THE HON'BLE SRI JUSTICE P.S.NARAYANA W.P.No.15444 & 18369 of 2007 Date : 1-2-2010 Between : M/s. Nagarjuna Modern Rice Mill, Village N.Annaram, Mandal Penpahad, District Nalgonda, represented by its Proprietor D.Murali .. Petitioner And The Managing Director, A.P. State Financial Corporation, Chirag Ali Lane, Hyderabad and others .. Respondents THE HON'BLE SRI JUSTICE P.S.NARAYANA W.P.No.15444 & 18369 of 2007 ORDER: 1. Heard Sri C.Damodar Reddy, the learned Counsel representing the writ petitioner in both these Writ Petitions and Sri Durga Reddy, the learned Counsel representing the respondents in both these Writ Petitions. 2. In view of the commonality of questions of fact and questions of law involved in both these matters, both these Writ Petitions are being disposed of finally. 3. This Court issued rule nisi in W.P.No.15444/2007 and ordered notice. In W.P.No.18369/2007 while issuing rule nisi on 31-8- 2007 in W.P.M.P.No.23578/2007, this Court made the following order: “There shall be interim stay of sale subject to the condition that the petitioner deposits a sum of Rs.3 lakhs within three weeks from today, failing which the interim stay shall stand vacated and it is open for the respondents to proceed in accordance with law” It is stated that the said conditional order had been complied with. 4. W.V.M.P.No.2495/2007 is filed to vacate the interim stay granted in W.P.M.P.No.23578/2007 in W.P.No.18369/2007 dated 31- 8-2007. A common counter affidavit had been filed in both these Writ Petitions. When the vacate application came up for hearing the Counsel on record made submissions in elaboration and further made a request for disposal of these Writ Petitions and hence these Writ Petitions are being disposed of finally. 5. Sri Damodar Reddy, the learned Counsel representing the writ petitioner in both these Writ Petitions had taken this Court through the averments made in the respective affidavits filed in support of the Writ Petitions and had pointed out to the relevant dates and would maintain that though the One Time Settlement application had been considered, the same was not considered in accordance with law and the said decision taken also had not been communicated to the petitioner. The learned Counsel also further had taken this Court through the chronological events and would maintain that the petitioner submitted One Time Settlement application on 16-7-2004 and in spite of the order made by this Court in W.P.No.8866/2005 dated 21-4-2005, the respondents failed to consider the application and the reminders of the petitioner for more than 3 years and the same is contrary to the One Time Settlement scheme. The learned Counsel also placed before this Court a copy of the One Time Settlement scheme. The learned Counsel also pointed out that the unit of the petitioner is a small unit and because of the conduct of the respondents, the petitioner sustained heavy loss and he is unable to discharge the loan amount and thus serious prejudice had been caused to him. The learned Counsel also would maintain that inasmuch as the previous One Time Settlement application had not been considered in accordance with law, let the One Time Settlement application be reconsidered and in view of the fact that the conditional order of making the deposit had been complied with, reasonable opportunity may be given to the petitioner to discharge the rest of the amount. The learned Counsel also placed reliance on certain decisions to substantiate his submissions. 6. Per contra Sri Durga Reddy, the learned Counsel representing the respondents had taken this Court through the contents of the counter affidavit and would maintain that in matters of this nature, normally, a writ court not to interfere and the Writ Petition itself is not maintainable. The learned Counsel while further elaborating his submissions had taken this Court through the relevant paras of the counter affidavit in general and paras 5, 6 and 8 in particular and would maintain that inasmuch as the One Time Settlement application had been considered and reasonable opportunity had been given to the petitioner since the petitioner was not inclined to discharge the loan amount, left with no other option, the respondents, to realize the loan amount, proceeded with conduct of auction. The learned Counsel also placed strong reliance on several decisions. 7. Heard the Counsel, perused the averments made in the affidavit filed in support of the Writ Petitions and also the averments made in the common counter affidavit and also the material papers placed before this Court. 