IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) FRIDAY, THE NINETEENTH DAY OF DECEMBER TWO THOUSAND AND EIGHT PRESENT THE HON'BLE MR JUSTICE V.V.S.RAO WRIT PETITION NO : 3158 of 2003 Between: Patluru Rama Rao S/o. Veeraswamy R/o. Gangadharam Street, Kothapeta, Nuzvid, Krishna District. ..... PETITIONER AND 1 Andhra Pradesh State Financial Corporation (incorporated under the State Financial Corporation Act, IXIII of 1951), rep. by Senior Brach Manager, Vijayawada Brach, Pioneer House, III Floor, Labbipet, Vijayawada -520010, Krishna Dist 2 Vadlamudi Radhakrishna S/o. Seetharamaiah R/o. Konda Road, Visannapeta, Vissannapeta Mandal, Krishna District. .....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 issue a writ or order or direction, particularly one in the nature of Writ of Mandamus, declaring the alleged action of sale by the 1st respondent in favour of the 2nd respondent on 18-1-2003 of the Petitioner's 333 Sq. Yards of land in R.S. No.586/2, situated within the Municipal Limits of Nuzvid Town, Krishna District, without advance notice to the petitioner, as illegal, unconstitutional, arbitrary and unwarranted, and consequently set aside the alleged sale of the petitioner's land mentioned above in favour of the 2nd respondent. Counsel for the Petitioner: MR.MALLIKARJUNA RAO KONDASANI Counsel for the Respondent No.1: MR.M.VIDYASAGAR The Court made the following : THE HON’BLE SRI JUSTICE V.V.S.RAO WRIT PETITION No.3158 of 2003 ORDER: The petitioner is an artisan specialising in polishing of marble stones. In pursuance of Promotion Programme by Andhra Pradesh State Financial Corporation (SFC) to give loans to skilled workers for running Small Scale Industries, petitioner purchased 330 square yards of land in R.S.No.586/2 in Nuzvid under registered sale deed. He approached SFC for term loan and working capital for proposed small scale industry i.e., M/s.Vijayalaxmi Polishing Industry. On 16.02.1990, Rs.1,26,000/- towards term loan and Rs.22,000/- towards working capital was sanctioned. However, SFC allegedly disbursed Rs.26,415/-. When he applied for electricity connection, deposit of Rs.90,000/- was demanded. He requested for the disbursement of balance loan, in vain. As he could not pay Rs.90,000/- towards electricity deposit, project was not grounded. He abandoned the project. He allegedly paid a sum of Rs.52,000/- from time to time towards repayment of disbursed loan during period from 29.05.1991 to 26.11.2001. On the ground that there was a default on the part of petitioner, SFC initiated action for recovery. A notice, dated 11.10.2002 was issued informing that petitioner is liable to pay Rs.7,948/-. Petitioner disputed the same and requested to settle account to enable him to pay the amount. He was informed that land was seized and sold for realization of balance dues. Petitioner alleges that there was no notice prior to conducting auction or after conducting auction, and that property worth about Rs.2,00,000/- was sold for recovery of less than Rs.10,000/- in an unfair manner violating petitioner’s fundamental right under Article 21 of Constitution of India. Therefore, he filed instant writ petition seeking writ of Mandamus declaring the action of first respondent in selling his property in favour of second respondent on 18.01.2003 as illegal and arbitrary. A consequential direction is also sought to set aside said sale. Senior Branch Manager of SFC, Vijayawada, filed counter affidavit. It is stated that after obtaining loan, petitioner abandoned the project and committed default in repayment, in spite of several notices. Therefore, SFC by letter, dated 22.09.1998 called upon petitioner to pay total outstanding dues of Rs.9,557/-. This was followed by telegram, dated 14.12.1998 as well as another letter, dated 07.01.1999. As there was no response, SFC issued recall-cum-sale (RCS) notice for payment of Rs.10,648/-. Petitioner paid Rs.1,500/- on 22.11.1999 and committed further default. Therefore, sale notice was advertised in newspapers proposing to auction lands and buildings of unit. No offers were received. Therefore, petitioner was approached again. He paid Rs.2,000/- after persuation, but again he committed default, in spite of SFC issuing letters on 28.08.2000 and 16.10.2000 demanding to clear the balance outstanding of Rs.8,921/-. SFC issued another RCS notice on 04.11.2000 for payment of Rs.9,388/-. Petitioner paid Rs.3,000/- on 08.12.2000 and also gave undertaking to close the loan account by 20th March, 2000. There was further correspondence but petitioner did not clear the loan except paying small amount. Hence, auction notice was advertised in ‘Eenadu’ on 17.06.2002 and 21.11.2002 for second and third times. This was also informed to petitioner by letter, dated 03.12.2002 advising petitioner to identify prospective buyers for purchase of assets advertised for sale. Petitioner did not respond. Second respondent offered a sum of Rs.41,625/- on 100% down payment. After negotiations, offer was raised to Rs.63,000/-. SFC put up a notice on 17.01.2003 in its premises with regard to offer received inviting the public to purchase assets by enhancing the offer. Petitioner did not identify prospective buyers. Therefore, SFC accepted offer of second respondent. He paid entire sale consideration on 25.01.2003 and possession was delivered to second respondent on 28.01.2003. After adjusting sale consideration, a sum of Rs.54,272/- is available by way of surplus amount realized, which is payable to petitioner after duly deducting payments required towards statutory dues. Petitioner filed additional affidavit (reply affidavit) after receiving counter affidavit. While disputing the amounts claimed, he alleges that he paid a sum of Rs.55,688.50. He denies allegation that he was informed about paper publication for sale. He further states that he never knew that the property was advertised for sale and no action was taken by SFC pursuant to advertisement. He denies receiving letter, dated 02.12.2002 informing about the sale. He further states that petitioner was not given any notice about alleged offer and the action was taken clandestinely behind the back of petitioner by playing fraud. The petitioner was not informed about fixation of valuation and that notice, dated 17.01.2003 to public is concocted one. Learned counsel for petitioner submits that