IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) TUESDAY, THE EIGHTEENTH DAY OF NOVEMBER TWO THOUSAND AND EIGHT PRESENT THE HON'BLE MS JUSTICE G.ROHINI WRIT PETITION NO : 19611 of 2007 Between: M/s.Sri Venkata Ramana Stone Crushers, represented byits Partner Smt.G.Padma, w/o Prabhakar Rao, r/o H.No.1-1-123, Mahalaxmi Nagar Colony, Nizamabad. ..... PETITIONER AND 1The A.P.State Financial Corporation represented by its Managing Director, Chirag Ali Lane, Head Office, r/o 5-9-194, Abids, Hyderabad. 2The A.P.State Financial Corporation represented by its Assistant General Manager, (AM/BIFR Department) Head Office, r/o 5-9-194, Abids, Chirag Ali Lane, Hyderabad. 3The A.P.State Financial Corporation represented byits Senior Branch Manager, Door No.6-2-256/1, Ground Floor, Opp:2-P Office, Subash Nagar, Nizamabad. 4Vajeer Shivaji Rao S/o Sambaji Rao R/o Mathusangam (V), Gandhari Mandal, Nizamabad Dist. 5Vajeer Mukund Rao S/o Hanumanth Rao R/o Mathusangam (V), Gandhari Mandal, Nizamabad Dist. 6Patlolla Ramachander Rao S/o Balaji R/o Mathusangam (V), Gandhari Mandal, Nizamabad Dist. 7Paila Mahender Reddy S/o Sayireddy R/o Bowenpally, Secunderabad. 8Bandaru Ramesh Reddy S/o Pothireddy R/o Polkampet (v), Lingampet Mandal Nizamabad Dist. 9Jadhav Narayana Rao S/o Vithal Rao Nizamabad Dist. RR- 4 TO 9 are impleaded as per COurt order dated 11.11.08 in wpmp 6549 of 2008. .....RESPONDENTS 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 issue a writ or order or direction more particularly one in the nature of the writ of mandamus declaring the action of the respondents in rejection the case of the petitioner's sick unit under OTS its LN/SVRSC/2006-07/1015, dated 13-10-2006 and also put in public auction vide 2nd respondent publication dated 28-8-2007 is arbitrary, bad, illegal and violation of Article 14 of the Constitution of India and also violation of RBI and SIDBI guidelines consequently call for the records pertaining to the petitioner loan account No.66265215 and set aside the rejection order dated 13-10-2006 by directing the respondents to reexamine the case of the petitioner under OTS in the interest of justice. Counsel for the Petitioner: MR.KURITIBHASKARA RAO Counsel for the Respondent No.: MR.J.PARTHASARATHY The Court made the following : THE HON’BLE Ms. JUSTICE G. ROHINI WRIT PETITION No.19611 OF 2007 ORDER : The petitioner herein was sanctioned a loan by the Andhra Pradesh State Financial Corporation (APSFC) for establishing a stone crushing plant in Nizamabad District. However, the petitioner unit was closed in the year 2002 and since it could not repay the loan amount as per the agreed repayment schedule, its loan account was declared as Non-Performing Account. While so, the Corporation issued a publication in the local dailies for settlement of loans under “One Time Settlement Scheme” by waiving the interest. Pursuant thereto, the petitioner made a representation on 31-12-2003 for settlement under OTS and paid Rs.4,50,000/- towards 15% of the amount outstanding against its loan account as per the conditions prescribed under OTS Scheme. However, the request of the petitioner for settlement under OTS was kept pending for a long time and ultimately by order dated.13-10-2006 the petitioner was informed that its request for settlement under OTS was rejected. Accordingly the petitioner was called upon to clear the arrears and regularize the loan account within ten(10) days failing which steps would be taken under Section.29 of the State Financial Corporations Act, 1951 for recovery of the amount due. Aggrieved by the same, the present writ petition is filed seeking a declaration that the proceedings of the Corporation dated.13.10.2006 rejecting the petitioner’s proposal for One Time Settlement(OTS), is arbitrary and illegal and in violation of the guidelines of the RBI and SIDBI. The petitioner sought for a further declaration that the consequential sale proposed by the 2nd respondent by issuing a pubic notice dated.22-08-2007 is also arbitrary and illegal. It is primarily contended by the petitioner that the impugned order dated 13.10.2006 rejecting the petitioner’s request for One Time Settlement without assigning any reasons in spite of the decision taken