RAMJEE POWER CONSTRUCTION LTD Vs. UNION OF INDIA

JUDGEMENT

(1.) In this Writ Petition it has been prayed that the letter dated 27.7.2005 issued by RITES Ltd. to the Jharkhand State Electricity Board (`JSEB' in short) be quashed calling upon them to freeze all payments due to the Petitioner in respect of an on-going project of JSEB. Similar prayers have also been made in respect of the letter dated 2.8.2005 issued on behalf of the JSEB instructing all banks to stop all payments made to the Petitioner. It is further been prayed that letters issued to various parties be held in abeyance calling upon them not to award contract to the Petitioner. Prayers have also been made for re-evaluating the amount of securities furnished by the Petitioner on the project.

(2.) The Petition had been rejected by me on the grounds of lack of territorial jurisdiction. Subsequently, an application was made for reviewing the decision. Mr.Seth, learned counsel appearing for RITES has waived all objections on this score and instead had sought a decision on the merits of the Petition. He had, however, raised an objection pertaining to the non- maintainability of the Writ Petition as it intrinsically involved disputes which were in the realm of contract. Second preliminary objection that has been raised by Mr.Seth is that the Writ Petition ought not to be entertained since an Arbitration Clause exists between the parties in respect of the disputes which have been ventilated in the Petition. I will deal with these Objections first. Writ Jurisdiction in contractual matters

(3.) The only question that has arisen was whether Karnataka State Industrial Investment & Development Corpn. Ltd. (`KSIIDC' in short) had acted in a bona fide manner in the sale of properties of the Borrower while exercising its right under Section 29 of the State Financial Corporation Act, 1951. Reliance has been placed by Mr.Seth on the decision in Karnataka State Industrial Investment & Development Corpn. Ltd., (2005) 4 Supreme Court Cases 456, on the following passage: 19. From the aforesaid, the legal principles that emerge are: (i) The High Court while exercising its jurisdiction under Article 226 of the Constitution does not sit as an appellate authority over the acts and deeds of the Financial Corporation and seek to correct them. The doctrine of fairness does not convert the writ courts into appellate authorities over administrative authorities. (ii) In a matter between the Corporation and its debtor, a writ court has no say except in two situations: (a) there is a statutory violation on the part of the Corporation, or (b) where the Corporation acts unfairly i.e. unreasonably. (iii) In commercial matters, the court should not risk their judgments for the judgments of the bodies to which that task is assigned. (iv) Unless the action of the Financial Corporation 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 businesslike it may be, for the decision of the Financial 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. (v) In the matter of sale of public property, the dominant consideration is to secure the best price for the property to be sold and this could be achieved only when there is maximum public participation in the process of sale and everybody has an opportunity of making an offer. (vi) Public auction is not the only mode to secure the best price by inviting maximum public participation, tender and negotiation could also be adopted. (vii) The Financial Corporation is always expected to try and realise the maximum sale price by selling the assets by following a procedure which is transparent and acceptable, after due publicity, wherever possible and if any reason is indicated or cause shown for the default, the same has to be considered in its proper perspective and a conscious decision has to be taken as to whether action under Section 29 of the Act is called for. Thereafter, the modalities for disposal of the seized unit have to be worked out. (viii) Fairness cannot be a one-way street. The fairness required of the Financial Corporations cannot be carried to the extent of disabling them from recovering what is due to them. While not insisting upon the borrower to honour the commitments undertaken by him, the Financial Corporation alone cannot be shackled hand and foot in the name of fairness. (ix) Reasonableness is to be tested against the dominant consideration to secure the best price.