Ajay Dubey vs H.P. State Financial Corporation and Another

Kamlesh Sharma, J.—In this writ petition the Petitioner has, inter alia, prayed for quashing of Annexure P-19 and direction to H.P. State Financial Corporation, Shimla Respondent No. 1 to rehabilitate his unit. By Annexure P-19 the Respondent-Corporation has conveyed its decision to the Petitioner that since he has failed to repay the loan and interest despite affording adequate opportunities, the possession of the mortgaged/hypothecated assets or his industrial unit, namely, M/s Sai Box Factory would be taken over on 14.4.1992 at 11.30 A.M. under the provisions of Section 29 of the State Financial Corporations Act, 1951 (hereinafter called the Act), unless he clears the default amount of Rs. 2,23,436.00 including interest upto 9.9.1991 against the outstanding loan dues of Rs. 5,80,936,50. On receipt of notice Annexure P-19, the Petitioner has filed the present writ petition, which came up for admission on 13.4.1992, when by an order passed in CMP No. 510 of 1992, the operation of Annexure P-19 was stayed till the next date but it continued thereafter.

The brief facts of the case, as stated in the writ petition, are that the Petitioner was granted loan of Rs. 1,31,000.00 on 11.3.1986 for establishing an unit to produce boxes made from old used corrugated boxes/cardboard. Out of the sanctioned loan amount, Rs. 21,000.00 was paid on 19.9.1986, Rs. 46,000.00 on 31.1.1987 and Rs. 50,300.00 on 30.4.1987 and remaining Rs. 14,000.00 was adjusted towards the payment of interest. Thereafter, the Petitioner started trial production on 25.8.1987 and for the purpose of working capital he applied for a loan of Rs. 2,80,000.00 to Canara Bank at Una, which was duly recommended by its Una Branch and approved by its Divisional Office but it was not paid till 20.11.1989, as the Respondent-Corporation did not co-operate. Thereafter, the Petitioner approached the Respondent-Corporation with viable project report for modernizing the plant and equipment of his unit and asked for a loan of Rs. 40 lacs. Ultimately, loan of Rs. 9.65 lacs was sanctioned by the Respondent-Corporation, out of which an amount of Rs. 2,06,700.00 was shown to have been disbursed on 25.7.1990 and another amount of Rs. 1,83,500.00 on 23.1.1991, whereas, in fact only an amount of Rs. 1.26 lacs and Rs. 1.59 lacs respectively was paid and the balance amount including central subsidy was adjusted towards interest and other charges without telling the Petitioner about it. As such, according to the Petitioner out of sanctioned loan amount of Rs. 10.96 lacs, the Petitioner was actually paid the following amounts:

Date Amount 19.9.1986 Rs. 21,000/- 31.1.1987 Rs. 46,000/- 30.4.1987 Rs. 50,300/- 23.7.1990 Rs. 1.26 lacs 23.1.1991 Rs. 1.59 lacs Rs. 4.02 lacs

It is further stated by the Petitioner that total amount adjusted towards interest by the Respondent-Corporation comes to Rs. 1,19,000.00, which according to him is "unbusiness like manner" as he was charged interest even when his industrial unit was not in production.

Further case of the Petitioner is that one of the stipulations for grant of term loan of Rs. 9.65 lacs was that he was to complete the construction of his factory building by 12.9.1990 in order to implement his expension programme within a period of six months from 12.3.1990 which could not be fulfilled as the first installment of additional loan was paid to him on 25.7.1990 and the second installment on 23.1.1991. The allegations of the Petitioner are that though he had started making constructions on his land for installation of machinery and also booked some orders in anticipation of disbursement of loan amount on due date in order to implement the project by November, 1991 but his plan fizzled out due to acts of omission and commission of Respondent-Corporation in not paying full amount of sanctioned loan in time and delaying the disbursement thereof, with the result the construction of the building remained incomplete and what to talk of starting production as per the expansion programme, even manufacturing activities which had started in old building came to a grinding hault.