8. W.P.No.15444/2007 is filed praying for a writ of mandamus declaring the action of the respondents in issuing approval letter dated 24-3-2007 in directing the petitioner to pay a sum of Rs.6,03,608/- (including down payment of Rs.77,000/- with further O.E., if any, with interest upto 31-1-2007 in respect of the petitioner’s account No.64356418 under One Time Settlement scheme without disclosing the guidelines or Scheme under which the petitioner’s account is determined to pay a sum of Rs.6,08,608/- as unfair, unreasonable, bad, illegal and contrary to the order passed by this Court in W.P.No.8866/2005 dated 21-4-2005 and in violation of principles of natural justice and consequently to direct the 2nd respondent to furnish the details of guidelines or Scheme under which the petitioner’s account is determined to pay a sum of Rs.6,03,608/- under One Time Settlement scheme in the interest of justice and pass such other suitable orders. 9. W.P.No.18369/2007 is filed for a writ of mandamus declaring the action of the respondents in seizing the petitioner ‘s unit and issuing sale notice dated 10-8-2007 to sell the same, published in Eenadu Telugu daily newspaper on 12-8-2007 at Item No.22 as illegal, arbitrary and in violation of principles of natural justice and consequently to set aside the said seizure of unit and sale notice dated 10-8-2007 published in Eenadu Telugu daily newspaper on 12-8-2007 at Item No.22 in the interest of justice and to pass such other suitable orders. 10. In view of the fact that the averments made in both the affidavits filed in support of the Writ Petitions being almost common, it may be appropriate to have a glance at the averments made in W.P.No.18369/2007. 11. It is the case of the petitioner that the petitioner availed a loan of Rs.4,70,000/- vide A/c.No.64356418 for running Rice Mill in the year 1987 from the 3rd respondent and so far the petitioner had paid a sum of Rs.6,00,000/- to the credit of his loan account. Further it is stated that as the petitioner sustained heavy loss, the petitioner made representations dated 16-7-2004, 22-12-2004 and 31-3-2005 to the respondents-authorities for One Time Settlement of the loan account but the respondents failed to decide the said representations for One Time Settlement and hence the petitioner was constrained to file W.P.No.8866/2005 on the file of this Court against the respondents to direct the respondents to consider the said representations for One Time Settlement and this Court was pleased to pass an order in W.P.No.8866/2005 dated 21-4-2005 directing the respondents to take appropriate decision on the representation of the petitioner dated 31-3- 2005 in accordance with the scheme governing One Time Settlement within a period of four weeks. 12. Further it is averred that the 3rd respondent issued a letter dated 7-7-2005 directing the petitioner to pay 15% of the principal amount amounting to Rs.67,704/- as down payment on or before 14-7- 2005 to process the petitioner’s request for One Time Settlement. In pursuance of the said letter issued by the 3rd respondent, the petitioner made payment of Rs.30,000/- vide receipt No.231080 dated 27-7- 2005. It is also further stated that the petitioner made a representation dated 23-12-2005 to the 1st respondent stating that the petitioner paid Rs.30,000/- on 27-7-2005 to the 3rd respondent to furnish the details of One Time Settlement i.e., instalments, time schedule and waiver of interest but no details of One Time Settlement of the petitioner account had been furnished by the 3rd respondent. The 3rd respondent issued a letter dated 17-2-2006 directing the petitioner to make the payment of balance amount of Rs.37,304/- towards 15% of down payment on or before 24-2-2006 to submit the One Time Settlement proposals to the Head Office. The petitioner paid a sum of Rs.37,350/- on 23-2-2006 vide receipt Nol.234524 to the 3rd respondent. The petitioner paid 15% of the amount as directed by the respondents-authorities to settle the petitioner’s account under One Time Settlement scheme. The 3rd respondent again issued a notice dated 24-2-2006 directing the petitioner to issue post dated cheques to forward the petitioner’s request for settlement of the loan account. The petitioner then made a representation dated 28-3-2006 to the 1st respondent stating that the petitioner’s request for One Time Settlement is under consideration by the respondents for the last two years but the respondents did not settle the account under One Time Settlement scheme. The petitioner paid 15% of the amount by 23-2-2006 as demanded by the respondents-authorities and paid a sum of Rs.10,000/- to the 3rd respondent to the credit of the loan account. However no action had been taken by the respondents-authorities to settle the petitioner’s account under One Time Settlement scheme even after receipt of 15% of the principal amount by 23-2-2006. Therefore the petitioner made a representation dated 3-3-2007 to the 3rd respondent stating all the grievances. Even after expiry of more than one year period after payment of 15% of the principal amount, the respondents did not intimate the petitioner the scheme of One Time Settlement and hence the petitioner requested the 3rd respondent to inform the details of One Time Settlement scheme as soon as possible. The respondents did not issue any notice to the petitioner till the petitioner made the said representation dated 3-3-2007 after payment of 15% of the principal amount by the petitioner. 