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Judgment
S.V. Maruthi, J.—These two writ petitions are disposed of by a common judgment as the issues involved are common in both the writ petitions. The first petitioner is Tensil Glass Works Fvt. Ltd. and the second petitioner is A.G. Natarajan in Writ Petition No. 2837/95 (sic. /93).
Mr. A.G. Natarajan was a technical Engineer in Indian Telephone Industries Ltd. In the year 1984, he resigned his job and joined as working partner in the first petitioner company which is manufacturing Glassware at Bangalore. Natarajan is a resident of Bangalore. The first respondent offered Shed Nos. 6 and 7 (3600 Sq.ft) which was originally purchased by M/s. Electronics Ltd., from the first respondent and who became a defaulter in repayment of loan at Rs. 4.65 lakhs out of which the petitioner paid Rs. 1.02 lakhs towards 25% of the value of the Industrial sheds and also towards old machinery. The petitioner purchased the unit for purpose of setting up of an industry for manufacture of Scientific Glassware like ground joints, reaction flasks upto 50 litres capacity and condensers etc. The petitioner purchased stamp papers worth Rs. 26,000/- and submitted the sale deed on 30-1-89 in the office of the Sub-Registrar for registration. In the sale deed a balance of Rs. 3.65 lakhs (i.e. Rs. 4.65 lakhs - Rs. 1.20 lakhs Rs. 3.65 lakhs) was shown as loan from the first respondent i.e. the State Finance Corporation.
Out of the amount of Rs. 4.65 lakhs an amount of Rs. 2 lakhs was shown towards land and building and the remaining amount of Rs. 2.65 lakhs was shown towards value of the machinery. On getting the sale deed registered the petitioner was required to apply for a loan to the first respondent as per the project report for Rs. 8 lakhs towards purchase of plant and machinery and for purpose of the loan, the land and building was mortgaged as security. However, the sale deed could not be registered as objections were raised by the Sub-Registrar regarding the valuation of the properties purchased by the petitioner. The first respondent sanctioned and disbursed an amount of Rs. 3 lakhs though he offered a loan of Rs. 12.29 lakhs to the petitioner. Since the first respondent did not release the loan as promised, he could not start the project as scheduled. By raising loan from various quarters other than the first respondent he purchased machinery worth Rs. 8 lakhs. When he was about to commence production, the Andhra Pradesh State Electricity Board insisted that he should pay arrears of electricity consumption charge to a tune of Rs. 11,000/- which was due by the earlier occupants. The first respondent however, having not come to the rescue of the petitioner, the petitioner had to borrow monies and pay all the electricity dues. After crossing over all the hurdles, the petitioner started manufacture of scientific Glassware with effect from 10-10-92. Over a period of five months, it has produced 4 lakhs worth of Glassware. The petitioner had orders from the reputed companies like Sipla Pharmaceuticals, M/s. Pharma India Ltd., M/s. Astra I.D.L., M/s. Indecarb etc. These orders were to be executed by 30-3-1993. After commencing the production, the petitioner paid an amount of Rs. 1,50,000/-towards repayment of loan as per the repayment schedule. As per the documents, the repayment of loan should start from March, 1990. Since, the respondents have went back on their promise, the petitioner was forced to raise private loans to pool up all his resources. While so, the first respondent issued a communication dated 22-9-1992 informing that an amount of Rs. 6,16,549/- in Account No. 53836910 and an amount of Rs. 1,17,706-50 in Account No. 53836936 is due from the petitioner''s suit (sic. unit) (total amount of Rs. 12,33,79940 and that respondents are taking steps for recovery of the amount u/s 29 of the State Financial Corporation Act, 1951 (hereinafter referred to as ''the Act''). They have also enclosed a tender notice inviting tenders for the purchase of the petitioner''s unit. However, the respondents have not taken any action pursuant to the notice dated 22-9-1992. On 8-12-1992, the second respondent informed one Mr. Ramesh Verma who was one of their raw material supplier asking him to shift his stocks from shed No. 6 as they are seizing the sheds belonging to the petitioners. At this stage the