IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) THURSDAY, THE ELEVENTH DAY OF DECEMBER TWO THOUSAND AND EIGHT PRESENT THE HON'BLE MR JUSTICE V.V.S.RAO WRIT PETITION NO : 2104 of 2002 Between: ..... PETITIONER AND .....RESPONDENT Petition under Article 226 of the constitution of India praying that in the circumstances stated in the Affidavit filed herein the High Court will be pleased to Counsel for the Petitioner:MR.V.RAVI KIRAN RAO Counsel for the Respondent No.: MR.Y.NEELA LOHITHA SASTRY The Court made the following : ..... REGISTRAR // TRUE COPY // SECTION OFFICER To 1.2CCs to 2.2CD copies Form-NIC-OGS/WP{ } THE HON'BLE SRI JUSTICE V.V.S.RAO WRIT PETITION No.2104 of 2002 ORDER: The petitioner is a proprietary concern. Andhra Pradesh State Financial Corporation (APSFC), ﬁrst respondent herein sanctioned a sum of Rs.3,93,000/- as loan to M/s Venkateswara Silk Reeling Industry, Dorakunta Village, Kodad Mandal, Nalgonda District. Said borrower committed default. APSFC seized the unit and auctioned the same for recovering the dues. The petitioner oﬀered Rs.5,15,000/-. Accordingly the sale was conﬁrmed and the unit was handed over to the petitioner and the petitioner inaugurated the unit in August, 1997. The proprietor of the petitioner concern ﬁled an aﬃdavit in support of the writ petition alleging that he came to know that APSFC issued a sale notice on 25.09.1998 and no notice was served on him. Invoking the powers under Section 29 of the State Financial Corporations Act, 1951 (the Act, for brevity) the unit was seized on 13.01.1999 and advertisement was released. The petitioner alleges that after ﬁnalizing the sale APSFC did not inform the petitioner nor oﬀered one time settlement (OTS). The unit was purchased by respondent Nos.3 to 8 for a lower sum which was conﬁrmed by APSFC. Aggrieved by the same, the petitioner ﬁled instant writ petition seeking a writ of Mandamus to set aside the sale in favour of respondent Nos.3 to 8 and restore the assets of the unit to the petitioner. A counter-aﬃdavit is ﬁled by the Senior Branch Manager of APSFC. While denying various writ petition averments it is stated that the petitioner committed default in repayment of the loan. Therefore, the unit was seized under Section 29 of the Act in public interest and the same was advertised on 06.01.1999, 19.06.1999, 12.09.1999, 11.12.1999 and 15.04.2000. In response to the last advertisement fourth respondent and one N. Karunasree oﬀered to purchase the assets for a consideration of Rs.89,928/- and Rs.1,10,000/- respectively. The matter was negotiated with fourth respondent, who agreed to buy for Rs.2,56,978/- on 100% down payment basis. APSFC wrote letter dated 02.06.2001 to the proprietor of the petitioner concern oﬀering OTS. The petitioner concern failed to respond the same. Again in accordance with the decision of the Supreme Court in Mahesh Chandra v Regional Manager, U.P. Financial Corpn. [1] final opportunity was given to the petitioner concern by addressing letter dated 14.06.2001. The same was returned unserved. Therefore, the sale was ﬁnalized in favour of fourth respondent. Notice was remitted to the petitioner concern. The other allegations with regard to service of notice are denied. Learned counsel for the petitioner concern submits that the sale notice and notice conﬁrming sale were not issued to the petitioner concern and therefore, sale of the petitioner concern’s assets in favour of respondent Nos.3 to 8 is vitiated. Secondly he submits that the unit was sold to fourth respondent for a sum of Rs.2,56,978/- when the petitioner purchased the unit for Rs.5,15,000/- from M/s Venkateswara Silk Reeling Industry. Per contra learned standing counsel for APSFC submits that there is no requirement of informing the borrower about the sale proceedings and that the sale was conducted in accordance with the law laid down by the Supreme Court in Haryana Financial Corpn. v Jagdamba Oil Mills[2]. He also placed reliance on Karnataka State Industrial Investment & Development Corpn. Ltd. V Cavalet India Ltd[3]. The petitioner concern has not ﬁled any reply aﬃdavit denying the counter averments in spite of the fact that counter was served in July, 2003. Therefore, the counter averments with regard to service of notice under Section 29 of the Act and information to the petitioner concern with regard to the oﬀer made by fourth respondent remained uncontroverted. In this background whether action of APSFC is arbitrary? I n Jagdamba Oil Mills (supra) the Supreme Court, while overruling Mahesh Chandra (supra), laid down as under. The obligation to act fairly on the part of the administrative authorities was evolved to ensure the rule of law and to prevent failure of justice. This doctrine is complementary to the principles of natural justice which the quasi-judicial authorities are bound to observe. It is true that the distinction between a quasi-judicial and the administrative action has become thin, as pointed out by this Court as far