Instead of coming to the rescue of the Petitioner, the Respondent-Corporation gave him legal notice on 9.12.1991 (Annexure P-15) calling upon him to make payment of Rs. 5,41,360.50 with interest calculated upto 31.10.1991 and future interest till the date of payment, within one month from the receipt of notice, failing which the appropriate proceedings for recovery of its dues or for taking over possession of his unit u/s 29 of the Act would be started at his risk and costs. The Petitioner sent reply dated 7.3.1992 (Annexure P-16) to this notice through his counsel denying the allegations made therein as well as the liability to pay the loan amount as claimed by the Respondent-Corporation. He requested for rehabilitation of his unit in the facts and circumstances in which he could not implement his project. The Petitioner also made complaint in H.P. Consumer Disputes Redressal Commission, Shimla but his application was rejected by order dated 24.3.1992 (Annexure P-17) on the ground that the Commission has no jurisdiction in the matter. Thereafter, the impugned notice Annexure P-19 was issued on 31.3.1932.

In its reply the Respondent-Corporation has taken number of preliminary objections but we are not referring to them as these were not pressed at the time of arguments. On merits, it is stated that the Petitioner was in default of Rs. 2,05,874.50 including interest amounting to Rs. 55,874.50 upto 3.12.1991, which figure does not tally with the default amount as shown in the impugned notice Annexure P-19. According to the Respondent-Corporation, loan amount was disbursed "In accordance with the agreement and procedure of the Corporation" and "there is nothing wrong in adjusting the installments against interest". It is admitted that since the Petitioner had failed to implement the scheme as approved by the Respondent-Corporation for grant of loan of Rs. 9.68 lacs for expansion of the unit, it had acted within its right to withhold undisbursed part of the loan. In its letter dated 2.7.1992 (Annexure R-1) the Respondent-Corporation taking into account the building material at site and bank balance as shown in balance sheet of 20.1.1991, held out that building would be completed by then and asked the Petitioner to send proposal for purchase of machinery. Since the Petitioner ignored the suggestion made by the Respondent-Corporation in letter Annexure R-1 to regularise the over-run in building, no further instalment of loan was disbursed in his favour. On the failure of the Petitioner to implement the scheme of rehabilitation by way of expansion already granted in his favour, the Respondent-Corporation was compelled to take decision to take possession of the unit.

Respondent No. 2 has also filed reply on the affidavit of Shri J.R. Gejta, Joint Secretary (Industries) to the Government of Himachal Pradesh stating that the case of the Petitioner cannot be referred to the State Loan Industrial Committee (S.L.I.C.) for rehabilitation as it is not a statutory body or authority and all the members constituting it are not made party. Moreover, the recommendations made by this committee are only advisory in nature and Respondent-Corporation is free to take its decision on merits. It is also stated that the case of the Petitioner does not fall under the category of sick units, which are normally considered for rehabilitation by the said committee. In rejoinder to the reply of the Respondent-Corporation, the Petitioner has denied all the preliminary objections and reiterated the averments made in the writ petition.