petitioner gave a representation on 12-7-1992 requesting him to use his good offices to regularise the allotment of sheds in their favour and allow them to run the industry. After the receipt of the letter dated 22-9-1992 the petitioner paid an amount of Rs. 25,000/- on 17-10-92.'' Therefore, he filed writ petition No. 2837/93 challenging the letter of the respondent dated 22-9-1992 proposing to seize and sell the unit. The writ petition was admitted and the learned Single Judge granted interim suspension of the letter dated 22-9-1992. In the interim order the petitioners were directed to pay at the rate of Rs. 25,000/- by 20th of every month commencing from 1983 (sic. 1993) and in default the stay stood vacated. Pursuant to the interim order, the petitioners paid an amount of Rs. 25,000/- per month for the months of March, April and May 1993. Thereafter, the second petitioner met with an accident and also suffered hypertension. In September, 1983 (sic. 1993) an amount of Rs. 25,000/- was paid. Along with the Demand Draft for Rs. 25,000/- a cheque for Rs. 50,000/- was also given to the respondent. On 24-11-1993 the first respondent wrote a letter stating that they have seized the unit on 15-10-1993 and unless and until the petitioner arranges the payment of Rs. 1,25,000/- on or before 10-12-1993 they would proceed further in bringing the unit for sale. The second petitioner approached the second respondent with cash of Rs. 50,000/-and requested him to accept the payment and to allow them to proceed with the functioning of the unit. However, the second respondent demanded that unless an amount of Rs. 3 lakhs is paid immediately and the writ petition filed is withdrawn, he wilt not be permitted to run the unit. The petitioner could not comply with the said demand. Meanwhile, the second respondent informed the petitioner that an amount of Rs. 45,000/-paid by them in excess is adjusted in their account. On 3-1 -95, the Manager State Bank of India, Tirupathi sent a letter dated 29-12-1994 to the petitioner enclosing two communications he received from the second respondent. From the letters addressed to the Branch Manager, State Bank of India, Tirupathi the petitioner came to know that the respondents sold away the unit to the third respondent Mr. Jeevaratnam and handed over the same on 7-12-94 and the raw material kept at the unit was shifted to some other place. Aggrieved by the action of the respondents the son of the second petitioner in W.F. No. 2837/93 filed W.P. No. 826/1995.
In the counter-affidavit filed on behalf of the respondents, it is stated that after taking possession of the sheds by the petitioner an additional term loan of Rs. 8.90 lakhs was asked for by the petitioner and the same was sanctioned by the respondents on 8-11-1988. Pursuant to the sanction, the petitioner has drawn the first instalment of term loan on 21-2-1989 to the extent of Rs. 2.22 lakhs being 25% of the sanctioned amount of Rs. 8.90 lakhs to enable the petitioner to implement the project. The respondent corporation released the sanctioned loan pending receipt of original sale deed from the Sub-Registrar to the petitioner. The petitioner took his own time to implement the project even after releasing the first instalment. He has allowed the third party to keep seed processing machinery and stocks in the sheds which was objected by the respondent Corporation. Thereafter, the petitioner submitted the explanation on 22-8-1989 and promised not to repeat such things in future. The respondent- corporation released a total amount of Rs. 5,46,830/-against the bills submitted by the petitioner for purchase of machinery. The petitioner started operating the unit in the second half of 1990 and not from 10-10-92. Inspite of various problems faced by the petitioner, he has managed to run the industry and was in a position to pay Rs. 40,000/- and sought time for the payment of remaining amount. The petitioner has also issued four cheques amounting to Rs. 85,000/- payable in March, 1992. Out of the four cheques, only one cheque amounting to Rs. 25,000/- was honoured and the remaining cheques were dishonoured. From February, 1992 the petitioner paid an amount of Rs. 90,000/- into the loan account i.e. Rs. 40,000/- on 19-2-1992; Rs. 25,000/- on 26-3-92 and Rs. 25,000/- on 19-10-92. Whenever, the Corporation approached the petitioner for recovery of the loan