M/S. Tirputi Plywood Product (P) Ltd. and Another Etc. Vs. the Pradeshik Industrial Investment Corporation of Uttar Pradesh Ltd. and Others - Court Judgment

Excerpt:
commercial - surety of loan - section 29 of state financial corporation act,1951 and section 128 of contract act, 1872 - petition filed by guarantor who is director of company to recover loan amount first from principal debtor that is company and then from guarantor - court referred section 128 of contract act and held that liability of surety is co-extensive and proceeding rightly initiated - sufficient time and relief to deposit loan amount in instalments given to petitioner - petitioner did not follow the directions and not entitled to further relief - petition dismissed. - - often the entire amount as promised to be given, is not given in time, as a result of which industrial units fail to fulfill its obligation in purchasing the plants in time and it suffers losses. some time due to non-availability of land, raw materials and inadequte supply of electricity, as well as bureaucratic delays in the award of licences and labour unrest, new industrial units fail in their endeavour to make the unit viable. unscrupulous persons by exerting various pulls and pressures, obtain loan from financial institution like picup, and instead of setting up a viable industrial unit, they squander away the money in the marriages of their kith and kins, building houses for their residence and furnishing it with lavish fittings and fixtures and enjoy the hospitality of five star hotels. village rajepur, post bahradapur, district lakhimpur kheri as well as its guarantors, who stood security for the payment of the loan, which, the said company had obtained from picup. 9212 of 1989 raising several pleas including the plea that the notice was contrary to the terms and conditions of the loan deed as well as hypothecation deed. it was indicated by the petitioner in that writ petition that the delay in deposit of the interest instalments which fell due on 28-2-1989 was bona fide and beyond the control of the petitioner as the exployees of the slate government as well as the state corporation wcrconstrike. 2131 (mb)/1991, praying for the issuance of a writ in the nature of mandamus commanding the opposite parlies not to take recourseunder section 29 of the state financial corporation act, 1951 for taking over the possession of the petitioner unit, and to allow the petitioner to deposit the amount which had already become due by way of easy instalments, in view of the representation of the petitioner dated 2-5-1991 as well as to decide the petitioner's representation. as the company failed to pay the dues, the possassionof the company was laken over by the picup on26-2-1993. 18. in the pending writ petitions, a grievance has also been raised by some of the petitioners that the inventory of the assets of the company was not prepared. 4. it was also prayed that the respondents be directed not to initiate the recovery proceedings against the petitioner, till all the outstanding dues areappropriated or adjusted from the assets of the company, which is the principal borrower, and not to attach the properties of the petitioner as well as to issue directions to the opposite parties to release the bus bearing the registration no. for the purposes of realisation of the dues of the said financial corporation by disposing of the assets of a sick industrial unit and by retaining the possession without the production to go on, the respondents cannot be allowed to saddle the promotors and directors of the company with the liabilities and they cannot be permitted to saddle the liabilities with the petitioner as they, themselves, after taking over the factory failed to sell the unit and realise the dues. 29. it was asserted by the petitioners that the unit was taken over on 26-2-1993 but till now the respondents failed to dispose of the said unit with a view to realise the outstanding dues. ' it was further observed (para 18) :the corporation or its officers or servants, as trustee are bound to exercise the 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. ' 35. before dealing with the question as to whether the term loan and interest can he realised from the petitioner, particularly when the unit is in possession of the corporation, which is neither sold nor released hy the corporation, we have to look into the conduct of the petitioner as well. high court as well as hon'ble supreme court. the effort of the picup to dispose of the unit and thereby, to realise the term loan as well as the interest accrued thereon, was frustated by the petitioners, leaving nooption to the picup except to recover ilsdues from the directors, guarantors and promoters. as well as sections 433. 483 and some other provisions of the companies act contained in chapter-iii. 55. petitioners have grossly abused the process of the court by filing series of cases and writ petitions and even failed to avail the concession given by the court in paying the outstanding amounl in instalments.orders. h. a. raza, j. 1. pradeshik industrial investment corporation of uttar pradesh ltd. (hereinafter referred as picup), has been created and constituted for the development and advancement of industries in the state of uttar pradesh, which in comparison to other states, is still economically and industrially backward.picup gives financial assistance to enterpreneures to set up the industries. often the entire amount as promised to be given, is not given in time, as a result of which industrial units fail to fulfill its obligation in purchasing the plants in time and it suffers losses. some time due to non-availability of land, raw materials and inadequte supply of electricity, as well as bureaucratic delays in the award of licences and labour unrest, new industrial units fail in their endeavour to make the unit viable. unit becomes sick and efforts are made to regenerate the same by giving them further financial assistance through financial inslitutionetc. in such situations, often the courts intervene to adjust equities between the parties.2. but, there is also another side of the story. unscrupulous persons by exerting various pulls and pressures, obtain loan from financial institution like picup, and instead of setting up a viable industrial unit, they squander away the money in the marriages of their kith and kins, building houses for their residence and furnishing it with lavish fittings and fixtures and enjoy the hospitality of five star hotels. they never bother to pay off the loan, which they have taken from the financial institution and when notices purporting to be one undersection 29 of the u.p. financial corporation act, arc issued, they file civif cases or the writ petitions before the high court and often obtain stny order from the court and proceedings are stalled for years. if one case is dismissed, they prefer appeal and when appeal is finally dismissed even from the apex court, they start other innings by filing the writ petitions again and again, to foil the effort of the financial institution to recover the amount. while granting interim order, the courts often forget that if the finance of such financial institution would be obtained out, how genuine persons would recive the financial help and assistance.3. with this prelude, we have to examine the facts of the present case. these writ petitions are an example to show as to how theeffort of picup to recovery the loan it had advanced, has been thwarted by the petitioners by filing civil cases and writ petitions one alter the