We notice that by our order dated 1.12.1992 we directed the Respondent-Corporation to consider the case of the Petitioner in view of the observations made in the judgment of the Supreme Court in Mahesh Chandra Vs. Regional Manager, U.P. Financial Corporation and others, . In the supplementary affidavit dated 9.3.1993 filed by Shri B.S. Thakur, Manager (Legal) of the responded Corporation, it is stated the observations made in Mahesh Chandra''s case (supra) do not help the Petitioner, who himself is guilty of inaction to implement the project despite maximum accommodation granted to him by the Respondent-Corporation. After considering this affidavit and other affidavits exchanged between the parties, this Court on 28.9.1993 directed Respondent No. 2 to consider the case of the Petitioner for rehabilitation on his filing representation within a period of three weeks and to place its decision on record by way of affidavit. In compliance to this order Joint Secretary (Industries) to the Government of Himachal Pradesh Shri G.R. Gazta filed his affidavit dated 23.12.1993 stating that Respondent No. 2 held its meeting on 18.11.1993 and noted that the Petitioner had not submited his representation as ordered by this Court on 29.9.1993. However, Respondent No. 2 considered the case of the Petitioner after giving him opportunity to explain his case in person but did not find it a fit case for rehabilitation due to default commited by him not only against the Respondent-Corporation but also Canara Bank. Thereafter, on 27.12.1993 Shri J.R. Gazta was further directed to file fresh affidavit on behalf of Respondent No. 2 whether the Petitioner was asked to submit his rehabilitation proposal after the meeting of 18.11.1993, as stated by his counsel in the Court, if so, the decision taken thereon was also directed to be placed on record. On 11.4.1994, on perusal of the proceedings of the meeting held on 18.11.1993, this Court found that Respondent No. 2 did not "effectively and purposefully considered the rehabilitation proposal submitted by the Petitioner as directed by the Court" and directed Respondent No. 2 to take decision of the rehabilitation proposal submitted by the Petitioner on 21.12.1993 and place its decision on record within a period of four weeks. Ultimately, the then Joint Secretary (Industries) Shri P.C. Jassal placed on record proceedings of the meeting of Sub Committee of Respondent No. 2 held on 11.5.1994 as well as of Respondent No. 2 itself held on 17.5.1994 along with his affidavit dated 23.6.1994. As per the decision taken by the Sub Committee of Respondent No. 2, the unit of the Petitioner was not found a sick unit, though recommendations were made to the Respondent-Corporation to consider the proposal of the Petitioner for additional funds as per their norms in view of the fact that it had not come into full production and there had been cost over-runs and the Petitioner was asked to arrange for equity as required by the Respondent-Corporation. Similarly, Recommendations were given to Canara Bank to consider the case of the Petitioner for financing its working capital if Respondent-Corporation would decide to grant additional funds. From the proceedings of the meeting of Respondent No. 2 held on 17.5.1994 we find that the rehabilitation proposal of the Petitioner did not find favour as Respondent No. 2 and Canara Bank refused to provide further funds. The allegation made on behalf of the Respondent-Corporation before the Committee was that the Petitioner had "mis-utilised the funds and they could not throw good money after bad money. The party had not got the dies made for which loan was released to him. The party had not set up the shed.... The Corporation was not satisfied about the credibility of the borrower and had lost faith in him. The expansion programme could not be financed." It was also pointed out by the Respondent-Corporation that the proposal of rehabilitation "involved financing of additional loan of Rs. 10.00 lacs". Similarly, the representative of Canara Bank pointed out that the Petitioner had "diverted the working capital and they did not support the rehabilitation proposal".

The Petitioner has filed reply to the affidavit of Respondent No. 2 on his affidavit dated 10.7.1994 in which he has denied all the allegations made by the Respondent-Corporation as well as the Canara Bank before Respondent No. 2 in its meeting held on 17.5.1994 on the ground that these were not borne from the record of the Respondent-Corporation which was not referred to by the Committee. It is denied that the Petitioner had mis-utilised the funds and any excess payment was made. According to him, estimate for fabrication of four machines at Rs. 42,000/- per machine was obtained on 30.1.1990 and since the disbursement of installment of loan amount was delayed from January, 1990 to January, 1991, the price of the machine had escalated to Rs. 12,000/- and additional sum of Rs. 48,000/- was paid by the Petitioner from his own resources. Referring to the dates of disbursement of installments of loan amount, the Petitioner has reiterated that it was the Respondent-Corporation which should be blamed for the delay of execution of the project. The Petitioner has placed on record pre-disbursement reports Annexure P-6 to P-9 to show that at no point of time any complaint regarding misuti1isation of funds was made against the Petitioner. It is also stated that "the dies machines had not been fabricated, is not correct and it is within the knowledge of the Respondent-Corporation that such dies have been fabricated but the machines could be kept in factory premises after the building is complete". Correspondence exchanged between the Petitioner and the manufacturers of said machines is also on record, which shows that it was within the knowledge of the Respondent-Corporation that due to non-completion of the building the machines could not be installed, though these were fabricated on the orders of the Petitioner. In the circumstances the Petitioner has prayed for reconsideration of his case for rehabilitation.

