THE HON’BLE SRI JUSTICE A. GOPAL REDDY SECOND APPEAL No. 454 OF 2009 Date: 07-08-2009 Between Sunkavalli Subba Rao and two others …..APPELLANTS A.P State Finance Corporation, represented by its Branch Manager, Seethampet, Rajahmundry and two others …..Respondents THE HON’BLE SRI JUSTICE A. GOPAL REDDY SECOND APPEAL No. 454 OF 2009 JUDGEMENT: The unsuccessful plaintiffs in the Courts below filed this second appeal against the judgment dated 22-12-2008 of the I Additional District Judge, East Godavari, Rajahmundry in A.S No. 206 of 2006 confirming the judgment and decree dated 26-09-2006 of the I Additional Junior Civil Judge, Rajahmundry in dismissing O.S No. 1207 of 1999 filed by them for mandatory injunction directing defendant Nos. 1 and 2 to transfer the assets belonging to the 3rd defendant to the plaintiffs and for future profits at Rs.40,000/- per month. The facts which are not in dispute are as under: The 3rd defendant availed finance from defendants 1 and 2 - Corporation and became sick thereafter. The Corporation exercised the statutory right to sell the 3rd defendant – Company without intervention of the Court for realisation of its debt under Section 29 of the State Financial Corporation Act, 1951 (hereinafter called, ‘the Act’) and the said news was published on 01-05-2005 in Eenadu newspaper and accordingly, auction was held on 20-05-1995. One Chandana Ramesh became the highest bidder. Thereafter, the highest bid value offered by the said bidder was intimated to the 3rd defendant in the light of the procedure laid down by the apex Court, calling upon its objections to exercise the option to purchase and redeem the unit at the same value as offered by the highest bidder. The 3rd defendant exercised the option to purchase the unit, as per the highest bid value and nominated its shareholders to purchase the said property and the plaintiffs who are the shareholders of the 3rd defendant have come forward to purchase the same. The 2nd defendant accepted the offer made by the 3rd defendant, but enhanced the bid value by private negotiations for a sum of Rs.22,00,000/-. The acceptance of the offer of the plaintiffs who are the purchasers of the land and building of the 3rd defendant was communicated to the plaintiffs by letter dated 02-09-1995 and thus the contract of sale was concluded. As per the terms, the said amount of Rs.22,00,000/- is payable within 30 days from the date of communication by the 2nd defendant. That letter was addressed to the 1st plaintiff. Thus, there was a concluded contract. Thereafter, the plaintiff made payment of Rs.6,00,000/- and gave post dated cheque with a letter dated 30-09- 1995. Accordingly, the 1st plaintiff secured the purchasers for the sale of machinery and the 1st defendant accepted the proposal and sold the machinery to M/s.Delta Tubes and other purchasers and transferred the assets under a cover of panchanma dated 02-12-1995 and collected Rs.5.50 lakhs and appropriated the same in pursuance of the concluded contract. Thereafter, the plaintiffs arranged balance amount from State Bank of India, Rajahmundry and the said Bank issued letter intimating its intention for finance and called for the remarks from the 1st defendant vide letter dated 19-12-1996 expressing its willingness to execute appropriate transfer deeds etc., provided the balance amount is paid with interest at 19%. In the meanwhile, the plaintiffs with a view to complete the transaction by defendant Nos.1 and 2 sold their house site and paid the entire amount agreed before 30-03-1996. That amount was also received by the 1st defendant. The 3rd defendant under the influence of one A.V.Rao and Akula Venkateswara Rao made a publication for the auction of its unit. On that, the plaintiffs filed Writ Petition No.2636 of 1997 before this Court seeking directions to defendant Nos.1 and 2 to extend offer enabling to exercise option under Section 29(4) of the Act to transfer the assets auctioned. Meanwhile, the 3rd defendant filed O.S No. 58 of 1997 for injunction and obtained orders of interim injuncton on 27-03-1997 to stop the auction. The plaintiffs averred that out of anxiety they also filed C.D No. 313 of 1996 on the file of the District Consumer Forum, Rajahmundry seeking to enforce the statutory obligation of transfer of assets of the 3rd defendant in their favour and that the same is pending. They have also filed L.G.C.S.R No. 6594 of 1997 seeking recovery of the possession of the property and the same is pending on the file of the District