other. even when the apex court of the country, put up a final seal, the petitioners again made effort by abusing the process of law, before this court to file a writ petition and succeeded in obtaining the interimorders. but, before dealing with the factual matrix as set out in the writ petition, even the court should make an introspection as to how long it will allow such persons to play the game of draught and covert the court as todraught board.4. present writ petitions are filed by managing directors, directors of m/s. tirpati plywood product(p) ltd. village rajepur, post bahradapur, district lakhimpur kheri as well as its guarantors, who stood security for the payment of the loan, which, the said company had obtained from picup. they have assailed the recovery certificates issued against them personally, notices of attachment of their properties sale declaration, sale proclamation etc. they have also prayed for the issuance of a writ in the nature of mandamus commanding the respondents that the loan be recovered from the assets of the company, which is in possession of picup since 1993, after the company was taken over by picup under sec. 29 of the u.p. financial corporation act before initiating any recovery proceedings against the directors, promotors and guarantors for realising the outstanding amount in pursuance of those citation, they may not be arrested.5. some where in the year 1987, m/s. tirpali plywood product pvt. ltd. applied for the grant of loan, to respondent no. 1 for a sum of rs. 77 lacs for setting up plywood factory in village rajepur post bahardarpur, district lakhimpur. according to the said company, the total project cost was about its. 1,10 crores. on august 31, i987, petitioners were allowed to complete format lies in respect of a term of rs. 70 lacs, which was sanctioned by the pigup for the said project. promotors were asked to furnish a collateral security by way of bank guarantee to the extent the private promoters could be held liable if sales tax assessment goes against them. the co-llateral security could also be by way of a mortgage of personal property of the promoters. accordingly, hypothecation deed and agreement deed dated 10-12-1987 and a joint equitable mortgage created by the petitioners in favour picup was executed on the said date.6. in accordance with the termsand conditions of the agreement for the grant of loan after the gestalion period interest was payable in quarterly instalments i.e. on 28th feb. 31st may, and 30th nov. of the year. the interest was payable @ 18% per annum of 3% rebale was available to thepetitioner in case of the payment on or before the specified dates.7. admittedly, inslatment which fell due on 28-2-1989, could not he deposited on or before the said date. the petitioned was required to deposit 2,93,424/66 on which amount of rebate @3% came to r-s. 51,780/82. the petitioner deposited only 2,41,643/84 by deducting 3% rebate. ultimately, amount of rebate was deposited on 28th may, 1989 thereafter, instalments were deposited on 31st may, 1989 31-8-1989 1989 31-8-1989 and 30-11-1989. all these instalments were deposited after deducting the amount of rebate @ 3%.8. picup, took a stand that as in terms of clause vi of the agreement, the petitioner did not pay the instalments on due date, hence the petitioner was not entitled for the rebate and as the full amount was not paid as agreed upon, the petitioner has committed default thereafter, picup issued the petitioner notice under section 29 of the state financial corporation act, on 3-10-1989.9. the notice indicalcd that the petitioner hascommitted default in observance of the term ofdeed of mortgage and a sum rs. 1,56,236762 wasoutstanding against him. the petitioner was calledupqn to pay said amount on or before 27-10-1989at the head office of the corporation by bankdraft. notice further indicated that if the depositwould not be made within the time allowed,picup would, in exercise of the power vested inhim under seclion 29 of the act, take over thephysical possession of the petitioner with effectfrom 28th october, 1989.10. on receipt of that notice, the petitioner filed a writ petition bearing no. 9212 of 1989 raising several pleas including the plea that the notice was contrary to the terms and conditions of the loan deed as well as hypothecation deed. it was indicated by the petitioner in that writ petition that the delay in deposit of the interest instalments which fell due on 28-2-1989 was bona fide and beyond the control of the petitioner as the exployees of the slate government as well as the state corporation wcrconstrike.petitionerstaked a claim for the condonation of delay in paying the said instalment. an interim order was passed inthat writ petition; providing that the possessionof the factory would not be taken over by picupand the picup would not interfere with theworking of the petitioner and petitioner wouldcontinue to remain in possession of the factory.11. during the pendency of the aforesaid writpetition, the petitioner, filed anotherwrit petition,bearing no. 1940 of 1990 on 28-2-1990 whereinmore or less same pleas were raised; that thedelay in deposit of the instalment which fell dueon 28-2-1989 deserved to he condoned. by thedate, that writ petition was filed, first instalmentof the principal amount had also become due.the petitioner asserted that the first instalment ofthe principal amount was not paid as fire brokeout in the petitioner unit.12. petitioner requested the picup authorities to allow the petitioner to pay first half yearly instalment of principal loan amounting to rs. 6 lacs to he paid in six equal monthly instalments of: rs. 1 lac, each but the picup refused and instead a letter was sent on 2-2-1990, insisting upon the petitioner to make the payment of the entire dues so as to avoid coercive steps under section 29 of the act.13. the petitioner, in the said writ petition bearing no. 1940 of 1990, prayed for the issuance of a writ in the nature of certiorari quashing the corporation letter dated 12-2-1990 and for the issuance of a writ in the nature of mandamus commandirig the picup to allow the petitioner to deposit the entire amount of interest instalments due on 28-2-1990 amounting to rs. 2,41,645/84 on the due date and:also to permit the petitioner to deposit first half yearly instalment of principal lan amounting to rs. 6 lacs in six equal monthly instaments, writ petition bearing no. 9212 of 1989 was also dismissed on 25-5-1991. as the interim order was passed in w.p. no. 9212 of 1989, picup could not take the possession of the petitioner-unit, till 26-2-1993.14. after the dismissal of the writ petition bearing no. 9212 of 1989 and 1940 of 1990, on 26th may, 1991, the petitioner filed another writ petition on 6-6-1991, bearing writ petition no. 2131 (mb)/1991, praying for the issuance of a writ in the nature of mandamus commanding the opposite parlies not to take recourseunder section 29 of the state financial corporation act, 1951 for taking over the possession of the petitioner unit, and to allow the petitioner to deposit the amount which had already become due by way of easy instalments, in view of the representation of the petitioner dated 2-5-1991 as well as to decide the petitioner's representation. writ petition was filed without serving the noticeupon the standing counsel of the picup. an endorsement was made in the writ petition that the counsel was not available, hence the copy could not be served. this writ petition came up for consideration before hon'ble the vacation judge and following interim order was passed;'issue