This Court has heard learned Counsel for the parties and gone through the record, Shri D.D. Sood, learned Counsel appearing for the Petitioner, has relied upon the judgment in Mahesh Chandra v. Regional Manager, U.P. Financial Corporation and Ors. (supra) and urged that in the facts and circumstances on record it was not fair and just for Respondent-Corporation to give the impugned notice u/s 29 of the Act to take over the unit of the Petitioner. According to him the refusal by the Respondent-Corporation to disburse the full loan amount as per agreement as well as delayed disbursement of the installments of the loan amount was the cause of non-completion of the building as well as non-installation of the machinery within stipulated period, with the result the unit of the Petitioner could not come in production; instead of rehabilitating the unit by advancing balance amount of sanctioned loan or otherwise the Respondent-Corporation hastened to recall the loan. In addition, Shri Sood has also invoked the principle of promissory estopple to submit that once loan was sanctioned and the Petitioner had complied with all the conditions put up by the Respondent-Corporation to secure the loan and also incurred other expenditure and suffered liabilities to implement and execute the project, the Respondent-Corporation could not refuse disbursement of sanctioned loan amount on the flimsy ground as raised by the Respondent-Corporation in the present case. For making his submissions, he has relied upon the judgment of the Supreme Court in Gujarat State Financial Corporation Vs. Lotus Hotels Pvt. Ltd., .

On the other hand, Shri Ravi Bakshi, learned Counsel appearing for the Respondent-Corporation, has drawn support from another judgment of the Supreme Court in U.P. Financial Corporation Vs. Gem Cap (India) Pvt. Ltd. and Others, to urge that there is no statutory violation on the part of the Respondent-Corporation and in the facts and circumstances on record its action not to disburse the full sanctioned loan amount and recall the loan as well as to issue impugned notice u/s 29 of the Act to take over the unit of the Petitioner was....responsible. According to Shri Bakshi, this is not a fit case for interference to review the administrative decision of the Respondent-Corporation by this Court in exercise of jurisdiction under Article 226 of the Constitution of India.

After giving our best consideration to the arguments addressed by the counsel for the parties we would like to first recapitulate the ratio of above cited judgments of the Supreme Court to apply it to the facts and circumstances on record of the present case. In the case of Mahesh Chandra (supra), the learned Judges of the Supreme Court in para 10 of the judgment pointed out as under:

"Thus a helping attitude on the part of the Corporation to constantly monitor the working of the industrial concern or units (it may even charge the overhead expenses on this account) would subserve the purpose of the loan, object of the Act, and the constitutional objective of economic justice to the needy. Equally employment and better working conditions to the workmen are assured and the unit gets stabilised and starts yielding returns for repayment of principal amount and interest payable thereon. The facts in this case do demonstrate that non-cooperation by the partners and depletion of working capital are causes to close down the mill and the consequential default in the payment of the principal amount and the interest accrued thereon. The Corporation acted indifferently.

After examining the Scheme of Section 29 of the Act, their Lordships observed in para 15:

"... Default in payment of loan may attract Section 29. But that alone is insufficient either to assume possession or to sell the property. Neither should be resorted to unless it is imperative. Even though no rules appear to have been framed nor any guideline framed by the Corporation was placed, yet the basic philosophy enshrined in Section 24 has to be kept in mind. Rationale of action and motive in exercise of it has to be judged in the light of it. Lack of reasonableness or even fairness at either of the two stages renders the take over and transfer invalid. Unfortunately the Corporation was guilty of not acting in accordance with law either at the stage of take over or in transferring the unit. Admittedly the entire loan was not disbursed. Need of the capital in the last stages cannot be doubted. If the Corporation refused to release the amount at a time when the unit is nearing completion or is ready to start functioning, then it falls short of capital and it is found to land itself in trouble. This is what happened in this case. The partners did not cooperate and the Corporation without any explanation refused to release the full amount. Result was that the Appellant stood pressed on one hand from absence of capital and on the other by recovery proceedings. The Corporation, therefore, should honour their commitments of releasing entire loan timely except for very good reasons which should be intimated before hand to enable the unit holder to comply with shortcomings if any. In its absence of its completion, the proceedings for recovery u/s 29 may not be justified. Similarly various situations may arise which may hamper start of the unit delay in electric supply or delayed delivery of machinery vital for the functioning of the unit. Such difficulties do require rescheduling of payment of installment because, if the unit, for reasons beyond the control of unit holder, could not start, then how will the amount be repaid. Endeavor should be to adjust and accommodate as business considerations require the unit to function for benefit, both, of the general public and the Corporation. It is not mandatory, as a matter of law, to observe the process of taking over strictly. But if there is no option left and the unit is taken over then its transfer requires not only sincere effort but to act reasonably and fairly."(Emphasis supplied)