the sale conducted by SFC is unfair and contrary to Section 29 of State Financial Corporations Act, 1951 (the Act, for brevity). Secondly, he submits that mandatory procedure is not followed by SFC after identifying the buyer and petitioner was never informed about the sale. In the absence of any RCS notice under Section 29 of the Act, the sale is illegal. He placed reliance on V.Gopal Reddy v A.P.State Financial Corporation and decision of Supreme Court in Jammigumpula Sivaiah v A.P.State Financial Corporation, in which High Court decision to refund money to auction purchaser for not following procedure in fair and transparent manner, was confirmed. Per contra, learned standing counsel for SFC relying on correspondence between first respondent and petitioner submits that there was a transparent and unarbitrary exercise of power under Section 29 of the Act and petitioner was put on notice at every stage, and therefore, sale cannot be interfered with. He placed reliance on Haryana Financial Corporation v Jagdamba Oil Mills. The main contention is that at the stage of invoking Section 29 of the Act and/or at the stage of putting the assets of petitioner Concern for sale and before confirmation of sale, the petitioner was not given notice and SFC conducted sale in an unfair and clandestine manner. The evidence produced by petitioner in support of this contention is the averment he made in the affidavit accompanying writ petition and additional affidavit filed by way of reply to counter affidavit. The evidence produced by SFC in support of their contention that the transparent and fair procedure was followed is cogent and convincing. This evidence is in the form of contemporaneous documents by way of correspondence between petitioner and SFC. All these documents are annexed to counter affidavit of SFC. After perusing these documents, this Court is convinced that petitioner’s contention of unfair and arbitrary sale procedure cannot be accepted. Indeed, in his additional affidavit, petitioner states that, he “does not know that his property was also included in those paper publications along with several items and it is also not possible to know about these paper publications”. This itself would show that petitioner is aware of the procedure followed by SFC of advertising the sale of units where default is committed. Secondly, after issuing first RCS notice in November, 1999, petitioner paid a sum of Rs.1,500/-. Again after issuing notice in March, 2000, petitioner paid a sum of Rs.3,000/- on 10.03.2000. Yet again after issuing RCS notice on 04.11.2000, petitioner paid Rs.3,000/- on 08.12.2000. These counter averments are not denied by petitioner in his additional affidavit. From this, an inference can be drawn that SFC has had initiated action for recovery of their loans after following fair procedure. The alleged arbitrary auction sale cannot be readily presumed and there are compelling facts on record, which do not lead to any such interference. Yet another submission made by learned counsel for petitioner is that land and shed costing about Rs.2,00,000/- was sold for a sum of Rs.60,000/-. This cannot be accepted. As per SFC, their engineer valued assets at Rs.87,200/-. Three advertisements were issued and there was no good response from purchasers. Ultimately, second respondent came forward with an offer of Rs.41,625/- and after negotiations, he raised offer to Rs.63,000/-, which is more than 75% of the value of assets. Such a sale cannot be considered as unfair. The two decisions relied on by learned counsel for petitioner do not help him in his challenge to the action of SFC. In V.Gopal Reddy (supra), sale of borrower’s property was challenged as vitiated by incorrect procedure, learned single Judge dismissed writ petition directing SFC to refund excess amount to borrower with 15% interest. On appeal, Division Bench came to the conclusion that principles laid down by Supreme Court in Mahesh Chandra v Regional Manager, U.P.Financial Corporation were not followed and that borrower had no opportunity to offer sale price as laid down in that case. The Division Bench, therefore, set aside the sale and gave direction to get properties revalued and give notice to borrower to repay the amount within two months, in default of which, SFC was given liberty to offer unit for sale by auction of tender or negotiations. The auction purchaser who was third respondent in V.Gopal Reddy (supra) filed appeal before Supreme Court. In Jammigumpula Sivaiah (supra), Supreme Court did not interfere in the High Court and gave direction for refund of money to the auction purchaser. Supreme Court observed that while disposing of the property of the borrower, SFC did not follow transparent and fair procedure and that they violated principles of natural justice. In the present case, SFC has demonstrated by producing copies of various letters, acknowledgements by petitioner and other correspondence to show that the action of SFC is fair. As held by Supreme Court in Jagdamba Oil Mills (supra), in writ petition against SFC’s auction sale, High Court must not sit as appellate authority. The only permissible review in such cases is whether SFC as a public authority has acted fairly towards borrower or not. Dealing with this aspect in Karnataka State Industrial Investment & Development Corporation Limited v CAVALET India Ltd, Supreme Court after referring to U.P.Financial Corporation v Gem Cap (India) (P) Ltd, U.P.Financial Corporation v Naini Oxygen & Acetylene Gas Limited, SIPCOT v Contromix (P) Limited and Karnataka State Financial Corporation v Micro Cast Rubber & Allied Products (P) Limited, laid down the following principles. (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 realise 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. This Court has examined this case with reference to material on record and principles laid down by Supreme Court in Karnataka State Industrial Investment & Development Corporation Limited (supra). This Court is of considered opinion that petitioner’s complaint of arbitrary, unfair and clandestine procedure adopted by SFC, is a mere unsubstantiated allegation and there are no grounds much less valid grounds to accept such a plea. The writ petition is devoid of any merit and is accordingly dismissed. No costs. _______________ (V.V.S.RAO, J) .12.2008 pln