notice to the opposite parties. according to the learned counsel for the opposite parties about a sum of rs. 20 lacs isdue against the petitioner and he wants that the amount is paid in instalments. the following direction is issued. the petitioner shall pay a sum of rs. 50,000/- till december, 1991 and thereafter from january, 1992 onward rs. 1 lac till the entire amount is paid up. the petitioner is also directed to pay the amount of regular instalments which will fall due from february, 1992. if the petitioner makes default in payment of any of the instalments, the opposite parties shall beat liberty to recover the disputed amount.' , 15. in the said writ petition, according to picup as averred in the affidavit supporting the vacation of the interim order, that till 31st may, 1991, the petitioner's liability was to the tune of rs. 87.67 lacs which included the principal amount of rs. 70 lacs and rs. 17.67 lacs as interest. although the last instalment of the principal amount was to he paid by 31-8-1991, but as the petitioner had committed default, according to picup, rs. 70 lacs as principal amount, became payable inaccordance with the term of the agreement. it was also submitted that the reschcdulement of the payment, by the court order dated 6-6-1991 was inadequate and it was asserted that the picup cannot be prohibited from exercising its statutory right under section 29 of the ad.16. a division bench of thiscourt in its order dated 20-8-1991 deprecated the effort of the petitioner in filing the successive writ petitions inrespect of almost identical mutter. division bench noted the fact that the petitioners have involved the picup in litigation and by obtaining the interim orders prevented the picup from recovering the amount inaccordance with law. with the aforesaid observation, writ petition bearing no. 2131 (mb)/1991 filed by the petitioner was dismissed withcosts to the opposite party-1, which was quantified as rs. 5000/- and a direction was issued to the office to prepare a decree or formal order within one month and transmit the same ot the learned district judge. luckno where the opposite parly no. i may lake appropriate proceedings to realise the same. interim order dated 6th june, 1991 was also vacated.17. it was averred in the counter - affidavitfiled in writ petition bearing no. 371 (mb)/1996filed by shyam kishore gupta, one of thedirectors of m/s. tripati plywood pvt. ltd. thateven after the dismissal of the aforesaid threewrit petitions, picup waited for almost sixmonths in which the petitioner company wasgiven opportunity to clear their outstanding duesof the respondent-corporation. but when thecompany was unable to pay its dues, noticeunder section 29 of the act was issued, on 23-1-1993. in the said notice another opportunity wasgiven to the said company, to clear off the duesamounting to rs. 8,09,500.00, failing which thephysical possession of the factory will be takenover by the respondent-corporation. as the company failed to pay the dues, the possassionof the company was laken over by the picup on26-2-1993.18. in the pending writ petitions, a grievance has also been raised by some of the petitioners that the inventory of the assets of the company was not prepared. in the counter-affidavit, it was submitted lhat when the officer of the respondent corporation went to altach the factory of the petitioner-company, sri rajan gupta, managing director of the petitioner-company spilt a chemical in the factory premises called formaline used as raw material for preparation of tear gas/ shells, to prevent the officers of the respondent: corporation to enter into the factory. thereafter, with the help of the district authorities, and the police, the respondent-corporation was able toto take over physical possession and control of the petitioner company by the respondent. when the inventory of the assets lying in the factory was prepared. managing director who was present at that time, refused to sign the list of articles prepared by the corporaiion, as a result of which inventory was prepared and signed by all persons present at that time. the documents pertaining to the preparation of inventory, have been annexed with the counter-affidavit.19. even after the dismissal of the three writ petitions, mentioned above, sri rajan gupta, managing director of the said company, filed a regular suit bearing no. 31 of 1993 before the civil judge, lakhimpur kheri and also moved an application for temporary injunction. on 17-3-1993, in the aforesaid suit, ex-parte injunction was granted by the civil judge, kheri, directing the corporaiion to open the lock of the factory in presence of the advocate commissioner who was also authorised to break open the lock with police force, if required. the company was, however required lodcposit a meagre amount of 1-1/2% of the entire outstanding dues.20. being aggrieved against the aforesaid order of injunction, picup preferred first appeal from the order, before this court. f.a.f.o. no. 51 of 1993 was allowed on 27-4-1993, with the direction to the petitioner-company to deposit rs. 10 lacs within a week from the date of passing of the judgment in the appeal and to deposit another rs. 7 lacs within a period of two months. it was further directed that only after 17 lacs would be paid by the company to the picup, the corponion would open the lock of the company and thereafter, the petttioner-company will be allowed to carry on its work. petitioner-company was further directed to pay a sum of rs. 3 lacs every month towards repayment of the outstanding amount due to the respondent-corporation. the first instalment of rs.3 lacs shall be paid by the petitioner-company on the expiry of two months from the opening of the lock as directed in the judgment and shall continue to pay the instalments of rs. 3 lacs every month thereafter. in the event of default in payment of instalment as directed in the judgment, it was also provided that the respondent corporation will be entitled to take necessaryaction as provided under section 29 of the state financial corporaiion act.21. instead of complying with the directions of this court in f.a.f.o. no. 51 of 1993, a review petition bearing no. 2 of 1993 was preferred, which was also dismissed, on 6-5-1993.22. petitioner-company without mentioningthe fact that the review petition was pendingbefore this court, filed a s.l.p. bearing no.941111 of 1993 before hon'ble supreme courtagainst the order passed in f.a.f.o. no. 51 of1993. on 2-7-1993, s.l.p. filed by the petitionerwas dismissed.23. petitioner's effort to stall the recovery of the loan amount, did not stop even after the s.l.p. was dismissed. m/s. tripati plywood pvt. ltd. filed another writ petition bearing no. 3518 (mb)/ 1993 before this court for quashing the auction notice, which ws issued in pursuance of the taking of possession of the factory under section 29 of the state financial corporation act. the said company also prayed for the preparation of an inventory through the commissioner, appointed by the court, of all the goods and' materials which have been taken possession of by the respondent-corporation in exercise of the powers under section 29 of the state financial corporation act, 1951 and to return back all the goods, which have been taken possession of by picup, but, ultimately the writ petition was dismissed on 9-12-1993. two other writ petitions bearing no.2715(mb)/1993 and no.5801 (mb)/ 1993 were also filed by m/s. tripati plywood pvt. ltd., through its director sri rakesh kumar gupta by means of which they assailed the claim of the district