In the other judgment of the Supreme Court in U.P. Financial Corporation v. Gem Cap (India) Pvt. Ltd. and Ors. (supra), the learned Judges considering the relationship between the Financial Corporation and loanee, observed that, "These corporations are not sitting on King Solemn''s mines. They too borrow monies from Government or other financial corporations. They too have to pay interest thereon. The fairness required of it must be tempered - nay, determined, in the light of all these circumstances. Indeed, in a matter between the corporation and its debtor, a writ Court has no say except in two situations: (1) there is a statutory violation on the part of the corporation or (2) where the corporation acts unfairly i.e. unreasonably." In order to find out whether in a particular case the second situation has arisen, the High Court in exercise of jurisdiction under Article 226 of the Constitution of India is not supposed to convert itself into appellate authority and is supposed to act with constraints-self-imposed undoubtedly, was further observed by the learned Judges of the Supreme Court. It is further held that, "The obligation to act fairly on, the part of the administrative authorities was evolved to ensure the rule of law and to prevent failure of justice". Their Lordships have quoted a passage from the judgment of Lord Greene M.R. in Associated Provincial Picture Houses Ltd. v. Wednesbury Corporation, which is as under:

"It is true the discretion must be exercised reasonably. Now what does that mean? Lawyers familiar with the phraseology commonly used in relation to exercise of statutory discretions often use the word ''unreasonable'' in a rather comprehensive sense. It has frequently been used and is frequently used as a general description of the things that must not be done. For instance, a person entrusted with the discretion must, so to speak, direct himself properly in law. He must call his own attention to the matters which he is bound to consider. He must exclude from his consideration matters which are irrelevant to what he has to consider. If he does not obey those rules, he may truly be said, and often is said, to be acting ''unreasonably''. Similarly, there may be something so absurd that no sensible person could ever dream that it lay within the powers of the authority.

The decision in Mahesh Chandra v. Regional Manager, U.P. Financial Corporation and Ors. (supra) was also considered by the learned Judges and it was held that the observations made therein were in context of the said case wherein "it was found that the Corporation was acting reasonably (sic: unreasonably).

So far judgment in Gujarat State Financial Corporation v. M/s Lotus Hotels Pvt. Ltd. is concerned, the learned Judges found the action of the Gujarat State Financial Corporation arbitrary, which caused harm and injury to the loanee by its unreasonable conduct of not disbursing sanctioned loan in terms of the agreement without any reasonable cause. Rejecting the plea that dispute between the parties was in the realm of contract, as such the remedy lies elsewhere and writ of mandamus could not be issued compelling the Corporation to specifically perform the contract, the learned Judges held that:

"It is too late in the day to contend that the instrumentality of the State which would be ''other authority'' under Article 12 of the Constitution can commit breach of a solemn undertaking on which other side has acted and then contend that the party suffering by the breach of contract may sue for damages but cannot compel specific performance of the contract.... Acting on the solemn undertaking the Respondent proceeded to undertake and execute the project of setting up a 4-Star hotel at Baroda. The agreement to advance the loan was entered into in performance of the statutory duty cast on the Corporation by the statute under which it was created and set up. On its solemn promise evidenced by the aforementioned two documents, the Respondent incurred expenses, suffered liabilities to set up a hotel. Presumably if the loan was not forthcoming, the Respondent may not have undertaken such a huge project. Acting on the promise of the Appellant evidenced by documents, the Respondent proceeded to suffer further liabilities to implement and execute the project. In the back drop of this incontrovertible fact situation, the principle of promissory estoppel would come into p1ay.

Thereafter, the learned Judges referred so the law laid down in Motilal Padampat Sugar Mills Co. Ltd. Vs. State of Uttar Pradesh and Others, and Jit Ram Shiv Kumar and Others Vs. State of Haryana and Others, , in which it is concurrently held that, "... When the officer authorised under a scheme enters into an agreement and makes a representation and a person acting on that representation puts himself in a disadvantageous position, the Court is entitled to regulate the officer to act according to the scheme and the agreement or the representation. The officer cannot arbitrarily on his mere whim ignore his promise on some undefined and undisclosed grounds of necessity or changed the conditions to the prejudice of a person which had acted upon such representation and put himself in a disadvantageous position".