13. It is also further stated that that 3rd respondent issued a notice dated 8-6-2007 stating that the respondents-authorities had agreed to close the loan account under One Time Settlement by accepting an amount of Rs.6,03,608/- (including down payment of Rs.77,000/-) with further O.E., if any, without further interest from 1-2- 2007 payable on or before 31-3-2007 vide their Head Office letter dated 24-3-2007 and agreed to waive the interest outstanding of Rs.2,22,534/- as on 31-1-2007 if the One Time Settlement amount is paid within 31-3-2007. It was further alleged in the said letter that the petitioner had not paid the One Time Settlement amount and closed the account and decided to proceed under Section 29 of State Finance Corporation Act. After receipt of the said letter the petitioner made a representation to the 3rd respondent stating that the Head Office approval letter dated 24-3-2007 regarding One Time Settlement had not been served on the petitioner and requested the 3rd respondent to kindly send a copy of the One Time Settlement letter for information. In pursuance of the said request, the 3rd respondent issued a letter dated 19-6-2007 enclosing the Head Office approval letter dated 24-3-2007 and further informing that if the petitioner fails to pay the One Time Settlement amount the will proceed against the assets of the unit. 14. It may be appropriate to have a glance at the letter dated 24-3-2007 and the contents thereof : “With reference to your proposal cited above, we inform you that Executive Committee of the Corporation at its meeting held on 21-3-2007 has approved your request for closure of your loan account under OTS as follows: Approved to close the loan amount on One Time Settlement basis by accepting an amount of Rs.6,03,608/- (including down payment of Rs.77,000/-) with fur O.E., if any but without further interest from 1-2-2007 payable on or before 31-3-2007. Please note that in case you fail to honour the schedule of payment approved by the Corporation as above, the reliefs granted under O.T.S. shall be cancelled and you shall be liable to pay the entire outstanding amount with further interest thereon at prevailing rate and recovery action will be initiated immediately. Hence, please act immediately and pay the amount as agreed above within the above schedule to settle your account under One Time Settlement.” 15. It is also the case of the petitioner that the petitioner received the approval letter dated 24-3-2007 issued by the 2nd respondent through the 3rd respondent by his notice dated 19-5-2007 only and prior to that the said approval letter dated 24-3-2007 was not served on the petitioner. Further it is stated that the approval letter issued by the 3rd respondent is vague, ambiguous and not specific and the same does not disclose the guidelines in accordance which the petitioner’s account had been settled at Rs.6,03,608/- (including Rs.77,000/-). The said approval letter does not disclose the petitioner’s statement of account. No opportunity was given to the petitioner before issuing the said approval letter by the 3rd respondent. The approval letter dated 24-3-2007 is not disclosing on what guidelines the interest had been charged upto 31-1-2007 and without disclosing the guidelines for waiver of interest under One Time Settlement scheme but directed the petitioner to pay Rs.6,03,608/- (including Rs.77,000/-) with further O.E., if any. The 2nd respondent ought to have disclosed the principal amount, the rate of interest calculated upto 31-1-2007 and for what reasons the interest had been charged upto 31-1-2007 as the petitioner paid 15% of the principal amount as demanded by the respondents by 23-2-2006. The respondents ought to have decided the account under One Time Settlement scheme immediately after payment of 15% of the principal amount only i.e., by 23-2-2006. Therefore the calculation of interest subsequent to 23-2-2006 to 31-1-2007 is bad and arbitrary. It is further stated that the petitioner unit had been ceased by the 3rd respondent on 18-7-2007 arbitrarily. 16. Further it is stated that the action of the 2nd respondent in issuing the approval letter dated 24-3-2007 without disclosing he guidelines of the One Time Settlement scheme and determining at Rs.6,03,608/- is unfair and unreasonable and contrary to the order passed by this Court in W.P.No.8866/20056 dated 21-4-2005 directing the respondents to decide the petitioner’s case in accordance with the scheme governing One Time Settlement. The 2nd respondent did not furnish what is the principal amount, what is the rate of interest waived and for what reasons the interest had been charged upto 31-1-2007 to determine the amount payable by the petitioner and without disclosing the details of the account under One Time Settlement, mere directing the petitioner to pay the said amount is bad, illegal, unfair and unreasonable. 