Allowed

Satyam Roller Flour Millsplt v. the State of Bihar and Ors.

Patna HC25 Feb 2013CWJC/12898/2010

Case brief

AI extract

What is this about?

In a writ petition challenging the rejection of an application under the One Time Settlement Scheme and a sale order, the Patna High Court held that the petitioner retained the right to redeem as the sale deed was not registered. The court allowed the writ, quashed the sale order and the Board's rejection, and directed authorities to consider applying the scheme.

What did the court decide?

Both writ applications allowed; Board decisions of 23.6.2010 and 6.5.2011 quashed; sale order dated 21.7.2010 quashed; directions to grant benefit under OTS Scheme 2009.

Satyam Roller Flour Millsplt Vs the State of… — Contract and Commercial Disputes | Patna HC (2013)

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IN THE HIGH COURT OF JUDICATURE AT PATNA Civil Writ Jurisdiction Case No.12898 of 2010

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Satyam Roller Flour Mills (P) Ltd. Having Its Registered Office Situated At Makhdum Sarai P.O.+P.S.+Town - Siwan, Distt.- Siwan, Through Its Managing Director Sri Kanhaiya Lal, S/O Late Prahlad Prasad, R/O Makhdum Sarai, P.O.- Siwan, P.S.- Siwan, Distt.- Siwan

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.... .... Petitioner/s

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Versus

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The State Of Bihar Through The Director Of Industries-Cum-Chairman Apex Body Constituted For Rehabilitation Of Sick Industries, Department Of Industries, Government Of Bihar, Patna

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The Secretary Cum Commissioner Department Of Industries, Government Of Bihar, Patna

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The Director Cum Member Secretary Small Industries Service Institute, Government Of India, Ministry Of Small Scale Industries, Industrial Estate, Patna-800013

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The Board Of Director, Bihar State Financial Corporation Frazer Road, Patna

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The Managing Director Bihar State Financial Corporation, Frazer Road, Patna

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The Specified Authority Bihar State Financial Corporation, Frazer Road, Patna

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Ashfaque Hussain Khan S/O Lauwan R/O Haridya, P.S.- Badharia, Distt.- Siwan

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.... .... Respondent/s

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with

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Civil Writ Jurisdiction Case No.1090 of 2011

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Ashfaque Hussain Khan Son Of Abdul Manan Khan Resident Of Village Lauwan, P.S. Hardia, P.S. Badharia, District- Siwan

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.... .... Petitioner/s

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Versus

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Bihar State Financial Corporation , Fraser Road, Patna Through Its Managing Director 2. The Managing Director, Bihar State Financial Corporation, Fraser Road, Patna

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The Specified Authority, Bihar State Financial Corporation, Fraser Road, Patna

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M/S Satyam Roller & Flour Mills Pvt. Ltd, Having Its Registered Office Situated At Makhdum Sarai P.O. + P.S. + Distt- Siwan Through Its Managing Director, Sh, Kanhaiya Lal

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.... .... Respondent/s

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====================================================== Appearance : (In CWJC No.12898 of 2010) For the Petitioner/s : Mr. Ranjeet Kumar Mr. Dilip Kumar Mr.Kundan Kumar

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Patna High Court CWJC No.12898 of 2010 (26) dt.25-02-2013

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For the B.S.F. : Mr. Partha Sarthy,Advocate For respondent No.7 : Mr. Amir Alam For the State : Mr. Alok Ranjan A.C. to G.P.17 (In CWJC No.1090 of 2011) For the Petitioner/s : Mr. Amir Alam For the B.S.F.C. : Mr. Vinay Krishna Tripathy For respondent No.4 : Mr. Ranjeet Kumar

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====================================================== CORAM: HONOURABLE MR. JUSTICE RAMESH KUMAR DATTA ORAL ORDER

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26 25-02-2013

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Heard learned counsel for the petitioner and learned counsels for the Bihar State Financial Corporation and private respondent No.7 as also learned counsel for the State in both the cases.

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Both the writ applications raise common issues and have, accordingly, been heard together and are being disposed of by this common order.

