ORDER
P.K. Mohanty, J.
1. In both the writ applications, the action of the Orissa State Financial Corporation in auctioning M/s Lords Food Products (India) Pvt. Ltd. and settling the same in favour of opp. Party No. 5, Tarakanta Mohapatra being under challenge and common question of fact and law being involved, on the consent and on agreement of the learned counsel for the parties, both the writ petitions were heard analogously and is being disposed of by this common order.
2. O. J. C. No. 13332 of 1999 has been filed by M/s Lords Food Products (India) Pvt. Ltd. represented through its Chairman-cum-Managing Director, Dr. Durga Prasad Sahoo (Petitioner No.2). In O. J. C. No. 13385 of 1999, Shree Jagannath Education Trust, represented by its Chairman is the petitioner, which was an auction bidder in the auction conducted on 14-10-1999 by the Orissa State Financial Corporation (hereinafter called as 'O.S.F.C.') of the defaulting a bakery unit. Lords Food Products (India) Pvt. Ltd. (Petitioner No.1 in O.J.C. No. 13332 of 1999).
3. The short facts of the case leading to the present writ applications are that M/s Lords Food Products (India) Pvt. Ltd., a private Limited Company, established in the year 1986 having equity capital of Rs. 10.00 lakhs and petitioner No.2 is its Chairman-cum-Managing Director, manufacturing Bread, Biscuits etc. by a fully mechanised Biscuit Plant at Industrial Estate, Mancheswar. According to the petitioner unit, as per the official valuer, the asset and cost of the unit is more than Rs.6.15 Crores. The Company incurred a Term loan of Rs.37.00 lakhs from Orissa State Financial Corporation by mortgaging assets and it also incurred loans from different financial institutions like Industrial Promotion and Investment Corporation Ltd. (IPICOL), Industrial Development Corporation. (IDCOL) and the State Bank of India towards its working capital. It started its commercial production on 26-2-1988, but for various reasons, the unit became sick by the end of the year 1993. The Industrial Unit was seized by the O. S. F. C. on 24-3-1994 under Section 29 of the State Financial Corporation Act, 1951, but however, on 6-4-1994, the unit was released under certain conditions in terms of Annexure-2. It is alleged that after releasing from the seizure, the O. S. F. C. failed to take any action to revive the unit. In the year 1996 IPICOL was entrusted to make rehabilitation package, but since no assistance was made available towards the need based working capital, the unit could not revive. The O. S. F. C. arbitrarily, without complying with the provisions of Section 29 of the Act and without considering the one-time settlement proposal (in short called 'O.T.S.') and without allowing the petitioners to give a better bid, clandestinely wanted to sale the unit to one M/s T. K. Narayan. Director, Teekey foams Pvt. Ltd. The petitioner-unit moved this Court in O.J.C. No. 4728 of 1999 challenging the seizure made by the O, S. F. C. This Court by Judgment/order dated 20-8-1999 disposed of the writ petition directing for a fresh auction and fixed the terms.
4. Pursuant to the direction in O, J, C. No. 4728 of 1999. the O. S. F. C. vide letter dated 7-9-1999, a copy of which is Annexure-3, directed the petitioner, seized unit,' to submit O. T. S. proposal on 15-9-1999 in the proposed joint meeting to be held In the chamber of Executive Director. The petitioner unit submitted O. T. S. Proposal on 15-9-1999, a copy whereof is Annexure-4. The O. T. S. proposal submitted by M/s Lords Food Products Pvt. Ltd. was rejected by the O. S. F. C. in letter dated 1-10-1999 on the ground that the total over dues of O. S. F. C. and IPICOL as on 31-8-1999 stood at Rs.219.13 lakhs. A copy of the letter had been annexed as Annexure-5 (in O. J. C. No. 1332 of 1999).