amount, the petitioner issued cheques without arranging funds. In view of the indifferent attitude of the petitioner, the respondents issued notice u/s 29 of the Act on 22-9-92 for recovery of the total outstanding amounts. The respondent though issued notice on 22-9-92 could not take action as the sheds were occupied by one Ramesh Verma of M/s. Standard Agro-Vet Industries as godown taken on lease from the petitioner in the present writ petition. The said Ramesh Verma is a Trader in dealing with different types of Poultry feed stocks. Therefore, the statement that the said Verma is a raw material supplier to the petitioner is false. It is stated that pursuant to the interim order of this Court in W.P.No. 2837/92 (sic/93) the petitioner paid Rs. 23,000/-each on 29-3-1993 and 24-4-1993 and Rs. 50,000/-on 29-9-93 and 24-4-93 and promised to pay Rs. 75,000/- on or before first October, 1993 and undertook to withdraw the writ petition. On 30-9-1993, the petitioner gave third party cheque for Rs. 50,000/- which was dishonoured. Therefore, the respondent-corporation was forced to seize the unit on 15-10-1993. When the petitioner approached the first respondent, the respondent corporation gave time up to 10-12-1993 to clear the arrears as per the directions of the High Court and continue to pay Rs. 25,000/- every month. However, the petitioners have not complied with the said request of the respondents. The respondent- Corporation never demanded payment of Rs. 3 lakhs. It is also denied that the total cost of the company is Rs. 25 lakhs. The respondent Corporation after advertising three times in leading news papers finalised the highest offer after conducting due negotiations among the tender participants. Pursuant to the finalisation of the tender of sale, the unit was handed over to the third respondent on 7-12-1994. The third respondent offered 7 1/2 lakhs for land and building and one lakh for machinery after opening the tenders. The total amount that is due from the petitioner is about 16 lakhs and he also has to pay interest from 1-11-94. In view of the above, it is stated that the writ petition is liable to be dismissed.
The third respondent also filed a counter reiterating the same facts that were made in the counter filed by the first and second respondents.
Before considering the issues that arise for consideration in this writ petition, it is necessary to refer to Section-29 of the Act and the interpretation placed by the Supreme Court with regard to Section-29.
Section-29: 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 takeover the management or possession of 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 first decision that arose for consideration is Mahesh Chandra Vs. Regional Manager, U.P. Financial Corporation and others, . Briefly, the facts are Mahesh Chandra, who was the appellant before the Supreme Court, of M/s. Shiva Rice Mill owned two plots bearing Nos. 208 and 220/2 ad measuring 18 and 8 Biswas. The partnership firm constructed a Rice Mill in the plot bearing No. 208. The partnership firm obtained a loan of Rs. 4,28,000/- in 1979 from the respondent-corporation. Out of the amount of Rs. 4,28,000/- Rs. 3,70,660/- was alone disbursed in 1980 which was repayable in 11 annual instalments up to 1991. The appellant repaid a sum of Rs. 9,000/- in December, 1981. Since the appellant company could not pay the amount and the interest was piling up, they wrote to the respondent corporation to release plot No. 220/2 which was hypothecated to the respondent corporation to enable him to sell the same and discharge the debt. The Corporation did not agree but took possession of the mortgaged land and called for tenders. Ultimately, a tender for a sum of Rs. 2,55,000/- was accepted and Rs. 63,750/- was deposited. However, before accepting the tender, no notice nor an opportunity was given to the appellant Therefore, the appellant approached the High Court and ultimately the matter went up to the Supreme Court. While holding mat the action of the respondent is unreasonable the Supreme Court laid down the following guidelines before bringing the property of the unit brought to sale in exercise of the powers conferred u/s 29 of the Act.
"Every endeavour should be made, to make the unit viable and be put on working condition if it becomes unworkable:
(1) Sale of a unit should always be made by public auction.