17. Further it is also stated that previously the writ petitioner filed W.P.No.15444/2007 against the respondents questioning the approval letter dated 24-3-2007 issued by the 2nd respondent and to direct the 2nd respondent to furnish the details of the guidelines or scheme under which the petitioner’s account had been determined to pay Rs.6,03,608/- under One Time Settlement and the said Writ Petition was admitted on 23-7-2007 and notice was ordered and the same is pending. Further it is also stated that the approval letter dated 24-3-2007 was served on the petitioner through the 3rd respondent by his letter notice dated 19-6-2007 only. The said approval letter was not served on prior to 19-6-2007. The petitioner paid 15% of the principal amount as per the directions of the respondents-authorities by 23-2-2006 itself but the authorities did not decide the petitioner’s account under One Time Settlement scheme. But, the 2nd respondent issued the approval letter on 24-3-2007 and the same was served through the 3rd respondent by his notice dated 19-6-2007. The petitioner’s unit was ceased on 18-7-2007. The writ petitioner filed W.P.No.154544/2007 and pending the same the 3rd respondent issued a paper publication in Eenadu Telugu daily newspaper on 12- 8-2007 inviting Tenders to sell the petitioner’s unit M/s. Nagarjuna Modern Rice Mill. The approval letter issued by the 2nd respondent without furnishing the details of One Time Settlement Scheme and fixing the amount at Rs.6,03,608/- (including Rs.77,000/- payable by the petitioner) and the said approval letter was not served on the petitioner. When the petitioner complained to the 3rd respondent, by his letter dated 19-6-2007 the approval letter dated 24-3-2008 issued by the 2nd respondent was served on the petitioner and the petitioner’s unit was ceased on 18-7-2007 and the said notice was issued on 12-8- 2007 and the same had been published in Eenadu Telugu Daily newspaper dated 12-8-2007 by the 3rd respondent. 18. It is stated that the action of the 3rd respondent in ceasing the unit on 18-7-2007 and issuing the sale notice dated 10-8-2007 published in Eenadu Telugu daily newspaper dated 12-8-2007 is without giving appropriate time and pending W.P.No.15444/2007 the 2nd respondent be directed to furnish the details of One Time Settlement guidelines in arriving at Rs.6,03,608/- (including Rs.77,000/-) payable by the petitioner. The action of the 3rd respondent in issuing the sale notice is only with an intention to flout the orders to be passed in W.P.N.15444/2007. Further, the action of the 3rd respondent in seizing the unit and issuing the sale notice is illegal, arbitrary and the same is in violation of principles of natural justice. Further it is stated that it is just and necessary to declare the action of the 3rd respondent in seizing the unit on 18-7-2007 and issuing the sale notice dated 10-8-2007 of the petitioner’s unit in Eenadu Telugu daily newspaper on 12-8-2007 is illegal, arbitrary and in violation of principles of natural justice and prayed to set aside the seizure of the unit and sale notice dated 10-8-2007 in the interest of justice. 19. In the counter affidavit filed by the respondents in both these Writ Petitions, it is stated that that A.P. State Finance Corporation was established with a view to provide medium and long term credit to industrial undertakings, business houses and service sectors and deals with public money. The Corporation can operate effectively only if there is regular realization of loans granted and if the repayments are not received as per schedule it would disturb the equilibrium of financial arrangements of the Corporation. Therefore unless the Corporation recovers the amounts due from defaulters it cannot function and survive and it cannot cater to the needs of needy, genuine entrepreneurs. 20. It is further stated that the Writ Petition is not maintainable and is liable to be dismissed in limine having regard to the authoritative pronouncement of the Hon’ble Supreme Court in Haryana Financial Corporation and another Vs. M/s. Jagadamba Oil Mills and another [1] and Karnataka State Industrial Investment & Development Corporation Ltd Vs. Cavalet India Ltd. And others [2]. Further it is stated that it is a fact that Sri D.Murali s/o.late Laghupathi Rao r/o.N.Annaram village is the proprietor of M/s.Nagarjuna Modern Rice Mill, situate at N.Annaram village, Penpahad Mandal, Nalgonda District. The respondents-Corporation sanctioned a term loan of Rs.8.34 lakhs on 31-3-1997 to M/s.Nagarjuna Modern Rice Mill for expansion of the existing ½ ton Rice Mill to 1 ton/hr Rice Mill and the petitioner availed an amount of Rs.4.68,930/- during the year 1997 and offered the following properties as security to the respondents-Corporation: Primary security : Factory land admeasuring Ac.0-30 gts. Covered by Sy.No.580 situate at N.Annaram village, Penpahad Mandal, Nalgonda District together with buildings constructed to be constructed thereon and Hypothecation Plant & Machinery existing and proposed with future acquisitions thereon. Collateral security : (1) Agricultural dry