5. The O. S. F. C. published a sale notice on 14-10-1999 in daily newspapers inviting offers for sale of assets through Disposal-cum-Advisory Committee {for short 'D. A. C.'). Pursuant to the notice, four offers were received, but according to the petitioners, the tender papers were not opened in front of all the bidders /applicants. But of the four, two offers were accepted as valid bid and the two other offers were rejected on the ground that the said two offerers did not agree to out-right purchase. The petitioner in O. J. C. No. 13385 of 1999, Shree Jagannath Educational Trust offered Rs.101 lakhs with full down payment and Sri Tarakanta Mohapatra (opp. party No.5 in both the writ applications) offered Rs.110 lakhs with full down payment. Subsequently, said Shree Jagannath Educational Trust offered Rs. 1ll lakhs and thereafter Mr. Tarakanta Mohapatra raised the offer to Rs.115 lakhs down payment. According to the petitioners, Shree Jagannath Educational Trust wanted to raise the offer more than the offer of Sri Tarakanta Mohapatra, but his request was not acceded to and the unit was settled on 29-10-1999 in favour of opp. party No. 5. According to the petitioners, had the O. S. F. C. made further auction and allowed Shree Jagannath Educational Trust to raise its offer, the unit could be sold at much higher price than the offer' made by opp. party No, 5 and thereby the loan burden on the petitioners might have reduced. It is claimed that Dr. DurgaPrasad Sahoo petitioner No.2 in O. J. C. No, 13332 of 1999) Is the founder member of the Company, on whose sweat and blood the Company has come into existence, but he was denied to match the offer or to bring better offer. It is pleaded that the O. T. S. proposal of M/s Lords Food Products Pvt. Ltd. had been rejected solely on the ground that it is much less than the dues accrued, but without any reason or rhyme, the same has been settled at Rs.115 lakhs in favour of opp. party No.5 depriving the unit of the O. T. S. proposal, whereas the O. S. F. C. has waived out the compound interest and other penalties from many other defaulter units and sanctioned O. T. S. proposal. The settlement made in favour of opp. party No.5, is alleged to be discriminatory and contrary to the principles settled by the Apex court and Mahesh Chandra v. Regional Manager, U.P. Finance Corporation; AIR 1993 SC 935 (1992 All LJ 1202) and the direction in the judgment dated 20-8-1999 passed in O. J. C. No. 4728 of 1999. The petitioners therefore, have prayed for quashing the settlement of the Unit in favour of opp. party No. 5 and for directing the opp.. parties to settle on the terms of O. T. S. Proposal and/or to match the offer made by opp. party No.5.
6. Opp. party No. 1 O. S. F. C. and opp, party No. 5 have filed their respective counter affidavits denying the allegations made and controverting the facts averred In the writ petition. The petitioner has filed a rejoinder affidavit bringing about some new facts. It is stated that pursuant to the letter dated 7-9-1999 (Annexure-3) petitioner No. 2 in O. J. C. No. 13332 of 1999 attended the meeting held on 15-9-1999. There he submitted the O. T. S. proposal jointly for O. S. F. C. and IPICOL, a copy whereof is Annexure-4. Petitioner No.2 gave a separate O. T. S. proposal to the representative of the S. B. I. It has been averred that the O. T. S. proposal given by the petitioner had not been placed before the Board nor any final decision of the Board had been communicated to petitioner No.2 and as such, the communication made by the Joint General manager (Recovery) under Annexure-5 is without jurisdiction. It is alleged that the financial institution, though accepted the revival package, did not Implement the same in its true essence, as a result, the Unit could not revive and continued to be sick. The Board of Directors of opp. parties 1 and 2 being the only competent authority to consider and take any decision on any proposal for one time settlement made by any borrower, decision of the Joint General manager is without Jurisdiction and cannot be acted upon. The guidelines of the Reserve Bank of India circulated vide circular No. DBOD. BP. BC. 57/21. 01-04/99 has been annexed as Annexure-14 and the corresponding Board Decisions of opp. party No. 1 is Annexure-14 (A) and 14(B) respectively. It is alleged that the unit is yet to be transferred legally in favour of opp. party No. 5 since as yet no document has been executed by opp. party JMo. 1 in favour of opp. party No. 5 accepting the transfer of the Unit till date and as such the transfer if any made by opp. party No.5 in favour of some other party is governed by lis pendency.
6A. Opp. Party No. 1, State Financial Corporation has filed its counter, denying the allegations and the claim made in the writ petition. It is the specific stand of the Corporation that the petition is not entertainable since in the earlier writ petition O. J. C. No. 4728 of 1999, which was disposed of by judgment dated 20-8-1999, a direction was given to hold fresh auction under certain terms and conditions by all the financial institutions like the O. S. F. C., IPICOL and S. B. I. and in compliance thereof, O. S. F. C., IPICOL and S. B. I. jointly have taken a decision on 15-9-1999 rejecting the proposal for one time settlement given by the petitioner and the decision was communicated by letter dated 1-10-1999 (Annexure-5). After the one time settlement proposal given by the petitioner was rejected in terms of the directions in the judgment, the sale notice was published in local Oriya daily 'The Samaj' and English daily 'The Economics Times' dated 14-10-1999 and 16-10-1999 respectively. The Disposal Advisory committee meeting was held on 28-10-1999, wherein all the financial institutions jointly have decided to sell the unit in favour of Sri Tarakanta Mohapatra (opp. party No. 5) for sale price of Rs.115 lakhs on outright purchase basis after considering four offers received. It is stated that the petitioner had accepted the rejection of his one time settlement proposal communicated to him on 1-10-1999. But he neither could settle the account nor could match /better the offer received by the D. A. C, pursuant to the decision of the D. A, C. dated 18-ID-1999, the sale letter was issued to opp. party No.5 and the possession of the unit was handed over to opp. party No. 5 on 3-11-1999 after he complies with the conditions of the sale letter. The D. A. C. received four numbers of offers as follows :