Applying the ratio of above stated judgments of the Supreme Court to the facts and circumstances of the present case, we find that the Respondent-Corporation has acted unreasonably in not disbursing the full amount of sanctioned loan in accordance with the agreement entered into between the parties without any valid ground. Not only this, they disbursed the installments of the loan amount with so much delay that it was not possible for the Petitioner to complete his building within the stipulated period and install machinery therein to start production and meet his liability as per the agreement. It is not in dispute that out of the loan amount of Rs. 1,31,000/ only an amount of Rs. 1,17,000/ was disbursed and the remaining amount of Rs. 14,000/- was adjusted towards payment of interest. Similarly, out of the disbursed installments of additional sanctioned loan, an amount of Rs. 1,05,200/- was adjusted against payment of interest. As such, an amount of Rs. 1,19,200/- was not actually paid. This does not appear to be a fair practice of the Respondent-Corporation that without releasing the full amount of loan to enable the entrepreneur to complete his project and come in production and start earning, it starts adjusting interest accrued on the loan amount. By fixing such a schedule for repayment under which recovery of loan amount or interest thereon starts before the production commences and unit starts earning, the Respondent-Corporation does not subserve the purpose of loan or object of the Act but only add to the list of units and their entrepreneurs who meat their end before they are given opportunity to start. Further, the Respondent-Corporation has not given any explanation why it had disbursed the two installments of the additional loan sanctioned in favour of the Petitioner late? Admittedly, additional loan of Rs. 9,65,000/- was sanctioned on 12.4.1990 (Annexure P-1 with affidavit dated 10.7.1994 of the Petitioner). It was for the expansion programmed of the unit and one of the stipulations was to complete the factory building within a period of six months. How could this promise be fulfilled by the Petitioner if the first installment of the additional loan was disbursed on 25.7.1990 and second installment on 23.1.1991? Thereafter, the Respondent-Corporation stopped disbursing further installments and gave legal notice on 9.12.1991 calling upon the Petitioner to make payment of Rs. 5,41,360.50 with interest calculated upto 31.10.1991 alongwith future interest within one month from the date of receipt of notice, failing which the Corporation would start appropriate legal proceedings for recovery of its dues or may take over possession of his unit and mortgaged properties u/s 29 of the Act. The defense of the Respondent-Corporation is that further installments of additional loan were not disbursed because the Petitioner failed to implement the scheme as approved....The precise allegations made by the Respondent-Corporation against the Petitioner, which weighed with Respondent No. 2 while considering the proposal of rehabilitation, are that the Petitioner misutilised the funds in as much, as, "he had not got the Dies made for which the loan was released to him" and "the party had not yet set up the shed". In support of these allegations Shri Bakshi, learned Counsel for the Respondent-Corporation, has referred to letters dated 15.3.1991 and 1.7.1991 (Annexure R-1 and R-3 to the reply-affidavit). In the letter dated 15.3.1991 referring to balance sheet as on 21.9.1991, the Deputy General Manager of the Respondent-Corporation stated that in view of building material, cash and the bank balance depicted therein the Petitioner could complete his building. Further explanation was called for advancing Rs. 2.01 lacs for fabrication of Die Machines against the provisions of Rs. 1.68 lacs. In the other letter dated 1.7.1991, again referring to the same balance sheet, it was presumed that the building would be completed and the Petitioner was advised to send proposal for purchase of machinery. Here, we may notice that as per sanction letter dated 12.4.1990 Rs. 3.80 lacs were to be awarded for building and Rs. 5.73 lacs for machinery, but only Rs. 1.26 lacs were disbursed on 25.7.1990 and Rs. 1.59 lacs on 23.1.1991. We find that in his enthusiasm to complete the project, the Petitioner had started construction of factory building in the month of April, 1990 and completed it up to lintel level, as stated in letter dated 21.1.1991 (Annexure P-1 to the rejoinder). After the sanction of additional loan amount on 12.4.1990 he started representing to the Respondent-Corporation but he could get the first installment of Rs. 1.26 lacs on 25.7.1990 and second installment on 23.1.1991. In his letter dated 21.1.1991, the Petitioner has given full account as to how he was treated by the Respondent-Corporation in the matter of release of installments of additional loan amount duly sanctioned in his favour. The Petitioner approached the Small Industries Development Bank of India also but it also referred him to the Respondent-Corporation, as stated in its reply dated 30.10.1931. From the material on record it is established that the Petitioner could not put roof on the building constructed by him and install machinery to commence production and start earning, out of which he could repay the loan amount, because the Respondent-Corporation failed to fulfill its obligation to disburse the loan amount promptly and.... with-held further installments of loan amount without any valid reason.

