Mahabir Prashad Sharma and others vs Collector, Rewari at Narnaul and others

S.K. Jain, J.—The petitioners claiming themselves to be workmen employed with M/ s. Surendra Enterprises Pvt. Ltd., Rewari have challenged the action of the Haryana State Industrial Development Corporation Ltd., Chandigarh taken under S. 29 of the State Financial Corporation Acts, 1951 against M/s. Surendra Enterprises Pvt. Ltd. in this petition under Arts. 226/227 of the Constitution of India.

M/s. Surendra Enterprises Pvt. Ltd., Delhi Road, Rewari (for short, the Company) was set up to manufacture products of Copper, Brass and Zink, Industrial sheets and circles and L. P. G. Cylinders, etc. The Haryana State Industrial Development Corporation Ltd., Chandigarh (hereinafter to be referred to as the Development Corporation) and the Haryana Financial Corporation, Chandigarh (hereinafter to be refened to as the Financial Corporation) advanced loans to the Company in the year 1982/1986 amounting to approximatively Rs. 58.90 iacs. The Company did not pay the instalments of the loans as stipulated in the agreements. A sum of Rs. 64.80 lacs was outstanding against the Company. As the amount was not paid, proceedings under S. 29 of the State Financial Corporations Act, 1951 (for short, the Act) were initiated against the Company and after following the procedure prescribed, the Development Corporation and the Financial Corporation took possession of the factory premises of the Company on March 8, 1990. The Company, on learning that the possession will be taken of the factory premises, filed a civil suit against the Development Corporation and the Financial Corporation for restraining them from taking possession. Along with the suit, an application under O. 39, Rr. 1 and 2, Civil Procedure Code, was also filed. The Subordinate Judge granted ex parte interim stay. The Development Corporation contested the application and the ex parte interim stay order was vacated. The Company''s appeal against the vacation of the interim slay order was dismissed by the District Judge vide order dated February 1, 1990. The Company contested the claim of the Development Corporation and the Financial Corporation on the same pleas as have been enfolded in the writ petition.

The Financial Corporations have two independent remedies provided under Ss. 29 and 31 of the Act. Section 31 of the Act itself says that action can be taken under that section without prejudice to the provisions of S. 29 of the Act. The application of the provisions of S. 29 is restricted to only those cases where an industrial concern has incurred a liability under an agreement and to no other. Indisputably, the loan amount and interest accrued thereon is being recovered by the Development Corporation and the Financial Corporation in compliance with the mortgage deeds executed by the Company in terms of the provisions of the Act. Section 29 of the Act entitles the Financial Corporation to take possession of the debtor''s property without adjudication by any judicial authority.

In Sheeshyla Crowns and Screws Pvt. Ltd. v. Union of India AIR 1983 Kant 130,it was held that the provisions contained in Ss. 29 and 31 of the Act are not violative of Art. 14 of the Constitution and are valid. Similarly, in Srinivasa Kandasari Sugars, Narasimhunipet Vs. Government of Andhra Pradesh and Others, , their Lordships of the Division Bench of the Andhra Pradesh High Court held thus (at pp. 100-101) :--

"In the light of the aforesaid principles of the constitutionality of S. 29 of the Act has to be examined. The State Financial Corporations Act, 1951 was enacted in order to provide immediate and long term credit to industrial undertakings which fall outside the normal activities of the commercial banks etc. As seen from the Statements of Objects and Reasons, the intention is that the State Corporations will finance medium and small scale industries. One of the main features of the Bill was that the Corporation will be managed by a Board consisting of Directors nominated by the Government, Reserve Bank and the Industrial Finance Corporation of India. It is also mentioned that the Corpora- will have Special Privileges in the matter of Enforcement of Its Claims Against Borrowers. Section 3 of the Act deals with the establishment of State Financial Corporations. Sub-section (2) of S. 3 is in the following terms :--

"(2) The Financial Corporation shall be a body corporate by the name notified under sub-sec. (1), having perpetual succession and a common seal, with power, subject to the provisions of this Act, to acquire, hold and dispose of property and shall by the said name sue and be sued."