Sl. No.Name of the offerers.Original offerOriginal down paymentRevised offer(Rs. in lakhs) Revised down payment
1.Institute Of Mgmt. Information Science107.0025.00120.0028.002.Teekay Foame (P) Ltd.101.0022.00101.0022.003.Sri Jagannath Educational Trust101.00101.00101.00101.004.Sri Tarakahta Mohapatra101.50101.50110.00110.00
It is further stated that petitioner No.2 Dr. D. P. Sahoo attended the D. A. C. but failed to settle the account and also failed to match or arrange Rs. 110 lakhs received by the Corporation from opp. party No.2. The petitioner No.2 requested the Committee by his representation dated 28-10-1999 for further negotiation, since he felt, the bidders may raise their offers still higher, a copy of which is Annexure-D/1. Pursuant to the request of the petitioner No.2, another round of negotiation was held with al! the bidders on the same day. In the second round of negotiation, the offer of opp. party No.5 was found to be better and reasonable with a sale consideration of Rs.115 lakhs outright down payment. Petitioner No.2 then was called upon to match or better the highest price of Rs. 115 lakhs on out right purchase, but he failed to do so. Accordingly, the Committee consisting of the representatives of the O. S. F. C., IPICOL and S. B. I. decided to sell the unit in favour of opp. party No.5 for a consideration ofRs. 115 lakhs on outright purchase basis. The possession of the unit was handed over to opp. party No.5 on 3-11-1999 and Industrial Development Corporation was requested to transfer. .It Is also indicated in the counter affidavit that according to the guidelines and norms followed by the corporation, the petitioner was advised to deposit 25% of his own offer on 15-9-1999, but he failed to do so. The proposal of the petitioner for one-time settlement 'to pay only the principal amount to O. S. F. C. and IPICOL excluding the interest, funded interest and compound interest' was not acceptable by the O. S. F. C. and IPICOL as a reasonable one. The alternative offer of Rs. 101 lakhs to both O. S. F. C. and IPICOL as O. T. S. proposal given separately to S. B. I. to make payment of the principal without any interest and payment of 25% of the final amount in one month and balance within one year, was also not acceptable to State Bank of India. Therefore, in compliance to the direction of this Court, all the financial institution have taken a collective decision that the one time settlement propdsal is not acceptable. It is pleaded that sufficient opportunity and scope was given to the petitioner to pay back the dues, but he failed to do so. Moreover, this Court had also given an opportunity to settle the amount, but he also failed to do so.
7. Mr. B. Misra, learned counsel for the petitioners in O. J. C. No. 13332 of 1999 submitted that in view of the R. B. I. guidelines, the State Financial Corporation for-mulated a set of norms for settlement of proposals and in accordance with those norms One Time Settlement (O. T. S.) proposals submitted by the unit holders were to be pleaded before the Board and the Board alone could consider ttnd taktv a decision thereof. But the One time Settlement (O. T. S.) proposal given by the petitioner or the alternative proposal to pay Rs.101 lakhs towards full and final settlement dues of O. S. F. C. and IPICOL was not placed before the Board and it was Illegally rejected by the Joint General Manager (Recovery) of the O. S. F. C, who had no authority under law or under the norms to consider and take a decision thereon. The O. T. S,. proposal given by the petitioner to the O. S. F. C. and IPICOL it is submitted Was Just, fair and reasonable and more or less in conformity with the modal proposal set forth by the Hon'ble Supreme Court in U.P. Financial Corporation v. Gem Cap (India) Pvt. Ltd. AIR 1993 SC 1435 (1993 All LJ 515) and, therefore, in ail fairness the proposal ought to have been considered by the Board and a favourable decision taken. The learned counsel in this context relies on the resolution of the Board of Directors in its 298th meeting held on 21-6-1999; the extract of which is Annexure 14(a) to the rejoinder affidavit filed on behalf of M/s Lord Food Products Pvt. Ltd. to indicate that such proposal was to be considered by the Board. However, the O. S. F. C. has produced the minutes of the 298th meeting of the Board of Directors held on 21-6-1999 minutes thereof St. sl. No. 51, item No. 9, 'Guidelines for one Times Settlement' indicates, that the Board approved acceptance of at least 25% of the offer of one Time Settlement by the borrower before considering the O, T. S. Proposal to show the borrower's bona fide which along with subsequent payment towards current dues, is to be treated as part of the settlement amount after approval of the proposal by the competent authority etc. It further appears from the general circular No. 547 dated 5-8-1999 of the O. S. F. C. issued to all Branch Managers, that the Branch Managers should request and insist on payment at least 25% of the one Time Settlement offer as initial deposit before processing the O. T. S. proposal at the branch level inasmuch as where the O. T. S. proposal was not accompanied with the initial deposit at least 25% of the offer amount the proposal was to be dropped at the Branch level under intimation of O. T. S. cell of Recovery Department.