by the Board of Directors to settle the claim of the petitioner for a sum of Rs.34 lakhs, once for all, is arbitrary and illegal. It is also contended that the impugned action of the respondents is discriminatory and in violation of Article 14 of the Constitution of India since similar requests made by other sick units located in Kamareddy area of Nizamabad District were considered under OTS by waiving the interest running to several crores of rupees. In the counter-affidavit filed on behalf of the Corporation (respondents 1 to 3), it is stated that since the petitioner unit was closed in the year 2002 and it committed default in payment of the principal as well as the interest the unit was seized and proposed to be sold under Section 29 of the State Financial Corporations Act, 1951, by publishing a sale notice dated 15.7.2003. Aggrieved by the same, the petitioner filed W.P.No.16103 of 2003 in which this Court granted interim stay subject to payment of Rs.6 lacks by the petitioner on or before 25-02-2004. Pursuant thereto, though the unit was handed over to the petitioner on 4.8.2004, the petitioner failed to pay the amount as ordered by this Court. Hence, a fresh seizure notice was issued by the Corporation on 16.8.2005. Challenging the same, the petitioner filed W.P.No.19932 of 2005. This Court granted four (4) weeks time to the petitioner to repay the amount due. However, the petitioner failed to comply with the same. Hence, the Corporation seized the unit on 23-07-2007 and thereafter a sale notice dated.22-08- 2007 was published in the local dailies for sale of the seized property including land, building and machinery. In the meanwhile, the petitioner’s request for settlement under OTS was rejected by order dated 13.10.2006 since the said request was found to be not bona fide and the petitioner failed to comply with the order of this Court in W.P.No.19932 of 2005. The plea of the petitioner that a sum of Rs.4.5 lakhs was paid by it under OTS Scheme has been denied and it is stated that the petitioner paid Rs.4 lakhs as per the directions in W.P.No.16103 of 2003 for release of the unit seized in July, 2003. The further sum of Rs.50,000/- was paid only on 8.8.2006 as against Rs.34 lakhs directed to be paid in W.P.No.19932 of 2005. It is also explained that out of Rs.44.25 lakhs sanctioned, the petitioner could repay only Rs.12 lakhs which was adjusted towards the interest due as per the Rules of the Corporation. Hence, the impugned order of rejection of OTS is neither arbitrary nor discriminatory. The Corporation filed a further counter-affidavit dated 15.04.2008 stating that pursuant to the sale notice dated 22.8.2007 the property was sold to one Wazir Sivaji Rao and others, who had already paid the entire sale consideration of Rs.50.26 lakhs, and the possession was also handed over to them. The purchasers who got themselves impleaded as respondents 4 to 9 filed a counter-affidavit stating that they paid a total sum of Rs.50.26 lakhs to the Corporation and the vacant possession of the land, machinery and building of the petitioner unit was handed over to them on 26.12.2007. Thereafter, they carried out the repairs and purchased various machinery investing huge amounts. The unit was revived and started functioning from 11.02.2008 in which 400 workers are working. While pleading that they are bona fide purchasers for a valuable consideration and more than Rs.1,20,00,000/- has been invested for purchasing and revival of the unit, it is contended that no case is made out by the petitioner warranting interference by this Court at this stage. I have heard the learned counsel for the both parties and perused the material on record. At the outset, it is to be noted that the OTS scheme offered by the Corporation is not governed by any statute. Hence, the petitioner cannot be said to have acquired any legal or statutory right which can be enforced by invoking Article 226 of the Constitution of India. However the Corporation being an instrumentality of the State, is bound to act fairly and reasonably without infringing Article 14 of the Constitution of India while considering the claims for settlement under OTS. In the case on hand, though it is alleged by the