BAISHYA BROTHERS PRIVATE LIMITED Vs. STATE OF ASSAM

JUDGEMENT

(1.) The legitimacy of the action initiated on behalf of the respondent No. 2 in aid of Section 29 of the State Financial Corporation Act, 1951 (hereinafter referred to as the Act) is the core question requiring adjudication in this proceeding. The facts and the circumstances which gave rise to the proceeding under Art. 226 of the Constitution are summed up below :

(2.) The petitioner company moved the respondent No. 2 for financial assistance by way of term loan in its venture of Hotel Samrat. Accordingly the parties entered into a loan agreement whereby respondent No. 1 sanctioned a sum of Rs. 58.25 lakhs. As per the contractual stipulation the loan was repayable within March, 1991. There was some modification of the schedule of pay. The repayment of Rs. 50 lakhs of term loan was to commence from Sept. 1988 and to be completed in March, 1992. Further the additional loan of Rs. 6.24 lakhs was repayable commencing from Nov. 1990 and completing in Nov. 1997. The interest was due in May and Nov. every year. It was averred that because of change of economic scenario, the petitioner's Hotel incurred financial loss from the beginning which caused serious set back on their project. On the pressure of the respondent for immediate liquidation of the debt, the petitioner company increased its monthly payment to Rs. 50,000/- against the earlier payment schedule of Rs.10,000/- per month. The petitioner company could not cope with the pace, but the respondent with improper motive mounted its pressure for making immediate payment on pain of action under Section 29 of the Act. Failing to keep pace and generate more resources, the petitioner company sought for colloboration with M/s. Baruah Overseas Private Limited. In the process, the petitioner company came to an understanding with M/s Baruah Overseas Private Limited that subject to approval of respondent No. 2 M/s. Baruah Overseas (P) Limited would take over management of the unit at its own expenses and the petitioners would transfer 57% share in favour of M/s Baruah Overseas (P) Ltd. A registered agreement was entered into between the petitioner company and M/s. Baruah Overseas (P) Ltd. On the basis of the promise of respondent No. 2, the petitioner transferred 57% of its share in favour of M/s. Baruah Overseas Private Limited on consideration that the latter would effectively run, manage and maintain Hotel Samrat and would liquidate all overdue to the AIDC. But the respondents resiled from their stand and issued a Notice on 18-10-1997 to the petitioner under Section 29 of the State Financial Corporation Act, 1951 and threatened to take over the project of the petitioner.

(3.) Situated thus the Managing Director of Baruah Overseas (P) Limited approached the Chairman of the AIDC for providing him with a chance of reviving the Hotel by utilising his expartise in the business venture. Respondent No. 4, the Chairman interim advised respondent No. 3, the Managing Director to examine the proposal by his endorsement on the body of a letter dated 23-10-1997. In spite of the said endorsement respondent No. 3 on his own accord and without any reason, took over the possession of the hotel, closed it down and put locks on it. The petitioner contended that respondent No. 3 thereby crippled the growing concern without accepting the liability of making payment of the staffs of the Hotel including the Manager and other staffs. The petitioners referred to the instances of two such hotels namely, Hotel Kuber of Guwahatiand Ashok Hotel of Tinsukia which were similarly situated with that of the petitioner. The petitioner asserted that the respondent in both the cases entered into one time settlement with the parties and gave them scope to revive their business. The Managing Director of Baruah Overseas (P) Limited brought this aspect to the notice of the Chairman of the Corporation and the Chairman in turn mentioned the same to the Managing Director (Res. 3). Respondent No. 3 then invited the parties for discussion at the instance of respondent No. 4. Both the parties i.e. the petitioner as well as the Managing Director of Baruah Overseas (P) Limited attended the office of respondent No. 3 but without any result. The petitioner thus questions the ligitimacy and propriety of the action of respondents 2 and 3 as unjust, unfair and discriminatory. Respondents 2, 3 and 4 constested the proceeding and submitted one consolidated affidavit on their behalf through the Managing Director of the Corporation. The respondent in their affidavit while denying the assertions of the petitioners stated about the initiative of the petitioner for borrowing a sum of Rs. 42 lakhs under the IDBI's re financing scheme. In pursuance of the loan application of the petitioner dated 2-7-1984 for construction of the Hotel, respondents sanctioned a term loan of Rs. 42 lakhs on 13-2-1985 and the first instalment of the term loan was disbursed on 6-9-1995. To meet the cost of the over run of the project, the petitioner applied for additional term loan of Rs. 8 lakhs which was sanctioned on 11-2-1987. The petitioner thereafter also applied for additional term loan of Rs. 6.25 lakhs which was sanctioned on 8-9- 1989. The total term loan sanctioned stood at Rs. 56,25 lakhs. The respondents stated that at all an amount of Rs. 56,24,200.27 (Rs. Fifty Six Lakhs Twenty four thousand and two hundred approx) was disbursed to the petitioner by the respondents. The respondents reiterated that the money was lent to the petitioner out of the fund borrowed from IDBI under the re-financing scheme. Failure, to pay the principal loan amount was visited for penal interest, additional interest etc. On 28 -4-1994, the Corporation issued legal notice to the petitioner demanding the payment of the outstanding dues. But in sptie of making the payment, the petitioner approached the then Chief Minister of Assam imploring for a direction on the Corporation not to act upon the notice and provide 5 to 6 months time for repayment of the loan. The petitioners informed the respondents that they were trying to explore some arrangement with the Arunachal Pradesh Govt. and in the meantime, they would pay Rs. 40,000/- to 50,000/- per month to the Corporation and accordingly the Corporation granted 6 months time to the petitioners as prayed for. The petitioners, however, failed to fulfill the promise and to pay the money as promised. The petitioners also failed in its move to have any arrangement with the Govt. of Arunachal Pradesh. In the month of Dec. 95 the respondents again remained the petitioner to pay its dues which stood at Rs. 108.50 lakhs. The petitioner company again approached the Chief Minister making request for necessary orders to protect the company from the proposed action of the respondents so much so that the company was unable to pay more than Rs. 50,000/- per month. By letter dated 2-5-1996, the respondent Corporation requested the petitioner company to pay the dues within 15-5-1996 failing which the Corporation would be compelled to initiate proper legal action. The petitioner company repeatedly failed to pay its dues and accordingly the resspondents initiated steps to take over the unit to recover its outstanding dues in August, 1996.