8. Before considering the rival contentions raised at the Bar, it is necessary to refer to the directions of this Court dated 20-8-1999 passed in O. J. C. No. 4728 of 1999. The petitioners' allegation in the earlier writ petition was that, even though the unit was a value of more than Rs. 7 Crores, with ulterior motive, the Corporation proposed to hand over the unit to M/s. T. K. Foams EM. Ltd., and even though the petitioners were allowed some time to find out a buyer who would make better offer than that is received, it went ahead to finalise the deal with opp. party No. 5 therein. The Court found from records that the opp. party No. 5 had made an offer of Rs. 90 lakhs with a stipulation to make down payment of Rs. 10 lakhs, which was later on enhanced to Rs. 1 Crore with a down payment of Rs. 20 lakhs. One M/s. Utkal Udyog was willing to pay Rs. 1 Crore 1 Lakh with down payment of Rs. 22 lakhs which was a better offer than that made by opp. party No. 5 on consideration and on agreement by the parties that it would be in the best interest of all concerned, if the unit fetches the highest price, this Court while finding that the offer made by M/s. Utkal Udyog was a better offer than one made by opp. party No. 5, a direction was given for holding of a fresh auction on the following terms (at paragraph-6), which may be quoted hereunder :
'(i) The auction shall be held in presence of representatives of the Corporation, IPICOL and SBI. The parties shall be permitted to make their offers in sealed covers and on the date of auction if any if the parties want to offer better terms than those indicated in the sealed covers, after they are opened that shall be permitted.
(ii) Each of the tenderers shall be required to make earnest money deposit of Rs. 1 lakh.
(iii) If any of the parties makes a speculative bid and after having given an offer backs out from the same, the earnest money shall stand forfeited.
(iv) Each tenderer shall be required to indicate the total consideration, period during which the amount shall be paid and the down payment.
(v) The offset price shall not be less than Rs.1,01,00.000/- and Rs. 22.00.000/- as down payment since that is the highest offer received by now from M/s. Utkal Udyog.
(vi) A Committee consisting of the representatives of the Corporation, IPICOL and SBI shall take a final decision so far as acceptance of tender is concerned. While accepting the tender best available price offered, capacity of the bidder to pay the amount and such other relevant aspects shall also be considered.
(vii) It has to be borne in mind that ultimately the purpose would be to have highest price for the Unit in question.
(viii) the cost of effecting the auction advertisements therefor shall be equally borne by the Corporation, IPICOL and SBI. An advertisement shall be inserted in two widely circulating daily newspapers in Orlya language and English language each having fairly good circulation in the State of Orissa and outside.
(ix) The auction shall be held within four weeks. In case of opposite party No. 5 does not become the highest bidder the money stated to have been deposited by him shall be returned. He shall be paid interest (c) 12% per annum from the date of deposit till date of refund. For the other bidders, except in case of forfeiture, earnest money shall be refunded.
(x) Before the auction is held, the offer for One Time Settlement made be considered and necessary orders be. passed. It would be appropriate if the corporation, IPICOL and SBI take the decision within ten days from today.
9. Undisputedly One Time Settlement proposal was submitted to O. S. F. C. and IPICOL by the C. M. D. of M/s. Lord Food Products in the meeting held on 15-9-1999. A separate proposal was submitted for S.B. I. also. In course of discussion the petitioner No.2 (in O. J. C. No. 13332 of 1999) gave an alternative One Time Settlement proposal to liquidate the dues of the O. S. F. C. and IPICOL on payment of Rs.101 lakhs in addition to the payment made. The proposal was not accepted and thus, the rejection was communicated by the Joint General Manager (Recovery). It is also not in dispute that the petitioner had not deposited or even tendered 25% of the offered amount under the proposal for One Time Settlement. There is also no dispute that pursuant to the direction of this Court in earlier O. J. C. No, 4728 of 1999, a Division Bench of this Court in ordering portion as quoted hereinbefore at paragraph 6(x) while directing fresh auction sale o the unit stipulated that before the auction is held the offer for One Time Settlement made, be considered and necessary order be passed. It was specifically directed therein that it would be appropriate if the Corporation, meaning the O. S. F, C., IPICOL and S. B. I. take a decision within ten days. In clause (vi) of paragraph-G of the order, the Division Bench directed that a Committee consisting of the representatives of the O. S. F. C., IPICOL and S. B. I. will take a final decision so far as acceptance of the tender is concerned,
10. In such view of the matter, the petitioner having admittedly not deposited any amount whatsoever as an initial deposit towards 25% of the amount offered for One Time Settlement, such proposal was not required to be considered by the Board of Directors of the O. S. F. C. and rightly could be rejected at the Branch level. But according to the petitioner's own showing the two O. T. S. proposals were submitted, one for the O. S. F. C. and IPICOL Jointly and the other for the S. B. I. The proposals were placed before the joint meeting of the representatives of the aforesaid three Financial Institutions convened in terms of the direction of this Court in the earlier writ petition on 15-9-1999 by the petitioner No. 2 himself. On consideration, the financial agencies have taken a decision that the proposal was unacceptable and hence rejected. This decision was communicated to the writ petitioner M/s. Lords Food Products, by the Joint General Manager (Recovery) of the O.S.F.C. in his letter dated 1-10-1999. inasmuch as, even after the communication regarding rejection of the O. T. S. proposal, the petitioners, without objecting to such rejection participated in the auction proceeding held by the very same representative in their meeting held on 28-10-1999. In such circumstances, the contention that the proposal was not considered by the appropriate authority, the Board of Directors of O.S.F.C. and as such, the rejection of the proposal was Illegal has to be rejected. The petitioner No. 2, the Chairman-cum-Man-aging Director of M/s. Lords Food Products, having himself submitted the proposal before the Committee for consideration, otherwise also, it is not open to him to turn round and say, it was not the appropriate authority to consider, when the said proposal got rejected. Even otherwise. If the proposal is treated to have be-on .submitted to the State Financial Corporation, then also the offer for One Time Settlement being unaccompanied by initial 25% deposit of the offered amount was liable to be rejected, without consideration of the Board since the Board had fixed such criteria as condition precedent for consideration of the proposal.
