NEECO Vs. ORISSA STATE FINANCIAL CORPORATION

JUDGEMENT

(1.) Petitioner No. 2 is an entrepreneur who had set up the industry in the Industrial Estate at Bhubaneswar by taking term loans from the financial institutions like Orissa State Financial Corporation (O.S.F.C.) and IPICOL. Having defaulted in making payment of the instalment dues, the O.S.F.C. exercised its power under Section 29 of the State Financial Corporation Act (hereinafter referred to as the 'Act') and seized the industrial unit on 22.8.1990. While the Corporation was about to sell the unit, the petitioners approached this Court and obtained an interim order on 30th of August, 1990, and because of this interim order, the industrial unit has not been disposed of as yet.

(2.) The petitioners had challenged also the constitutional validity of Section 29 of the Act by exercise of which power, the unit has been seized by the Corporation, but the provision of Section 29 has been held to be intra vires by a Bench of this Court in the case of Sk. Kamiruddin and Others v. Union of India and Others, 1993 AIR(Ori) 238. The petitioners, therefore, attack the legality of the order of seizure on the ground that there was no valid service of notice before taking action under Section 29 of the Act and on the ground that the financial institution has not acted in a business like manner and instead of extending its helping hand to promote the industry in question with a mind to help the unit, it has acted with unreasonableness and arbitrarily in not considering the petitioner's application for additional term loan and in not releasing the sanctioned amount with promptitude which has resulted the industry to become sick and ultimately failure on the part of the industrial concern to make the payment in question.

(3.) It is alleged in the writ application that the Orissa State Financial Corporation had sanctioned Rs. 30 lakhs in November, 1982 and the IPICOL had agreed to sanction Rs. 63 lakhs. But the IPICOL disbursed Rs. 6 lakhs on 6.8.1993 and O.S.F.C. disbursed Rs. 17 lakhs by 7.8.1993. In November, 1983, the O.S.F.C. further disbursed further sum of Rs. 5.6 lakhs and then on 29.1.1985 it disbursed another Rs. 4.6 lakhs. On 3.2.1985, the IPICOL disbursed Rs. 7 lakhs and again oil 31.3.1986 O.S.F.C. disbursed Rs. 2 lakhs, but this was adjusted towards the interest due to the O.S.F.C. On 31.3.1986, IPICOL sanctioned Rs. 1 lakh but that was again adjusted to IPICOL towards interest dues. In 1989, the petitioner had made an application to the O.S.F.C. for additional loan of Rs. 11 lakhs, but the Corporation had sanctioned only Rs. 4.5 lakhs which was just the amount to cover up their interest dues and according to the petitioners if the O.S.F.C. would have sanctioned Rs. 11 lakhs in December, 1989, pursuant to petitioner's application, then the industry could have easily carried out its unit and could have repaid the instalment dues. Finally the O.S.F.C. issued recall notice on 17.7.1990 and then seized the unit on 22.8.1990.