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The writ application was originally filed for issuance of a direction upon the Managing Director of the Bihar State Financial Corporation to produce a copy of the decision, if any, taken by the Board of the Corporation regarding settlement of dues of the petitioner‟s unit under One Time Settlement Scheme, 2006 in view of the decision dated 29.02.2008 taken by the Apex Level Committee, headed by the Director of Industries, Bihar and as per the observation of this Hon‟ble Court in the order dated 9.10.2009 passed in C.W.J.C. No.13683 of 2008 and for quashing of the same. Further prayer is to set aside the order dated 21.7.2010 issued by the Managing Director of the respondent Corporation,

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Patna High Court CWJC No.12898 of 2010 (26) dt.25-02-2013

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by which the petitioner‟s unit has been proposed to be sold to one Ashfaque Hussain Khan, respondent No.7. During the pendency of the writ petition, a prayer was made for setting aside the decision of the Board of Directors dated 23.6.2010, by which the Board has rejected the decision dated 29.2.2008 of the Apex Level Committee for rehabilitation and thereby declined to settle the dues under OTS Scheme. Thereafter by another interlocutory application a challenge was made to the Board‟s order dated 6.5.2011 rejecting the application under OTS Scheme, 2009.

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The petitioner during the period 1987 to 1989 was sanctioned loan amounts of Rs.59.85 lacs from the Bihar State Financial Corporation (B.S.F.C.). The Unit of the petitioner stopped functioning from 15.1.1995 due to shortage of necessary funds and ultimately a report was sent for rehabilitation to the Apex Body under the Chairmanship of the Director of Industries constituted under the Industrial Policy, 1995 of the State Government on the application of the petitioner before the Apex Body to declare the unit as sick but having potential to revive and for allowing a suitable rehabilitation package. The Apex Body considered the case of the petitioner for declaration as a sick unit and its rehabilitation from time to time in its different meetings. While the case was pending before the Apex Body, the respondent Corporation came out with the OTS Scheme, 2006 but the

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Patna High Court CWJC No.12898 of 2010 (26) dt.25-02-2013

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petitioner did not apply against the same in view of the pendency of rehabilitation proceedings before the Apex Body. It may be pointed out that the Apex Body, which is headed by the Director of the Industries, Bihar, had also the Managing Director of B.S.F.C. as one of its members. Finally in the meeting of the said Apex Level Committee held on 29.2.2008, it was held as follows:“As per decision of the Sub Committee held on 30.8.2007, the promoter was advised to settle their case with BSFC under OTS Scheme. Since the time of OTS Scheme of BSFC has already been expired, the Committee has decided that a letter from DI, Bihar may be issued to BSFC for consideration of OTS proposal of the Unit as a special case even after expiry of OTS Scheme.”

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Pursuant to the same, the Director, Industries wrote to the Managing Director, BSFC by his letter dated 8.5.2008 to take further steps in terms of the aforesaid decision dated 29.2.2008. The case of the petitioner was rejected by the Manager, Coordination by his order dated 19.5.2008 and the sale notice with respect to the petitioner unit was also published on 15.8.2008. The said action of the respondent Corporation was challenged by the petitioner by filing C.W. J.C. No.13683/2008. The said writ application was disposed of by

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Patna High Court CWJC No.12898 of 2010 (26) dt.25-02-2013

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order dated 9.10.2009 setting aside the order of the Manager, Coordination contained in letter dated 19.5.2008 with further direction to the Managing Director and the Board of the Corporation to consider the case of the petitioner unit for grant of OTS Scheme benefit as a special case in the light of the minutes of the Apex Level Committee dated 29.2.2008 in accordance with law as early as possible in any case within one month from the date of receipt of the order before the Managing Director of the Corporation. Any steps taken, in the meanwhile, was to be subject to the result of the decision of the Board in the light of the said order of the Court. Since no information regarding the order passed by the Corporation was given to the petitioner, the petitioner filed a contempt application. On enquiry being made by the petitioner an order dated 21.7.2010 was received by him in which it was informed that the sale of the unit has been made in favour of respondent No.7 and further that the representation dated 6.11.2009 of the petitioner along with the minutes of the Apex Body meeting held on 29.2.2008 and the order of this Court dated 9.10.2009 passed in C.W.J.C. No.13683/2008 was placed before the Board of Director‟s meeting held on 26.3.2010 where it was declined. The petitioner was granted 21 days time from the date of issue of the sale order to make payment and if the payment plan was found acceptable by the Corporation he may be

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Patna High Court CWJC No.12898 of 2010 (26) dt.25-02-2013

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permitted to retain the unit on matching terms and conditions as contained in the sale order.

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Aggrieved by the same, the petitioner has filed the present writ application.

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During the pendency of the writ application, the Board at its meeting held on 11.9.2009 and 23.6.2010 came out with the OTS Scheme, 2009 which was issued by Notification dated 17.8.2010 in which the last date for making the application for the benefit of the said OTS Scheme was 15.11.2010. The petitioner submitted his application on the last date, i.e., 15.11.2010 for the benefit of OTS Scheme with required demand of Rs. 16.5 Lacs. It is also stated that the petitioner deposited further an amount of Rs. 49,30,335/- on 14.12.2010. However, the same has also been rejected holding that the proposal for sympathetic consideration on the application of the original promoter does not arise since the sale has been decided and the same proceeded ahead; action of the promoter was only to frustrate the sale otherwise they could have made payment in any of the earlier OTS or other schemes or would even have retained the unit in terms of the sale order.

