IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) FRIDAY, THE EIGHTH DAY OF AUGUST TWO THOUSAND AND EIGHT PRESENT THE HON'BLE MR JUSTICE GODA RAGHURAM WRIT PETITION NO : 25023 of 2006 Between: Sri Ram Rice Tec Pvt.Ltd., having its office at 7-1-29, United Avenue, (North End) G/1, B.Block Ameerpet, Hyderabad-500 072, Represented by its Director Smt.K.Raja Rajeshwari, w/o Sri K.G.K.Murthy, M/s.Sri Ram Rice Tec.Pvt.Ltd., 7-1-29, United Avenue (North End) G/1, B.Block, Ameerpet, Hyderabad-500 072. ..... PETITIONER AND 1 The Andhra Pradesh State Financial Corporation incorporated under the State Financial Corporations Act, 1951, having its head office at 5-9-194, Chirag Ali Lan Hyderabad-500 001 represented by its Managing Director. 2 the Branch Manager, The APSFC B-12A, Industrial Estate, A.K.Nagar, Nellore. 3 M/s.Gopala Reddy and Associates, c/o Surya Constructions (P) Ltd., Lecturers' Colony, Magunta Lay Out, Nellore represented by Mr.Gopala Reddy, s/o late Venku Reddy, .....RESPONDENT(S) 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 to issue an appropriate writ, order or direction more particularly one in the nature of writ of mandamus declaring the action of the respondents No.1 and 2 in not disposing of the representations of the petitioners dated 17-11-2006 and 21-11-2006 and confirming the sale to the respondent No.3 in violation of condition of sale proclamation dated 5-9-2006 as arbitrary and illegal and consequently set aside the same and to direct the respondents to dispose off the representations dated 17-11- 2006 and 21-11-2006 and to consider the offer of the petitioners to repay substantial amount within a short span of time and the balance amount within 3 months time, and pass such other suitable order or orders as are deemed fit and proper under the circumstances of the case. Counsel for the Petitioner:MR.S.ASHOK ANAND KUMAR Counsel for the Respondent No.: MR.Y.V.RAVI PRASAD The Court made the following : THE HON’BLE SRI JUSTICE GODA RAGHURAM W.P.No. 25023 of 2006 Oral Order: The petitioner-company seeks a declaration that the action of respondent Nos. 1 and 2 in not disposing of the representations dated 17-11-2006 and 21-11-2006 while confirming the sale of the petitioner’s industry to the 3rd respondent is arbitrary and further in violation of the conditions of sale proclamation dated 05-09-2006. The petitioner seeks a further direction to the respondents to dispose of the representations and to consider the petitioner’s latest offer to repay a substantial amount within a limited span of time. The petitioner sought a term loan from the 1st respondent for construction of a rice mill at Bodduvari Palem, Kodavaluru Mandal, Nellore District with a project cost of Rs.3,15,20,000-00 and was sanctioned an amount of Rs.2,12,00,000-00 by the letter of the respondents dated 20-06-2000. Initially an amount of Rs.1,24,27,000-00 was released as per the eligibility and the balance amount was not released since the petitioner is stated to have pruned the cost of the project. The petitioner defaulted in the payment of interest and Monthly Installments as per the schedule agreed to between the parties. Thereafter an abundance of correspondence was generated partly from the respondents demanding repayment and as a resonance from the petitioner seeking further time. The respondent-SFC after exhausting its patience, considered the petitioner a ‘chronic defaulter’ and the loan a non-performing asset and issued on 14-12-2005 a re-call-cum-sale notice for recovery of the term loan with interest due. Even thereafter the petitioner failed to repay any amounts. After a lapse of considerable time even after recall-cum- sale notice dated 14-12-2005, the SFC initiated proceedings under Section 29 of the State Financial Corporation Act, 1951 (for short ‘the Act’). It issued a notification dated 09-08-2006 published in the press calling for bids for sale of the petitioner’s unit. Among the conditions of the notification was one that the notification will be in force for 90 days from its date. However after receiving the 3rd respondent’s bid of Rs.01,56,60,000-00, the respondent SFC accepted the same and confirmed the sale of the unit in favour of the 3rd respondent. Earlier, where a notification for sale dated 05-07-2006 was issued, the petitioner filed W.P.No. 22894 of 2006 challenging the same. The writ petition was however dismissed on 06-11-2006. Having failed to pay any amount even after the recall-cum-sale notice dated 14-12- 2005 and after the dismissal of W.P.No. 22894 of 2006, the petitioner lodged a representation dated 17-11-2006 with the respondent-SFC and submitted yet another representation dated 21-11-2006 seeking further time for repayment of the amounts due and offering to pay some amounts. By this time, the SFC however had made up its mind and had initiated proceedings under Section 29 of the Act. As already noticed, the petitioner is aggrieved that the respondents did not provide further opportunity to the petitioner as requested in the