Case: A.P. State Fin. Corpn Vs. Vajra Chemicals

2. The Corporation sanctioned a term loan of Rs. 10,09,080/13.2.1987. Upon a representation made by the 1st respondent on 3.3.1990, the Corporation rescheduled the loan repayment, waived an amount of Rs. 4,48,803.23 and the due date was extended. There was default in payment of the instalments. The 1st respondent made a representation on 17.8.1992 and paid Rs. 25,000/and undertook to pay Rs. 25,000/in the 1st week of September, 1992 and balance of Rs. 1.50 lakhs before 31.12.1992 and other instalments in time. The Corporation sent telegram dated 2.2.1992 and letter dated 4.7.1992 requesting the 1st respondent to make payment.notice was issued on 28.7.1992 for Rs. 9,87,250.79. As the 1st respondent did not avail of the opportunity, the Corporation exercised power under Section 29 of the State Financial Corporations Act (hereinafter called the Act) and seized the unit belonging to the 1st respondent on 17.12.1992 and issued an advertisement on 22.2.1993 for sale of the unit. The 1st respondent paid an amount of Rs. 85,000/on 29.6.1993, gave one cheque dated 30.6.1993 for Rs. 20,000/and also gave two post dated cheques dated 21.7.1993 and 27.7.1993 for Rs. 30,000/each and requested the Corporation to release the unit and promised to pay the instalments in time. The Corporation lifted the seizure on 29.6.1993 and handed over the unit to the 1st respondent. However, the postdated cheques, when presented, were dishonoured by the Bank and no offer was made by the 1st respondent to make good the amounts covered by the cheques. In fact, earlier cheques dated 17.9.1984 for Rs.11.3.1985 for Rs. 25,000/: 25.3.1985 for Rs. 25,000/: 30.3.1985 for Rs.17.7.1985 for Rs.20.12.1989 for Rs.31.3.1990 for Rs. one lakh and 26.11.1992 for Rs. 1.99 lakhs were dishonoured. The Corporation, in exercise of its powers under Section 29 of the Act issued anotice dated 9.9.1993 for Rs. 10,70,45,695/for payment before 20.9.1993 and on default, seized the unit on 11.11.1993.3. The 1st respondents Managing Director, made a fresh representation in person on 27.12.1993 for lifting the seizure and for making asettlement. According to the Corporation, a meeting of the officers of the Corporation, headed by its Executive Director and of the Managing Director of the 1st respondent (Mr. Vijaya Kumar) and Branch Manager of the Corporation (R.R. Dist.) took place on 27.12.1993 and the Corporation decided to give one more opportunity. The Managing Director of the Corporation made an endorsement on the file agreeing to lift seizure on condition of the 1st respondent making a payment of Rs. 30,000/by a demand draft and giving acheque for Rs. 50,000/and the 1st respondent was to make a onetime settlement in 6 months. It is the further case of the Corporation that this arrangement was entered into in the presence of Shri Vijaya Kumar (Managing Director of the Company) and that in spite of the above concessions, no payment was made by the 1st respondent. Thereafter, the Corporation issued an advertisement on 9.3.1994 in Enadu and Deccan Chronicle newspaper for sale of the unit. Only three offers were received, the highest being Rs. 13.50 lakhs. As the offers were low, they were rejected by the Corporation. A second advertisement dated 9.8.1994 in the two newspapers produced an offer of Rs. 10.50 lakhs as the highest offer which was again not accepted. A third advertisement was issued in the same two newspapers on 8.8.1994 and the highest offer received this time was Rs. 23.50 lakhs given by one Mr. M.S. Shyam, who was none other than theof Shri Vijay Kumar, Managing Director of the 1st respondent Company. As the offer of Rs. 23.50 was treated as low, the Corporation rejected the same. A further advertisement was issued on 2.3.1995 in the same two newspapers. Five offers were received, one for Rs. 24 lakhs by Mr. ShyamThe Corporation negotiated with the bidders and one of them M/s Vasant Organics (appellant in CA No. arising out of SLP (C) No. 15260/1998) increased its offer for Rs. 26 lakhs during meetings on 9.3.1995. 11.3.1995 and 13.3.1995. At that stage, Mr. M.S. Shyam withdrew from further negotiation and took back his deposit. So did another bidder Mr. Narasimha. Ultimately only M/s Vasant Organics remained in the field with the highest offer at Rs. 26 lakhs and there were further negotiations with that party and the offer was increased to Rs. 30 lakhs finally.4. On 13.5.1995, the Board of the Corporation approved the sale to M/s Vasant Organics on condition of making 100% down payment of sale consideration out of which 35% was to go towards the loan straightaway and the balance consideration was to be treated asrepayable within 3 years. Instead of availing the instalments, the said purchaser paid away the full consideration on 21.6.1993 and took possession of the unit.5. It is also the case of the Corporation that it was on request of the debtor (the 1st respondent), that out of the excess amount (after adjusting the loan of the Corporation) remaining with the Corporation, an amount of Rs. 1,58,047 due by the 1st respondent to the Vysya Bank was paid by the Corporation to the said Bank.6. At that stage, litigation in Courts started. Initially, a writ petition bearing No. 