MINHAS STEELS LIMITED Vs. PUNJAB AND SIND BANK

JUDGEMENT

(1.) BY this petition under Article 226 of the Constitution, the petitioners are seeking a writ of mandamus directing the Punjab and Sind Bank, the respondent No. 1 to withdraw its letters dated 20th October, 1995 and 6th January, 1996 and to release the working capital of Rs. 2. 02 crores in phases in favour of petitioner No. 1 company. The factual antecedents in which the controversy leading to this petition has arisen may be stated first. The first petitioner is a company incorporated under the Companies Act, 1956 and the second petitioner is the managing director of the company. The petitioner No. 1 was initially incorporated as a private limited company and was converted into a public limited company on 21st April, 1992. The company is established to manufacture ingots and alloy steels. The project of the petitioner No. 1 was initially appraised by the Maharashtra State Financial Corporation (MSFC), the respondent No. 2 and accepted by the Canara Bank, wherein term loan was to be granted by the respondent No. 2 and the working capital for the project was to be granted by the Canara Bank. Accordingly, the respondent No. 2 released the term loan to the extent of Rs. 42. 87 lakhs. As regards the working capital, the Canara Bank though initially agreed to grant working capital, later on withdrew from the project. Thereafter, the petitioners approached the respondent No. 1, Punjab and Sind Bank and requested for grant of working capital by letter dated 9th August, 1988. It seems that although some correspondence was exchanged between the parties, finally by its letter dated 20th May, 1991 the respondent No. 1 conveyed its inability to grant the working capital as there was complete ceiling on advance at that time.

(2.) SOME time in 1992, in view of the liberalised economy and decontrol of steel industry, at the request of the petitioner No. 1, the respondent No. 1 again took up the case of the petitioner No. 1 for considering the grant of working capital. A fresh project report was submitted by the petitioner No. 1 on 15th September, 1992 which included expansion/modernisation of the project by increasing the capacity of production from 3000 M. T. to 30,000 M. T. per annum. . The proposal was appraised by the officers of the respondent No. 1 and a report was submitted to the respondent No. 1 that the project is viable. Some time in December, 1992 the petitioner No. 1 proposed a public issue in view of the favourable appraisal of its project by the respondent No. 1. The respondent No. 1 agreed to be a lead-manager to the public issue. Thereafter, at the instance of the respondent No. 1 PNB Capital Services Ltd. , a wholly owned subsidiary of the Punjab National Bank was engaged as second lead-manager to the said public issue.

(3.) AT this stage it will be useful to refer to certain letters exchanged between the petitioners and the Bank which has got material bearing on the issues raised in the present petition. We have noted that the project of the petitioners was approved by the officers of the respondent No. 1 and recommendation was made to sanction the working capital. By a letter dated 14th January, 1993 the respondent No. 1 Bank wrote to the managing director of the petitioner No. 1 that he has not given the property papers to be taken as additional collateral security inspite of number of verbal requests. The managing director was asked to do the needful as early as possible so that the proposal can be finalised for submission to the higher authorities. The managing director of the petitioner No. 1 company, however, by his reply letter dated 15th January, 1993 stated that the company is ready to give a personal guarantee of the directors and a second charge of fixed mortgaged assets as per the norms prescribed.