,683/- (Rupees one crore twenty nine lakhs nineteen thousand six hundred and eighty three only) in discharge of the loan payable to third respondent who has filed suit for recovering principal amount of Rs.67.8 lakhs with interest at 19.5% with quarterly rests. First respondent filed a counter affidavit admitting the share holding pattern in the fourth respondent company by petitioners and first respondent. It is stated that the company was laid off on 31.5.1991 due to non-availability of working capital. As per the decision of the shareholders of the company, auction to lease out the factory was notified when the highest bid of Rs.19,00,000/- for a period of three years was received. First respondent referred the matter to APITCO, who opined that the lease amount is very less. Therefore, the idea of leasing out was dropped by the shareholders of fourth respondent company. The petitioners had alternative remedy of approaching the High Court under the provisions of the Companies Act, 1956 (for short, the Companies Act) and also to approach the company requesting to hold the meeting of the shareholders of the fourth respondent company. In the meeting held on 12.8.1981 first petitioner was removed as Managing Director and, petitioners 2 and 3 resided as Directors, and thereafter petitioners never attended General Body Meeting of the Company. It is further stated that first petitioner filed W.P.No.12149 of 1996 praying for a direction to respondents 1 and 2 to discharge the petitioners liability as personal guarantors in relation to debts due from fourth respondent company by replacing with the corporate guarantee of first respondent. The High Court dismissed the Writ Petition holding that the relief prayed by first petitioner cannot be granted in the Writ Petition observing that the liability of petitioners regarding personal guarantee executed by them in relation to the debts due from the company is a matter which cannot be considered in the Writ Petition. The matter was carried in appeal to Division Bench, which dismissed the Writ Appeal on 31.8.1998. Therefore, the Writ Petition is not maintainable in law. First respondent which holds 50% share capital in the company, referred the matter to the Government to disinvest 12,000 shares in the joint venture company. The Government accorded permission to first respondent to disinvest 12,000 shares of Rs.100/- each at the best market price or par value whichever is higher in the interest of first respondent. Accordingly, an offer was made to first petitioner valid upto 11.10.1992. However, having regard to financial performance of the company for the years 1988-89, 1990-91, and 1991-92, the Government of Andhra Pradesh by its orders made in G.O.Ms.No.46, dt.6.4.1993 revoked the approval given for disinvestment. The Government also directed to explore the possibility of running unit through MARKFED/STC and initiate steps to investigate affairs in the business during the tenure of the former Managing Director. The Government also instructed the second respondent not to finalize the sale of the unit without the concurrence of first respondent. First respondent wrote letters to MARKFED/STC/Agros Industries, but did not receive any communication expressing willingness to run the unit. One Sri Ch.Satya Rao, who submitted a proposal to take over the unit also withdrew the proposal. In the meanwhile, second respondent approached the unit for sale and the petitioner filed Writ Petition No.7385 of 1993 which was disposed of directing the second respondent to take a decision regarding confirmation of the auction within a period of two months. Subsequently, the petitioner filed a review petition which was closed on 12.11.1996. Again the first petitioner approached this Court by filing Writ Petition No.12149 of 1996 which was dismissed. The first petitioner offered to purchase 50% of shares held by first respondent at the rate of Rs.102/- per share. The matter was referred to the Government for consideration. The first petitioner filed a case before the State Consumer Disputes Redressal Commission which was dismissed as withdrawn. The first petitioner again filed Writ Petition No.22872 of 1994 for direction to refund the amount paid by the first petitioner. This Court dismissed the Writ Petition. In the counter affidavit referring to various transactions of the fourth respondent company, it is alleged that first petitioner has not approached the Court with clean hands and that he is involved in huge financial irregularities and fraud. As the dispute is in relation to purely commercial transaction between petitioners and respondents, Writ Petition would not lie. It is also stated that the company requested the first respondent to give a loan of Rs.2,50,000/- (Rupees two lakhs fifty thousand only) in order to discharge of the loan due to second respondent. Such loan sanctioned by first respondent was paid by fourth respondent company to second respondent and hence unit of the