(2) Valuation of a unit for purposes of determining adequacy of offer or for determining if bid offered was adequate, should always be intimated to the unit holder to enable him to file objection if any as he is vitally interested in getting the maximum price.
(3) If tenders are invited then the highest price on which tender is to be accepted must be intimated to the unit holder.
(4)(a) If unit holder is willing to offer the sale price, as the tender, then he should be offered same facility and unit should be transferred to him. And the arrears remaining thereafter, should be rescheduled to be recovered in instalments with interest after the payment of last instalment fixed under the agreement entered into as a result of tendered amount."
(b) If he brings third parties with higher offer it would be tested and may be accepted.
(5) Sale by private negotiation should be permitted only in very large concerns where investment runs in very huge amount for which ordinary buyer may not be available or the industry itself may be of such nature that by normal buyers may not be available. But before taking such steps there should be advertisements not only in daily news papers but business magazines and papers.
(6) Request of the unit holder to release any part of the property on which the concern is not standing of which he is the owner should normally be granted on condition that sale proceeds shall be deposited in loan account."
In U.P. financial Corporation v. Gem Cap (India) Pvt. Ltd. AIR 1993 SC 1435 the facts in brief are that a sum of Rs. 26,29,578/- was released to the respondents as a loan. The first respondent went into production in December, 1982. Within a few months i.e. March, 1983. Its operations ceased. By an order dated February 21, 1984 the first respondent unit was declared as sick unit. The respondents did not make any repayment as stipulated in the agreement and hypothecation deeds whereupon the Corporation look steps to take over the unit under Section-29 of the State Financial Corporation Act, 1951 for recovering an amount of Rs. 38-57 lakhsdue to it by trust date-vide notice dated July, 101984. Then the matter went upto Supreme Court and it was held:
"In the matter of administrative action, it is well known, more than one choice is available to the administrative authorities; they have a certain amount of discretion available to them. They have a right to choose between more than one possible course of action upon which there is room for reasonable people to hold differing opinions as to which is to be preferred. (Lord Diplock in Secretary of State for Education v. Tameside Metropolitan Borough Council 1977 AC 1014). The Court cannot substitute its judgment for the judgment of administrative authorities in such eases; only when the action of the administrative authority is so unfair or unreasonable that no reasonable person would have taken that action, can the Court intervene."
It was also held that:
"the fairness required of it must be tempered-nay determined, in me light of all these circumstances. Indeed in a matter between the Corporation and its debtor, a writ Court has no say except in two situations:
(1) there is a statutory violation on the part of the Corporation; (2) where the Corporation acts unfairely i.e. unreasonably. While the former does not present any difficulty..........
"Doctrine of fairness, evolved in administrative law was not supposed to convert the writ Courts into appellate authorities over administrative authorities: The constraints-self-imposed undoubtedly of writ jurisdiction still remain ignoring them would lead to confusion and uncertainty. The jurisdiction may become redderless."
In The Maharashtra State Financial Corporation Vs. M/s. Suvarna Board Mills and another, It was observed that:
"Notice calling upon defaulter to repay dues by certain date failing which possession of his factory would be taken sufficiently meets requirement of natural justice. Action u/s 29 cannot be set at naught for want of independent notice."
In U.P. Financial Corporation and Others Vs. Naini Oxygen and Acetylene Gas Ltd. and Another, it was held:
"However, we cannot lose sight of the fact that the corporation is an independent autonomous statutory body having its own constitution and rules to abide by, and functions and obligations to discharge. As such, in the discharge of its functions, it is free to act according to its own right. The views it forms and the decisions it takes are on the basis of the information in its possession and the advice it received and according to its own perspective and calculations. Unless its action is mala fide, even a wrong decision taken by it is not open to challenge. It is not for the Courts or a third party to substitute its decision, however, more prudent, commercial or business like it may be, for the decision of the Corporation, Hence, whatever the wisdom (or the lack of it) of the conduct of the Corporation, the same cannot be assailed for making the Corporation liable.
