Writ petition challenging possession takeover by Respondent under Section 29 State Financial Corporations Act, 1951. Court rejected allegations of malafide and misuse of power, finding action justified by defaulted loans and procedural compliance.
Petition rejected; no interference with the writ jurisdiction.
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE SIDE JURISDICTION
WRIT PETITION NO.2717 OF 2002
Kumkum Food Products Limited
& Anr. ... .. Petitioners
Vs.
Maharashtra State Financial
Corporation. ... .. Respondent
--
Shri Niranjan Lapashiya i/b M/s.Niranjan & Co.for the
petitioners.
None for the respondent.
--
CORAM : R.M.S.KHANDEPARKAR &
NARESH H.PATIL, JJ
DATED : 23RD AUGUST, 2006
P.C.
1. Heard. The petitioners challenge the taking
over of possession of the assets of the petitioners in
exercise of powers under Section 29 of the State
Financial Corporations Act, 1951, hereinafter called
as "the said Act", being malafide and of misuse of
powers. The allegation of malafide and misuse of
powers is on three grounds. The first ground is that
the possession of the assets of the petitioners in
exercise of powers under Section 29 of the said Act
was taken over even before the rejection of the
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request for one time settlement. Secondly that the
advertisement for sale of the property was issued even
before taking over of possession in exercise of powers
under Section 29 of the said Act, and thirdly that the
respondent failed to take note of the fact that till
1997 the petitioners were regular in repayment of loan
amount and had even cleared 4 short-term loan accounts
out of 5 short-term loan accounts and 2 long-term loan
accounts out of 5 long-term loan accounts. Besides,
from the remaining 3 long-term loan accounts, there is
substantial amount repaid in relation to the two of
long-term loan accounts.
2. As regards the first ground of challenge about
taking over possession of the assets of the
petitioners prior to rejection of the proposal for one
time settlement, the records apparently disclose that
pursuant to the request in that regard by the
petitioners under their application dated 12th May,
2001, the respondent had informed the petitioners by
its letter dated 31st May, 2001 to furnish certain
details within 15 days with the warning that in case
of failure to do so, the application/request for one
time settlement would be treated as withdrawn by the
petitioners. Undisputedly, necessary information as
was called for by the respondent under its letter
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dated 31st May, 2001 was not furnished by the
petitioners within the said period of 15 days. In
that regard, attention was sought to be drawn by the
learned advocate for the petitioners to the letter
dated 25th October, 2001 while contending that the
fact that the requirement of the letter dated 31st
May, 2001 was complied with by the petitioners was
brought to the notice of the respondent under the said
letter and it is only thereafter, i.e. 7th November,
2001, the proposal for one time settlement was sought
to be rejected. It is pertinent to note that the
letter dated 25th October, 2001 was received by the
office of the Maharashtra State Financial Corporation
only on 29th October, 2001, the date on which the
notice under Section 29 of the said Act was issued to
the petitioners. The records nowhere disclose that
the letter dated 25th October, 2001 was served upon
the respondent prior to issuance of the notice under
Section 29 of the said Act. There is every reason to
believe that the letter dated 25th October, 2001 was
submitted by the petitioners as a counter to the
notice issued under Section 29 of the said Act on 29th
October, 2001. Though under the letter dated 7th
November, 2001, the petitioners were informed about
the non acceptance of the proposal for one time
settlement for Rs.99 lakhs, the fact remains that
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pursuant to the request for one time settlement made
by the petitioners under letter dated 12th May, 2001,
the respondent had directed the petitioners to furnish
certain details within the specified period and the
petitioners failed to comply with the said
requirement. It is also a matter of record that the
letter dated 31st May, 2001 clearly warned the
petitioners that in case of failure to comply with the
said requirement, the proposal for one time settlement
would be deemed to have been withdrawn by the
petitioners. Being so, merely because, under the
letter dated 7th November, 2001, the respondent sought
to reply the letter dated 25th October, 2001 which was
received by the respondent on 29th October, 2001, that
would not mean that the petitioners were for the first
time made aware about the rejection of the proposal
for one time settlement. The petitioners were already
aware of the said situation under the letter dated
31st May, 2001 itself.
3. As regards the second ground of challenge i.e.
advertisement for auction of the assets about 15 days
prior to the taking over of possession, the action
under Section 29 of the said Act was initiated on 29th
October, 2001 much prior to the issuance of
advertisement. Being so, merely because taking over
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of possession of the assets was delayed beyond
issuance of advertisement, that itself cannot be a
sufficient ground to contend that the respondent had
acted malafide or had misused of powers.
4. As regards the third ground of challenge,
undoubtedly, the records disclose that till 1997, the
petitioners had been repaying the loan without any
occasion for the respondent to make grievance about
non compliance of the obligation of the petitioners
regarding repayment of loan. However, at the same
time, the records undoubtedly disclose that since 1998
the petitioners had failed to repay the loan and the
action under Section 29 was initiated only in the
month of October, 2001 nearly after three years from
the first default. In such circumstances, the
allegations regarding malafide are not at all
corroborated by any piece of material on record. The
action on the part of the respondent therefore cannot
be said to be either malafide or in misuse of powers.
The facts clearly justify the action taken by the
respondent, and therefore, there is no case for
interference in writ jurisdiction. The petition is,
therefore, rejected.
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(R.M.S.KHANDEPARKAR, J)
(NARESH H.PATIL, J)
3 issues framed by the court
Whether the taking over of possession under Section 29 was motivated by malafide or misuse of power.
Whether the advertisement for sale before actual possession taking implies bad faith.
Whether the petitioner's repayment history justifies a writ challenge against the action.
1 provisions across 1 enactments
Kumkum Food Products Limited & Anr.
Maharashtra State Financial Corporation
R.M.S.KHANDEPARKAR
NARESH H.PATIL
As recorded by the court registry
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