From the Objects and Reasons and S. 3(2) of the Act it is clear that the Financial Corporation is a responsible body vested with the power to discharge the various functions under the Act. Section 9 deals with ''Management of Financial Corporations'' and lays down that the general superintendence, direction and management of the affairs and business of the Financial Corporation shall vest in the Board of Directors and shall be assisted by the Executive Committee and the Managing Director. As we find in S. 10, very responsible and highly placed persons will be the Directors of the Board. Section 24 deals with the ''general duty of the Board'' and lays down that the Board in discharging its functions under the Act shall act on business principles, due regard being had by it to the interests of industry, commerce and general public. Again under S. 25 it is the Corporation as managed by the Board, that is empowered to grant loans or advances to an industrial concern, repayable within a period not exceeding 20 years. Section 27 empowers the Financial Corporation to impose such conditions as it may think necessary or expedient for protecting the interests of the Financial Corporation and securing that the accommodation granted by it is put to the best use by the industrial concern. Now having regard to the scheme of the Act and these general provisions, Ss. 29 and 31 are incorporated for safeguarding the interests of the Corporation. As already mentioned, the two procedures mentioned in Ss. 29 and 31 are different and there arc no provisions by way of guidelines in these two sections as to when a particular procedure can be resorted to. The choice is left to the Corporation. It may also be noted that under S. 29 the Financial Corporation shall have the right to take over the management of the defaulting industrial concern as well as the right to transfer by way of lease or sale. Normally one would expect a reasonable body like the Financial Corporation, to take action under this section when it becomes necessary depending on the circumstances. From a combined reading of the Objects and Reasons and Sections 8, 9, 10, 24, 25 and 27, the requisite guidance can be inferred and a very responsible authority is vested with the power of seiecting either of the procedures under Ss. 29 and 31 respectively. So the statute itself discloses a definite policy and objective and it confers authority on the Corporation to make selection of the procedure. When that is so, a responsible body like the Financial Corporation will act in a realistic manner keeping in view the interests of the Corporation, industry, commerce and the general public. For these reasons, we are of the opinion that there is a guiding policy and principle available from, the statute for the Corporation to act in this regard and accordingly we hold that S. 29 is not violative of Art. 14 of the Constitution. Further, we are also of the view that in this case the Corporation acted with due care and caution and that it did not act arbitrarily or capriciously and we will be considering this aspect in detail at a later stage.

Now it remains to be seen whether there is any substance in the second contention, viz., that the Financial Corporation having proceeded under S. 31 cannot again resort to S. 29. We have already held that S. 29 is a valid provision of law. When the Corporation has the choice, which is not unguided to resort to either of the procedure and if the Corporation in a given case, having withdrawn its application under S. 31 proceeds under S. 29, it cannot be said that such an action is illegal. As pointed out by the Supreme Court in A. Thangal Kunju Musaliar Vs. M. Venkitachalam Potti and Another, "it is to be presumed, unless contrary were, shown, that the administration of a particular law would be done ''not with an evil eye and unequal hand'' and the selection made by the Government of the cases of persons to be preferred for investigation by the Commission would not be discriminatory". However, the petitioner has no right to say that the Corporation should have no choice of proceedings when such a course is permissible under law. The Corporation is not barred from withdrawing its own application filed under S. 31 of the Act. As long as S. 29 is a valid peace of legislation, the Corporation has every right to proceed under S. 29, unless it is shown that it has acted arbitrarily or maliciously. Having held that S. 29 of the Act is not violative of Art. 14 of the Constitution, now it remains to be seen whether in the instant case the Corporation has acted arbitrarily."

In the instant case, the action of the Financial Corporation in resorting to an action under S. 29 of the Act is legal and valid. In the body of the writ petition, it is stated that the Company has become a sick unit and the action should be taken under the Sick Industrial Companies (Special Provisions) Act, 1985 and that the workers of the Company should be afforded an opportunity of hearing before taking possession of the sick unit. The submission is devoid of any merit. The petitoners claim that they are the workers employed by the Company. Therefore, they have got their remedy, if any, against the Company under the Industrial Disputes Act. The Act provides for special privileges for the Financial Corporation in the matter of enforcement of its claims against the borrowers. The requisite guidelines for enforcing the special privileges are also contained in the Act. The Financial Corporation has acted in conformity with the guiding policy and remedy available from the Act. The provisions of the Sick Industrial Companies (Special Provisions) Act are wholly alien to the present proceedings. The Company is not being wound up, but a creditor of the Company is seeking to recover possession of the debtor''s property in conformity with the provisions of the Act and the workers of the debtor-Company have no right to hearing in the proceedings initiated under S. 29 of the Act by the Financial Corporation.

For the reasons stated above, there is no merit in the writ petition. The same is dismissed.

Petition dismissed.