representations dated 17-11-2006 and 21-11-2006 to repay the amounts outstanding. Normally, it is not within the province of this Court to determine whether the persistent default by the petitioner qualifies to be characterized as a ‘chronic defaulter’ or otherwise. The relationship between the petitioner and the SFC is a commercial relationship, that of a borrower and lender. In the plenitude of the managerial expertise available with the SFC and the social obligations for which the SFC was engendered as an instrumentality of the State, the SFC must be seen to inhere a broad spectrum of discretion to determine the circumstances and time at which a particular loan is considered a ‘non-performing asset’ and expeditious strategies for recoveries available under Section 29 of the Act should be pursued. In the case on hand, as is apparent from the facts pleaded in paragraph Nos. 4 and 5 of the respondent’s counter affidavit dated 20-02-2007 more than fair opportunity was afforded to the petitioner to repay the loan installments. The petitioner however failed to adhere to the payment schedules and defaulted on every count. Except promises made in fits and starts, that the loan amount would be repaid there was no performance on the succession of promises. The determination by the SFC that the petitioner was a ‘chronic’ defaulter suffers from no patent perversity within the spectrum of judicial review available. Consequently the conduct of the SFC in invoking the summary power available under Section 29 of the Act suffers from no infirmity warranting interference under Article 226 of the Constitution of India. Sri .S. Ashok Anand Kumar, the learned counsel for the petitioner would urge that it is on account of the failure by the SFC in making available the working capital as per the original understanding between the petitioner and the respondent-SFC that the petitioner was disabled from effective commercial performance and therefore from repaying the loan installments. This is an area that does not fall for adjudication in this writ petition. If the respondent-SFC had failed to perform of its reciprocal obligations under the loan agreement and for no justifiable reasons, the petitioner had a cosmos of remedies available to move against the SFC and to ensure compliance of its reciprocal obligations. The litigative silence of the petitioner in this respect could be considered acquiesce to the SFC’s conduct in not extending the working capital amount, even if the allegations were true. In any event that is not an issue germane to the lis presented in this writ petition. In extremis, on behalf of the petitioner it is contended that since the notification for the sale of the petitioner’s asset specifies that the bid would be kept open for a period of 90 days, the acceptance by the SFC that of the 3rd respondent offer even before the 90 days period had elapsed constitutes a fatal infirmity that invalidates the sale in favour of the 3rd respondent. This is a contention that does not commend acceptance by this Court. The only consequence of the statement in the notification that the bid will be open for 90 days is that there is an opportunity to the SFC to accept bids for the entire duration of 90 days and SFC would not be obligated to consider a bid before the period of 90 days had elapsed. In the facts and circumstances of this case, it is revealed that the bid of the 3rd respondent was accepted after a period of two and half months had elapsed and just a fortnight before the 90 days period. Except technically contending that the SFC accepted the 3rd respondent’s bid before the 90 days period, the petitioner has shown no prejudice caused on account thereby. The petitioner neither pleads nor establishes that there was a clear possibility of receiving a higher bid ( than offered by the 3rd respondent), in the remaining 15 days available from the date of acceptance by the SFC of the 3rd respondent bid. In any event, this Court is unable to construe the clause in the notification as disabling the SFC from accepting a bid before the 90 days period had passed by. The further contention on behalf of the petitioner is that in its representations dated 17-11-2006 and 21-11-2006 the petitioner had offered to deposit an amount of Rs.50,00.000-00 (Rupees fifty lakhs only) and sought further time for repayment of the balance due and that the non-acceptance of such offer by the respondent-SFC is arbitrary. This contention also does not merit acceptance. The entitlement of the SFC to recover the amounts due from a borrower do not dependent upon mercies of the borrower or his/its convenience. As already noticed considerable latitude was given to the petitioner and the petitioner failed to utilize the munificence of the SFC. The conduct of the SFC cannot even remotely be characterized as arbitrary. On the aforesaid analysis, there are no merits. The writ petition is accordingly dismissed, but in the circumstances without costs. _____________________ GODA RAGHURAM, J Dated: 08-08-2008 Pvks/