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Learned counsel for the petitioner submits that the action of the respondent Corporation in the present case is malicious as the respondents deliberately delayed the communication of the Board of Directors‟ decision till 23.6.2010 and in the meantime

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Patna High Court CWJC No.12898 of 2010 (26) dt.25-02-2013

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passed the sale order dated 21.7.2010. The manner in which the respondent Corporation has acted to benefit the private respondent, according to learned counsel for the petitioner, is also highlighted by the fact that on the same date, i.e., 23.6.2010, when the Board of Directors rejected the application of the petitioner in terms of the recommendation of the Apex Level Committee dated 29.2.2008 on the ground that no OTS Scheme was in existence, a decision was taken to finalize OTS Scheme, 2009.

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That being the position, it is submitted by learned counsel for the petitioner that it was not open to the respondent to reject the application of the petitioner only on the ground that there was no OTS Scheme,2009 on 23.6.2010 when the fresh OTS Scheme was being directed to be floated in the Board‟s meeting on the same date.

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Learned counsel also submits that the direction of this Court by order dated 9.10.2009 was to consider the minutes of the Apex Committee for rehabilitation but the same has not been done. It is urged that the rejection on the ground that the OTS Scheme, 2006 has expired is quite contrary to what was recommended by the Apex Committee in which the Managing Director was also a member to consider the case of the petitioner irrespective of the fact that OTS Scheme, 2006 has come to an end as a special case in view of the fact that the Scheme was floated

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Patna High Court CWJC No.12898 of 2010 (26) dt.25-02-2013

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during the pendency of the rehabilitation proposal of the petitioner before the Apex Body Committee.

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It is also the submission of learned counsel for the petitioner that a mere sale order without there being registration of the deed of sale does not defeat the right of the petitioner as the mortgager to redeem the mortgage so long the sale is not completed by registration and thus it could not be said that the petitioner was not an existing promoter on 17.8.2010 when the OTS Scheme was publicly issued and continued to remain in force even on 15.11.2010 when he filed an application under the same Scheme, as till that date there was no completed sale so as to defeat the rights of the petitioner to retain the mortgage. Thus, it is urged by learned counsel for the petitioner that the petitioner was entitled to be granted the benefit of the OTS Scheme, 2009 on 17.8.2010, the date on which the Scheme was floated and even on the date when he filed his application, i.e., on 15.11.2010, his right over the property remained and thus he had every right to claim the benefit of the OTS Scheme, 2009 which could not stand defeated by the mere issuance of the sale order by the respondent Corporation.

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In support of the aforesaid proposition, learned counsel for the petitioner relies upon a decision of this Court in C.W.J.C. No.103 of 2010: Smt. Kanti Devi and others vs. The State of Bihar

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Patna High Court CWJC No.12898 of 2010 (26) dt.25-02-2013

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& others. In the said decision relying upon an earlier decision of a learned single Judge of this Court in the case of M/s. Dayal Fuel Industry vs. Bihar State Financial Corporation and others: 2009 (1) PLJR 800 and of the Apex Court in the case of Narandas Karsondas vs. S.A. Kamtam and another: AIR 1977 S.C.774 it was held as follows:-

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“Apart from what has been laid down in the aforesaid decision, it is evident that under Section 60 of the Transfer of Property Act a mortgagor‟s right of redemption cannot be taken away as long as there is no transfer of property by sale by the execution and registration of a deed of conveyance. It is based upon the principle “once a mortgage always a mortgage” and the right of redemption cannot be fettered, except in the manner as laid down in the said Section. The said proposition has been laid down by a three Judges bench of the Supreme Court in the case of Narandas Karsondas vs. S.A. Kamtam and another: AIR. 1977 S.C. 774 in paragraph Nos. 35 and 37 of the said decision in the following terms:

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“35. The mortgagor‟s right to redeem will survive until there has been completion of sale by

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Patna High Court CWJC No.12898 of 2010 (26) dt.25-02-2013

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the mortgagee by a registered deed. In England a sale of property takes place by agreement but it is not so in our country. The power to sell shall not be exercised unless and until notice in writing requiring payment of the principal money has been served on the mortgagor. Further Section 69 (3) of the Transfer of Property Act shows that when a sale has been made in professed exercise of such a power, the title of the purchaser shall not be impeachable on the ground that no case had arisen to authorize the sale. Therefore, until the sale is complete by registration the mortgagor does not lose right of redemption.

