Case: Bihar State Financial Corpn.&amp;Ors Vs. M/S.Chemicot India P.Ltd.&amp;Ors

The 1st respondent herein had set up a small scale industrial unit. The appellant herein is an establishment constituted under the State Financial Corporation Act, 1951. An application for sanction of loan in the Corporation was submitted by the respondent-Company. It was approved. The necessary agreements for loan were executed in terms whereof the properties of the 1st respondent were mortgaged2. It was decided to expand the existing unit and procure some machinery therefor. The Respondent also placed orders for other and further equipments/machinery necessary for expansion of the said scheme. Allegedly, the Managing director of the Corporation visited the 1st respondents factory on 29.1.1988 and having satisfied himself that there existed justification for expansion of the capacity utilization had agreed to sanction an additional term loan to the tune of Rs.15 lakhs on terms and conditions mentioned therein, some of which are as under:Clause 7: The concern will have to submit the following papers before the execution of the legal documents: -(a) Income Tax Clearance Certificate under section 230(A) of the Income Tax Act, 1961 in respect of the Directors. (b) Original title deed in respect of land. (c) Valid SSI, Registration CertificateClause 24: The concern shall have to submit D.G.T.D., Registration Certificate3. The agreement was registered on 31.3.1988, although no D.G.T.D. Certificate had been furnished. According to the 1st respondent, its unit being a small one, furnishing of such certificate was not necessary and in any event, the same was not granted by the authorities concerned. The Corporation refused to advance any amount on the terms that the 1st respondent had failed to furnish the said certificate, which according to it was necessary4. A writ petition was filed by the respondent before the Patna High Court which was marked as C.W.J.C. No.1691/1990. On a finding that the Corporation has waived its right to insist upon the Respondent to furnish such certificate in view of the fact that the agreement was registered, the Corporation was directed to disburse the term loan to the respondent- Company. The Corporation is, thus, before us

Court's reasoning:
9. The Corporation is a statutory organization. Ordinarily, the Court in exercise of its writ jurisdiction, should not interfere with a decision taken by it, but, it is well settled, that the doctrine of promissory estoppel would apply as against the financial corporation if a case is made out therefor10. In the writ petition the High Court was not concerned with the question as to whether the respondent had complied with the terms and conditions of the loan agreement in the matter of repaying of the installments in time, but was concerned with the question as to whether the Corporation being a statutory organization, could take a stand different from the one passed in its order. The High Court evidently proceeded on the basis that it could not have been done. The High Court may not be entirely correct in its approach as the transactions were governed by a statute and were essentially commercial in character. Unfortunately, however, the contentions, which have been raised before us, were not raised before the High Court12. We, therefore, in the peculiar facts if this case, are of the opinion that it would be futile to issue a writ of or in the nature of mandamus directing the Corporation to pay the aforementioned amount of Rs.15 lakhs to the respondent-Company. We may, however, hasten to add that we have not gone into the question as to whether the respondent-Company had paid any amount to the Corporation as against the loan amount which had admittedly been received by it. If the respondent-Company had not done so, the Corporation may take such steps in relation thereto, as it may be advised in this behalf but it goes without saying that it would be open to the respondent-Company to raise such contentions, including the payment of additional subsidy to it and/or effect thereof in the proceedings, which may be initiated by the Corporation.