We are, therefore, of the view that this is not a matter where the High Court should have stepped in and substituted its judgment for the judgment of the Corporation which should be deemed to know its interest better whatever sympathies the Court had for the prosperity of the Company. In matters commercial, the Courts should not risk their judgments for the judgments of the bodies to whom that task is assigned."
In Chairman and Managing Director, Sipcot v. Contromix Pvt. Ltd. AIR 1995 SC 632 referred to the observation in Maheshchandrn (1 supra) with approval and held, the decision in Maheshchandra cannot be construed as laying down that sale by tender is impermissible and invalid, and it cannot be said that a sale by inviting tender is ipso facto invalid. The validity of such a sale will have to be considered in the light of the facts and circumstances of this particular case;
In Karnataka State Financial Corporation Vs. Micro Cast Rubber and Allied Products (P) Ltd. and Others, the facts in brief are that the Corporation advanced a loan of Rs. 3.93 lakhs, on default in exercise of the power conferred u/s 29 possession of the unit was taken over by the Appellant Corporation. Steps were taken for the sale of the unit and number of advertisements were issued inviting offers. No suitable offer was received in response to the first advertisements. In response to the third advertisement five offers were received and it was also withdrawn. Thereafter, the offer of P.K. Joseph on behalf of M/s. Chemtech Industries was accepted. At this stage the respondent offered to purchase the unit for Rs. 25 lakhs. When the Corporation refused to accept the proposal a writ petition was filed and the matter went up to the Supreme Court. It was held that the directions contained in Maheshchandra are in the nature of guidelines for the exercise of power under Section-29 of the Act. The action of the State Corporation is not liable to be interfered with if it has acted broadly in consonance with these guidelines. In the matter of sale by the State Financial Corporation in exercise of power under Section~29 of the Act, the scope of judicial review is confined to (1) if there is statutory violation on the part of the Corporation, (2) where the State Financial Corporation acts unfairly i.e. unreasonably and it cannot sit as an appellate authority over the action of the Corporation.
It emerges from the above that Maheshchandra (supra) lays down the guidelines to be followed before the unit is brought to safe u/s 29 of the Act. According to these guidelines, sale of unit should always be made by public auction. Valuation of a unit should be intimated to the unit holder to enable him to file objections. If tenders are invited then the highest price on which tender is to he accepted must be intimated to the unit holder. If the unit holder is willing to offer the sale price, as the tenderer, then he should be offered the same facility and unit should be transferred to him, and the arrears remaining thereafter, should be rescheduled to be recovered in instalments with interest after the payment of last instalment fixed under the agreement entered into as a result of tendered amount; if he brings third parties with higher offer it should be tested and accepted; sale by private negotiation should he permitted only in large concerns where investmet runs in very huge amounts for which ordinary buyer may not be available or the industry itself may be of such nature that normal buyers may not be available; request of the unit holder to release any part of the property on which the concern is not standing of which he is the owner should normally be granted on condition that sale proceeds shall be deposited in the loan account. These guidelines were relied on with approval in Karnataka State Financial Corporation v. Micro Cast Rubber & Allied Products Ltd. (supra). The relationship between the Corporation and the borrower is that of creditor and debtor; In a matter between the Corporation and its debtor, a writ Court has no say except in two situations: (1) where there is a statutory violation on the part of the Corporation or (2) where the Corporation acts unfairly i.e. unreasonably. The High Court while exercising the jurisdiction under Article 226 of the Constitution of India cannot sit as an Appellate Authority over the acts and deeds of the Corporation. In the matter of administrative action, if more than one choice is available to the Administrative Authorities, they have certain amount of discretion available to them; they have a right to choose between more than one possible courses of action upon which there is room for reasonable people to hold different opinions as to which is to be preferred. The Court cannot substitute its judgment for the judgment of administrative Authorities in such cases. Only when the action of the Administrative Authority is so unfair or unreasonable that no reasonable person would have taken that action, can the Court interfere. The Corporation in the discharge of its functions, is free to act according to its own right. The views it forms and the decision it takes are on the basis of information in its possession and the advice it receives and according to its own perspective and calculation. Unless its action is mala fide even a wrong decision taken by it is not open to challenge.
