BHABAGRAHI PANIGRAHI Vs. UNION OF INDIA

JUDGEMENT

(1.) The petitioner No. 1 Bhabagrahi Panigrahi is the Managing Director of M/s. Premier Industrial Salts and Chemicals (Pvt.) Limited (petitioner No.2), a company, incorporated under the Indian Companies Act, 1956 (hereinafter referred to as 'the Company') carrying on business in the manufacture and sale of Sodium Dichromate by establishing a plant at Jagatpur in Cuttack district. The petitioners Nos. 1 and 2 have filed this writ application under Art.226 of the Constitution of India challenging the action of opposite party No. 2, the Orissa State Financial Corporation (hreinafter referred to as `the Corporation'), in taking over the possession of the Industrial Concern of the petitioner-Company with the right to sell in exercise of its power under S.29 of the State Financial Corporation Act, 1951 (hereinafter referred to as `the Act') in pursuance of the notice under Annexure-1 and handing over the possession of the same to the opposite party No.3 M/s. Kalinga Chemicals, a partnership firm (hereinafter referred to as 'the Firm'), of which opposite party No.4 S.K. Routray is a partner. Opposite party No. 1 is the Union of India.

(2.) According to the petitioners, the following chronology of events have ultimately driven them to file the present writ petition: On 16-9-1971 the petitioner-Company applied to the Corporation (opposite party No. 2) for a loan of Rs. 10 lakhs and the loan was sanctioned by the Corporation of (on) 5-61972. On 2-1-1973 petitioner No. 2 got lease of Government land masuring Ac.39.39 dec. in Mouza Khaira in Cuttack district for 99 years with a right to mortgage the same. On 5/6-1-1973 the petitioner No. 2 received the loan amount of Rs. 10 lakhs and executed and registered an English mortgage bond in favour of the Corporation mortgaging the said Ac.39.39 dec. of leasehold land agreeing to repay the principle sum of Rs. 10 lakhs, together with interest at the rate of 10 per cent per annum, with quarterly rests, in 9 annual instalments of equal value, the first instalment being payable on 31-3-1974 and the last instalment payable on 31-12-1982. On 30-4-1975 and 14-5-1975 the Corporation issued notice to the petitioner No. 2 making demands for the repayment of its dues, as the company committed default in the repayment of the same. The Corporation by its letter No. 8672 of the year 1975 intimated the petitioner No. 2 about its decision for filing a suit in the court of the District Judge for realisation of its dues. But subsequently at the request of the petitioner No. 2, on 29-5-1976 the Corporation sanctioned a further loan of Rs. 50,000/-. On 15-6-1976, after receiving a sum of Rs. 29,000/- out of the loan amount of Rs. 50,000/- thus sanctioned, the petitioner No. 2 created an Equitable Mortgage in respect the said Ac.39.39 dec. of land and agreed to repay the principal sum together with interest at the rate of 15 per cent per annum with quarterly rests, in 5 annual instalments commencing from 31-12-1978. Petitioner No. 2 did not avail of the balance loan amount of Rs. 21,000/-. On 8-1-1977 the Corporation sanctioned a further loan of Rs. 2 lakhs in favour of petitioner No. 2 and the terms of the loan were communicated to the petitioner No. 2 on 14-2-1977. By letter dated 13-9-1978, the Corporation intimated its objection to the petitioner No. 2 regarding its (petitioner No. 2's) proposal to lease out the Industrial Concern to M/s. Calcutta Colour Company and M/s. Oxford cheimicals Traders at a premium of Rs. 40,000/- per month. On 17-3-1979 the Board of Directors of the Corporation took a decision to take over the assets of the petitioner-Company in exercise of its powers under S.29 of the Act and accordingly authorised its Managing Director to take the necessary steps in the matter. On 30-3-1979 the senior Consultant (Technical) of Orissa Industrial and Technical Consultancy Organisation Limited along with an officer of the Corporation inspected the plant for assessing the value of the property mortgaged. On 2-4-1979 the Corporation took possession of the Industrial Concern of the petitioner-Company in exercise of the powers under S.29 of the Act and on that very date the Corporation, in its turn, delivered possession of the factory together with the premises extending over an area of Ac.39.39 decimals, to the firm opposite party No. 3 in pursuance of the agreement of sale (Annexure-B) dated 2-4-1979 entered into with it for a consideration of Rs. 19,01,000/-, out of which opposite party No. 3 paid a sum of Rs. 2,01,000/- only on the date of agreement and agreed to pay the balance sum of Rs. 17 lakhs together with interest at 9 per cent per annum in 16 equal half-yearly instalments, commencing from 20-6-1979. Being aggrieved by the action of the Corporation in taking over the possession of the Industrial Concern of the petitioners on 2-4-1979 and delivering the same to opposite party No. 3 in pursuance of the agreement of sale, the petitioners filed this writ petition on 5-4-1979 challenging the said action.

(3.) Mr. B.K. Mohanty, the learned counsel for the petitioners, during the course of his arguments, raised two substantial points for consideration: (1)As no notice was given to the petitioners by the Corporation (opposite party No. 2) before taking action under S.29 of the Act, there has been a flagrant violation of the principles of natural justice and on that score alone the action of taking over of the Industrial Concern of the petitioners is vitiated. (2) The background of facts under which the Corporation had taken over the Industrial Concern of the petitioners and delivered possession of the same to opposite party No. 3, purporting to be in exercise of its powers under S.29, would reveal that the Corporation's action of taking over was actuated by bad faith and prompted by the extraneous consideration of bestowing undue favours on opposite party No. 3 and therefore, the impugned action of taking over it otherwise also bad in law.