M/S. Swati Ferro Alloys Pvt.Ltd vs Orissa Indl.Infr.Dev.Corpn.(Idco)& ...

3. The factual matrix of the case is as follows:

4. The case of the appellant is that the assets of M/s Prachi Vanijya (P) Ltd. comprising of land and building, shed and fan machines situated at C/9, Industrial Estate, Cuttack were purchased along with a loan liability of Rs.6,60,000/- of the 2nd respondent by M/s Eastern Fans on 5.12.1987, of which Sri Satya Narayan Swain was the Managing Partner. M/s Prachi Vanijya requested the 1st respondent to give no objection to change its name as M/s Eastern Fan. The 1st respondent vide its letter dated 5.12.1987 informed that it has no objection to change of the name subject to receipt of recommendation from the 2nd respondent.

5. The 2nd respondent on 16.12.1987 intimated that it has agreed to a change in name of M/s Prachi Vanijya to M/s Eastern Fans. Thus, Plot No. C/9, Industrial Estate, Cuttack along with the loan liability was transferred in the name of the M/s Eastern Fans, a partnership firm. Ever since the transfer of assets in favour of Eastern Fans, the unit was non- functional and the loan amount of 2nd respondent against Eastern Fans had mounted and it had become impossible for Sri Satya Narayan Swain to run M/s Eastern Fans due to excessive paucity of funds. Sri Swain thus approached and persuaded Sri Purushottam Lal Kandoi, Director of the appellant company- M/s Swati Ferro Alloys Pvt. Ltd. for relieving him of the loan burden of 2nd respondent.

6. Pursuant to discussion between the parties, the appellant company was incorporated on 22.3.1989 with three Directors, namely, Sri Purushottam Lal Kandoi, Sri Rakesh Jajodia and Sri Satya Narayan Swain with a share capital of Rs.5,00,000/-. The object of the Company was, inter alia, to undertake manufacturing Ferro Alloys.

7. On the request of appellant company and M/s Eastern Fans, on 26.4.1989 the 1st respondent gave permission to accommodate the appellant company in the premises aforesaid for a period of 2 years. It was mutually agreed on 6.7.1989 that the appellant-company will take over the term loan liability of M/s Eastern Fans as against the complete transfer of all its assets in favour of the appellant company. A Board resolution dated 6.7.1989 was passed resolving that all liabilities of M/s Eastern Fans with the 2nd respondent as on said date be taken by the appellant company along with all the assets including the land. The Managing Partner of M/s Eastern Fans, Sri Satya Narayan Swain, who was also the Director of the appellant company at that time was authorized to negotiate and finalize the said matter with 2nd respondent. The Managing Partner of the partnership firm M/s Eastern Fan wrote letters dated 10.7.1989 and 11.7.1989 to the 2nd respondent intimating that the appellant company will take responsibility to clear the term loan along with accrued interest by taking over the fixed assets of M/s Eastern Fans i.e. the land along with shed and the plant and machinery. 2nd respondent acted on the letters written by Satya Narayan Swain and accordingly by letter dated 9.1.1990 agreed that the appellant company shall take over the entire assets and liabilities of M/s Eastern Fan. The appellant company was asked to pay a sum of Rs.1,00,000/- as down payment towards the loan liability outstanding against M/s Eastern Fan (Prachi Vanijya), which was duly done.

15. Respondents have disputed the claim of the appellant to transfer the land in the name of the appellant company.

Letter dated 26.4.1989 written by 1st respondent-IDCO shows that the appellant-company -M/s Swati Ferro Alloys Pvt. Ltd. was allowed only accommodation inside the premises of M/s Eastern Fan for a period of 2 years and they have not given permission for transfer of the land.

18. We agree with the observation of the High Court that this matter involves disputed question of fact. Despite the same, prima facie it appears that neither original borrower nor the present appellant does any business in the land in question, except for taking loan against the land. In this background while we upheld the impugned judgment dated 18th April, 2012 passed by the Division Bench of High Court of Orissa at Cuttack in WP(C) No.16790 of 2008, we are of the opinion that the respondent-IDCO should inquire into the matter to find out as to whether the land is properly used by one or other party for the purpose it was open or by opening different firms or companies in different names in same premises, they are availing loan mortgaging the same very land. For such inquiry the respondent-IDCO will issue notice to the 2nd respondent-Orissa State Financial Corporation, appellant-M/s Swati Ferro Alloys Pvt. Ltd., M/s Eastern Fan and any other party who may be interested. On such enquiry it will be open for the competent authority to pass an appropriate order.

19. The appeal is dismissed with aforesaid observations.