Sale by tender is permissible and valid provided wide publicity to get the maximum price is made. The date on which the sanction of the loan was granted cannot afford a basis for fixing the price of the unit on the date of sale and it depends on the facts and circumstances of each case. The action of the Financial Corporation is not liable to be interfered with if it has acted broadly in accordance with the guidelines laid down in Maheshchandras case (supra).
The judgment in M/s. Gem Cap (India) Pvt. Ltd. (2 supra) referring to the guidelines laid down in Maheshchandra stating "that was a case where the debtor was anxious to pay off the debt and had been taking several steps to discharge his obligations. On the facts of that particular case it was found that the Corporation was not acting reasonably. In that context certain observations were made" does not whittle down the tenor of the observations in view of the subsequent judgment in Micro Cast Rubber and Karnataka State Financial Corporation (6 supra) referring to these guidelines with approval. Therefore, the scope of enquiry under Article 226 of the Constitution of India is limited and it cannot interfere with the action of the State Financial Corporation if it is in confirmity with the guidelines laid down in Maheshchandra (supra) and if its action is not unreasonable and arbitrary and if there is no violation of the statute.
Some of the circumstances which may result in declaring the action of the Financial Corporation as unreasonable are failure to release the balance of loan due resulting in the lack of working capital, refusing to release the land of the owner who was anxious to discharge his liability to the Corporation; in the absence of release of entire loan, initiating proceedings u/s 29 bringing the property of the unit to sale; and bringing the property to sale without giving wide publicity; and bringing the property to sale without giving an opportunity- to the unit holder to purchase the same or bringing the third party to purchase; failure to take into account the circumstances which led to the unit not commencing its functioning as per schedule like natural calamities etc bringing the property to sale without, proper valuation and selling the property at a desperately low price; and failure to intimate the valuation of property to the defaulter.
I would now examine whether there are any circumstances, on the facts of the present case to declare the action of the respondents as unreasonable, unfair warranting interference under Article 226 of the Constitution of India.
The unit i.e. land and building was sold at Rs. 4.64 lakhs out of which the petitioner paid Rs. 1.20 lakhs, the balance of sale consideration was treated as loan. After the sale deed was executed, the petitioner had to execute a mortgage mortgaging the land, building and machinery and the respondent had to grant an additional loan of Rs. 8.90 lakhs. Out of the loan sanctioned, the respondent released a total amount of Rs. 5,46,880/-. The balance is still to be released. Even before the release of the entire loan, the respondents issued a letter on 22-9-92 proposing to seize the unit on the ground that there was default in payment of loan. It is true by October, 1990 the petitioner started production but before he could start production he had to face insumountable problems. The respondents have not denied that the second petitioner in W.P.No. 2837/95 (sic./93) met with an accident and that the machinery which was ordered by the petitioner from Ganesh Enterprises, bangalore got damaged due to inundation of water because of heavy rains and the machinery became useless and he was forced to make alternate arrangements for getting new type of machinery. The respondents have not denied that they have released only Rs. 3 lakhs as loan. The Corporation mechanically without applying its mind to the reasons for default committed by the petitioner issued the letter dated 22-9-92. The petitioner by spending an amount of Rs. 8 lakhs from out of his pocket purchased the machinery. It is surprising that the respondent in the counter stated that he is not aware of the fact that, the petitioner purchased machinery by himself. He also paid an amount of Rs. 90,000/- before he commenced production. Pursuant to the order of the Court,he deposited an amount of Rs. 75,000/- in three instalments each instalment at the rate of Rs, 25,000/-.
