ANDHRA PRADESH STATE FINANCIAL CORPORATION VASANT ORGANICS PRIVATE LIMITED Vs. VAJRA CHEMICALS:A P STATE FINANCIAL CORPORATION

JUDGEMENT

(1.) Leave granted in both the special Leave Petitions.

(2.) The Corporation sanctioned a term loan of Rs. 10,09,080/- to the writ petitioner 1st respondent (M/s. Vajra Chemicals (P) Ltd.) on 28-11-1979 and the said amount remained unpaid by the due date - 13-2-1987. Upon a representation made by the 1st respondent on 3-3-1990, the Corporation rescheduled the loan repayment, waived an amount of Rs. 4,48,803.23 and the due date was extended. There was default in payment of the instalments. The 1st respondent made a representation on 17-8-1992 and paid Rs. 25,000/- and undertook to pay Rs. 25,000/- in the 1st week of September, 1992 and balance of Rs. 1.50 lakhs before 31-12-1992 and other instalments in time. The Corporation sent telegram dated 2-2-1992 and letter dated 4-7-1992 requesting the 1st respondent to make payment. Recall-cum-sale notice was issued on 28-7-1992 for Rs. 9,87,250.79. As the 1st respondent did not avail of the opportunity, the Corporation exercised power under Section 29 of the State Financial Corporations Act (hereinafter called the Act) and seized the unit belonging to the 1st respondent on 17-12-1992 and issued an advertisement on 22-2-1993 for sale of the unit. The 1st respondent paid an amount of Rs. 85,000/- on 29-6-1993, gave one cheque dated 30-6-1993 for Rs. 20,000/- and also gave two post dated cheques dated 21-7-1993 and 27-7-1993 for Rs. 30,000/- each and requested the Corporation to release the unit and promised to pay the instalments in time. The Corporation lifted the seizure on 29-6-1993 and handed over the unit to the 1st respondent. However, the post dated cheques, when presented, were dishonoured by the Bank and no offer was made by the 1st respondent to make good the amounts covered by the cheques. In fact, earlier cheques dated 17-9-1984 for Rs. 25,000/-; 11-3-1985 for Rs. 25,000/-; 25-3-1985 for Rs. 25,000/-; 30-3-1985 for Rs. 25, 000/-; 17-7-1985 for Rs. 50,000/-; 20-12-1989 for Rs. 15,000/-; 31-3-1990 for Rs. one lakh and 26-11-1992 for Rs. 1.99 lakhs were dishonoured. The Corporation, in exercise of its powers under Section 29 of the Act issued a Recall-cum-sale notice dated 9-9-1993 for Rs. 10,70,45695/- for payment before 20-9-1993 and on default, seized the unit on 11-11-1993.

(3.) The 1st respondent's Managing Director, made a fresh representation in person on 27-12-1993 for lifting the seizure and for making a one time settlement. According to the Corporation, a meeting of the officers of the Corporation headed by its executive Director and of the Managing Director of the 1st respondent (Mr. Vijaya Kumar) and Branch Manager of the Corporation (R.R. Dist.) took place on 27-12-1993 and the Corporation decided to give one more opportunity. The Managing Director of the Corporation made an endorsement on the file agreeing to lift seizure on condition of the 1st respondent making a payment of Rs. 30,000/- by a demand draft and giving a post-dated cheques for Rs. 50,000/- and the 1st respondent was to make a one time-settlement in 6 months. It is the further case of the Corporation that this arrangement was entered into in the presence of Shri Vijaya Kumar (Managing Director of the Company) and that in spite of the above concessions, no payment was made by the 1st respondent. Thereafter, the Corporation issued an advertisment on 9-3-1994 in Enadu and Deccan Chronicals newspaper for sale of the unit. Only three offers were received, the highest being Rs. 13.50 lakhs. As the offers were low, they were rejected by the Corporation. A second advertisement dated 9-8-1994 in the two newspapers produced an offer of Rs. 10.50 as the highest offer which was again not accepted. A third advertisement was issued in the same two newspapers on 8-8-1994 and the highest offer received this time was Rs. 23.50 given by one Mr. M. S. Shyam, who was none other than the brother-in-law of Shri Vijay Kumar, Managing Director of the 1st respondent Company. As the offer of Rs. 23.50 was treated as low, the Corporation rejected the same. A further advertisement was issued on 2-3-1995 in the same two newspapers. Five offers were received,one for Rs. 24 lakhs by Mr. Shyam above mentioned. The Corporation negotiated with the bidders and one of them M/s. Vasant Organics (appellant in CA No. arising out of S.L.P. (C) No. 15260/1998) increased its offer for Rs. 26 lakhs during meetings on 9-3-1995, 11-3-1995 and 13-3-1995. At that stage, Mr. M. S. Shyam, withdrew from further negotiation and took back his deposit. So did another Bidder Mr. Narasimna. Ultimately only M/s. Vasant Organics remained in the field with the highest offer at Rs. 26 lakhs and there were further negotiations with that party and the offer was increased to Rs. 20 lakhs finally.