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In view of the fact that only on execution of conveyance, ownership passes from one party to another it cannot be held that the mortgagor lost the right of redemption just because the property was put to auction. The mortgagor has a right to redeem unless the sale of the property was complete by registration in accordance with the provisions of the Registration Act.

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In view of the aforesaid proposition, there being no denial of the fact that there has been no registration

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Patna High Court CWJC No.12898 of 2010 (26) dt.25-02-2013

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or even execution of a deed of sale in favour of the auction purchaser, the petitioner‟s right to redeem the mortgaged property continues and was in existence on 17.8.2010 when the OTS Scheme, 2009 was floated by the respondent Corporation and still continues to exist. So long as the right to redeem the mortgaged property remains and in the meantime any OTS is floated by the Corporation then it would be open to the promoter of the Unit to take the benefit of the said OTS Scheme as the owner of the said Unit”.

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Learned counsel for the B.S.F.C., on the other hand, submits that the petitioner did not apply either under OTS Scheme, 2004 or 2006 and thus, it is not open to him to claim the benefit of the OTS Scheme, 2009 also as in the meantime, the petitioner‟s Unit has been sold by a sale order. Learned counsel also refers to the order of this Court dated 10.9.2008 in C.W.J.C. No.130 of 2008 filed by the petitioner in which while passing interim order dated 10.9.2008, this Court had noted that the petitioner may make an application up to December, 2008 but no such application was filed by the petitioner even under the Incentive cum Loan Restructuring Scheme, 2008. It is submitted that under those circumstances, the Corporation has rightly decided not to grant the

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Patna High Court CWJC No.12898 of 2010 (26) dt.25-02-2013

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petitioner the benefit of OTS Scheme, 2006 or 2009.

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So far as OTS Scheme, 2009 is concerned, it is contended by learned counsel for the Corporation that the same was necessitated only on account of agreement with the Bihar Industrial Area Development Authority and the matter was earlier decided on 11.9.2009 and thereafter final decision was taken on 23.6.2010, as in the meantime, it was thought that there may be violation of Article 14 of the Constitution if the benefit of the said Scheme was kept confined only to matters relating to BIADA.

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Learned counsel also submits that respondent No.7 has already deposited Rs. 82.25 Lacs pursuant to the sale whereas the petitioner did not avail of the opportunity of 21 days as given in the sale order on matching terms and conditions or even thereafter and thus the sale should not be disturbed by this Court.

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Learned counsel for respondent No.7 has adopted and reiterated the stand taken by learned counsel for the B.S.F.C. Learned counsel also submits that the sale order dated 21.7.2010 has been issued in terms of the order of this Court under which the sale was subject to the decision of the Board of Directors on the petitioner‟s application pursuant to the recommendations of the Apex Committee and the Board of Directors having rejected the petitioner‟s application on 23.6.2010, the issuance of sale order dated 21.7.2010 is unexceptional. Learned counsel also submits

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Patna High Court CWJC No.12898 of 2010 (26) dt.25-02-2013

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that the interim order dated 3.12.2010 has resulted in the sale deed not being registered and no benefit can be derived from the same.

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Learned counsel for the respondent B.S.F.C. has also sought to rely upon a decision of this Court in L.P.A. No.596 of 2005: The Bihar State Financial Corporation and others vs. Alakh Saran alias Alakh Saran Singh and others and another analogous case in which the order of a learned single Judge of this Court directing the Corporation to accept the offer of the writ petitioner for retention of the unit by accepting the initial cash amount and to take all consequential steps was set aside and the sale order in favour of the purchaser was directed to be proceeded with.

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I have considered the submissions of learned counsels for the parties. It is evident from the facts narrated above that the petitioner‟s case was under consideration of the Apex Level Committee, which was constituted under the Industrial Policy of the State Govt. headed by the Director of Industries Bihar in which apart from others the Managing Director of the BSFC was also a member. While disposing of the matter for rehabilitation, the Apex Committee had requested the respondent BSFC to consider the case of the petitioner under the OTS Scheme, 2006 being fully aware of the fact that the said Scheme had expired and thereby directing the case of the petitioner to be treated as a special case. The said directions do not appear to be contrary to

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Patna High Court CWJC No.12898 of 2010 (26) dt.25-02-2013

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law as it is evident that while the matter of the petitioner‟s Unit was under consideration for rehabilitation by a Body set up by the State Government by taking a policy decision, if the petitioner did not apply in the meantime under the OTS Schemes 2004 and 2006, it could not be held against it. The respondent Corporation ought to have taken a sympathetic view considering the fact that the Unit of the petitioner has not been held to be unviable, rather it was apparently the view of the Apex Committee that it was a fit case when the benefit of OTS, 2006 should be given to the petitioner‟s Unit. Thus, the rejection solely on the ground that the Scheme had expired does not appear to be a decision taken with a proper frame of mind.

