Smt. Pushpa Rani Madhu vs The State of Bihar and Others

This writ application has been filed on behalf of the petitioners for quashing a notice issued u/s 29 of the State Financial Corporation Act, 1951 (hereinafter referred to as ''the Act''). In exercise of the power u/s 29 aforesaid, 12 kathas of land, apart from other moveable and immoveable properties which have been mortgaged with the Corporation, are going to be sold after inviting tenders. On 14.3.86, during the course of argument, on behalf of the petitioners, it was suggested that the petitioners were prepared to clear the dues which amounts to about Rs. 7,00.000/- by selling 6 kathas out of 12 kathas of land which have been mortgaged to the Corporation, if the Corporations allows three months'' time to the petitioners to sell that portion of the land. We directed Mr. Kamlapti Singh to consult the Managing Director of the Corporation as to whether the Corporation is agreeable to the aforesaid offer. Today Mr. Kamlapati Singh informed the Court that as the decision to sell the properties aforesaid has been taken at a meeting of the Board of Directors, it is not possible for the Managing Director of Corporation to agree to the offer given by the petitioners. Mr. Kamlapti Singh submitted that the agreement which has been entered into between the Corporation and the petitioners shall not be deemed to be a contract within the meaning of Article 299 of Constitution, so that this Court may interfere with the realisation of the dues in accordance with the terms of the contract entered into between the parties.

There cannot be any dispute that any agreement entered into between the Corporation and the petitioners shall not be deemed to be a contract within the meaning of Article 299 of the Constitution but, in view of series of judgments of Supreme Court, the Corporation which is statutory in nature, cannot be held to be just an ordinary company. The Corporation shallbe dee medtoee a Stat wit hinb the meaning of Article 12 of the Constitution and as such it has to act in a just and fair manner. This aspect of the matter has recently been considered by the Supreme Court in the case of Gujarat State Financial Corporation Vs. Lotus Hotels Pvt. Ltd., in connection with the Gujarat State Financial Corporation. It was observed as follow :--

Viewing the matter from a slightly different angle altogether, it would appear that the appellant is acting in a very unreasonable manner. It is not in dispute that the appellant is an instrumentality of the Government and would be ''other authority'' under Act. 12 of the Constitution. If it be so, as held by the Court in Ramana Dayaram Shetty Vs. International Airport Authority of India and Others, , the rule inhibiting arbitrary action by the Government would equally apply where such corporation dealing with the public whether by way of giving jobs or entering into contracts or otherwise and it cannot act arbitrarily and its action must be in conformity with some principle which meets the test of reason and relevance.

It is true that under the terms of the agreement, the properties which had been mortgaged with the Corporation can be sold once the petitioners have defaulted in the payment of instalments. But when an offer has been given on behalf of the petitioners to pay the arrears alongwith interest up-to-date, within three months from today by selling a part of the properties which have been mortgaged with the Corporation, we are of the opinion that an opportunity Should be given to the petitioners otherwise the sale of the whole undertaking may not only cause injury to the petitioners bat as well as affect the small scale industry which we are informed is being carried on by the petitioners on the basis of the loan advanced by the Corporation. We are quite conscious that many unscrupulous industrialists having taken money from the Corporation or some other agencies do not like to pay the instalments in time and they do not deserve any sympathy. Because of their action they affect the very functioning of the financial institution but, in view of the fact that only three months'' time has been asked for on behalf of the petitioners it will be only just and proper that the petitioners should be allowed to pay the whole amount with interest after selling 6 kathas out of 12 kathas of land mortgaged with the Corporation. It is made clear that the sale amount shall be deposited by the purchasers directly to the Corporation. Any such sale and deposit should be made within three months from the date the Managing Director of the Corporation grant permission to the petitioners. In case of default the Corporation shall be entitled to sell the entire properties on the basis of the tenders which have already been received and no fresh notice u/s 29 of the Act need be issued. This writ application is, accordingly, disposed of.