IN THE HIGH COURT OF JUDICATURE AT PATNA CWJC No.11750 of 2007 SHAMIMUDDIN, son of late Chote Mian, resident of Mohalla Alamganj, P.O. and P.S. Biharsharif, District-Nalanda, Proprietor of M/S-Premi Printing Press, Industrial Estate, Ramchandrapur, Biharsharif, District- Nalanda. ……..Petitioner Versus 1. The Bihar State Financial Corporation through its Managing Director, Fraser Road, Patna. 2. The Managing Director, Bihar State Financial Corporation, Fraser Road, Patna. 3. Branch Manager, Bihar State Financial Corporation, Biharsharif Branch, Biharsharif, District-Nalanda. 4. Manager, Zone III, Bihar State Financial Corporation, Fraser Road, Patna. 5. Sri. Ashutosh Saran Singh, son of late Chandramani Prasad, resident of Nadiyauna, P.S.-Noorsarai, District-Nalanda. ………Respondents ----------- 08. 21.04.2009 This case shows the apathy of the Corporation towards the Units financed by it. One of the main objects of the Parliament to enact the State Financial Corporation was to set up State level Financial Corporation to make money available for entrepreneur who would otherwise not get benefits from commercial Banks. This was intended to encourage industrialization which in turn would provide employment opportunity to unemployment riddle State. Regrettably this is not the solitary case. In almost all cases which have come up before this Court from time to time the only action of B.S.F.C. has been to sanction the term loan, disburse part of it and then 2 proceed to sell the Unit in exercise of its statutory power to recover the amount with interest which mounts to five times to ten times principle advanced. Not in one case has anything been brought on record by the Corporation as to the steps they have taken to supervise the Unit financed by them or to help the entrepreneur rather funding only the capital outlay and then leaving the Unit to go to Commercial Banks for working capital. Here the commercial Banks refuse to give working capital to industries financed by the Corporation because such industries were normally set up by entrepreneurs having no previous experience. The result was that the Units were ready but had no money to operate. There were defaults and consequently total shut down with heavy compound interest and a consequence thereof, not a single unit worth his name has come in several decades of the Corporation’s existence in this State. Petitioner intended to set up a Printing Press at Biharsharif, it took allotment of 6,400 Sq. Ft of land from the Industrial Area Development Authority at Biharsharif. It applied for small term loan of about Rs. 1.44 lacs from the Corporation in the year 1978. Though loan was sanctioned in small installments, only about Rs. 85,000/- was disbursed. Some of these facts in relation to the petitioner are controverterted by the Corporation 3 but these are not materials for resolving the dispute. In 1981 as a consequence of communal riot, petitioner suffered great loss. Petitioner applied to the Corporation for rehabilitation package to restart his Printing Press which had been burned. He was sanctioned Rs. 1.50 lacs. This would have come to great help if that reached to the petitioner. As is usual when the very first disbursement of Rs. 31,000/- was made, it was adjusted fully against outstanding interest. Though on paper the Corporation has done a great job for rehabilitation, but the money never reached for rehabilitation to the needy. Petitioner then again for the third time sought to burn his finger. Again in 1986, third time loans were sanctioned but with no use as the disbursement thereof was adjusted against outstanding interest. Again on paper the petitioner received money which in fact never crossed the boundary of the Corporation as in the Accounts Section itself, the disbursement was eaten away by the accrued interest and the Unit left high and dry. Ultimately B.S.F.C. in exercise of its power under Section 29 of the Act advertised for auction sale of petitioner’s Unit which included lease hold land as aforesaid. In November, 1994, B.S.F.C. dispossessed the petitioner of the Industrial Unit. This was the surety 4 (mortgage) which was given by the petitioner to B.S.F.C. for securing the loan. Thus in 1994 the securities were taken possession by the Corporation for discharge of liabilities of petitioner towards Corporation. This leads to the first grievance of the petitioner. The first grievance is that once the Corporation exercise its right to take over surety for realization of its debts then from the date onwards the Corporation can not charge any interest in the account because that is not permissible. The reason is simple. Surety was given for securing the debt, the Corporation can not appropriate the surety and keep the debt alive. At the same time the moment surety is appropriated towards the debts, to the extent debts get extinguished. What Corporation does with the surety is not material in this respect. It is not in dispute that even though in 1994 the petitioner was totally dispossessed of all his assets, Corporation kept charging compound interest in the account quarter after quarter and “book building” its assets, with what purpose one does not understand. The object of the Corporation being industrialization was never achieved nor attempted to be achieved. On the plea of public finance the Corporation is acting only as a commercial banker which is not the terms of legislation under which it was born. 5 The second grievance of the petitioner is that having taken possession of the entire mortgaged assets, on the part of B.S.F.C., it took seven long years for auction sale. In the seven years the interest kept mounting and over Rs. 6,00,000/- that was realized from the sale process was not enough to even clear the accumulated interest liability, that is arbitrary, it is submitted. The third grievance is that having taken possession of petitioner’ Unit, about 1900 Sq. Ft. of petitioner’s area has been occupied by the B.S.F.C. for its Office use without payment of any rent or compensation to the petitioner. On behalf of Corporation it is submitted that these facts are not correct. In fact BIADA. and the Corporation jointly requested to the District Magistrate, Biharsharif to take possession of the said land. The District Magistrate obliged and took possession of the Petitioner’s land. But in fact the possession was then retained by the BIADA. till it was made over to the Corporation in 2001. To this Court, it is difficult to accept this contention. The moment BIADA. and the Corporation join to ask the District Magistrate to take over possession and consequently the District Magistrate disposes the petitioner and handed over the possession to BIADA., who 6 had jointly with Corporation prayed for such an action, it would be deemed that possession was with the Corporation if not physically, in constructive manner with BIADA. It is also not in dispute that while in this status, in 1995 the advertisement for sale of Unit was issued, the Corporation sold about 3208 Sq Ft. to be in its possession which was ultimately sold in 2002. In the meantime, petitioner was allowed to retain as a matter of compromise about 1200 Sq. ft. Thus what was left was about 1900 Sq. ft which the Corporation retained and opened its office in it. The grievance is that even though the Corporation is running its Office in the premises of the petitioner, it has taken no steps to compensate the petitioner for use of its property. In my view, these facts need to be resolved and the Managing Director of the Corporation needs to reapply his mind to the facts aforesaid and take a decision at the first instance. Let petitioner file a detailed representation along with copy of the order of this Court before the Managing Director of the Corporation within six weeks from today and on representation so being filed. The Managing Director of the Corporation would hear the petitioner or his representative and take a decision in the 7 matter within two months thereafter and communicate the same to the petitioner. Petitioner if remains aggrieved by the said decision, would be at liberty to assail before the appropriate authority. With these observations and directions, the writ application stands disposed of. Shageer (Navaniti Prasad Singh, J)