CIVIL WRIT PETITION NO. 15415 OF 2008 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. DATE OF DECISION: September 8, 2009. Parties Name Abhinav Cotspin Ltd. ...PETITIONER VERSUS Punjab State Industrial Development Corporation Ltd. and others ...RESPONDENTS CORAM: HON'BLE MR. JUSTICE JASBIR SINGH PRESENT: Mr. Deepak Sibal, Advocate, for the petitioner. Mr. B.S.Walia, Advocate, for respondents No1 & 2. Mr. Anil Sharma, Addl. A.G., Punjab, for respondent No.3. JASBIR SINGH, J. (oral) ORDER: This writ petition has been filed with a prayer to issue a writ of certiorari to quash the letter dated June 23, 2008 (P-13), intimating the petitioner that 'One Time Settlement' entered into between the parties on February 21, 2006 (P-6) was cancelled and payment made earlier stood adjusted, as per terms and conditions of the bridge loan agreement. Further direction was issued to the petitioner to make payment of balance amount as per agreement within 15 days, failing which, it was mentioned that action shall be taken up as per law. CIVIL WRIT PETITION NO. 15415 OF 2008 -2- It is apparent from the records that the petitioner – Company was incorporated in the year 1995. 30% shares of the Company were owned by the respondent – Corporation in terms of the financial agreement entered into between the Managing Director of the petitioner and the respondent – Corporation, subject to certain conditions. It is apparent from the record and not disputed before this Court that the State of Punjab declared subsidy to the extent of Rs. 50,00,000/- in favour of the petitioner- Company in the year 1998. Payment of subsidy amount was delayed. The petitioner obtained bridge loan to the extent of Rs. 50,00,000/- from the respondent – Corporation, however, only Rs. 40,00,000/- was disbursed. Loan amount was to be repaid within a period of two years from the date of payment. It was further stipulated in the agreement that the borrower shall give authority letter in favour of the Corporation, requesting the Director, Industries, Punjab, to disburse amount of State subsidy, directly to Punjab State Industrial Development Corporation (in short PSIDC) for adjustment against bridge loan, interest and other charges, if any. It is also an admitted fact on record that the subsidy was not released by the State Government for a number of years. In the year 2003, petitioner and the respondent Corporation entered into a 'One Time Settlement' so far as bridge loan is concerned. It is also an admitted fact that before entering into that settlement, the petitioner had already paid an amount of Rs. 30,00,000/- towards interest. One time Settlement was entered on February 21, 2006 (P- 6). Following mode of repayment was fixed as per that settlement: “1) OTS amount would be the principal outstanding which is Rs. 40.00 lacs to be paid as under:- a) 10% of the principal amount, i.e., Rs. 4.00 lacs to be paid CIVIL WRIT PETITION NO. 15415 OF 2008 -3- upfront immediately. 50% of the remaining principal outstanding, i.e., Rs. 18.00 lakh (50% of Rs. 36.00 lakh) to be paid by 31st March, 2006 out of sale proceeds on sale taking place of Unit-I. In case sale proceeds are not available by 31.03.2006, company will start making the OTS payments @ Rs. 0.65 lakh per month from 1st April, 2006, with 27 EMI of Rs. 0.65 lacs and 28th EMI of Rs. 0.45 lacs in line with IFCI. (b) Balance OTS amount of Rs. 18.00 lakh would be converted into Zero Rate Loan (ZRL) payable in 20 equated quarterly instalment of Rs. 0.90 lakh each commencing from 15th April, 2016 and ending on April 2021. PSIDC will have the right to convert part or whole of ZRL into equity on one or more occasions during the currency of loan.” It is further an admitted fact that the petitioner paid 10% of the agreed amount on February 26, 2006, and thereafter he issued various cheques, for an amount of Rs. 65,000/- each, to be adjusted towards instalments for every month starting from April, 2006, upto May, 2007. All these cheques were received and encashed by the respondent – Corporation. In the meantime, the State of Punjab released the subsidy amount, as per terms and stipulation of the bridge loan agreement, that amount was released in favour of the respondent -Corporation. At that time, the petitioner made a request to the Corporation that after adjusting amount towards one time settlement, rest of the amount be refunded in his favour. In response to his request, the impugned order was passed. CIVIL WRIT PETITION NO. 15415 OF 2008 -4- Upon notice, reply has been filed, wherein it is stated that settlement was cancelled because the petitioner had failed to comply with the terms and conditions of the 'One Time Settlement' entered into between the parties on February 21, 2006. It was further stated that One Time Settlement was subject to the normal and special conditions and one of the special