industries centre and u.p.s.e.b. against the dues.24. thereafter, sri shyam kishore gupta, one of the directors of the said company filed the present writ petition bearing no. 371 (mb)/1996 for quashing the recovery certificate issued by the picup and the notice dated 27-1-1996 issued by tehsildar, sadar district lakhimpur - kheri. sri shyam kishore gupta has filed this writ petition in his own name arraying m/s. tripali plywood pvt. ltd., as respondent no. 4. it was also prayed that the respondents be directed not to initiate the recovery proceedings against the petitioner, till all the outstanding dues areappropriated or adjusted from the assets of the company, which is the principal borrower, and not to attach the properties of the petitioner as well as to issue directions to the opposite parties to release the bus bearing the registration no. ush 6565, which has been attached by the opposite party no. 3 on 30th january, 1996. they have also prayed that the respondents be commanded not to charge any further interest on the outstanding dues with effect from the date the physical possession of the said company had been taken over under section 29 of the act.25. it is pertinent to mention here that sri shyam kishor gupta is not only the director of the said company, but he is also a guarantor for the payment of loan and is signatory of the hypothecation deed.26. m/s. tirputi plywood product pvt. ltd., itself filed a writ petition bearing no. 656/96 through its managing director sri rajey gupta, praying for a direction to the picup to first dispose of the unit of the petitioner company which is in their possession since 1993 before initiating any recovery proceedings against the directors promoters for recovering the outstanding from them, and to restrain the opposite parlies from making any recovery in pursuance of the cilation notice issued against the petitioner rajey gupta, managing director of the said company.27. similar writ petitions bearing no. 1670(mb)/1996 and 1669(mb)/1996 were filed by sanjay gupta and smt. gayatri devi, respectively, the directors and guarantors of the said company.28. main thrust of the petitioners in the present writ petitions mentioned in the foregoing paragraph, is that once the unit has been taken over under section 29 of the act. for the purposes of realisation of the dues of the said financial corporation by disposing of the assets of a sick industrial unit and by retaining the possession without the production to go on, the respondents cannot be allowed to saddle the promotors and directors of the company with the liabilities and they cannot be permitted to saddle the liabilities with the petitioner as they, themselves, after taking over the factory failed to sell the unit and realise the dues. it was also submitted that as the unit was taken over threeyears before, the respondents cannot be permitted to charge the intereston the existing term loan as it was incumbent upon the respondents first to dispose of the assets of the unit to satisfy the dues against the unit and only thereafter, if any balance remained, it could be recorvered from the direclors. guarantors and promotors.29. it was asserted by the petitioners that the unit was taken over on 26-2-1993 but till now the respondents failed to dispose of the said unit with a view to realise the outstanding dues. it was asserted that the land, and plant of the unit, arc worth of several crores of rupees and the term loan along with the interest could have easily been realised but the respondents, instead of realising the amount from the unil, itself, have been harassing and humiliating the petitioner.30. taking a cue from certain observation ofhon'ble supreme court in mahesh chandra v.regional manager u.p. financial corportion.1992 all lj 1202 : (air 1993 sc 935) it wassubmitted that the object of the state financialgorportions, is to promote industrialisation andthe corporation has to act as a trustee, it's actionmust be fair, honest, just -- and reasonable,wherein it was held (para 16) :--'sub-section (4) of section 29 treated thecorporation to be a trustee of the debtor or personclaiming title through him. it saddles thecorporation or the officer concerned with inbuiltduties, responsibilities and obligations towardsthe debtor in dealing with the property and entailshim to act as a prudent and reasonable manstanding in the shoes of the owner.'it was further observed (para 18) :--'the corporation or its officers or servants, as trustee are bound to exercise the 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. therefore, 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 a 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.31. il was urged that the respondents could have secured maximum price after selling theunit to liquidate the liabilities incurred by the unit, hut instead of doing so. and performing their statutory obligation, they have been issuing recovery certificate against the promoters.32. in that regard, they placed reliance upon the observation of hon'ble supreme court in union bank of india v. munku narayana. air 1487 sc 1078. wherein it was observed:'where the decree in execution is a composite decree personally against the principal debtor and the guarantor and also against the mortgaged property, and a portion of the decreed amount is covered by the mortgage, the decree-holder bank has to proceed against the mortgaged property first and then proceed against the guarantor.'33. in union bank of india (air 1987 sc 1078) (supra). hon'ble supreme court, distinguished the case of bank of bihar ltd. v. damodar prasad (air 1969 sc 297). wherein it was observed:'under section 128 save unprovided in the contract the liability of the surety is co-cxtensive with that of the principal debtor. the surety thus becomes liable to pay the entire amount. his liability is immediate. it is not deferred until the creditor exhausts his remedies against the principal debtor. in the absence of some special equity the surety has no right to restraint an action against him by the creditor on the ground that the principal is solvent or that the creditor, may have relief again st principal in some other proceedings. likewise where the creditor has obtained a decree against the surety and the principal, the surety has no right to restrain execution against him until the creditor has exhausted his remedies against the principal.it was further held (para 6);'it was the duty of the surety to pay the decreetal amount. on such payment he would be subrogatcd to the rights of the creditor under section mo. the security would become useless if rights against the surety could he so easily cut down. the direction in the decree could not he justified under order 20. rule. 11 (1). assuming that apart from order 20, rule 11(1), the court had the inherent power under section 151 civil procedure code to direct postponement of execution of the decree against the surety, the ends of justice did not require such postponement.' 