16282/1995 was filed by Mr. M.S. Shyamof of the Managing Director of the 1st respondent) in the High Court of Andhra Pradesh questioning the negotiations and the finalisation of the sale. The writ petition was dismissed on 17.8.1995 on various grounds including the ground that on 11.3.1995, the said Mr. Shyam had withdrawn from the competition and had taken back his deposit.7. On the same day, i.e. 17.8.1995, writ petition No. 18585/1995 filed by the 1st respondent (M/s Vajra Chemicals) came up for "admission" before the same learned Judge who dismissed the Writ Petition No. 16282/95 filed by hisMr. Shyam.8. This writ petition filed by the 1st respondent was dismissed by the learned single Judge holding that the 1st respondent had knowledge of the sale because it was at the instance of the 1st respondent that the Vysya Bank claimed its due out of the balance lying with the Corporation and therefore the 1st respondent cannot be allowed to plead that the factum of the sale was not known to it till 19.7.1995. The learned Judge also held that the offer of the 1st respondent at the stage of the writ petition to pay up the amount due by it could not be accepted. The learned Judge also observed that the writ petition was filed only to delay the matters.9. Against the said judgment dated 17.8.1995 in Writ Petition No. 18585/1995 W.A. No. 946/1995 was preferred by the 1st respondent. A Division Bench of the Andhra Pradesh High Court allowed the appeal by judgment dated 8.5.1996 and the writ petition was allowed subject to thepaying the entire dues with interest within 6 weeks and it was further directed that in case this was done, the Corporation would refund the amount paid by it with interest at the same rate to Vasant Organics and the Corporation shall then put back the 1st respondent in possession of the seized properties.

Reasoning:
20. Summarising the position, we are of the view that the Division Bench of the High Court while allowing the Writ Appeal overlooked the fact that there was no pleading in the writ petition regarding the representation dated 27.12.1993 or theof any decision thereon. No rejoinder was filed by the 1st respondent to contradict the specific averments made in the Corporations affidavit as to what happened on 27.12.1993 in the Chambers of the Executive Director of the Corporation. There is internal evidence in the endorsement of the Executive Director of the Corporation which shows that the matter was discussed and an arrangement was arrived at in the presence of Mr. Vijaya Kumar and was reduced to writing and communicated to him and consequential directions were issued to the office of the Corporation to receive Rs. 30,000/as outright payment and release the unit, and to receive Rs. 50,000/by March, 1994, receivecheques and it was also agreed that the 1st respondent was to make asettlement (OTS). The learned Judge therefore erred in entertaining and accepting a plea put forward by the 1stfor the first time in the Writ Appeal for which there was no foundation in the pleading or affidavits of the 1st respondent Company.It is true that this Court does not normally interfere with findings of fact arrived at by the High Court. But where there is no pleading and where a factual issue is permitted to be raised for the first time in Writ Appeal and findings are given contrary to the affidavit filed by the opposite party and where no reference is made to the contents of the only crucial documents in the case, (the endorsement dated 27.12.1993 on the representation), this Court can and will interfere.21. We may also refer to the conduct of the 1st respondent which, in fact, estops it from approaching the Court. The certificate issued by the Vysya Bank, after the sale was made, shows that the 1staccepted the factum of the sale of the unit. In the additional affidavit of Sr. V. Ramchandra dated 10.9.1995 filed before the Division Bench it was stated that the certificate dated 3.7.1995 issued by the Vysya Bank shows that the 1st respondent was aware of the sale finally made by the Corporation and had accepted the sale. The certificate dated 3.7.1995 by the Bank read as followsis to certify that a demand loan availed by M/s Vajra Chemicals Pvt. Ltd. is outstanding with us wherein the balance amount together with interest accrued thereon upto 30th June, 1995 at Rs. 1,58,047.00 (Rs. One Lakh fifty eight thousand and forty seven only). This certificate is issued at the request of the Company.From the above certificate of the bank, it is clear that the 1st respondent Company wanted that the balance amount remaining after adjusting the dues to the Corporation, should go in discharge of the Companys dues to the Vysya Bank. The 1st respondent Company was not able to explain what was the occasion for the Company to ask the Vysya Bank to move the Corporation. The sale of the unit was on 13.3.1995, the same was approved by the Board of the Corporation on 13.5.1995 and the purchaser had deposited the entire sale consideration on 21.6.1995. It is not in dispute that the Corporation has paid the Vysya Bank the amount covered by the certificate out of the balance of the sale proceeds that remained with the Corporation. This conduct of the company precludes it from questioning the sale.