conditions was as under: “1. The company shall comply with the various terms and conditions as put forth by IFCI for sanction of OTS for Unit No. 1 to the satisfaction of PSIDC.” It is contention of counsel for the respondents that as the petitioner has failed to discharge liability so far as IFCI is concerned, on account of that it was not incumbent upon the respondents to honour the 'One Time Settlement' , mentioned above. To say so, reliance has been placed upon letters dated August 1, 2007 (P-10) and September 28, 2007 (P- 11), vide which it was intimated by the IFCI Ltd. that it has no objection to the sale of assets of Unit No. 1, established by the petitioner, to discharge its liability in terms of One Time Settlement entered into between the petitioner and IFCI. In letter (Annexure P-11), it is stated that because the matter is pending before BIFR, it is not possible to sell property of the petitioner until and unless requisite permission is sought from the above said authority. As is apparent from the letter , mentioned above, in the meantime, the petitioner had deposited an amount of Rs. 2,35,00,000/- with the IFCI Ltd. and prior thereto an amount of Rs. 70.63 Lakhs was also deposited at the time when One Time Settlement was entered into between the parties. It is also not in dispute that ultimately, IFCI Ltd. Settled entire liability of the CIVIL WRIT PETITION NO. 15415 OF 2008 -5- petitioner for an amount of Rs. 3,05,63,000/- against the earlier settlement of amount of more than Rs. 5,00,00,000/-. The IFCI Ltd. also wrote to the BIFR that the entire loan amount stands repaid . It is contention of Shri Walia that because the dispute with the IFCI Ltd. has not been settled for an amount of Rs. 5,12,00,000/- and the settlement was effected for a lesser amount, so one time settlement arrived at between the petitioner and the respondent – Corporation has come to an end. Shri Walia further states that the petitioner has failed to comply with the terms and conditions of One Time Settlement, as incorporated in Annexure R2/2, so the respondent – Corporation was justified in rejecting One Time Settlement entered with the petitioner. The argument is obnoxious and is liable to be rejected. Nothing is due, to be paid by the petitioner to the IFCI. The IFCI has made a request to the BIFR to permit it to release charge, which was existing against property of the petitioner and for return of the title deeds etc. If that is so, it is very strange as to how, under what circumstances and in what manner the respondent was going to suffer if the petitioner had settled the dispute with a lesser amount. Perusal of One Time Settlement Annexure P- 6 nowhere indicates that the amount settled with the IFCI was noticed and considered by the respondent – Corporation to settle the bridge loan account of the petitioner. To be on the safer side, it was only said that the petitioner should also comply with the various terms and conditions of One Time settlement, which it has entered into with IFCI Ltd. regarding Unit No. 1. It appears that this condition was incorporated on account of a fact that the respondent – Corporation is also a collaborator in the petitioner – company. Before accepting 10% of the agreed amount and thereafter when the CIVIL WRIT PETITION NO. 15415 OF 2008 -6- cheques submitted by the petitioner were encashed, no objection was raised . The respondent Corporation was satisfied with the one time settlement. The dispute arose only when the respondent – Corporation received an amount of Rs. 50,00,000/- from the State Government against subsidy, which as per terms and conditions of the bridge loan agreement was released in favour of the Corporation. As per One Time settlement, after receipt of Rs. 50,00,000/- by the Corporation, amount became due, from the respondent – Corporation, to the petitioner. At that time, the respondent – Corporation showed its greed and with a view to secure more amount, order Annexure P-13 was passed. This Court feels that before passing that order, no objection was ever raised to say that the petitioner was not performing its duty as per One Time Settlement entered into with IFCI Ltd. This objection was taken with a view to retain the amount coming in the hands of the respondent – Corporation, on received subsidy amount. At the time of arguments, no plausible explanation has been given as to under what circumstances respondent – Corporation can retain that amount. In view of facts, mentioned above, this writ petition is allowed and order Annexure P-13 is quashed. The respondent – Corporation is directed to release, to the petitioner, excess amount along with interest as may be fixed by the respondent Bank within a period of one month. The Corporation is also burdened with costs of Rs. 50,000/- to be paid to the petitioner. ( Jasbir Singh ) Judge September 08, 2009. DKC