34. learned counsel for the petitioners, placingreliance in govind prasad v. u.p. financial corporation. kanpur. (1990) to all lr 574 : (1990 all lj 580) urged that after taking possession of the unit under section 29 of the state financial corporations act. the respondents cannot proceed against the petitioner, so long as the property is not sold or released. following excerpt was cited in support of the aforesaid contention (para 3):'we think the corporation could not legallyand at any rate ought not in all fairness to proceedagainst the petitioners while keeping the propertymortgaged with them under its control. thecorporation having decided to proceed againstthe borrowers and having taken possession oftheir assets could not turn around and proceedagainst the petitioners without attempt ing to sealthe assets seized from the borrowers. it shouldnot be forgotten that the corporation is aninstrumentality of the state. it must, therefore, utall times act reasonably and fairly. there isnothing to indicate that value of the propertyseized by the corporation is less than the amountremaining the from the borrowers. the impugnedaction against the petitioners is hence plainlyunjust and unfair.it was further held (para 4) :'the upshoet of the foregoing discussion, is that so long as the property in possession of the corporation is not sold or released by the corporation, it would he unfair and unjust for the financial corporation to proceed against the petitioner. the corporation, may therefore, either sell the properties and recover the balance from the petitioners or it may release the property and proceed against the petitioners.'35. before dealing with the question as to whether the term loan and interest can he realised from the petitioner, particularly when the unit is in possession of the corporation, which is neither sold nor released hy the corporation, we have to look into the conduct of the petitioner as well.36. we have already indicated in the body of the judgment that the petitioners have involved the picup in a seriesof litigation before the civil court. high court as well as hon'ble supreme court. undoubtedly, as stated above, the possession of the unit was taken by the authorities of the picup on 26-2-1993 and till now, it has neither been sold nor released.37. the respondents have very categorically blamed the petitioners in creating impediments or hurdles in the way of the picup authorities to dispose of the progeny. no buyer would he willing to purchase a property, which is subject to litigation. we have already narrated the circumstances that when the picup authorities went to take over the unit, the impediment and hurdles were created by the petitioners and it was only due to intervention of the district administration, that the picup authorities could enter into the premises of the unit. when the inventory of the assets were prepared. managing director refused to sign over it and filed writ petition before this court alleging that no inventory was prepared and urged the court to appoint the advocate commissioner to prepare the inventory. it whs averred in the counter-affidavit that the picup made number of efforts after taking over physical possession of m/s. tripali plywood product pvt. ltd., to sell the writ by advertising the same into the national dailies. whenever any party became interested in purchasing the unit after making the local inspection of the factory premises, the prospective purchasers were encountered by the directors of the company, who are local resident of lakhimpur. the threatened the prospective purchaser with the dire consequences in case they opted to purchase the factory, which stood attached under section 29 of the act, by the picup. in consequence of such threats, the purchasers dropped the idea of purchasing such factory and all the efforts made by the picup were foiled.38. it was further submitted in the counter-affidavit that on number of occasions, the corporation had to register the f.i.r. against the activities of the directors of the said company. on 21-9-1993, an f.i.r. was registered against the directors for committing a theft of the assets of m/s. tribunal plyood product pvt. ltd. with the connivance of the security agency, namely vikas security service, lucknow. the f.i.r. has been annexed with the counter-affidavit.39. it was also stated in the counter-affidavit that when the picp was left with no alternative, it opted to invoke personal guarantee of the directors to realise the outstanding amount due against m/s. tripali plywood product pvt. ltd. a registered notice was sent to the directors andguarantors of the said company to pay off the dues. when no response was received from the directors and guarantors of the said company. then the corporation was left with only one alternative to take recourse to invoke the personal guarantee of the directors and accordingly, the recovery certificates were issued.40. we are of the view that since the beginning, there was no intention on the part of the petitioners to clear off the term loan and the interest accrued thereon. even the concession granted by the courts to pay off the outstanding dues in instalments, were not honoured by the petitioners. by filing successive writ petitions, they not ony involved the picup into unnecessary litigation, bul also frightened the prospective purchasers. the effort of the picup to dispose of the unit and thereby, to realise the term loan as well as the interest accrued thereon, was frustated by the petitioners, leaving nooption to the picup except to recover ilsdues from the directors, guarantors and promoters. the petitioners, themselves, are responsible in creating hurdle and impediment in the way of picup authorities from realising the outstanding dues. being the guarantors/the petitioners cannot escape their liability to pay off the dues in view of the bond of guarantee which they, themselves, had willingly executed.41. clause (5) of the said guarantee-bond provides that the guarantors will observe and perform all the terms. conditions and covenants contained in the mortgage' which bear on the company of the principal sum interest or any other money for the lime being due to the corporation insuch manner in which the company is liable ibr the due observance and performance of the said terms, conditions and covenants'.42. clause (6) of the guarantee-bond provides that the guarantee herein contained shall be enforceable against the guarantors, notwithstanding that the securities specified in the mortgage or any of them shall at the lime. when proceedings arc taken against the guarantors, hereunder, be outstanding or unrealised.43. clause (7) stales that the guarantee herein contained shall be enforceable against the guarantors notwithstanding that no action of any kind has been taken by the corporation against the company/borrower and an intimation in writing sent to the company by the corporationthat a default or breach has occurred, shall be treated as final and conclusive proof as to the facts stated therein.44. clause (9) provides that in order to give effect to the guarantee herein contained, the corporation shall be entitled to act, as if the guarantors were the principal debtors to the corporation for all payment and covenants guaranteed by them as afore said to the corporaton.45. clause (16) provides that the guarantors also hereby agree that the liability to repay the amount due to the corporation shall arise on demand being made by the corporation by a registered notice addressed to the guarantors on their addresses herein conferred.46. clause (17) further provides that the guarantors further hereby agree, lhat till such lime as the guarantee is not released by the corporation, the guarantors and the properly of each guarantor jointly and serverally and all moneys that belong to either the guarantors or jointly to the guarantors, shall be available to the corporation for the repayment of all moneys which shall at any time be due from the said company/borrower subject to the limit aforesaid.'47. after signing me aforesaid guarantee bond, by means of which they have accepted their liability jointly, and severally for the repayment of all money', which shall at any time be due to the said company the petitioners cannot resile from the said agreement by raising technical pleas.48. section 128 of the indian contract act, 1872 lays down that the liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract. in view of the aforesaid specific provision, the petitioners are stopped from taking a plea that the picup should first proceed against the properties of m/s. triputi plywood products pvt. ltd. before invoking the guarantee of the guarantors.49. hon'ble supreme court in maharashtra state electricity board, bombay v. official. liquidator. high court, ernakulam. (1982) 3 scc 358 : (a1r 1982 sc 1497) after considering the provisions of sections 128. 