The allegation that the Petitioner did not get the Dies made, is also not proved from the record. As stated in letter dated 15.3.1991 (supra), the Petitioner had already given advance for the fabrication of Dies Machines which were fabricated but could not be brought to the factory premises as the building was incomplete. These facts are proved from the correspondence placed on record alongwith documents Annexure P-6 to P-9 to the affidavit of the Petitioner dated 10.7.1994. We also find that at no point of time any complaint regarding misutilisation of funds was made against the Petitioner as is apparent from pre-disbursement reports which are on record as Annexure P-6 to P-9. In Para 8 of his affidavit the Petitioner has also pointed out that due to delay in the disbursement of the loan amount the price of Die Machines had escalated and higher price was paid to the manufacturer, which has not been controverter by the Respondent-Corporation.

From the above discussion it is clear beyond any reasonable doubt that the Petitioner stood pressed on one hand by delayed payment of installments of loan amount and on the other by non-disbursement of further installments of loan amount, and on the top of it, the Respondent-Corporation recalled the loan and gave notice to take over the unit u/s 29 of the Act. We find that at no point of time the case of the Petitioner was considered by the Respondent-Corporation in its proper prospectus (sic) and besides delaying the release of installments further payment of loan amount was with-held for no valid reason. The above mentioned acts of omission and commission of the Respondent-Corporation are unfair and unreasonable, and do not stand the judicial scrutiny. These also amount to backing out from its promise held out to the Petitioner by sanctioning the additional loan of Rs. 9.65 lacs, acting on which the Petitioner had made huge expenditure as margin money as well as by collecting money from all possible sources and incurred liabilities. We find that the Petitioner has duly fulfilled his part of the obligations as settled at the time of grant of additional loan and has not defaulted to invite recall of full amount of loan and proceedings u/s 29 of the Act. In the back-drop of factual situation which has appeared in the present case, the principle of promissory estopple would definitely come in play, as held in Gujarat State Financial Corporation v. Lotus Hotel (P) Ltd. (supra) and writ of mandamus can be issued directing the Respondent-Corporation to perform its statutory duty and release the balance amount of sanctioned loan, but since the issuance of impugned notice a period of more than three years has passed, the proper direction to the Respondent-Corporation will be to reconsider the case of the Petitioner for rehabilitation as well as rescheduling the re-payment of the loan amount.

We also find that in pursuance to interim order passed by this Court, Respondent No. 2 did consider the case of the Petitioner for rehabilitation of his unit in its meeting held on 17.5.1994 but the Respondent No. 2 accepted whatsoever was stated by the Respondent-Corporation and did not accept the recommendations of its Sub Committee made in its meeting held on 11.5.1994 (Annexure R-1 to the affidavit dated 23.6.1994 of the Joint Secretary (Industries) to the Government of Himachal Pradesh). This Sub Committee had considered the proposal for rehabilitation and came to the conclusion that Petitioner''s unit "has not come into full production and there had been cost over-runs, so H.P. State Financial Corporation may consider the proposal of this unit for additional funds as per their norms. The unit will arrange equity as required by the H.P. State Financial Corporation". This Court does not find any reason why these recommendations were not accepted by Respondent No. 2. Above all the decision of Respondent No. 2 is only recommendatory and not binding on the Respondent-Corporation as per the stand of both of them. Therefore, in order to avoid further delay in the matter, it will be proper to direct the Respondent-Corporation to consider the case of the Petitioner for rehabilitation at its end-without referring it to Respondent No. 2.

In the result, this writ petition is allowed, impugned Annexure P-19 is quashed and the Respondent H.P. State Financial Corporation is directed to consider the case of the Petitioner for rehabilitation in the light of the observations hereinabove as well as law laid down by the Supreme Court in the judgments aforesaid. The Respondent-Corporation will take its decision within a period of six weeks and take further action without any further delay. No costs.

Petition allowed.