petitioner that the impugned action of the Corporation is arbitrary and discriminatory, on a careful consideration of the material on record, I do not find any substance in the said contention. As could be seen, the petitioner initially filed W.P.No.16103 of 2003 challenging the recall-cum-sale notice dated 15.07.2003 issued by the Corporation. This Court by order dated 24.2.2004 directed the petitioner to deposit Rs.4 lakhs within four weeks subject to which the Corporation shall consider One Time Settlement within a period of four weeks from the date of fulfilling the said condition and the sale notice was deferred till the petitioner’s case is considered for OTS. However, the petitioner failed to pay Rs.4 lakhs within four weeks. Admittedly, the said amount was paid in three (3) installments i.e., on 8.1.2004, 5.8.2004 and 8.1.2005 i.e., long after the time granted by this court. Thereafter, the petitioner filed W.P.No.19932 of 2005 challenging the subsequent sale notice dated 16.8.2005 and requesting to consider his case for OTS for a sum of Rs.34 lakhs as per the Board Resolution dated 26.11.2004. This Court, though observed that no legal infirmity or factual inaccuracy was pointed out in the impugned notice, disposed of the writ petition by order dated 12.09.2005 with directions as under : “Learned counsel for the petitioner made repeated appeals that his client is prepared to deposit the amount said to have been fixed as one time settlement. This Court intends to give him a last chance to prove his bona fides. In that view of the matter, it is directed that the further steps, in pursuance of the impugned notice, shall be deferred by four weeks. In case, the petitioner deposits a sum of Rs.34,00,000/- upto that date, the sale of the unit shall not be proceeded with and it shall be open to the petitioner to make representation for the remaining part of the liability.” Admittedly, the petitioner did not pay the said amount of Rs.34 lakhs. Having regard to the above facts which make it clear that the petitioner is a chronic defaulter, the action of the Corporation in rejecting the petitioner’s request for OTS cannot be held to be arbitrary or illegal. It is also relevant to note that whereas the impugned order of rejection was passed on 13.10.2006 the present writ petition was filed after about an year on 13.9.2007, after a sale notice was published by the Corporation on 24.8.2007. Though the writ petition came up for admission on 14.09.2007, no interim orders were passed restraining the Corporation from proceeding with the sale notice. Consequently the tenders were finalized on 27.09.2007 on which date the respondents 4 to 9, being the successful bidders, paid 50% of the sale consideration. Though there was no interim order, in view of the pendency of the writ petition the Corporation issued the sale confirmation letter dated 27.09.2007 making it clear that the sale was subject to final decision in this writ petition. Thereafter, on 29.11.2007 an interim order was passed directing the Corporation not to finalize the bids / offers for a period of two weeks i.e., till 13.12.2007. The said interim order was extended on 31.12.2007 upto 17.01.2008. In the interregnum the remaining 50% was paid by the respondents 4 to 9 on 26.12.2007 and since there was no interim order as on that date the vacant possession was delivered to them by the Corporation. As noticed above, the interim order was extended subsequently by order dated 31.12.2007. From the undisputed facts noticed above, it is clear that the petitioner is a chronic defaulter and could not make the payments even as per the conditional orders passed by this Court leave alone the payments to be made while opting for OTS. For the aforesaid reasons, the impugned order dated.13.10.2006 passed by the Corporation rejecting the petitioner’s request for settlement under OTS cannot be held to be arbitrary, illegal or discriminatory on any ground whatsoever and the interference by this Court with the rights acquired by the respondents 4 to 9 under a valid transaction is not warranted. Accordingly, the writ petition, which is devoid of any merit, is hereby dismissed. No costs. ______________ G. ROHINI, J. Dt. 18.11.2008 TSNR