Civil Writ Petition No.13260 of 2007 -1- **** IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Civil Writ Petition No.13260 of 2007 Date of decision: 19.10.2011 M/s Agni Wire Industries Pvt. Ltd. and another ...petitionerss Versus Haryana Financial Corporation and another ...Respondents CORAM: HON'BLE MR.JUSTICE HEMANT GUPTA HON'BLE MR.JUSTICE G.S.SANDHAWALIA Present: Mr. Vikas Awasthi, Advocate for the petitioners. Mr. Puneet Gupta, Advocate for the respondents. **** G.S.SANDHAWALIA, J. The petitioners in the present writ petition have challenged the notice dated 14.11.2006 (P-10) issued by the Financial Corporation under Section 32-G of the State Financial Corporation Act, 1951 (hereinafter referred to as “the Act”) wherein a demand of Rs.1,17,54,262/- with further interest at the rate of 20.5% per annum from 1.9.2006 was raised upon them and they were asked to put in appearance and show cause as To why the said amount be not determined. Secondly notice dated 23.7.2007 (P-14) issued by the Assistant Collector, Grade I & II, Kotwali, Delhi to recover the above said amount as arrears of land revenue is also impugned. The grievance of the petitioners was that they had approached the Financial Corporation for granting term loan and working capital loan and vide letter dated 17.1.1996 Rs.43.05 lacs had been sanctioned as working capital loan facility and mortgage deed, collateral and additional Civil Writ Petition No.13260 of 2007 -2- **** security had been got executed from the petitioners by the Financial Corporation. It was further alleged that entire loan was not disbursed and due to which the unit remained functional for only three years and the petitioners suffered financial losses and they could not repay the loan amount and unit was accordingly shut down in April, 1999 and the Financial Corporation took possession on 31.5.1999 and thereafter sold the said unit for Rs.15 lacs against the valuation of Rs.25.50 lacs and also sold collateral security on 4.11.2004 for Rs.9.75 lacs against the valuation of Rs.18.96 lacs. The respondent-Financial Corporation had also issued a recovery certificate dated 2.9.2005 directing the petitioners to pay a sum of Rs.78,66,022/-. The said amount was thereafter sought to be recovered through Assistant Collector Ist Grade, Hauz Khas, New Delhi which was challenged by filing Civil Writ Petition No.7604 of 2006 and the said recovery certificate was quashed on the ground that recovery could not be effected by invoking the provisions of Haryana Public Moneys (Recovery of Dues) Act, 1979. It was thereafter respondent-Financial Corporation initiated proceedings under Section 32-G of the Act which is now the subject matter of the dispute. The respondent-Financial Corporation contested the said writ petition on the ground that the petitioners company failed to repay outstanding dues as per the terms and conditions of the mortgage deed due to which proceedings under Section 29 were resorted to and the unit was taken over and sold to the best buyer and the collateral security was also sold to recover the outstanding amount. The respondent-Financial Corporation in its reply submitted that it had received a sum of Rs.37,53,538/- including sale proceedings against the disbursed amount of Rs.33.4 lacs and petitioners were still liable to pay a sum of Rs. 1,17,54,262/- with further interest with effect from 1.9.2006 as per the Civil Writ Petition No.13260 of 2007 -3- **** mortgage deed. The case of the respondent-Financial Corporation was that the petitioners has been asked to put in appearance and give their reply and thereafter on 28.3.2007 recovery certificate had been issued against them as none had appeared for hearing on 19.2.2007 and the specified authority under Section 32-G of the Act had quantified the amount and the recovery was being done in accordance with the procedure prescribed. The argument raised by the learned counsel for the petitioners was that once the respondent-Financial Corporation had taken over unit on 31.5.1999, thereafter, the Corporation could not charge interest and, therefore, the interest which has been charged after 31.5.1999 was illegal and, thus, the recovery of Rs.1,17,54,262/- under Section 32-G of the Act was not permissible, and reliance was placed upon a judgment of this Hon’ble Court in M/s Advance Oils Private Limited Vs. Punjab Financial Corporation and others 2006(4) RCR (Civil) 425, in support of the said submission. The said submission though attractive is not sustainable in view of the fact that a Letters Patent Appeal was preferred against the said judgment in LPA No.175 of 2006 by the Punjab Financial Corporation which was decided on 13.9.2006 wherein while deciding the appeal, the Division Bench had noticed as under:- “We may, however, notice that there is some justification in the submission made by the counsel for the appellant-PFC that respondent no.1 could not be completely absolved of its liability to pay interest on the sum of loan that was still pending against him when all these proceedings commenced. We are of the view that respondent no.1 cannot escape the liability to repay the complete amount taken as loan. We had, Civil Writ Petition No.13260 of 2007 -4- **** accordingly, put this to the counsel for respondent no.1, who was present in Court on caveat, if respondent no.1 was prepared to pay the liability that would be standing against him with interest. The counsel, on instructions from his client, who was present in the Court, agreed to discharge the liability by paying the loan amount that was due towards him with 9 per cent simple interest from the date it is due to the date of payment. We would, as such, direct the appellant-PFC to calculate the total amount that would be found due and payable by respondent no.1 along with interest as aforementioned within a period of one month and intimate the same to it (respondent no.1), which in turn, would discharge this entire liability within a period of one month thereafter. The possession of the property would then be handed over to respondent no.1. We would leave it open for the PFC to take this property into its possession from respondent no.2 (appellant in LPA No.176 of 2006). Subject to these observations, we would dismiss both the Letters Patent Appeals.” In view of the above finding, it would be clear that the view taken by the learned Single Judge in M/s Advance Oils Private Limited’s case (supra) was not upheld and the Corporation had been entitled to simple interest from day the proceedings had commenced. Even otherwise, subsequently the Hon’ble Supreme Court in Punjab Financial Corporation Vs. M/s Surya Auto Industries 2010 (1) PLR 404, while allowing the appeal of the Corporation has held that the relationship between the Corporation and the Borrower is that of creditor and debtor and the High Court could not examine the legality or otherwise Civil Writ Petition No.13260 of 2007 -5- **** the terms of the agreement entered into between the Corporation and the loanee under which the later was obliged to pay interest at a particular rate with periodical rests especially in view of the fact that the terms of the contract had never been challenged between the parties and therefore, the rate of interest could not be varied. Admittedly, the petitioners have never appeared before the Corporation when it received the show cause notice to contest the amount which was being claimed as per terms of the agreement as per the case of the Corporation. This fact is admitted by the petitioners in replication that since the authorities had already decided upon recovering the amount without hearing the petitioners at the first instance which showed their predetermined mind and on this ground petitioners have challenged the action without approaching the authority under Section 32-G. The Hon’ble Supreme Court has held that Section 32- G of the Act is one of the various remedies available to the Corporation to secure its debt in Karnataka State Financial Corporation Vs. N.Narsimahaiah and others (2008) 5 Supreme Court Cases 176. Accordingly, we find no justification to entertain the present writ petition in which the Corporation is only seeking to recover its dues as per agreement between the parties. Consequently, the writ petition is dismissed. (G.S.SANDHAWALIA) Judge October 19, 2011 (HEMANT GUPTA) Pka Judge