KAMALA INDUSTRIAL UNIT, REPRESENTED BY ITS PROPRIETOR, J S RAMAMOORTHY Vs. STATE BANK OF INDIA REPRESENTED BY ITS MANAGER, SMALL INDUSTRIES BUSINESS DIVISION

JUDGEMENT

(1.) In this writ petition, the petitioner, a proprietary industrial unit, has prayed for the issue of a writ of mandamus directing the first respondent herein to come forward with a scheme for nursing the petitioner industrial unit. The proprietor of the petitioner is a qualified engineer. In 1970 the 1st respondent announced a scheme known as "entrepreneur Scheme" to aid and assist by way of financial assistance and expect guidance for setting up of small scale "industries by enterprising and technically qualified and skilled persons. Under that scheme, if a qualified entrepreneur of experience craftsman having personal attributes like character, integrity and possessing the requisite knowledge in a particular line and managerial ability, desired to set up worth while projects with prospects of successful operation and reasonable assurance of repayment, the State Bank (hereinafter referred to as the "Bank") expressed willingness to offer financial support. The assistance so extended covered the entire range of financial requirements for working capital, acquisition of fixed assets, etc. In deserving cases, depending upon the merit of the project, making available of higher finances will also be considered. The assets created from the Bank finance should be charged to the Bank. Advances towards working capital were recoverable every year. The other advances were repayable within a period of 5/10 years in suitable instalments depending the profitability of the project. A start up period of 18 months to 24 months or more was also allowed. The case of the petitioner is that in response to this scheme, in March, 1970, it applied for financial assistance for settirig up a small scale industry in Tiruchi for manufacturing machine parts to accord with the specifications given by large scale industries such as BHEL, TAFE, etc., By letter No. D1/SSI, dated 27.8.1971, the Bank extended to the petitioner the following facilities:

(2.) In the affidavit filed in support of this writ petition, the petitioner has stated that the Bank had held out a promise and assurance to extend financial assistance and support to the petitioner industry and that it cannot be permitted to go back on its promise and act to the detriment of the petitioner. In short, the petitioner has invoked the principle of promissory estoppel. Besides, the petitioner has also charged the Bank with having acted arbitrarily in picking and choosing industrial units similarly situated (or bestowing favours on some and not extending assistance to others. While assuring the Bank about the earnestness to repay every pie due to it, the petitioner claimed that it was only seeking an implementation of a nursing scheme which will rejuvenate the sick unit and promote the growth. The notice issued by the Bank recalling the advances was also stated to be arbitrary in that the Bank had not given the petitioner any reasonable opportunity. On the aforesaid grounds, the petitioner has approached this Court for the issue of a writ of mandamus to come forward with a scheme for nursing the petitioner.

(3.) In the counter affidavit filed by the Bank, it stated that in 1971, it sanctioned credit facilities to the petitioner on an application made after undertaking feasibility studies. Three such facilities were given to the petitioner (a) medium term loan of Rs. 1,42,000 (b) demand cash credit facilities of Rs. 8,000 and (c) Rs. 24,000 on bills purchase account and 100% loan had been given to the petitioner and the petitioner did not contribute any capital for setting up plant and machinery. Under the terms Of the contract, the medium term loan was repayable from the cash generated by the unit in 28 quarterly instalments of Rs. 5,000 each and the last instalment of Rs. 2,000 was payable as the 29th instalment. The contract further provided that in the event of default in payment of any one of the instalments or interest, the-entire loan could be recalled and the period for liquidating the debt was fixed at 8 years and 9 months. According to the Bank, the petitioner did not adhere to the repayment schedule agreed and since the inception, only a sum of Rs. 30,000 had been paid, though the unit became sick only in 1973, leaving the balance of Rs. 3,40,000 due. Adverting to the amounts advanced to the petitioner as cash credit facilities, the Bank stated that a sum of Rs. 40,000 was due. The Bank also stated that there was no delay on its part in the disbursement of the loans and that it had lent all financial support and given full assistance to the petitioner as promised. Even a change of management, though not agreed to by the Bank, was unproductive of results in the matter of regeneration of funds for repayment to the Bank. The Bank also stated that though the petitioner availed itself of finance on bills submitted to the Bank for discount, yet, it entered into concurrent transactions with other banks and did not make any payment to the Bank and this amounted to deception by the petitioner. Though amounts had been realised by the petitioner, it would not deposit those amounts with the Bank and the realisations were not routed through the Bank but siphoned off by the petitioner for its purposes. After referring to the proceedings culminating in C.R.P. No. 2244 of 1981, the Bank stated that the writ petition has been filed on the very same grounds on which the injunction had been asked by the petitioner earlier in O.S. No. 348 of 1981, Sub-Court, Tiruchi, which was rejected by this Court and the Supreme Court and therefore, the petitioner is not entitled to any relief. The defect in the machinery purchased was not admitted by the Bank and that according to the Bank, would establish that the petitioner did not know its requirements and what to purchase. According to the Bank, the recommendations of the Rohira Committee were only recommendatory in nature for the purpose of internal assessment and does not clothe the petitioner with any rights as to how a Bank should deal with a sick unit and it was found that the petitioner unit is incapable of revival. The Bank reiterated that the petitioner unit is a sick unit beyond redemption and there was no possibility of its making or generating profit or surplus and the petitioner has been siphoning all funds for un provocative and personal uses. Referring to the recommendations made by the second respondent, the Bank took up the stand that those recommendations were not binding on the Bank as it was business of the Bank to act as a banker and help customers and while doing so, the Bank is the sole judge and the discretion of the Bank and its decisions - managerial and commercial - cannot be made justiciable issues. The Bank also stated that the petitioner had no right whatever to compel the Bank to lend to institutions which the Bank considered as incapable of survival. The Writ Petition was also characterised as a total abuse of the process of court.