134 and 126 of the contract act, observed, that by virlue of section 128 of the contract act, the surety bank's liability is co-extensive with that of the principal debtor i.e. the company. though under section 134 of that act, the bank can be discharged byrelease or discharge, of the principal debtor, but adischarge which the principal debtor may secure by operation of law in bankruptcy or in liquidation proceedings in the case of a company, does not absolve the surely of his liability. it was further indicated; 'that the bank's liability under the guarantee in question was absolute and unconditional and did not depend upon prior proof of any default on the pan of the company. the electricity board was not concerned with what the bank did in order to reimburse itself after making payment of the amount guaranteed by it. it was the responsibility of the bank to deal with the securities held by it in accordance with law.'50. in bihar state electricity board patna v.m/s. green rubber industries, (1990) 1 s cc 731: (air 1990 sc 699), hon'ble supreme court inpara 23 of the report observed (para 21, at p. 705of air);'it is settled law that a person who signs a document which contains contractual terms is normally bound by them even though he has not read them, even though he is ignorant of the precise legal effect. in view of clause (4) having formed one of the stipulations in the contract along with others ilicannol be said to be nudum paclum and the maxim nudum pactum ex quo non oritur actio does not apply. considered by the test of reasonableness, it cannot be said to be unreasonable inasmuch as, the supply of electricity to a. consumer involves incurring of overhead installation expensesby the board which do not vary with the quantity of electrity consumed and the installation has to be continued irrespective of whether the energy is consumed or not until the agreement comes to an end.it was further indicated;'every contract is to be considered with reference to its object and the whole of its terms and accordingly the whole conlext must be considered in endeavouring to colled the intention of the parties, even though the immediate objection of enquiry is the meaning of an isolated clause. this agreement with the stipulation of minimum guaranteed charges cannot be held to be ultra vires on the ground that it is incompatible with the statutory duty.'51. in stale bank of india v. messrs indexport registered, air 1992 sc 1740, hon'ble supremecourt relying upon the observations of bank of bihar ltd. v. damodar prasad, air 1969 sc 297, observed that manku narayana's case air 1987 sc 1078 (supra) was not correctly decided. it was observed:'where the money decree was against all the defendants including the guarantor and a mortgage decree against one of the defendants who had mortgaged the shop with the plaintiff bank, so far as the said shop was concerned and the decree did not put any feller on the right of the decree holder to execute it against any party whether as a money decree or as a mortgage decree, the decree-holder would be entitled to proceed against the guarantor first for the execution of the decree. moreover, it is the right of the decree holder to proceed with it in a way he likes. section 128 of the indian contract act itself provides that the liability of the surety isco-extensive with that of the principal deblor, unless it is otherwise provided by the contract. if on principle a guarantor could be sued without even suing the principal debtor there is no reason, even if the decretal amount is covered by the mortgaged decree, to force the decree holder to proceed against the mortgaged property first and then to proceed against the guarantor. in such a case. when the sadi decree had become final all pleas as'to the rights which the guranlor had had to be laken during trial and not after the decree while execution is being levied'.52. we are definitely of the view lhal the contention of the petitioners that as the principal deblor was m/s. tripati plywood products pvt. ltd., hence outstanding amount be realised first from the principal deblor and thereafter the guaranlors should be proceeded with, if the amount outstanding could not be recovered from the principal deblor. is totally misconceived in view of the law laid down by hon'ble supreme court in the aforesaid cases.53. from the side of the respondents, a preliminary objection was raised about the maintainability of the writ petitions filed on behalf of the directors of the company, in view of the provisions of order 21. rule 90 of the c.p.c. as well as sections 433. 483 and some other provisions of the companies act contained in chapter-iii. taking a hint from the observation of calcutta high couri in shyamlal purohil v. jagannath ray. (1970) 40 com cas 138 : (air1969 cal 424) and purna in vestment ltd. v. bank of india ltd.. 1984 company gases vol. 55 page 737, it was asserted that the share-holder has a right to participate on the distribution of the assets in case of winding up and also a right to dividend declared by the company out of the profits made by the company by the user of the assets. in that conlexl perhaps, he has an interest in the assets of the company, but that kind of interest cannot, be said to be an interest in a particular property in respect fo which asset a share-holder has such an interest that would entitle him to intervene and object to dealing with this property independently of the company as such. il was contended lhat before the dissolution of the company, no share-holder can be said to have any interest in the properties or assets of the company, hence he cannot file a writ petition on behalf of the company without being authorised by the company to file such a case. il was contended that m/s. tripuli plywood products pvt. ltd. has filed the wril petition on behalf of ils managing director, which is not permissible, under law as the company, itself, has a legal identity and can sue or be sued.54. in view of the fact that we have already heard the parties on merit and we are nol inclined to interfere into the action of the picup authorities to realise its outstanding dues from the guarantors through citation issued under u.p. public money (recovery of dues) act read with section 282 of the u.p.z.a. & l. r. rules, hence we desist ourselves from deciding this question.55. petitioners have grossly abused the process of the court by filing series of cases and writ petitions and even failed to avail the concession given by the court in paying the outstanding amounl in instalments. their conduct throughout, has been as such, which disentitles them from any intervention by this court any more. writ petitions are devoid of merit and deserve to be dismissed.56. in view of what has been indicated herein above, wril petitions are dismissed with costs.57. petitions dismissed.

