Case: U.P. Financial Corporation Vs. Gem Cap (India) Private Limited And Others

in furtherance of the object underlying the Act. But this factor cannot be carried to the extent of obligating the Corporation to revive and resurrect every sick industry irrespective of the cost involved. Promoting industrialisation at the cost of public funds does not serve the public interest; it merely amounts to transferring public money to private account. The fairness required of the Corporation cannot be carried to the extent of disabling it from recovering what is due to it. While not insisting upon the borrower to honour the commitments undertaken by him, the Corporation alone cannot be shackled hand and foot in the name of fairness. Fairness is not a one way street, more particularly in matters like the present one. 8. The above narration of facts shows that the respondents have no intention of repaying any part of the debt. They are merely putting forward one or other ploy to keep the Corporation at bay. Approaching the Courts through successive writ petitions is but a part of this game. Another circumstance. These Corporation are not sitting on King Solomons mines. They too borrow monies from Government or othern financial corporation. They too have to pay in terest thereon. The fairness required of it must be tempered nay, determined, in the light of all these circumstances. Indeed, in a matter between the Corporation and its debtor, a writ court has no say except in two situation: (1) there is a statutory violation on the part of the Corporation or Where the Corporation acts unfairly i.e., unreasonably. While the former does not present any difficulty, the latter needs a little reiteration of its precise meaning. What does acting unfairly or unreasonably mean? Does it mean that the High Court exercising its jurisdiction under Article 226 of the Constitution can sit as an Appellate Authority over the acts and deeds of the corporation and seek 158 to correct them? Surely, it cannot be. That is not the function of the High Court under Article 226. Doctrine of fairness, evolved in administrative law was not supposed to convert the writ courts into appellate authorities over administrative authorities. The constraints self-imposed undoubtedly of writ jurisdiction still remain. Ignoring them would lead to confusion and uncertainty. The jurisdiction may become rudderless.The obligation to act fairly on the part of the administrative authorities was evolved to ensure the Rule of Law and to prevent failure of justice. This doctrine is complementary to the principles of natural justice which the Quasi-Judicial Authorities are bound to observe. It is true that the distinction between a quasi-judicial and the administrative action has become thin, as pointed out by this Court as far back as 1970 in A.K. Kraipak &Ors. v. Union of India &Ors. Even so the extent of judicial scrutiny/judicial review in the case of administrative action cannot be larger than in the case of quasi-judicial action. If the High Court cannot sit as an appellate authority over the decisions and orders of quasi- judicial authorities it follows equally that it cannot do so in the case of administrative authorities. In the matter of administrative action, it is well known, more than one choice is available to the administrative authorities; they have a certain amount of discretion available to them. They have "a right to choose between more than one possible course of action upon which there is room for reasonable people to hold differing opinions as to which is to be preferred (Lord Diplock in Secretary of State for Education v. Tameside Metropolitan Borough Counsel). The Court cannot substitute its judgment for the judgment of administrative authorities in such cases. Only when the action of the administrative authority is so unfair or unreasonable that no reasonable person would have taken that action, can the Court intervene. To quote the classic passage from the judgment of Lord Greene MR in Associated Provincial Picture Houses Ltd. v. Wednesbury Corporation, 1948 (1) KB 229. "It is true the discretion must be exercised reasonably. Now what does than mean? Lawyers familiar with the phraseology commonly used in relation to exercise of statutory discretions often use the word "unreasonable" in a rather comprehensive sense. It has frequently been used and is frequently used as a general description of the 159 things that must no t be done. For instance, a person entrusted with the discretion must, so to speak, direct himself properly in law. He must call his own attention to the matters which he is bound to consider. He must exclude from his consideration matters which are irrelevant to what he has to consider. If he does not obey those rules, he may truly be said, and often is said, to be acting unreasonably." Similarly, there may be something so absurd that no sensible person could ever dream that it lay within the powers of the authority.While this is not the occasion to examine the content and contours of the doctrine of fairness, it is enough to reiterate for the purpose of this case that the power of the High Court while reviewing the administrative action is not that of an appellate court. The judgment under appeal precisely does that and for that reason is liable to be and is herewith set aside. 9. On behalf of the appellant reliance has been placed upon the decision of this court in Mahesh Chandra v. Regional Manager, U.P. Financial Corporation &Ors., . We have perused the decision. That was a case where the debtor was anxious to pay off the debt and had been taking several steps to discharge his obligation. On the facts of that particular case it was found that the corporation was acting reasonably. In that context certain observations were made. The decision also deals with the procedure to be adopted by the Corporation while selling the units taken over under Section 29. That aspect is not relevant in this case. We are, therefore, of the opinion that the said decision is of no help to the appellant herein. 10.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]Here was a company which drew substantial public funds and became sick within three months of its going into production. One of the main reasons for its sickness appears to be the inter-necine fight between the two groups controlling the Company.The unit was closed. It was not paying a single pie in repayment of the loan neither the principal nor the interest. Already a huge amount was due to the appellant. There was no prospect of its recovery. And yet other financial corporations were being asked by the court, four years after its closure, to sink more money into the sick unit. Though a passing reference is made to the financial risk of appellant. this concern was not translated into appropriate directions. The Corporation was not allowed to sell the unit when it wanted to in 1984-85. Now, it is difficult to sell it, because it has been lying closed for about 8 years and more. The machinery must have become junk. While the Company could not be revived, the appellant-corporation now stands to lose more than a crore of rupees all public money in this one instance"We have heard learned counsel on both sides. Apart from the merits of the issues raised, it appears to us that the present impasse is to nobodys advantage. The dispute has to be resolved in some meaningful way. We accordingly direct the respondent-Company and Sri K.P. Chaturvedi, who claims to be in- charge of the affairs of the Company, to confirm in writing to the petitioner-Corporation within three weeks from today that they unconditionally agree to settle the claims of the. Financial Corporation at a figure which would represent the principal amount said to be Rs. 26.30 lacs and interest thereon from the inception at 13.5% per year with half yearly rests calculated upto 25.7.1986If such an offer is made, the Financial Corporation will assess the merit and acceptability of that offer and take within six weeks thereafter, an appropriate decision including the manner in which and the period over which the payment should be completed, and if the Financial Corporation agree s to grant time for payment, the rate of interest for the deferred period. The decision taken by the Corporation will be placed before this Court.If, however, a ny offer, as indicated above, is not communicated by the company or Sri Chaturvedi within a period of three weeks from today, then the Financial Corporation shall be at liberty to initiate, with notice to the respondents, steps for the sale by public auction of the subjectmatter of the security in its favour and to treat and hold the proceeds of sale as substituted security in the place of the subject-matter of the security, subject to the final result of this S.L.P. Call this matter in the 3rd week of May, 1992."On behalf of the appellant reliance has been placed upon the decision of this court in Mahesh Chandra v. Regional Manager, U.P. Financial Corporation &Ors., . We have perused the decision. That was a case where the debtor was anxious to pay off the debt and had been taking several steps to discharge his obligation. On the facts of that particular case it was found that the corporation was acting reasonably. In that context certain observations were made. The decision also deals with the procedure to be adopted by the Corporation while selling the units taken over under Section 29. That aspect is not relevant in this case. We are, therefore, of the opinion that the said decision is of no help to the appellant herein