IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA. CWP No. 655/2003 Reserved on:21.10.2008 Decided on: 3.11. 2008 M/s Royal Biscuits Private Limited and another. …Petitioner. Versus Himachal Pradesh State Financial Corporation Limited and others. …Respondents Coram The Hon’ble Mr. Justice Rajiv Sharma, J. Whether approved for reporting ?1. No. For the Petitioners : Mr. D. Dadwal, Advocate. For the Respondents : Mr. Ajay Kumar, Advocate for respondent No.1. Rajiv Sharma, J. Brief facts necessary for the adjudication of this case as gathered from the pleadings of the parties are that petitioner No.1 (earlier known as M/s Royal Food (P) Limited) was sanctioned a term loan of Rs. 16.50 lakhs and soft loan of Rs. 1.50 lakhs during the year 1981-82 by the respondent-corporation. The necessary documentation was done by the Promoters/Directors of the company on 24.2.1982 and additional term loan of Rs. 3.60 lakhs was sanctioned in favour of the company which was 1 Whether the reporters of Local Papers may be allowed to see the judgment? No. 2 secured under agreement of loan and hypothecation dated 11.11.1987. Second additional term loan of Rs. 39.00 lakhs and 3rd additional term loan of Rs. 8.00 lakhs was sanctioned in favour of the petitioner-company for expansion programme. The petitioner-company executed an agreement of loan and agreement of hypothecation with the respondent- corporation on 23.5.1992 and 15.12.1992. The petitioner-company was sanctioned total term loan of Rs. 67.10 lakhs and soft loan of Rs. 1.50 lakhs on four occasions. The petitioner-company had repaid the original and first additional term loan of Rs. 20.10 lakhs and soft loan of Rs. 1.50 lakhs along with interest. The respondent-corporation rescheduled the repayment of loan twice on 6.6.1997 and 24.3.2000. Recall-cum-takeover notice was issued by respondent-corporation to the petitioner-company under section 29/30 of the State Financial Corporations Act, 1951 (hereinafter referred to as ‘the Act’ for brevity sake) and advertisement was issued in the daily edition of The Tribune dated 18.1.2001 for the sale of the petitioner’s unit. The petitioner-company made a request for one time settlement to respondent-corporation on 5th February, 2001. The petitioner-company made a fresh offer for one time settlement on 14.2.2001. The detailed representation was made by the petitioner- company on 6.3.2001. The representation made by the petitioner- company was rejected by the respondent-corporation on 10.4.2001. The petitioner-company approached this Court by way of CWP No. 166/2001 assailing various orders passed by the respondent-corporation. The writ petition was disposed of by a detailed judgment dated 9.4.2003. In sequel to the judgment dated 9.4.2003, the petitioner-company made a representation to the respondent-corporation on 23.4.2003. The same was rejected by the respondent-corporation on 4.6.2003. The petitioner- company made another representation on 24.6.2003 which was rejected 3 by the respondent-corporation on 26.6.2003. The text of letter dated 26.6.2003 reads thus: “This has reference to your letter No. Nil dated 24.6.2003 on the subject cited above. The various issues raised by you have been examined and it has been observed that the issues indicated in the said letter are almost the same which have been given by you in your representation dated 22.4.2003. The Corporation has already examined the matter and have responded to the various points/issues raised by you vide letter No.2234-35 dated 4.6.2003 in terms of Hon’ble High Court order dated 9.4.2003. In fact the Corporation has given para-wise reply to the same after hearing you and your Chartered Accountant. As requested by you, the copy of the statement of account vide which amount on simple interest has been worked out has also been sent vide our letter No. 2763 dated 21.6.2003. In view of no additional issue/matter raised by you, no action is required on the part of the Corporation. However, you are advised to make the payment of amount, as already indicated vide our letter No. 2234-35 dated 4.6.2003. This letter is being issued with the approval of the Managing Director.” The respondent-corporation issued an advertisement vide Annexure-PT on 26.7.2003. The present petition has been filed by the petitioner-company primarily assailing orders Annexures-PA, PS and PT dated 4.6.2003, 26.6.2003 and 26.7.2003, respectively. The principal stand of the petitioner-company is that it has not been dealt with in a just and fair manner by the respondent-corporation. The instances of the units, which according to the petitioner-company have been unduly favoured, have been given in paras 14 and 24 of the writ petition, 4 respectively. Further stand of the petitioner-company is that the corporation has not followed the directions issued by the Reserve Bank of India and other financial institutions while considering the case of the petitioner for one time settlement. The stand of the respondent- corporation is that every case is decided on its own merits and the State Financial Corporation has its own policy regulating one time settlement. Mr. D. Dadwal, Advocate has strenuously argued that there is no consistency in the manner in which the cases of various units for one time settlement are settled. He has relied upon paras 14 and 24 of the writ petition. He has further submitted that the petitioners have not been treated at par with the industrial units whose particulars are given in paras 14 and 24 of the writ petition specifically. Mr. Ajay Kumar, Advocate has strenuously argued that the