IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH CWP No. 4339 of 2009 Date of decision: 23.9.2011 M/s Subhadra Fabrics …..Petitioner vs. State of Haryana and ors …..Respondents CORAM: - HON’BLE MR. JUSTICE HEMANT GUPTA HON’BLE MR. JUSTICE JASWANT SINGH Present: - Mr. Vivek Salathia, Advocate for the petitioner. Mr. Kamal Sehgal, Advocate for respondent. HEMANT GUPTA, J Present writ petition has a chequered history. One M/s Carbo Papers (India) Pvt. Ltd availed financial assistance from respondent-Haryana Financial Corporation (for short the ‘Corporation’) and mortgaged its land, building, plant and machinery. Since, the borrower failed to repay the amount as per the terms and conditions of the loan, the Corporation took possession of the land, building, plant and machinery in exercise of its rights under Section 29 of the State Financial Corporation Act, 1951. The Corporation put the property to sale on 15.3.1996 (Anneuxre P-1). The petitioner was the highest bidder having offered Rs. 16.05 lacs for the entire assets of the said company. The highest bid offered by the petitioner was accepted and an agreement executed on 14.10.1996 CWP No. 4339 of 2009 (Annexure P-2). Vide the aforesaid agreement, the Corporation acknowledged the receipt of Rs. 4,01,250/- i.e. 25% of the bid amount and also Corporation permitted the petitioner to pay the balance amount of Rs. 12,03,750/- in 11 quarterly installments starting from 1.11.1996 together with interest @ 19% per annum compounded quarterly w.e.f. 20.3.1996. The physical possession of the assets of the borrower was delivered to the petitioner. Petitioner deposited some of the installments, total amounting to Rs. 10,33,664/-. Since, the entire sale consideration was not paid by the petitioner, the Corporation declared the petitioner as defaulter and put the assets of the borrower, purchased by the petitioner, to sell again. In pursuance of the said action, the assets of the Company were sold to M/s Innovative Tec Pack for Rs. 20 lacs. Admittedly, the said purchaser has deposited the entire amount of Rs. 20 lacs and all the rights, title and interest in the property of the borrower stands transferred to the said purchaser. The petitioner earlier challenged the cancellation of the purchase of the assets by it by filing CWP No. 1947 of 1998 before this Court (Annexure P-4). The said writ petition was dismissed on 20.8.1998. However, the Corporation was directed to refund the amount deposited by the petitioner within four weeks after making deduction as may be permissible under law. 2 CWP No. 4339 of 2009 Petitioner also filed the COCP No. 1612 of 2003 before this Court as no decision regarding the refund of the amount was communicated. The said contempt petition was dismissed on 31.10.2006 when the Corporation produced the order dated 8.1.1999 that the entire amount deposited by the petitioner has been forfeited in terms of Clause 4(iv) of the agreement to sell. Thereafter, the present petition has been filed to challenge the forfeiture of the entire amount communicated to the petitioner on 8.1.1999. Mr. Sehgal, learned counsel for the Corporation has pointed out that there was a settlement with the original borrower on 23.10.2006, whereby, after adjusting the offer of Rs. 16.05 lacs submitted by the petitioner, another sum of Rs. 34,630/- was paid by the borrower in full and final settlement of the loan availed by the original borrower. An amount of Rs. 2,47,161/- was waived off as part of settlement. Mr. Sehgal has further pointed out that as a consequence of such settlement and forfeiture of the amount of the Petitioner, the Corporation has earned an income of Rs. 9,42,759/- which was credited to the miscellaneous income account of the Corporation on 21.6.2006. Mr. Sehgal has vehemently argued that in terms of Clause 4(iv) as reproduced below, the Corporation has rightly forfeited the entire amount: - “4(iv) In the event of purchaser failing to make the balance payment of Rs. 12,03,750/- the interest as mentioned above to the seller within the said stipulated 3 CWP No. 4339 of 2009 period the agreement shall cease to have effect and the purchaser shall be liable to deliver back the possession of the property to the Corporation and will not be entitled to refund of any part of money paid by him, which shall stand forfeited.” It is argued that there is no challenge to the said condition of the agreement in the present writ petition nor could be raised after the petitioner has accepted such agreement. Therefore, the amount forfeited by the petitioner can not be said to be unjust. After hearing learned counsel for the parties, at some length, we find that forfeiture of the entire amount of Rs. 10,33,664/- is unduly harsh and onerous on the rights of the petitioner. Though the physical possession of the assets were handed over to the petitioner but admittedly, the petitioner could not carry out any manufacturing activity as the permission to shift the machinery was not granted to the petitioner. The petitioner has not made any use of the physical possession of the assets purchased by it. On the other hand, the Corporation has settled the loan account of the borrower and sold the property again and earned net profit of Rs. 9,42,759/-. We find that such profit is at the cost of the petitioner, who unfortunately could not make the payment of all the due installments though he has paid the substantial amount of over Rs. 10 lacs. 4 CWP No. 4339 of 2009 In view of the said fact, we find that the action of the Corporation in forfeiting the entire amount is unjustified, untenable and arbitrary. The Corporation has waived off the amount of Rs. 2,47,161/- from the original borrower. We find that it will be in all fairness if the said amount is ordered to be retained by the Corporation and the balance forfeited amount is paid to the petitioner with interest at the rate of 10 % p.a from 21.6.2006 as the Corporation has made use of that money and deprived the petitioner of its money for many years. It could not be disputed that the Corporation charges much more than the said rate of interest from its borrowers. Consequently, we order that the Corporation shall refund the amount forfeited after adjusting the amount of Rs. 2,47,161/- with interest at the rate of 10% p.a. from 21.6.2006. The amount be refunded within one month from today. Thus the present petition is disposed of in terms as mentioned above with no order as to costs. (HEMANT GUPTA) JUDGE (JASWANT SINGH) JUDGE 23.9.2011 preeti 5