lands admeasuring Ac.2-06 gts. in Sy.No.570/A, Ac.0-10 gts. in Sy.No.571/A, in Sy.No.571/AA Ac.2-16 gts., situate at N.Annaram village, Penpahad Mandal, Nalgonda District which belongs to Sri G.Shyam Sunder Reddy. (2) Agricultural dry lands admeasuring Ac.4-17 gts. in Sy.No.64/AA, Ac.2-21 gts. in Sy.No.71/A, in total acres situate at Dosapadu village, Penpahad Mandal, Nalgonda District belonging to Smt.D.Sugunamma w/o.D.Murali. It is further stated that the above property documents had been deposited and an equitable mortgage created in favour of the Corporation. It is also further stated that as per the sanction condition, the loan was to be repaid in a period of 5 years from the date of first disbursement i.e., 1-9-1997 and the loan was to be closed on or before 1-9-2002. But the borrower failed to repay the instalments of principal and interest to the Corporation as per the schedule. The borrower expressed that the unit was not working well due to competition and requested the Corporation to reschedule the loan instalments. In view of the problems faced by the unit, the Corporation refixed loan instalments in September 1999 with extension of 3 years and as per the revised schedule the petitioner ought to have paid the entire loan amount by 8-9-2005. After re-fixation also the petitioner could not pay the instalments of principal and interest in spite of several letters and notices and became a chronic defaulter. From the date of availing the loan, the petitioner in total paid an amount of Rs.5,29,352/- till 31-7- 2005, out of which Rs.17,568/- towards principal Rs.5,07,823/- towards interest and Rs.3961/- towards other expenses and failed to pay further amounts. As huge arrears had been mounted in the petitioner’s account, the respondents-Corporation was compelled to issue recall- cum-sale notice on 5-7-2004. In response to the said notice, the petitioner proposed to close the loan account under One Time Settlement. It is totally incorrect to state that the petitioner’s representation for One Time Settlement was not considered and as such the petitioner was constrained to file W.P.No.8866/2005 for consideration of the petitioner’s case under One Time Settlement scheme. In fact, the Corporation had taken up the representation of the petitioner as per the guidelines of One Time Settlement and when the Corporation requested for 15% of the principal outstanding as down payment, the petitioner filed W.P.No.8866/2005 challenging the payment of down payment. The petition was dismissed at the admission stage on 21-4-2005 with an observation that the Corporation to take appropriate decision on the representation dated 31-3-2005 of the petitioner in accordance with the scheme within a period of four weeks. 21. It is also further stated that thereafter as per the directions of this Court, the Corporation advised the petitioner to pay Rs.67,704/- as down payment on or before 14-7-2005 to process the One Time Settlement vide letter dated 7-7-2005 as per the procedure of the One Time Settlement norms. However the petitioner failed to pay any amount before 14-7-2005 but paid an amount of Rs.30,000/- on 27-7- 2005 and had not paid balance down payment of Rs.37,704/-. At that stage, the petitioner without making full down payment started making representations asking about the amount settled under O.T.S., further time schedule for payment and number of instalments etc. In that context the respondents-Corporation informed the petitioner that only after making full down payment the Corporation can take a decision with regard to the O.T.S. and the same was communicated the petitioner. At that stage, the petitioner again filed W.P.No.2598/2006 and the same was dismissed by this Court on 16-2-2006 observing that the demand of Rs.37,304/- is a condition precedent for processing the request for O.T.S. and therefore the petitioner cannot question to the demand for payment of Rs.37,304/- which is a part of 15% down payment. After dismissal of the said Writ Petition, the writ petitioner paid Rs.37,000/- on 23-2-2006 but failed to submit a concrete proposal for payment under One Time Settlement scheme. 22. Further it is also stated that on continuous persuasion, the petitioner submitted a representation dated 30-12-2006 for One Time Settlement and promised to pay Rs.70,000/- in January 2007, Rs.30,000/- in February 2007 and the balance amount by the end of March 2007. On receipt of the request the O.T.S. proposal was processed and put up to competent authority for consideration. The Corporation’s Executive Committee approved the proposal and agreed for closure of the loan account under O.T.S. by accepting a total amount of Rs.6,03,608/- (including the down payment of Rs.77,000/-) with further O.E., if any, payable on or before 31-3-2007 and interest of Rs.2,22,534/- was agreed to waive under O.T.S. and the same was communicated to the petitioner vide H.O. letter dated 24-3-2007. It was also clearly informed to the petitioner through the said letter that if the amount is not