fourth respondent was not disposed of. Even according to third respondent, first petitioner has conspired with a view to cause wrongful loss to third respondent, and to get wrongful gain by diverting stocks, sale proceeds without remitting to the third respondent bank. First respondent being a shareholder as per Section 34 of the Companies Act, is liable only to the extent of share capital. First respondent has already paid the entire share capital and therefore there is no need to discharge the loan incurred by fourth respondent company to SBI, and first petitioner alone is responsible for the entire mismanagement. The APSFC initially filed a counter along with W.V.M.P.No.789 of 1999. Again when petitioners filed W.P.M.P.No.15912 of 1999 seeking further interim orders, APSFC filed another counter affidavit. The averments made in these two counter affidavits may be noticed in brief. The allegation regarding sale of the unit for an amount of Rs.54,00,000/- (Rupees fifty four lakhs only) as per the order of this Court in Writ Petition No.7385 of 1993 is not denied. It is stated that as directed by this Court on 8.10.1993, the Managing Director of first respondent had discussions with Managing Director of APSFC, and first respondent gave willingness to pay a sum of Rs.4,99,000/- (Rupees four lakhs ninety nine thousand only) to enable the second respondent to lift the seizure, that the first respondent vide letter dt.17.12.1993 remitted a cheque for Rs.2,50,000/- (Rupees two lakhs fifty thousand only) as against total outstanding amount of Rs.6,62,000/- (Rupees six lakhs and sixty two thousand only) due from the company and that having regard to the decision taken by the Managing Director of the second respondent, the seizure was lifted accepting the payment of Rs.2,50,000/- (Rupees two lakhs fifty thousand only) and unit was handed over to the District Manager on 18.4.1994. Second respondent further states that it went on addressing several letters to first respondent for settlement of loan account, in vain. Therefore, on 1.10.1996 recall- cum-sale notice was issued, but having regard to the request made by Chairman and Managing Director of first respondent, and also having regard to the fact that first respondent filed a petition before the Company Law Board against petitioners, further action was dropped. However, second respondent again failed to remit the dues to APSFC and addressed a letter dt.29.8.1998 stating that fourth respondent has become sick due to misdeeds of first petitioner. The allegation that second respondent acted negligently in not accepting the offer made by Sri G.K.B.Choudary at Rs.54,00,000/- (Rupees fifty four lakhs only) early nineties (90s) is denied. The allegation made by petitioners regarding actual outstanding amount at the time of conducting first sale are also denied. It is further alleged that fourth respondent company suffered and sustained losses only on account of acts of omission and commission on the part of the petitioners and therefore they alone personally liable to discharge the debt due to SBI. During the pendency of the Writ Petition, petitioners filed a miscellaneous petition being W.P.M.P.No.15912 of 1999 seeking orders from this Court directing respondents 2 to 6 to deposit a sum of Rs.36,00,000/- (Rupees thirty six lakhs only) for discharging the debt payable to third respondent Bank. In this W.P.M.P. the APSFC has filed a counter affidavit bringing to the notice of the Court the events that took place after filing Writ Petition. It is stated that fifth respondent withdrew the proposal for purchase of the assets of the fourth respondent and did not deposit any amount. In view of the same, the assets were sold to M/s.Durga Egg Pack Industries – sixth respondent herein, for a total consideration of Rs.38,00,000/- (Rupees thirty eight lakhs only) on outright sale basis taking into consideration the over all situation. The APSFC has right to recover sum of Rs.17,54,796/- (Rupees seventeen lakhs fifty four thousand seven hundred and ninety six only) from out of the amounts realised by sale. Learned counsel for the petitioners, Sri M.Chandrasekhara Rao submits that in the facts and circumstances of this case, the Writ Petition for payment of money is maintainable. He placed reliance on M.S.Grewal v. Deepchand Sood, Ramdeo Baba Kamala Nehru Engg. College v. Sanjay Kumar, and A.B.L. International Ltd. v. Export Credit Guarantee Corpn. of India Ltd. He further submits that respondents 1 and 2 have violated the Court orders in Writ Petition and Review W.P.M.P. and therefore the action of respondents 1 and 2 is imprudent and negligent. For such dereliction of duties of public authorities, this Court can award damages to the person who monetarily suffers such dereliction of duty. Learned counsel for first respondent (APCSC), Sri M.Anil Kumar, and learned counsel for second respondent (APSFC), Sri Y.Vivekananda submit that a Writ Petition for award of damages is not maintainable