Kashmir Carbon vs State of J&K and Others

This appeal is directed against the judgment passed by learned Single Judge in OWP 40/99 whereby a writ petition filed by the appellant was

dismissed on 1.3.2000.

Facts regarding which there is no controversy in this case need to be noted are that an industrial unit under the name and style of the appellant was

established by its proprietor. Loan for establishing the same was admittedly obtained from the J and K Financial Corporation. It is further not in

dispute that the loanee. Industrial Unit did not adhere to the repayment scheduled in terms of the loan documents subject to which loan in question

was obtained.

A sum of Rs. 21,38,180.86 paisa was due and outstanding as on 15.3.97 inclusive of interest upto this date. Out of this amount. a sum of Rs.

5.49,342.86 paisa was the principal component. Rest was interest at the agreed rates and rests and other moneys.

After having waited for quite some time and after having enabled the appellant to repay the loan in question and after being satisfied that the

amount is not likely to be retrieved, action under Section 29 of the State Financial Corporations Act was proposed to be taken. Thus notice under

Section 29 of the State Financial Corporations Act. 1951 was issued calling upon the appellant to repay the loan in question. This notice is dated

31.5.1997. When the amount remained unpaid, action under section 29(2) of the State Financial Corporations Act was initiated by the Financial

Corporation.

What appears in the meantime is that Financial Corporation had initiated some schemes for one time settlement. Loanees like appellant could

avail the same provided they adhered to such schemes. Amongst other things, party was required to pay 20% of the principal outstanding under

such scheme which was known as RehabilitationcumSettlement Scheme, floated by the Corporation. This was valid upto 3.8.93 and was extended

upto 31.12.98. With a view to avail the benefit of this scheme, appellant was required to tender 20% of the principal amount as also to complete

certain other formalities. It appears that the appellant was well aware regarding the scheme. The appellant was further aware about the auction

fixed by the Corporation. Vide its communication dated 20.8.98. a prayer was made to stop the auction proceedings. How this communication of

the appellant was replied, needs to be referred to. It was in the following terms:

Whereas you were finally advised vide letter No. 193031 dated 31.5.1997 to liquidate the dues of the Corporation but you did not take any

positive step in clearing the dues.

Whereas when the Corporation did not receive positive response from you. there remained no alternative to the Corporation but to put the unit to

auction after publishing auction notice in two local daily newspapers.

Whereas in response to the publication of auction notice, the Corporation has received highest bid of Rs. 5.18 lakhs which the Default Review

Committee of the Corporation has also approved.

Now vide your letter dated 20.8.1998 you have requested to stop auction proceedings, which the Corporation cannot withhold provided you

deposit the amount equivalent to the bid amount in one lumpsum instalment or deposit an amount of Rs. 1,09,969/being 20% of the principal

outstanding under the RehabilitationcumSettlement Scheme of the Corporation which is valid upto 30.9.98.

You are also advised to contact us personally on or before 21st September, 1998 enabling us to known failing which the Corporation shall be

constrained to transfer the unit alongwith its assets to the highest bidder entirely on your risk and costs."" 5. Thus. it. is obvious that the appellant

was put to notice by the Corporation to come forth with the money and fulfill other requirements so as to avail the benefit of the said scheme.

Admittedly, nothing was done. Thus, in the aforesaid background, admitted defaults on the part of the appellant in the repayment of loan amount,

interest and other moneys, the Corporation in exercise of its powers under Section 29 of the Act (supra) auctioned the unit and delivered its

possession to respondent No. 6 who was the highest bidder.

In the writ petition filed by the appellant, this action of the Corporation was challenged and the said writ petition has been dismissed. Sh. Bhat

learned counsel appearing for the appellant submitted that Relief and Rehabilitation Scheme was in force till 31st of December, 1998. therefore,

the unit of his client could not have been either sold or delivered to the highest bidder, respondent No.

This action was bad in law. According to him his client was not aware as to what was the outstanding amount, of which 20% was payable to the

Corporation. In these circumstances, he urged for allowing this appeal and as a consequence of it to declare the sale in favour of respondent No. 6

bad in law.

Today at the time of the hearing of the appeal, Sh. Bhat was asked as to what was the amount outstanding according to his client which was due

and payable. He was not in a position to state anything except for harping that possession could not be delivered upto 31.12.98. In response to the

communication of the appellant, corporation had specifically informed the details of the outstanding amount payable by the appellant as extracted

hereinabove. Even Sh. Bhat was not in a position to controvert the contents of the aforesaid communication. When again questioned as to when

the loan was raised and how much has been repaid by the appellant again the answer was the same that the unit could not be auctioned as has

been done in the present case. With a view to ascertain the facts urged in the appeal as well as appreciate the submissions of Mr. Bhat. will record

was summoned. From the perusal of the documents on the writ file it is clear that despite having been put to notice, except for dillydallying, no

bonafide effort appears to have been made by the appellant to avail the scheme referred to hereinabove. In case, appellant was serious in either

repayment and or availing the benefits of the scheme in question in a bonafide manner, it would have not awaited till the unit was sold, possession

delivered, then coming to this court, instead it would have approached the court without any loss of time. Its bonafide would have been further

established if whatever was due according to them had been deposited alongwith the writ petition while filing the writ petition to demonstrate that

the appellant is genuinely prosecuting the litigation.

In this behalf, we may observe that financial assistance is provided by the Financial Institutions like J and K Financial Corporation to

entrepreneurs like appellant for industrial growth of the State. This is meant for improving industrial health of the State generating directly indirect

employment in the area as also revenues to the State Government. In case money is not repaid and is allowed to be blocked as in the present case,

it cannot be recycled by the Corporation. Thus it is unable to carry out the purpose for which it is established under law. So far relief and

rehabilitation schemes floated by the Corporation is concerned, it was made to help the genuine entrepreneurs who were facing difficulty and

genuinely wanted to rejuvenate its unit. There is nothing on the record of the writ petition or this appeal brought by the appellant to suggest that the

appellant was ever genuinely interested in that behalf.

No other point was urged.

In view of the aforesaid discussion, there is no merit in this appeal which is accordingly dismissed at the admission stage.