Court, Rajahmundry. Pending the above CD and LGC, the above suit is filed for mandatory injunction. The 1st defendant contested the suit. Defendants 1 and 2 filed written statements on same lines. The 1st defendant who contested the suit filed a written statement contending that the suit is not at all maintainable as there is no contractual or statutory right to the plaintiffs to demand and compel defendant Nos.1 and 2 to transfer the assets of the 3rd defendant to the plaintiffs. In view of the auction proceedings invited by them, the 3rd defendant requested the 2nd defendant to agree for one time settlement. On the request of the 3rd defendant, the Corporation agreed to waive major portion of its claim towards interest and release its charge on condition that the 3rd defendant pays Rs.22,00,000/- on or before 01-10-1995, failing which, all concessions extended shall be withdrawn and the said decision was communicated to the 3rd defendant through the 1st plaintiff who is none other than the Managing Director of the 3rd defendant vide letter 06-09-1995 of the 2nd defendant. The proposal to receive the amount of Rs.22,00,000/- by 01-10-1995 is in full and final settlement of the claim and charges outstanding in the account of the 3rd defendant towards the loan but not towards any sale price from the 3rd defendant. So defendant Nos.1 and 2 could not finalise the auction and the 3rd defendant and its Board Members even prevented defendant Nos.1 and 2 from concluding the auction proceedings though the 3rd defendant failed to remit the amount of Rs.22,00,000/- within the stipulated time. There was no occasion for defendant Nos.1 and 2 to accept the alleged offer of the 3rd defendant or the plaintiffs for purchase of the plaint schedule property. The plaint schedule property is also subject to charge in favour of the Government of Andhra Pradesh towards the liability undertaken by the 3rd defendant consequent on obtaining the financial accommodation to a tune of Rs.10,00,000/- under the Srilanka Repatriates Rehabilitation Programme in terms of G.O.Ms.No.405, dated 06-03-1984 and, as such, the plaint schedule property is to answer the claim and charge of the Government of Andhra Pradesh in pursuance of agreement between the 3rd defendant and the Government of Andhra Pradesh. The 3rd defendant also executed memorandum by depositing the title deeds on 29-03-1994. The 3rd defendant failed to pay the said amount to the Government and hence, the plaint schedule property is liable to answer the claim and charge of the Government of Andhra Pradesh. The suit is filed only to avoid the said liability of the 3rd defendant and its Board of Directors to the Government of Andhra Pradesh and as such, the Government is also a necessary and proper party to the suit and the suit is bad for nonjoinder of necessary parties. The 2nd defendant filed separate written statement reiterating the pleadings of the 1st defendant and further pleaded that the suit is barred by the principle of res judicata. On dismissal of the said writ petition by this Court and the plaintiffs having approached the Consumer Forum in C.D No. 313 of 1996, the suit is not maintainable and the plaint should be valued under Section 28 of the Andhra Pradesh Court Fee and Suit Valuation Act and the suit for mandatory injunction simplicitor is not maintainable since the plaintiffs have not filed the suit for declaration. The suit is also barred by limitation since the alleged cause of action arose on 26-02-1996 and the suit as such was filed after 10-11-1999. The 3rd defendant filed a separate written statement sailing with the plaintiffs contending that defendant Nos.1 and 2 received Rs.22,00,000/- as one time settlement in a lumpsum and that the debt was closed. It was further averred that the 3rd defendant filed O.S No. 58 of 1997 against defendant Nos.1 and 2 seeking permanent injunction from exercising Sectin 29 of the Act and the plaintiffs have paid the entire sale transaction and it has no objection to transfer the properties purchased in auction by defendant Nos.1 and 2. On the above pleadings, the following issues were settled for trial: 1) Whether the plaintiffs are entitled to mandatory injunction as prayed? 2) Whether the plaintiffs are entitled to future profits as prayed for? 3) Whether the suit is barred for non-joinder of necessary party? 4) To what relief? The following additional issues were also framed: 1) Whether the suit is not maintainable under law? 2) Whether the suit is barred by the principle of Res-judicata? 