11. Sri Misra, learned counsel then contended that as would be evident from the minutes of the meetings of the Board of Directors of O. S. F. C., it having approved the proposals of several defaulting industrial units by waiving the penal interest, compound interest and the future interest, even in some cases principal amount involving huge sums, the petitioners have been discriminated. P.erusal of the proceedings of the 298th meeting of O. S. F. C. Board of Directors show that, it considered 40 proposals for One Time Settlement and in many of those cases, penal interest, compound interest and even future interest have been waived completely or partially without reflecting any tangible reason for such waiver. However, that not being the subject-matter of the present writ petition and being commercial consideration, this Court refrains from expressing any adverse comment on that matter, since even if some units have been granted some exemption, that does not justify that either the petitioner is entitled to be given such relaxation or that it has been discriminated in the matter without sufficient material or justification. However, it may be observed that the State Financial Agencies, like the O. S. F. C.. IPICOL or the Banks, are dealing with public money and, therefore, are the Trustees of such funds and, therefore, are required and expected to deal with such funds, in a fair and transparent manner with the commercial objectivity and not to act on whim or caprice and their action /decision is to be Informed of reasons. A bare perusal of the decisions of the Board does not give an Impression nor does It reflect the reasons, which weighed with it and the exact amount waived for each of the Industrial units. The Board must keep in mind, that it was dealing with a public fund, which otherwise could have been utilised, in advancing loans to eligible and viable industrial units in furtherance of the objective of the Corporation. Be that as it may. relaxation given to certain industrial units would not justify grant of relaxation to the petitioner unit unless, it stands the scrutiny of commercial viability and liquidation of the loan within the schedule.
12. Sri B. D. Misra, learned counsel for the petitioners, then submitted that the authority while conducting auction sale on 28-10-1999 has committed serious Illegalities, as a result of which, the unit holder was deprived of getting the maximum market price and auction was conducted In the manner showing undue favour to opp. party No. 5 at the cost of the unit holder as well as Investors. It Is submitted that as per the sale notice, copies of which are Annexures B/l and C/l, the auction was to be made on as is where Is basis either on outright payment or on deferred payment, but there Is no Justifiable reason as to why bidders offering to purchase on deferred payment basis were kept out of the arena of competition on bidding. It is submitted that the Institute of Management and Information Science had offered Rs. ICrore and 20 lakhs as down payment. But the authorities decided to auction In favour of Opp. party No. 5. The tenders received were opened whereafter the tenderers were advised to revise their offer, for. two rounds of bids only were conducted to negotiate between opp. party No, 5 and Sri Jagannath Educational Trust, the petitioner in O.J.C. No. 13385 of 1999. But no face to face/open bid was permitted. In the first round Sri Jagannath Educational Trust offered Rs. 101 lakhs and opp. party No. 5 offered Rs. 110 lakhs and in the second round Sri Jagannath Educational Trust offered Rs. Ill lakhs, whereas opp. party offered Rs. 115 lakhs. However, no third round of the bid was conducted nor there is any explanation as to why further negotiations were not made. Though the unit-holder wanted to take the unit at the above price he was not listened and, therefore, the conduct of sale on 28-10-1999 was most perfunctory and Illegal. The learned counsel has referred to the decision of the Apex Court In Mahesh Chandra v. Regional Manager, U. P. Financial Corporation; AIR 1993 SC 935 : (1992 All LJ 1202), to contend that every endeavour should have been made to make the unit viable and be put on working condition only If it becomes unworkable; and the sale of a unit was required to be made by public auction. Further, valuation of the unit for purpose of determining adequacy of offer or for determining if bid offered was adequate, should always be Intimated to the unit holder to enable him to file objection, if any. as he is vitally interested in getting the maximum price. In the case, it is also held that if the unit-holder is willing to offer the sale price, as the tenderer, then he should be offered same facility and the unit should be transferred to him. If the unit-holder brings third party with higher offer, it would be tested and may be accepted. It is contended that the principle decided in the aforesaid Apex Court decision has not been followed. In essence, the contention of the learned counsel is that right from the process of sale, which commenced with publication of sale notice under Annexures B/l and C/l during the process of conducting the auction on 28-10-1999, precluding 50% of bidders from participating the bid/competition, noncommunication of the highest offer received, by the Financial Institutions to the unit-holder to match/better the offer or take the unit at the price offered, non-communication of the highest offer received before confirming/accepting the offer of opp. party No. 5, transferring physical possession of the unit, without intimating anything to the petitioner on 3-11-1999, when the entire State of Orissa was paralysed under the spell of super cyclone, selling of the unit at a throw away price when compared with touchstone of Annexures 1 and 15 which are contemporaneous documents holding the field which are without challenge or opposition, leads to an irresistible conclusion that the opp. party-Corporation in an illegal, unjust, unfair manner and contrary to the interest of the unit-holder and investors wanted to show undue favour to opp. party No. 5 and the same having been finalised it is illegal, arbitrary and liable to be set aside.