Judgment:
ORDER

S. H. A. Raza, J.

1. Pradeshik Industrial Investment Corporation of Uttar Pradesh Ltd. (hereinafter referred as PICUP), has been created and constituted for the development and advancement of industries in the State of Uttar Pradesh, which in comparison to other States, is still economically and industrially backward.PICUP gives financial assistance to enterpreneures to set up the industries. Often the entire amount as promised to be given, is not given in time, as a result of which industrial units fail to fulfill its obligation in purchasing the plants in time and it suffers losses. Some time due to non-availability of land, raw materials and inadequte supply of electricity, as well as bureaucratic delays in the award of licences and labour unrest, new industrial units fail in their endeavour to make the unit viable. Unit becomes sick and efforts are made to regenerate the same by giving them further financial assistance through financial inslitutionetc. In such situations, often the Courts intervene to adjust equities between the parties.

2. But, there is also another side of the story. Unscrupulous persons by exerting various pulls and pressures, obtain loan from financial institution like PICUP, and instead of setting up a viable industrial unit, they squander away the money in the marriages of their kith and kins, building houses for their residence and furnishing it with lavish fittings and fixtures and enjoy the hospitality of five star hotels. They never bother to pay off the loan, which they have taken from the financial institution and when notices purporting to be one underSection 29 of the U.P. Financial Corporation Act, arc issued, they file civif cases or the writ petitions before the High Court and often obtain stny order from the Court and proceedings are stalled for years. If one case is dismissed, they prefer appeal and when appeal is finally dismissed even from the apex Court, they start other innings by filing the writ petitions again and again, to foil the effort of the financial institution to recover the amount. While granting interim order, the Courts often forget that if the finance of such financial institution would be obtained out, how genuine persons would recive the financial help and assistance.

3. With this prelude, we have to examine the facts of the present case. These writ petitions are an example to show as to how theeffort of PICUP to recovery the loan it had advanced, has been thwarted by the petitioners by filing civil cases and writ petitions one alter the other. Even when the apex Court of the Country, put up a final seal, the petitioners again made effort by abusing the process of law, before this court to file a writ petition and succeeded in obtaining the interimorders. But, before dealing with the factual matrix as set out in the writ petition, even the court should make an introspection as to how long it will allow such persons to play the game of draught and covert the Court as todraught Board.

4. Present writ petitions are filed by Managing Directors, Directors of M/s. Tirpati Plywood Product(P) Ltd. village Rajepur, Post Bahradapur, District Lakhimpur Kheri as well as its guarantors, who stood security for the payment of the loan, which, the said Company had obtained from PICUP. They have assailed the recovery certificates issued against them personally, notices of attachment of their properties sale declaration, sale proclamation etc. They have also prayed for the issuance of a writ in the nature of mandamus commanding the respondents that the loan be recovered from the assets of the Company, which is in possession of PICUP since 1993, after the Company was taken over by PICUP under Sec. 29 of the U.P. Financial Corporation Act before initiating any recovery proceedings against the Directors, Promotors and Guarantors for realising the outstanding amount in pursuance of those citation, they may not be arrested.

5. Some where in the year 1987, M/s. Tirpali Plywood Product Pvt. Ltd. applied for the grant of loan, to respondent No. 1 for a sum of Rs. 77 Lacs for setting up plywood factory in village Rajepur Post Bahardarpur, District Lakhimpur. According to the said Company, the total project cost was about Its. 1,10 crores. On August 31, I987, petitioners were allowed to complete format lies in respect of a term of Rs. 70 Lacs, which was sanctioned by the PIGUP for the said project. Promotors were asked to furnish a collateral security by way of bank guarantee to the extent the private promoters could be held liable if sales tax assessment goes against them. The co-llateral security could also be by way of a mortgage of personal property of the promoters. Accordingly, hypothecation deed and agreement deed dated 10-12-1987 and a joint equitable mortgage created by the petitioners in favour PICUP was executed on the said date.

6. In accordance with the termsand conditions of the agreement for the grant of loan after the gestalion period interest was payable in quarterly instalments i.e. on 28th Feb. 31st May, and 30th Nov. of the year. The interest was payable @ 18% per annum of 3% rebale was available to thepetitioner in case of the payment on or before the specified dates.

