Alwaye Fertilizer Industries Pvt. Ltd. vs Kerala Financial Corporation

P.N. Ravindran, J.—The appellant is the unsuccessful petitioner in W.P.(C) No. 23636 of 2008. The appellant had availed financial assistance from respondents 1 and 3 and the Bank of Baroda. It is stated that due to various reasons, the appellant company became a sick industrial unit and that attempts to revive the company did not fructify. The writ petition was filed when respondents 2 and 3 initiated revenue recovery proceedings against the appellant and the guarantors and the Bank of Baroda moved the Debts Recovery Tribunal and obtained a Recovery Certificate. The appellant contended that though the OTS proposal submitted by it was accepted subject to certain conditions, the acceptance was communicated belatedly, that too, after the time limit stipulated for payment of the first instalment. The instant writ petition was thereupon filed challenging the conditions imposed by respondents 2 and 3 while accepting the OTS proposal. The learned single Judge held that no final decision has been taken on the OTS proposal submitted by the appellant and that Ext.P12 letter sent by the first respondent will not bind the third respondent. The writ petition was accordingly dismissed. Hence this writ appeal.

When the writ appeal came up for hearing today, the Learned Counsel appearing for the appellant submitted that Board of Directors of the KSIDC Ltd that met on 3.4.2010 had decided to accept the OTS proposal submitted by the appellant and that the conditions subject to which the proposal was accepted were communicated to the Managing Director of the appellant company as per letter dated 28.4.2008. The Learned Counsel also submitted that the Board of Directors of the Kerala Financial Corporation however accepted the OTS proposal only at the meeting held on 18.6.2010, and therefore, in view of the interval of time that elapsed between the decision taken by the third respondent and the first respondent, a reasonable time may be fixed by this Court for payment of the first instalment. The Learned Counsel also made available to us a copy of the letter No. KSIDC/TVM/CS-28/2010/265 dated 28.4.2010 sent by the Company Secretary & Head (Legal) of the KSIDC to the Managing Director of the appellant company. The minutes of the meeting of the Board of Directors of the Kerala Financial Corporation held on 18.6.2010 has been placed on record as Annexure.R1(a) along with the statement dated 3.8.2010 filed by the learned standing Counsel.

The learned standing Counsel for respondents 1 and 2 submitted that the OTS proposal submitted by the appellant company was approved by the Kerala Financial Corporation only on 18.6.2010, though the third respondent KSIDC Ltd. had approved the OTS proposal on 3.4.2010. The learned standing Counsel submitted that as the Kerala Financial Corporation has taken a decision within the period of three months stipulated in the letter dated 28.4.2010 sent by the third respondent to the appellant, the appellant should have paid 25% of the OTS amount with the time stipulated by the third respondent. The learned standing Counsel appearing for the third respondent submitted that third respondent approved the OTS proposal on 3.4.2010 and communicated the decision by letter dated 28.4.2010.

We have considered the submissions made at the Bar by the Learned Counsel appearing on both sides. We have also gone through the letter dated 28.4.2010 sent by the third respondent to the appellant and Annexure R1(a) minutes of the meeting held on 18.6.2010. The letter dated 28.4.2010 sent by the third respondent to the appellant reads as follows:

Sub: Financial assistance availed from KSIDC by M/s. Alwaye Fertilizer Industries Pvt Ltd., - One Time Settlement - Reg.

Ref: Your letter dated 22./03/2010

With regard to your request for settling the term loan availed by the above Company by way of an OTS, we are pleased to inform you that, the Board of Directors of our Corporation had, at its 268th Meeting held on 3rd April, 2010, have decided to accept the OTS proposal, subject to the following terms and conditions:

The OTS amount shall be fixed at Rs. 360 Lakhs which will be shared between the KSIDC and KFC.

25% of OTS amount shall be settled in 3 months'' time as requested by the promoters, as against one month. Balance amount shall be paid in 12 months time with simple interest @ 10%.

RR charges will be in addition to the OTS amount.

RR action will be withdrawn upon receipt of 25% down payment.

Failure to comply with the terms of OTS will entitle KSIDC to cancel the OTS and revert to its original demand.

The said letter makes it evident that the OTS amount which was fixed as Rs. 360 Lakhs has to be shared between the KSIDC and KFC. By the said letter, the appellant was called upon to deposit 25% of OTS amount within three months'' time and the balance in 12 months time. The said period of three months expired on 27.7.2010. However, the KFC approved the OTS proposal only at its meeting held on 18.6.2010. The said decision was communicated to the appellant only when a copy thereof was produced before this Court along with the memo dated 3.8.2010. Going by the said minutes, the period of three months'' time will expire only on 17.9.2010 and the period of 12 months'' only on 17.6.2011. In view of the interval of time that had elapsed between the date on which the third respondent accepted the OTS proposal and the date on which the first respondent accepted the OTS proposal, the time limit fixed by the third respondent has expired. In such circumstances, we are of the opinion that the appellant should be given a reasonable time to comply with the decision taken by respondents 1 and 3. As noticed earlier, the period of three months stipulated by the first respondent will expire only on 18.9.2010. However, third respondent had taken a decision way back on 3.4.2010 and communicated its decision to the appellant by letter dated 28.4.2010. The period of three months stipulated by the third respondent expired on 28.7.2010.

In such circumstances, we deem it appropriate to grant the appellant one month''s time from today to pay 25% of the OTS amount of Rs. 360 lakhs. The appellant shall pay the balance 75% of the OTS amount together with interest and other charges as stipulated in the decision of respondents 1 and 3, within a period of 12 months'' from 18.6.2010. The appellant shall also comply with all the other stipulations and conditions referred to in the letter dated 28.4.2010 and in the minutes dated 18.6.2010.

The writ appeal is disposed of with the above observations.