back as 1970 in A.K. Kraipak v. Union of India [(1969) 2 SCC 262]. Even so the extent of judicial scrutiny/judicial review in the case of administrative action cannot be larger than in the case of quasi-judicial action. If the High Court cannot sit as an Appellate Authority over the decisions and orders of quasi- judicial authorities, it follows equally that it cannot do so in the case of administrative authorities. In the matter of administrative action, it is well known, more than one choice is available to the administrative authorities; they have a certain amount of discretion available to them. They have “a right to choose between more than one possible course of action on which there is room for reasonable people to hold diﬀering opinions as to which is to be preferred” (as per Lord Diplock in Secy. of State for Education and Science v. Metropolitan Borough Council of Tameside [1977 AC 1014: (1976) 3 All ER 665: (1976) 3 WLR 641], All ER at p.695f). The Court cannot substitute its judgment for the judgment of administrative authorities in such cases. Only when the action of the administrative authority is so unfair or unreasonable that no reasonable person would have taken that action, can the Court intervene. In Cavalet India Ltd (supra) the Supreme Court, after referring to the earlier precedents summarized the legal principles with regard to sale of assets of borrowers under Section 29 of the Act as under. From the aforesaid, the legal principles that emerge are: (i) The High Court while exercising its jurisdiction under Article 226 of the Constitution does not sit as an appellate authority over the acts and deeds of the Financial Corporation and seek to correct them. The doctrine of fairness does not convert the writ courts into appellate authorities over administrative authorities. (ii) In a matter between the Corporation and its debtor, a writ Court has no say except in two situations: (a) there is a statutory violation on the part of the Corporation, or (b) where the Corporation acts unfairly i.e., unreasonably. (iii) In commercial matters, the Courts should not risk their judgments for the judgments of the bodies to which that task is assigned. (iv) Unless the action of the Financial Corporation is mala ﬁde, even a wrong decision taken by it is not open to challenge. It is not for the Courts or a third party to substitute its decision, however, more prudent, commercial or businesslike it may be, for the decision of the Financial Corporation. Hence, whatever the wisdom (or the lack of it) of the conduct of the Corporation, the same cannot be assailed for making the Corporation liable. (v) In the matter of sale of public property, the dominant consideration is to secure the best price for the property to be sold and this could be achieved only when there is maximum public participation in the process of sale and everybody has an opportunity of making an offer. (vi) Public auction is not the only mode to secure the best price by inviting maximum public participation, tender and negotiation could also be adopted. (vii) The Financial Corporation is always expected to try and realize the maximum sale price by selling the assets by following a procedure which is transparent and acceptable, after due publicity, wherever possible and if any reason is indicated or cause shown for the default, the same has to be considered in its proper perspective and a conscious decision has to be taken as to whether action under Section 29 of the Act is called for. Thereafter, the modalities for disposal of the seized unit have to be worked out. (viii) Fairness cannot be a one-way street. The fairness required of the Financial Corporations cannot be carried to the extent of disabling them from recovering what is due to them. While not insisting upon the borrower to honour the commitments undertaken by him, the Financial Corporation alone cannot be shackled hand and foot in the name of fairness. (ix) Reasonableness is to be tested against the dominant consideration to secure the best price. In this case the petitioner concern approached the Court alleging that notice was not issued before conﬁrming the sale in favour of respondent Nos.3 to 8. There is no such requirement in law to inform the borrower before conﬁrmation of sale. In deed as a matter of fact APSFC appears to have taken all steps to settle the matter with the petitioner concern, but there was no positive response. Secondly except stating that the unit was sold for an unfair price, no material is placed before this Court with regard to the correct market value. In the absence of any such material before this Court, it will be hazardous to take up the exercise. As held by the Supreme Court this Court cannot sit as an appellate authority over the decisions of the statutory corporations. The writ petition is devoid of merits and the same is dismissed. No costs. _____________ (V.V.S.RAO, J) 12th November, 2008 GHN [1] (1993) 2 SCC 279 [2] (2002) 3 SCC 496 [3] (2005) 4 SCC 456