13. In order to appreciate the contentions raised by the petitioners, it is necessary to reiterate some relevant facts of the case. The petitioners had filed O.J.C. No. 4728 of 1999 challenging the action of the Orissa State Financial Corporation in seizing the unit and conducting the sale thereof under Section 29 of the State Financial Corporations Act, 1951. The petitioner in O.J.C. No. 1332 of 1999 took the specific stand that the total value of the unit was more than crores, but with an ulterior motive, the Corporation proposed to hand over the Unit to the opp. party No. 5 therein, i.e. M/s. Teekey Foams Pvt. Ltd. for a very small amount and the petitioners were allowed (sic) very short time to find out a buyer, who would make a better offer than made by the highest offerer and without waiting, went ahead to finalise the bid. The stand of the opp. party-Corporation was that the petitioners were granted adequate opportunity to liquidate the loan but when there was no positive response, it accepted the offer of opp. party No. 5 therein. The Division Bench of this Court found that opp. party No. 5 therein had made an offer to the tune of Rs. 90 lakhs with a stipulation to make down payment of Rs. 10 lakhs, but later on it was enhanced to Rs. 1 crore and out of which Rs. 20 lakhs as down payment. But M/s. Utkal Udyog gave an offer to pay Rs. 1.01 lakhs with a down payment of Rs. 22 lakhs, which was a better offer than that made by Opp. party No. 5, but at that juncture. Dr. Durga Prasad Sahoo, Chairman-cum-Managing Director of M/s. Lords Food Products (India) Pvt. Ltd., the petitioners herein attended the Disposal Advisory Committee of the Corporation and requested the members to give one month time to arrange finance to match the offer of any person, who may have made a bid. The Court further observed that it was fairly accepted by the learned counsel for the parties that it would be in he interest of all concerned, if the unit fetches the highest price. The Court having found that there has been already an offer by M/s. Utkal Udyog, which was better than that made by M/s. Teekey Foams Pvt. Ltd. (opp. party No. 5 therein} and that the Financial Institution like Orissa State Financial Corporation, which was involved in the transaction agreed that there is likelihood of better offers, held that it would be better that the wide publicity is given, the best available price of the unit in question would be received. The Court directed holding a fresh auction on the terms and conditions as quoted hereinbefore in the earlier paragraphs. The Court also broadly indicated the manner and procedure in which the auction/sale is to be conducted. It appears from the sale notice as well as the procedure adopted that the procedure was duly followed by the O.S.F.C. A Committee of the representatives of the State Financial Corporation, IPICOL and the S.B.I, was constituted for considering the offers received pursuant to the sale notice. As has been discussed earlier, the petitioner filed its proposal for One Time Settlement jointly to the State Financial Corporation as .well as IPICOL and a separate proposal to the S.B.I, and according to the Opp. parties, the proposal was considered but being found unacceptable was rejected. It has been held earlier that even if the proposal for One Time Settlement is taken as one to the State Financial Corporation alone, that having not complied with, the precondition of depositing 25% of the amount offered In the proposal, it could not be considered by the Board of Directors and was rightly rejected. It is clear from the documents produced as Annexures B-l and C/l that the sale notice was published in Oriya daily The Samaj' and the Economic Times,.setting forth therein that the matter shall be considered on 28-10-1999 through D.A.C. in the presence of representatives of IPICOL and S.B.I. It was further indicated therein that offset price is Rs. 1,01 lakhs and the minimum down payment. Rs. 22 lakhs. The loanee M/s. Lords Food Products and the guarantors were requested to remain present at the time of sale to match or better the highest offer. On 28-10-1999, the Committee of representatives of the Financial Institutions met to consider the four tenders received. The participants tenderers purchasers appeared before the Committee and submitted their revised offers. But the petitioner No. 2 .even though attended the meeting, did not submit any offer. The details of the offer received have been given in the counter-affidavit, extracts of which may be quoted hereunder for ready reference :
Sl. No.Name of the offerersOriginal offerOriginal down paymentRevised offerRevised down payment
1.Institute of Mgmt. Information Science107.0025.00120.0028.002.Teekay Foams (P) Ltd.101.0022.00101.0022.003.Sri Jagannath Educational Trust101.00101.00101.00101.004.Sri Tarakanta Mohapatra101.50101.50110.00110.00(Amount quoted in Lacs.)
