Panchkarma Chemicals Pvt. Ltd. and Another vs State of M.P. and Others

S.K. Gangele, J.—The petitioner company has filed this petition against the advertisement (Annexure P/1). By the aforesaid advertisement, the industrial land of lease hold was put to sell by the respondent No. 2. The petitioner company applied to the respondent No. 2 for advancement of term loan of Rs. 54 lacs for the purpose of establishing the unit at Malanpur. The respondents sanctioned loan of Rs. 42 lacs vide letter dt. 1.2.1993 on certain terms and conditions. The petitioners accepted the terms and conditions and thereafter a loan agreement was executed. A special deed and a general deed of hypothecation was also executed on 30.3.1994. By the aforesaid agreement, the petitioner created mortgage of immovable property and also mortgaged the company in favour of respondent No. 2. All the Directors of the company executed a deed of guarantee on 30.3.1994. The Corporation disbursed loan amount of Rs. 42.00 lacs between 2.5.1994 to 27.1.1996. Thereafter, an agreement for second charge was also executed. The petitioners did not repay the loan amount, then the Corporation issued notice for recovery of amount of Rs. 41.24 lacs as on 1.7.1996. When the amount was not deposited neither the reply was filed, Corporation had taken possession of the unit on 26.6.1997 in exercise of its powers u/s 29 of the State Financial Corporations Act, 1951 (hereinafter referred to ''Act of 1951'')

The Corporation found that the plant and machinery was illegally removed by the petitioner company, hence, an FIR was lodged by the Corporation. The Corporation issued advertisement for sale of unit and plant and machinery. Thereafter, after following the proper procedure and notice to the company and Directors the Standing Committee approved vide resolution dt. 21.12.2002 the sell of plant and machinery in favour of Mr. Udit Narayan for Rs. 1.35 lacs and possession of the plant and machinery was also handed over to Mr. Udit Narayan on 14.1.2003. A supurdaginama to this effect has been filed as Annexure R/11.

The Corporation further issued advertisement for sell of land and building and in the auction proceeding bid of Mr. Udit Narayan was found highest. During negotiation he further raised the offer upto 3.80 lacs and thereafter the standing committee in its meeting dt. 24.2.2003 approved the proposal of sell and the possession of the land and building was handed over to Mr. Udit Narayan on 7.3.2003. A copy of the supurdaginama has been filed as Annexure R/14. The Corporation further submitted in reply that an amount of Rs. 48,96,000/- with interest up to 15.9.2003 is still due against the petitioner.

The petitioner in this petition pleaded that the Corporation has no right and authority to take forcible possession of the property of the petitioner u/s 29 of the Act of 1951. It is further submitted that ''rights'' given to the Corporation under the aforesaid section could not be exercised as ''power''. It is further pleaded that the Board of Directors have power to take action u/s 29 of the Act of 1951. Because no such action has been taken by the Board of Directors, hence, the action taken by the Officers is illegal and the possession of the unit of the petitioners could not be taken by the respondent Corporation. Learned counsel for the petitioner has raised the same arguments in this petition and relied on the following judgments:-

(i) Naraindas Indurkhya Vs. The State of Madhya Pradesh and Others, .

(ii) State of M.P. Vs. Rakesh Kumar Gupta,

(iii) Mangulal Chunilal Vs. Manilal Maganlal and Another,

(iv) The Vice-chancellor, Utkal University and Others Vs. S.K. Ghosh and Others,

(v) State of U.P. and Others Vs. Lalji Tandon (Dead),

(vi) Pradeep Oil Corporation Vs. Municipal Corporation of Delhi and Anr.-AIR 2011 SC 1869.

Contrary to this, learned counsel for the respondent corporation and the State Government submitted that the petition has become infructuous. The property has already been sold and the possession has been delivered. The purchaser has not been made party in this petition. Hence, the petition deserves to be dismissed due to non joinder of necessary party. It is further submitted by the counsel for the Corporation that u/s 29 of the Act of 1951, the Corporation has power to take possession of the property and sell the property. Hence, the action of the Corporation is in accordance with law.

From the facts of the case mentioned earlier in the order, it is clear that the property has already been sold in favour of Mr. Udit Narayan. The possession had already been handed over long before in the year 2001 and 2003. Mr. Udit Narayan has not been added as party in this petition. If this court set asides the proceedings of sell and auction, then certainly his right would be adversely affected, hence, he is the necessary party. The petition is not maintainable due to non joinder of necessary party.

Section 29 of the Act of 1951 empowers the Corporation to take possession of the property and also transfer the right by way of lease or sell of the property placed, mortgaged or hypothecated to the Corporation. The relevant Section 29 of the Act of 1951 is as under:-

Rights of Financial Corporation in case of default.-(1) Where any industrial concern, which is under a liability to the Financial Corporation under an agreement, makes any default in repayment of any loan or advance or any instalment thereof or in meeting its obligations in relation to any guarantee given by the Corporation or otherwise fails to comply with the terms of its agreement with the Financial Corporation, the Financial Corporation shall have the right to take over the management or possession or both of the industrial concerns, as well as the right to transfer by way of lease or sale and realise the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation.

The petitioner company executed a hypothecation deed and also authorised the Corporation to sell the property in the event of default of loan. Admittedly, the company did not repay the loan amount. The corporation has acted in accordance with law and the advertisement had been issued and thereafter the property was leased out. Hence, the action of the corporation could not be said to be arbitrary or illegal. The argument advanced by the learned counsel for the petitioner that the rights mentioned u/s 29 could not be exercised as power can not be accepted. Because a specific provision has been made in the section itself in regard to action taken by the Corporation. The petitioner has not challenged the vires of the Section. In such circumstances, the arguments advanced by the learned counsel for the petitioner in this regard could not be accepted.

It is further contended that the Board of Directors of the Corporation are authorised to take action in the matter and the officers of the Corporation had no power to take action. This argument also could not be accepted because an additional reply has been filed by the Board and it is pleaded that the Board has authorised the Managing Director to take action against the borrowers and defaulters. The relevant resolution is as under:-

To Consider Authorising The Managing Director of The Corporation And Zonal Drcs To Pass Orders For Initiating Legal Action Against The Borrowers And Guarantors In Defaulter Cases.

Thereafter, the Managing Director constituted the committee in the case of the petitioner and the committee has taken action.

Hence, the action of the Corporation is in accordance with law. I do not find any merit in this petition. It is hereby dismissed. No order as to costs.