respondent-corporation has rescheduled the loans on 6.6.1997 and 24.3.2000 and as per the direction issued by this Court, it has again reconsidered the proposal of the petitioner for re-settlement whereby the respondent-corporation has offered to settle the case of the petitioner- company on payment of Rs. 62.62 lakhs as on 15.7.2003 by allowing them reliefs/concessions of Rs. 51.48 lakhs which amount was worked out by it as per its old OTS guidelines which were effective upto 1.5.2003. According to him, the petitioner-company has failed to avail this benefit and the corporation has every right to take over the assets of the industrial unit of the petitioner-company as per order dated 9.4.2003. I have heard the learned counsel for the parties and gone through the documents placed on record carefully. The total loan amount which has been advanced to the petitioner- company by the respondent-corporation is Rs. 67.10 lakhs as term loan and Rs. 1.50 lakhs as soft loan. According to Mr. Ajay Kumar, the 5 outstanding loan was Rs. 1,11,91,309.25 as on 15.11.2003, including interest upto 9.6.2003. It is not disputed by the parties that the rescheduling of the repayment of loan was done twice by the respondent- corporation on 6.6.1997 and 24.3.2000. The petitioner-company has made various representations as noticed above to the respondent- corporation for one time settlement. The representations were rejected on 4.6.2003 and 26.6.2003 and the advertisement for the sale of unit was issued on 26.7.2003. In sequel to the judgment rendered by this Court in CWP No. 166/2001 dated 9.4.2003, the respondent-corporation had agreed for one time settlement and the petitioner-company was offered to settle the case for Rs. 62.62 lakhs as on 15.7.2003 by allowing them reliefs/concessions of Rs. 51.48 lakhs as per old guidelines effective upto 1.5.2003. The Court passed the following orders on 7.12.2007: “The Court had permitted the petitioner on 9.4.2003 in CWP No.166 of 2001 to submit a fresh comprehensive representation to the respondent No.1 praying for one time settlement. In sequel to order dated 9.4.2003, the petitioner has made a detailed representation to the respondent No.1 on 22.4.2003. The petitioner was conveyed the decision of the representation on 4th June, 2003 by the respondent-Corporation. The operative portion of the decision dated 4th June, 2003 reads thus:- “From the perusal of your representation dated 22.4.2003 it would appear that you have not submitted any proposal for OTS in accordance with the directions of Hon’ble High Court and the same has not been submitted till date. The outstanding amount after crediting the payments already made by you stands at Rs.114.10 lacs (calculations made upto 15.7.2003). However, of its own, the Corporation is willing to offer you concessions/ reliefs under its old OTS guidelines which work out to Rs. 51.48 lacs and in case you want to 6 avail this concession you should pay the balance amount of Rs. 62.62 lacs (after accounting for concession of Rs. 51.48 lacs mentioned above) by 16.7.2003. Please note that in case you do not avail above offer and fail to pay the above amount by 16.7.2003, the Corporation shall go ahead with the sale of the unit in terms of order dated 9.4.2003 of the Hon’ble High Court to realise its entire outstanding loan of Rs.114.10 lacs (calculated upto 15.7.2003) alongwith future interest as per loan documents.” Mr. Dushyant Dadwal submits that his client had already deposited Rs.31 lacs as per the orders issued by the Hon’ble Supreme Court as well as by this Court from time to time. Mr. Dushyant Dadwal on the basis of the instructions imparted to him by his client submits that his client is ready and willing to settle the matter once for all in case his representation for one time settlement is considered in view of the observations contained in letter dated 4th June, 2003. Consequently, the petitioner is permitted to make the representation to the respondent-Corporation to either revive or arrive at a fresh settlement as per the contents of letter dated 4th June, 2003. The petitioner will make the representation within three days from today and the Corporation will take fresh decision on or before 27th December, 2007. The Board of Directors of the Corporation while deciding the representation made by the petitioner will take into consideration the prevalent rate of interest to be charged from the petitioner and the same will be incorporated in the one time settlement. List on 3rd January, 2008.” In sequel to order dated 7.12.2007, the petitioner-company made a representation on 8.12.2007. The matter was placed before the Board of Directors of the respondent-corporation in its meeting held on 27.12.2007. 7 The Board of Directors of the respondent-corporation considered one time settlement of the petitioner-company and the same was found too low against the outstanding loan of Rs. 245.00 lakhs (approximately), including interest upto 31.12.2007. It will be apt at this stage to reproduce the entire para 2 of the supplementary affidavit filed by the respondent- corporation as under: “That the Board of Directors of the respondent corporation considered the said OTS of the petitioner company which was found too low against the outstanding loan of Rs. 245.00 lakhs (approximately), including interest upto 31.12.2007. It has also been observed by the Board that an amount of Rs. 1,04,24,494/- is recoverable upto 31.12.2007, if the OTS (of Rs. 62.62 lakhs) earlier approved, as conveyed to the petitioner-company by the respondent corporation vide its letter