14. On a perusal of the offers, it appears that the petitioner in O.J.C. No. 13385 of 1999 Sri Jagannath Education Trust gave the revised offer of Rs. 1.01 crores and revised down payment at Rs. 1.01 crores as against which Tarakant Mohapatra (opp. party No. 5) gave the revised offer of Rs. 1.10 crores and down payment of the whole amount of Rs. 1.10 crores. The other two bidder did not agree for the outright purchase and the Committee on consideration did not accept their offer for purchase on instalments. Petitioner No. 2 Dr. Durga Prasad Sahoo attended the D.A.C. and even though was given opportunity to match or better the highest offer of Rs. 1.10 crores, did not either agree to that amount or intended to arrange a better offer. However, by his written representation, copy of which has been filed by the opp. party-O.S.F.C. as Annexure-D, asked the Committee to go for further rounds of negotiation with the two bidders so that the offers may go up.
15. It appears from records that pursuant to such request, another round of negotiation was made, wherein opp. Party No. 5 Sri Tarakanta Mohapatra raised his offer to Rs. 115 lakhs for outright purchase which, undisputedly is the highest offer. The petitioner No. 2 was then called upon to match or better the highest price for outright purchase, but undisputedly he failed to do so. Thereafter, the Committee decided to sell the unit in favour of opp. party No. 5 for consideration of Rs. 115 lakhs on outright purchase basis, Accordingly, the sale letter was issued and possession of the unit after completion of the formalities were handed over on 3-11-1999. In Mahesh Chandra's case (supra) which is a trump card of the petitioner, the Apex Court observed that the Corporation deals with the public money for public benefit and, therefore, the approach has to be public-oriented and helpful to the loanee without loss to the Corporation. The Finance Corporation under the Act is not visualised as a profit earning concern, but an extended arm of a welfare State to harness business potential of the country to benefit the common man. But the Corporation or its Officers or servants as trustee are bound to exercise their power in good faith in selling or dealing with the property of the debtor as an ordinary prudent man would exercise in the management of his own affairs to preserve and protect his own estate. The Apex Court held that the acts of the officer or servant of the Corporation should be reasonable, just and fair which must meet the eye and the offer accepted must be of competitive and every attempt should be made to secure as maximum price as possible to liquidate the liabilities incurred by the industrial concern or the debtor under the Act. Before sale by public auction wide publicity and final endeavour to fetch maximum price should be made. It has already been observed that the Financial Institutions in the present case had taken steps to secure a higher offer for the unit inasmuch as even on the request of the petitioner No. 2, the C.M.D. of M/s. Lord Food Products, went for another round of negotiation/bid in which opp. party No. 5 raised his offer by Rs. 5 lakhs more to the total offer of Rs, one crore and fifteen lakhs. However, in a recent decision of the Apex Court in Haryana Financial Corporation v. M/s. Jagdamba Oil Mills, 2002 (1) Supreme 404 : (AIR 2002 SC 834) the decision in Mahesh Chandra's case has been overruled.
16. In Haryana Financial Corporation's case (supra) the Apex Court held that Section 29 gives a right to the Financial Corporation inter alia to sell the assets of the Industrial concern and realise the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation. This right accrues when the industrial concern under an agreement, makes any default in repayment of any loan or advance or any instalment thereof or in meeting its obligations as envisaged in Section 29 of the Act. Hon'ble Justice A. Pasayat speaking for the Apex Court observed that the guidelines issued in Mahesh Chandra's case place unnecessary restrictions on the exercise of power by the Financial Corporation contained in Section 29 of the Act by requiring the defaulting unit-holder to be associated or consulted at every stage in the sale of the property. A person who has defaulted is hardly ever likely to co-operate in the sale of his assets. It is always accepted that the Corporation will always try and realise maximum sale price for selling the assets by following, the procedure, which is transparent and acceptable after due publicity wherever possible. The Apex Court in paragraph-9 of its judgment further observed that 'fairness cannot be a one-way street'. Corporations borrow money from the Government or other Financial Corporations and are required to pay interest thereon. Where the borrower has no genuine intention to repay and adopts pretexts and plays to avoid payme'nt, he cannot make the grievance that Corporation was not acting fairly, even if requisite procedures have been followed. The Apex Court has taken note of the earlier decision rendered by it in Gem Cap's case and U.P. Financial Corporation case. Applying the principles laid down by the decisions of the Apex Court in the context of factual backdrop of the case as exhaustively dealt with earlier, it is clear that in terms of the direction of the Division Bench in the earlier writ petition filed by the petitioner, the Corporation had published the sale notice in one widely circulated English newspaper i.e. 