Further before bringing the property to sale neither independent valuation of the unit was made nor the petitioner was informed of the valuation. No offer was made to the petitioner before selling the unit and the petitioner came to know of the sale by tender only when his banker informed him by its letter dated 29-12-94 endorsing the communication received from the respondent calling for tenders. Thus the respondent violated the guidelines laid down in Maheshchandra''s case (supra).
In my view, the respondent acted mechanically without applying its mind to the ground realities. It is not a case like M/s. Gem Caps (2 supra) where a company drew substantial public funds and became sick within three months of its going into production. It is a case similar to Maheshchandra (supra) where the petitioner was anxious in running the unit and in fact it has commenced production of the goods and due to circumstances beyond his control, namely his accident he could not continue running the factory. These troubles and set backs in any industry are normal. Therefore, the Corporation before taking action u/s 29 of the Act has to assess whether the petitioner''s case is genuine and he committed default for reasons beyond his control. In this case, the petitioner himself contributed 90% of the cost of the unit. Before taking action it has to make an assessment and give an opportunity to revive the unit. The respondent did not exercise the discretion reasonably and failed to distinguish a genuine case from a case which is not genuine. Therefore, it is a case where the respondent not only acted unreasonably and mechanically but also violated the guidelines laid down in Maheschandra''s case (supra). Therefore, it is a fit case, where this Court in exercise of its extraordinary jurisdiction under Article 226 of the Constitution of India can intefere with the decision of the Administrative Authority and set aside the sale in favour of the third respondent.
The argument of the learned Counsel for the petitioner is that there is no valid mortgage, as the sale was registered subsequent to the date of execution of the mortgage cannot be sustained as the mortgage registered subsequently relates back to the date of execution of the mortgage. The other argument of the Counsel is that the originals sale deed was not deposited at the time of execution of the mortgage and the mortgage executed by depositing a copy of the title deed cannot also be sustained as no material is placed before me whether after the registration of the sale deeds they were handed over to the respondent. In the absence of specific material facts, I do not want to express any view.
It is alleged by the petitioner that the entire unit costs about Rs. 25 lakhs and it was sold for an unreasonably low price. There is no material before me to consider this aspect as the respondents have not valued the machinery, the land and building by an approved valuer. The amount advanced by the respondent and me amount spent by the petitioner i.e. Rs. 5,46,830/- + Rs. 8,00,000/- the original cost of the machinery, land and buildings is Rs. 4,65,000/-. The original cost itself would come to Rs. 20,00,000/-. Even allowing depreciation on the machinery, the cost of land and building must have gone up.
The Writ Petition No. 826/95 is allowed with costs subject to the following conditions; The respondent is directed to get the unit valued by an approved valuer within six weeks from the date of receipt of a copy of this judgment. On such valuation, the respondent is directed to furnish the same to the petitioner. The petitioner is also entitled to get the valuation made by an approved valuer of his choice. On such valuation the petitioner and respondent may reassess the valuation in the light of the above. The respondent is directed to give an opportunity to deposit the dues of the respondent in equal instalments of three months duration commencing from first July, 1996 after ascertaining the dues in consultation with the petitioner, after duly giving credit to the amount of Rs. 1,00,000/- due hereunder paid by D.D.No. 385806, dated 31-1-1995 pursuant to the interim direction dated 24-1-1995. On payment of the 1st instalment, the possession of the unit shall be re-delivered to the petitioner immediately. The respondent should refund the amount deposited by the third respondent with 18% interest from the date of deposit till the date of payment. In case, the petitioner fails to pay any one of the instalments, it is open to the respondent to sell the unit by public auction and if the public auction does not fetch the amount recommended by the approved valuer the respondents are entitled to call for tenders. The W.P.No. 826/95 is allowed accordingly with costs.
As regards the W.F. No. 2837/93, the power to sell the unit is conferred u/s 29 of the Act when default is made. Admittedly the petitioner committed default. Therefore, the respondents are entitled to seize the unit and the seizure is followed after notifying the same to the petitioner. Therefore, I see no merit in the Writ Petition and it is accordingly dismissed. No costs.