R K INDUSTRIES PLOT NO SPL 35 INDUSTRIAL ESTATE KALLUR Vs. ANDHRA PRADESH STATE FINANCIAL CORPORATION

JUDGEMENT

(1.) R.K.Industries Plot No. SPL 35, Industrial Estate Kallur, Kurnool District petitioner herein prays for the issue of a writ of Mandamus directing respondents 1 and 2 to restore possession of the industry which was illegally taken possession of by respondent No. 3 by declaring that the act of taking possession of the properties and their sale is illegal and void being violative of Art. 14 of the Constitution of India.

(2.) The circumstances under which the above writ petition has been filed are as follows:

(3.) The petitioner-Industry was started by an educated unemployed person for the manufacture of mosaic chips and tiles as a small scale industry and established the unit in the industrial estate, Kallur, in Kurnool District. The Unit obtained financial assistance from the Andhra Pradesh State Financial Corporation and State Bank of India in addition to his own investment. Due to certain difficulties the industry could not be run on a regular basis. Further more, due to heavy competition in the market the petitioner-industry started incurring losses forcing it to close down the industry temporarily. As a result of the above strained circumstances, the petitioner could not repay the loan instalments due to the A. P. State Financial Corporation. The Branch Manager of the A.P. State Financial Corporation, Kurnool Branch respondent No. 2 herein auctioned the unit, which was knocked down at a very low cost in favour of the 3rd respondent. This action was taken by the A. P. State Financial Corporation u/S.29 of the State Financial Corporations Act, 1951 (Act No. 63 of 1951) hereinafter referred to as 'the Act'. It could be appropriate to reproduce S. 29 of the Act here itself which is in the following terms: "29. Rights of Financial Corporation in case of default:-- (a) 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 take over the management or possession or both of the industrial concern 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. (2) Any transfer of property under the Financial Corporation in exercise of its powers u/sub-s. (1), shall vest in the transferee all rights in or to the property transferred as if the transfer had been made by the owner of the property. (3) The financial Corporation shall have the same rights and powers with respect to goods manufactured or produced wholly or partly from goods forming part of the security held by it as it had with respect to the original goods. (4) Where any action has been taken against an industrial concern under the provisions of sub-section (1) all costs, charges and expenses which in the opinion of the Financial Corporation have been properly incurred by it as incidental thereto shall be recoverable from the industrial concern and the money which is recovered by it shall, in the absence of any contract to the contrary, be held by it in trust to be applied firstly, in payment of such costs, charges and expenses and, secondly, in discharge of the debt due to the Financial Corporation and the residue of the money so received shall be paid to the person entitled thereto. (5) Where the Financial Corporation has taken any action against an industrial concern under the provisions of sub-s. (1), the Financial Corporation shall be deemed to be the owner of such concern, for the purposes of suits by or against the concern, and shall sue and be sued in the name of the concern." U/S. 31 of the Act special provisions for enforcement of claims by Financial Corporation are provided, stating inter alia that if an industrial concern commits any breach of an agreement and makes default in repayment of any loan or advance or any instalment thereof, the State Financial Corporation may apply to the District Judge within the limits of whose jurisdiction the industrial concern carries on the whole or a substantial part of its business for the sale of the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation or for transferring the management of the industrial concern or for an ad interim injunction restraining the industrial concern from transferring or removing its machinery etc. from the premises of the industrial concern. An order passed by the District Judge is enforceable in the same manner as the decree under the Code of Civil Procedure.