that the petitioners being personal guarantors cannot plead discharge in proceedings under Article 226 of the Constitution of India, that the claim is barred by limitation and that claim is barred by res judicata. In support of the last submission, they relied on the orders of this Court in Writ Petition No.12149 of 1996 dt.21.1.1998 which was affirmed by the Division Bench in W.A.SR No.27218 of 1998, dt.31.8.1998. Learned counsel for first respondent further submits that petitioners being shareholders have a number of remedies under the Companies Act like requesting for General Meeting or filing application under Section 393 of the Companies Act, but they cannot be permitted to invoke writ jurisdiction of this Court as the disputed transaction is purely commercial transaction without any public law element. He also submits that the petitioners have not come to this Court with clean hands and that suppressed material facts from this Court. Respondents 1 and 2, he submits – have taken action strictly in accordance with the orders of this Court in Writ Petition No.7385 of 1993 and at one stage settled the matter. In spite of best efforts by first respondent, the Unit could not be revived and therefore ultimately APSFC had to sell the land for best price that was offered. He also submits that though at one stage petitioners offered to purchase shares of first respondent, they never made any attempt to bring a person offering better price at the time of second sale or third sale. In his reply arguments, learned counsel for the petitioners Sri M.Chandrasekhara Rao submits that merely because a direction is sought to respondents 1 and 2 to pay a specified amount, a Writ Petition cannot be dismissed when there are facts which are admitted by contesting parties. Secondly he pleads that the claim is not barred by limitation as the second respondent advertised the sale only on 28.11.1996 pursuant to which fifth respondent made offer of Rs.50,00,000/- (Rupees fifty lakhs only) Thirdly he would urge that the plea of res judicata has not been expressly pleaded by respondents 1 and 2 in their pleadings and therefore the principle of waiver applies and respondents 1 and 2 cannot be permitted to raise the plea of res judicata. Further, when there was no proper cause of action in the earlier proceedings, the same does not operate as res judicata. He placed reliance on A. Raghurama Arya v. Bapanna Rao, Katragadda China Anjaneyulu v. Katragadda China Ramayya, Sukhni v. Sukhbasi, and Jaswant Singh v. Custodian of Evacuee Property. The background facts and rival submissions give rise to these points for consideration. I. Whether Writ Petition for a direction to respondents 1, 2 and 5 to pay a sum of Rs.1,29,19,683/- (principal and interest) is maintainable ? II. Whether the respondents 1 and 2 are liable to pay the sum claimed by petitioners for their alleged negligence and failure to comply with the orders of this Court in Writ Petition No.7385 of 1993, dt.8.10.1993 ? III. Whether the claim made by petitioners is barred by principle of res judicata ? and IV. Whether the claim made by petitioners is barred by limitation ? In Re Point No.(I) A Writ Petition would lie only against State as defined under Article 12 of the Constitution of India. If a person seeks payment of money from a private person, a suit for recovery of money would lie. If a person seeks payment of money towards refund of excess tax or charges for the work done or service given etc., from State or public authority, Writ Petition is not a proper remedy. The exercise of power of judicial review is subject to many limitations. One such being the adjudication of disputed questions of fact. Invariably, a petition or application for judicial review is decided based on affidavits, counter affidavits and supporting documents. If the case involves serious disputed questions of fact, ordinarily, the Court would refrain from adjudicating such issues. Generally, all claims for money involve exercise of adjudication of questions of fact. Therefore, Writ Petition for refund of money or for that matter damages is ordinarily not maintainable. In a petition for damages relevant issues would be whether the respondent is guilty of dereliction of duty or guilty of negligence, whether the defence taken by the respondent like good faith, diligence etc., is sufficient to discharge respondent etc., are all matters involving production of acceptable evidence. In all situations and circumstances, the affidavit evidence would not be sufficient to arrive at definite conclusion even on balancing of probabilities. Therefore, over a period of time, the Courts, by and large, have taken the view that claim for money by way of writ petition is ordinarily not maintainable. I n Suganmal v. State of Madhya Pradesh (perhaps the first authority) a Constitution Bench of the Supreme Court considered the question whether a petition under Article 226 of the Constitution of India for refund of money