dated 4.6.2003, is revived by charging interest at documented rate. It has also been further observed by the Board that if prevalent rate of interest i.e. 12.5% as per order dated 7.12.2007 of this Hon’ble Court, is charged for reviving the earlier OTS, then in that case the recoverable amount works out to Rs. 85,76,369/- including interest upto 31.12.2007.” Consequently, the Board of Directors on 27.12.2007 had decided the petitioner-company be offered revived OTS of Rs. 85,76,369/- i.e. the amount payable on revival of earlier OTS of Rs. 62.62 by charging prevalent rate of interest with effect from 16.7.2003 to 31.12.2007. The amount was to be paid by the petitioner-company within one month. Thereafter the petitioner-company submitted representations on 31.1.2008 and 27.3.2008. These representations were also considered by the Board in its meeting held on 28.3.2008. The decision of the Board dated 28.3.2008, reads thus: 8 “The Managing Director placed the updated memorandum No. Bd.19/2008 dated 28.3.2008 alongwith its enclosures, which was considered. The Board observed that the Corporation had taken over the unit under section 29 of SFCs Act, in November, 2000 and it could not be sold of because of continued litigations. The present outstanding loan has increased to more than Rs. 245 lakhs against last disbursed loan of Rs. 47.00 lakhs. The Board considered representation dated 31.1.2008 and letter dated 27.3.2008 of the Company as given at Annexure-VI & Annexure-VIII of the memorandum. The Board observed that the unit is in possession of the Corporation since November, 2000 and could not be sold till date. The Board also took note of the fact that the Company has repaid substantial amount of Rs. 138 lakhs (approximately) till date against total term loan of Rs. 67.10 lakhs. The Board resolved that if the Company gives its firm offer for settlement only then matter be brought up before the Board again. The Board further resolved that possibilities of negotiated settlement may be examined for which Committee of Principal Secretary (Industries) and Managing Director, HPFC will take necessary action and report to the Board.” Thereafter on the basis of the representations made by the petitioner, the matter was placed before the Board of Directors for consideration of the proposal made by the petitioner-company in its meeting held on 15.9.2008. The Board had agreed to offer one time settlement in the following manner: “The Board resolved that company be offered one time settlement for Rs. 92,42,953/- i.e. the amount payable now if earlier OTS of Rs. 62.62 lakhs is revived by charging simple interest at 12.5% w.e.f. 16.7.2003 to 30.9.2008. The Board further resolved that company should deposit this amount within three months failing 9 which the entire concessions/reliefs considered shall stand automatically forfeited and entire outstanding loan as per books of accounts of the Corporation shall be recoverable. The Board desired that Hon’ble H.P. High Court be apprised about the decision of the Corporation accordingly.” The Court has gone through item No. 25 placed on record by Mr. Ajay Kumar during the course of hearing of the petition whereby the petitioner-company has been offered one time settlement for Rs. 92,42,953/- by reviving the earlier one time settlement of Rs. 62.62 lakhs by charging simple interest @ 12.5% with effect from 16.7.2003 to 30.9.2008. This amount was directed to be deposited by the petitioner- company within three months vide communication dated 3.10.2008. I am of the considered opinion that the petitioner-company has been dealt with in a just and fair manner by the respondent-corporation by initially rescheduling the loan on 6.6.1997 and 24.3.2000 and thereafter by repeatedly settling the matter with the petitioner-company. The respondent-corporation has drastically reduced the rate of interest as is evident from the terms and conditions of the one time settlement. The respondent-corporation has stuck to its one time settlement offered to the petitioner-company in the year 2003 and has only added the prevalent rate of interest from 2003 to 2008. One time settlement offered by the respondent-corporation to the petitioner-company on the basis of the decision of the Board of Directors dated 15.9.2008 conveyed to the petitioner-company on 3.10.2008 is just, fair and reasonable. The only modification which is required in the interest of justice is that the petitioner- company be directed to deposit the entire amount of Rs. 92.42,953/- within a period of six months instead of three months. 10 Consequently, in view of the observations made hereinabove, the writ petition is disposed of by issuing the following mandatory directions: i) the petitioner shall pay a sum of Rs. 92.42,953/- by way of three equal installments spreading over six months; ii) the first installment of Rs. 30,80,984/- will fall due on 4.1.2009 iii) the second installment of Rs. 30,80,984/- will fall due on 4.3.2009 iv) the third and final installment of Rs. 30,80,984/- will fall due on 4.5.2009. It is made clear that if the first installment of Rs. 30,80,984/- is not deposited on or before 3.1.2009, the directions issued shall become inoperative and in that eventuality, the respondent-corporation shall be absolutely at liberty to take steps for the sale of the unit for the recovery of the balance outstanding amount of Rs. 2,83,01,394/- as per the books of accounts of the respondent-corporation and one time settlement will cease to operate. There will, however, be no order as to costs. 3.11.2008 (Rajiv Sharma ), J. *awasthi*