HON’BLE SRI JUSTICE SANJAY KUMAR WRIT PETITION No.4920 of 2009 Date: June 09, 2011 Between: M/s. Pooja Digital Colour Lab, Rep. by its Managing Partner G. Chandra Bhanu. … Petitioner And 1. A.P. State Financial Corporation, Rep. by its Senior Branch Manager, Karimnagar & another. … Respondents * * * HON’BLE SRI JUSTICE SANJAY KUMAR WRIT PETITION No.4920 of 2009 O R D E R: The petitioner assails the action of the Andhra Pradesh State Financial Corporation in cancelling the subsidy granted to it and converting the same into a term loan. 2. The petitioner obtained a term loan of Rs.17.80 lakhs and subsidy of Rs.13.27 lakhs from the Corporation in the year 2008. The petitioner offered collateral security furnished by third parties for the term loan of Rs.17.80 lakhs. Thereupon, the Corporation issued the impugned letter dated 04.9.2008 pointing out that the petitioner had offered third party (non-Scheduled Castes) security as collateral security for the loan and it had therefore been decided to cancel the subsidy grant of Rs.13.27 lakhs and convert the same into a term loan. By letter dated 29.10.2008, the Corporation called upon the petitioner to get the documentation executed in this regard, failing which it threatened to recall the loan. Aggrieved by the above proceedings, the petitioner approached this Court by way of the present writ petition. 3. This Court, by order dated 13.3.2009, directed that no coercive steps should be taken against the petitioner pursuant to the impugned proceedings. Thereafter, on 22.6.2009 this Court, being of the opinion that there was no bar to the petitioner furnishing collateral security of non-Scheduled Castes persons, suspended the impugned proceedings. 4. The Corporation filed a counter in support of its vacate petition W.V.M.P. No.936 of 2010, wherein it stated that upon verification by the Corporation’s Vigilance Department it had found that the financial background of the petitioner’s promoters was not good enough for setting up the unit and as the collateral security for the term loan was given by third parties who were not members of Scheduled Castes, it had come to conclusion that the funds under the welfare scheme formulated by the Government for upliftment of the weaker sections were being misused and accordingly resorted to the action which is presently under challenge. 5. Pertinent to note, the impugned proceedings do not reflect that action was initiated against the petitioner owing to the particular facts which emerged for the enquiry initiated by the Corporation’s Vigilance Department. The impugned proceedings, on the other hand, read to the effect that the subsidy was cancelled only on the ground that the petitioner had offered collateral security from third parties who were not Scheduled Castes. 6. It is fairly conceded by Sri M.S. Ramachandra Rao, learned standing counsel for the Corporation, that there is no specific bar to the furnishing of collateral security by third parties from other castes even for loans availed by members of the Scheduled Castes. In the event the Corporation finds in any particular case that financial assistance extended under a welfare scheme to members of the weaker sections was being misused, it must necessarily put such beneficiaries on notice with full particulars, call for an explanation and only thereafter take a decision in the matter. No such exercise was resorted to in the present case. The action of the respondent Corporation, as evidenced by the impugned proceedings, therefore does not hold water. 7. The writ petition is accordingly allowed setting aside the impugned proceedings dated 04.9.2008 and the consequential proceedings dated 29.10.2008 issued by the Andhra Pradesh State Financial Corporation. This order shall however not preclude the Corporation from taking action against the petitioner for any misuse of the loan facility extended under the welfare scheme for weaker sections, after following the due procedure as indicated above. In the circumstances, there shall be no order as to costs. __________________ SANJAY KUMAR, J Date: June 09, 2011. BSB