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Be that as it may, the question that now arises is as to whether the petitioner having applied under the OTS Scheme, 2009 on 15.11.2010 within the time under the said Scheme is entitled to the benefit of the said OTS Scheme irrespective of the sale order dated 21.7.2010 in favour of respondent No.7.

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From a consideration of the facts and circumstances narrated above, it is evident that the action of the respondent Corporation has not been above-board in the matter. The claim of the petitioner was rejected on 23.6.2010 on the sole ground that there was no OTS Scheme in operation whereas on that very day the Board had given final shape and direction for floating the OTS

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Patna High Court CWJC No.12898 of 2010 (26) dt.25-02-2013

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Scheme, 2009 with respect to which earlier also a decision was taken in Board‟s meeting held on 11.9.2009. Thus, the Board was fully aware that the OTS Scheme, 2009 is to be floated under its direction and there was no occasion for the Board to come to the conclusion that there was no OTS Scheme in operation except by taking a highly technical view in the matter. Whether there should or should not be an OTS Scheme is a matter entirely at the discretion of the Board of Directors and it is not open to the officials of the Corporation to flout any direction of the Board. Thus, at least on 23.6.2010, there was a final decision by the Board of the respondent Corporation to have an OTS Scheme, 2009 and thereafter the decision in the case of the petitioner should have been taken to grant the benefit of OTS Scheme, 2009. Instead of doing so, the entire thing was kept under raps and the petitioner was not even informed about the decision rejecting its case until the letter in that regard was dispatched on 23.7.2010 which also according to the petitioner was not received by it. Even assuming that the letter was dispatched on 23.7.2010 the same does show an attitude on the part of the Board and its officials to act in favour of respondent No.7 as, in the meantime, the sale order dated 21.7.2010 was issued in favour of respondent No.7.

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Apart from all such actions of the respondent authorities of the B.S.F.C., which this Court does not expect of any organization

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Patna High Court CWJC No.12898 of 2010 (26) dt.25-02-2013

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or body, which is „State‟ under Article 12 of the Constitution, this Court is of the view that the petitioner would be entitled to the benefit of the OTS Scheme, 2009 in view of what has been held in Smt. Kanti Devi‟s case (supra) by the order dated 15.11.2010 of this Court. The present case is squarely covered by the said decision since the petitioner‟s right to redeem survived until the same could be extinguished by the completion of sale by the mortgagee by a registered deed, which has not been done till date.

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In this regard, the submission of learned counsel for the respondent No.7 that the interim order dated 3.12.2010 of this Court resulted in the sale deed not being registered is only noticed to be rejected as till 15.11.2010 when the petitioner had filed his application under OTS Scheme, 2009, there was no interim order to prevent the Corporation from taking steps. As a matter of fact, this Court is of the view that the right of the petitioner under OTS Scheme, 2009 arose immediately on 17.8.2010 when it was publicly issued and it could not be defeated by any action of the respondents until the last date for filing an application under the said OTS Scheme, 2009 on 15.11.2010. The petitioner having applied when the OTS Scheme, 2009 was in operation the respondent Corporation ought to have given it the benefit of the said Scheme in terms of the provisions laid down under the said Scheme.

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Patna High Court CWJC No.12898 of 2010 (26) dt.25-02-2013

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So far as the reliance of learned counsel for the respondent Corporation made on the decision of L.P.A. No. 596 of 2005: Bihar State Financial Corporation (supra) is concerned, in the said case no such issue was raised and the only issue under consideration was as to whether the petitioner of that writ petition was entitled to retain the Unit after having made the payment after the period of 21 days and the same was negatived by the Division Bench of this Court. The issues raised in the present matter were not at all under consideration before the Division Bench in the said case.

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Both the writ applications are, accordingly, allowed and the decision of the Board of Directors in its meeting held on 23.6.2010 and 6.5.2011, so far as they relate to the petitioner, are quashed and the respondents are directed to consider the case of the petitioner for the grant of benefit under OTS Scheme, 2009 in terms of the provisions of the said Scheme. The sale order dated 21.7.2010 is also quashed.

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(Ramesh Kumar Datta, J)

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V.P.Sinha/-

Satyam Roller Flour Millsplt v. the State of Bihar and Ors.

Case brief

What is this about?

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Satyam Roller Flour Millsplt v. the State of Bihar and Ors.

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