3) Whether the suit is barred by limitation? 4) Whether the suit is not valued properly? Before the trial Court, on behalf of the plaintiffs, the 1st plaintiff was examined as PW 1 and got exhibited Exs.A-1 to A-19. On behalf of the defendants, DWs 1 to 3 were examined and got exhibited Ex.B-1 to B-21. The trial Court after analysing the oral and documentary evidence dismissed the suit, but held that the suit is in time and the principles of res judciata are not applicable and that the suit is maintainable and properly valued. It was further held that the Government of Andhra Pradesh is not a proper and necessary party. Questioning the dismissal of the suit, the plaintiffs filed the appeal and defendant Nos.1 and 2 filed cross objections questioning the findings which went against them. The lower appellate Court after considering the entire evidence held that even if there is any concluded contract as pleaded by the plaintiffs and if there is any breach by defendant Nos.1 and 2, the remedy of the plaintiffs is not a suit for mandatory injunction but suit for specific performance. The mandatory relief envisaged under Section 39 is enforceable where there are established rights. Since in the case on hand, there are no established rights in favour of the 3rd defendant or its alleged nominees plaintiffs, the suit for mandatory injunction is not maintainable on payment of nominal fee of Rs.5,000/- and dismissed the same. Questioning the same, the present appeal is filed. I have heard Sri T.S. Anand, learned counsel for the appellants for admission of the second appeal. It is now well settled that a financial corporation can exercise the option without moving the Court by selling the unit under Section 29 of the Act and can auction the suit schedule property for due realisation of the loan amount advanced by it in view of the law declared by the apex Court in the case of Mahesh Chandra vs. Regional Manager, U.P Financial Corporation and others[1]. Defendant Nos.1 and 2 gave option to the 3rd defendant whether it is willing to pay the amount by accepting the highest bid received by it. In pursuance of the negotiation between defendant Nos. 1 and 2 on one hand and the 3rd defendant on the other hand, the loan account was settled and the 3rd defendant agreed to discharge the loan of Rs.22,00,000/- under the scheme of one time settlement against the outstanding balance of more than Rs.50 Lakhs and the entire amount has to be paid on or before 01-10-1995. Whereas, the plaintiffs have stated that the 3rd defendant offered to exercise the option to purchase the property at the highest bid value and it nominated the plaintiffs to purchase the property and that was accepted by the 2nd defendant. But the amount was enhanced to Rs.22,00,000/- and the auction was communicated to the plaintiffs by letter dated 02-09-1995 by the 2nd defendant under Ex.A- 1. PW 1 admitted that the 3rd defendant filed suit O.S No.58 of 1997 against defendant Nos.1 and 2. So, the 3rd defendant which is having the legal existence availed the loan. The plaintiffs even if they have discharged the debt on behalf of the 3rd defendant they will not acquire any legal right to enforce the agreement against defendant Nos.1 and 2 entered by the 3rd defendant under one time settlement. Unless the 3rd defendant discharged the debt or any person agreed to discharge the debt on its behalf, he alone can seek redressal for the concluded contract alleged to have been made between the 3rd defendant and defendant Nos.1 and 2. So, the Court below has rightly recorded the finding that even if there is any concluded contract as pleaded by the plaintiffs and if there is any breach on the part of defendant Nos.1 and 2, the remedy is not a suit for mandatory injunction, but a suit for specific performance to enforce such concluded contract, if any. Since plaintiff Nos.2 and 3 are the equity shareholders of the 3rd defendant Company, they are aware of the fact that Rs.22,00,000/- have to be paid on or before 01-10-1995. They have failed to pay the said amount on admitted facts. In view of the same, the findings recorded by the lower appellate Court on points 1 and 6 do not suffer from any illegality in appreciation of the evidence or suffer from any legal infirmities. In the circumstances, no question of law much less any substantial question of law arises for consideration in this appeal so as to admit the same. It is accordingly dismissed. A. GOPAL REDDY, J 07-08-2009 ks [1] AIR 1993 SC 935