'Economic Times' and Oriya newspaper 'The Samaj', received offers considered trie same in presence of the Chairman-cum-M.D. of the defaulting unit and even, on request of the petitioner No. 2 held another round of negotiation and ultimately found the highest offer as Rs. 115 lakhs. The said highest offer was intimated to the petitioner, but the petitioner neither could obtain a better offer nor wanted the unit to be revived by matching the said offer. In such circumstances, the action of the Financial Corporation or the Committee constituted pursuant to the direction of the Court in earlier writ petition could not be held to be illegal or improper. The contention of the learned counsel for the petitioner that had there been some more rounds of negotiation the amount of offer would have increased also does not sound to reason since the last two bidders i.e. opp. party No. 5 Tarakanta Mohapatra and the petitioner in O.J.C. No. 13385 of 1998 were given opportunity to raise their offer and while said M/s. SriJagannath Educational Institution refused to raise its offer, opp. party No. 5 Tarakanta Mohapatra raised his offer to Rs. 115 lakhs on outright purchase on down payment of the said amount. The payment having been made, the possession have been handed over. In his counter opp. party No. 5 now has disclosed that, he has already sold the assets so purchased to a third party,
17. The learned counsel for the petitioners then contended that the sale of the unit has not been complete so far and as such, question of further transfer would not be permissible in law. Sri Bijan Ray. learned Senior Advocate for opp. party No. 5 submitted that in absence of any prayer to set aside the sale in favour of opp. party No. 5. no relief is available to the petitioner. This Court directed sale of the unit. The sale was made in favour of the highest bidder whose offer was accepted on 28-10-1999. The sale was completed on 3-11-1999. The O.S.F.C. has also asserted regarding sale and further sale by opp. party No, 5, but the petitioner did not take steps to amend the prayer inasmuch as such a plea raised in the re-Joinder is not available to be considered by the Court. It is submitted that despite disclosure of sale to a third party the petitioner did not take any step to implead such a party Inasmuch as the new plea by way of amendment was rejected by the Court. Sri Ray submitted that by virtue of Section 29 of the State Financial Corporation Act, the deemed owner transferred the unit to opp. party No. 5 and in that event by virtue of the statutory sale opp. party No. 5 became the full and absolute owner on payment of the entire consideration ofRs. 1.15 crore on 3-11-1999 and opp. party No. 5 has transferred the unit to one M/s. Konark Aquatic on 12-11 -1999 with due intimation to the O.S.F.C. The contention of the learned counsel for the petitioner that the sale of the unit in favour of opp. party No. 5 is hot complete in view of Section 54 of the Transfer of Property Act read with Section 17( 1 -b) of the Indian Registration Act cannot be accepted inasmuch as it is of no consequence so far as the petitioner is concerned since, he had neither given his matching offer nor arranged a buyer with a higher offer. Section 29(2) of the State Financial Corporation Act. 1951 reads thus:--
'29. Rights of Financial Corporation in default.-- (1) Where any xxxxxxxx
(2) Any transfer of property made by the Financial Corporation, in exercise of its powers under Sub-section (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.'
In view of the aforesaid provisions of Subsection (2) of Section 29 of the State Financial Corporation Act any transfer made by the State Financial Corporation in exercise of its power under Sub-section (1) of Section 29 the property is to vest on the transferee as if It had been made by the owner of the property. By operation of the statute the property is deemed to have been vested in the transferee opp. party No. 5. The execution of the registration is a formality consequent upon acceptance of the highest offer and the transfer so made and all rights in or to the property transferred vests in the transferee. In any view of the matter since the auction held and knocked down in favour of opp. party No. 5 has been found to be valid, the petitioner's grievance as to the completion of transaction would be of no consequence, since in any event he has no further right in the property inasmuch as even after the disclosure by opp. party No. 5 that the property has been transferred in favour of M/s. Konark Aquatics the said transferee has not been made a party.
18. The claim of the petitioner Sree Jagannath Educational Trust in O.J.C. No. 13385 of 1999 that the settlement of the industrial unit with opp. party No. 5 was Illegal and arbitrary has to be rejected in view of the discussions and the findings recorded in the foregoing paragraphs. In its letter dated 28-10-1999, copy of which Is Annexure B/1 to the counter-affidavit of the O.S.F.C.. the petitioner enhanced his total offer to Rs. 1 Crore 1 lakh and down payment of Rs. 1 Crore 1 Lakh and subsequently the flnal offer was raised to Rs. Ill lakhs. It appears from the letter of the petitioner, Annexure B/l that he had offered Rs. Ill lakhs as its final offer. The endorsement of the petitioner in the aforesaid letter may be quoted hereunder for better appreciation:--
'Outright Rs. 111.00 lac. Final offer.'
Sd/- Illegible.
Chairman,
Shree Jagannath Education Trust.
If the petitioner Sree Jagannath Education Trust had made the outright offer of Rs. 1 Crore and 11 lakhs as his final offer he cannot make a grievance later on that he was not given opportunity to enhance his offer when the endorsement quoted above clearly stipulates that it was the final offer.
In any view of the matter. I do not find any merit in the writ applications, which are accordingly dismissed. But there shall be no orde as to cost.