7. Admittedly, inslatment which fell due on 28-2-1989, could not he deposited on or before the said date. The petitioned was required to deposit 2,93,424/66 on which amount of rebate @3% came to R-s. 51,780/82. The petitioner deposited only 2,41,643/84 by deducting 3% rebate. Ultimately, amount of rebate was deposited on 28th May, 1989 Thereafter, instalments were deposited on 31st May, 1989 31-8-1989 1989 31-8-1989 and 30-11-1989. All these instalments were deposited after deducting the amount of rebate @ 3%.

8. PICUP, took a stand that as in terms of Clause VI of the agreement, the petitioner did not pay the instalments on due date, hence the petitioner was not entitled for the rebate and as the full amount was not paid as agreed upon, the petitioner has committed default Thereafter, PICUP issued the petitioner notice under Section 29 of the State Financial Corporation Act, on 3-10-1989.

9. The notice indicalcd that the petitioner hascommitted default in observance of the term ofdeed of mortgage and a sum Rs. 1,56,236762 wasoutstanding against him. The petitioner was calledupqn to pay said amount on or before 27-10-1989at the head office of the Corporation by bankdraft. Notice further indicated that if the depositwould not be made within the time allowed,PICUP would, in exercise of the power vested inhim under Seclion 29 of the Act, take over thephysical possession of the petitioner with effectfrom 28th October, 1989.

10. On receipt of that notice, the petitioner filed a writ petition bearing No. 9212 of 1989 raising several pleas including the plea that the notice was contrary to the terms and conditions of the loan deed as well as hypothecation deed. It was indicated by the petitioner in that writ petition that the delay in deposit of the interest instalments which fell due on 28-2-1989 was bona fide and beyond the control of the petitioner as the exployees of the Slate Government as well as the State Corporation wcrconstrike.Petitionerstaked a claim for the condonation of delay in paying the said instalment. An interim order was passed inthat writ petition; providing that the possessionof the factory would not be taken over by PICUPand the PICUP would not interfere with theworking of the petitioner and petitioner wouldcontinue to remain in possession of the factory.

11. During the pendency of the aforesaid writpetition, the petitioner, filed anotherwrit petition,bearing No. 1940 of 1990 on 28-2-1990 whereinmore or less same pleas were raised; that thedelay in deposit of the instalment which fell dueon 28-2-1989 deserved to he condoned. By thedate, that writ petition was filed, first instalmentof the principal amount had also become due.The petitioner asserted that the first instalment ofthe principal amount was not paid as fire brokeout in the petitioner unit.

12. Petitioner requested the PICUP authorities to allow the petitioner to pay first half yearly instalment of principal loan amounting to Rs. 6 Lacs to he paid in six equal monthly instalments of: Rs. 1 Lac, each but the PICUP refused and instead a letter was sent on 2-2-1990, insisting upon the petitioner to make the payment of the entire dues so as to avoid coercive steps under Section 29 of the Act.

13. The petitioner, in the said writ petition bearing No. 1940 of 1990, prayed for the issuance of a writ in the nature of certiorari quashing the Corporation letter dated 12-2-1990 and for the issuance of a writ in the nature of mandamus commandirig the PICUP to allow the petitioner to deposit the entire amount of interest instalments due on 28-2-1990 amounting to Rs. 2,41,645/84 on the due date and:also to permit the petitioner to deposit first half yearly instalment of principal lan amounting to Rs. 6 Lacs in six equal monthly instaments, Writ petition bearing No. 9212 of 1989 was also dismissed on 25-5-1991. As the interim order was passed in W.P. No. 9212 of 1989, PICUP could not take the possession of the petitioner-unit, till 26-2-1993.

14. After the dismissal of the writ petition bearing No. 9212 of 1989 and 1940 of 1990, on 26th May, 1991, the petitioner filed another writ petition on 6-6-1991, bearing writ petition No. 2131 (MB)/1991, praying for the issuance of a writ in the nature of mandamus commanding the opposite parlies not to take recourseunder Section 29 of the State Financial Corporation Act, 1951 for taking over the possession of the petitioner unit, and to allow the petitioner to deposit the amount which had already become due by way of easy instalments, in view of the representation of the petitioner dated 2-5-1991 as well as to decide the petitioner's representation. Writ petition was filed without serving the noticeupon the standing counsel of the PICUP. An endorsement was made in the writ petition that the counsel was not available, hence the copy could not be served. This writ petition came up for consideration before Hon'ble the vacation judge and following interim order was passed;

'Issue notice to the opposite parties.

According to the learned counsel for the opposite parties about a sum of Rs. 20 Lacs isdue against the petitioner and he wants that the amount is paid in instalments. The following direction is issued. The petitioner shall pay a sum of Rs. 50,000/- till December, 1991 and thereafter from January, 1992 onward Rs. 1 Lac till the entire amount is paid up. The petitioner is also directed to pay the amount of regular instalments which will fall due from February, 1992. If the petitioner makes default in payment of any of the instalments, the opposite parties shall beat liberty to recover the disputed amount.' ,

15. In the said writ petition, according to PICUP as averred in the affidavit supporting the vacation of the interim order, that till 31st May, 1991, the petitioner's liability was to the tune of Rs. 87.67 Lacs which included the principal amount of Rs. 70 Lacs and Rs. 17.67 Lacs as interest. Although the last instalment of the principal amount was to he paid by 31-8-1991, but as the petitioner had committed default, according to PICUP, Rs. 70 Lacs as principal amount, became payable inaccordance with the term of the agreement. It was also submitted that the reschcdulement of the payment, by the Court order dated 6-6-1991 was inadequate and it was asserted that the PICUP cannot be prohibited from exercising its statutory right under Section 29 of the Ad.

16. A Division Bench of thisCourt in its order dated 20-8-1991 deprecated the effort of the petitioner in filing the successive writ petitions inrespect of almost identical mutter. Division bench noted the fact that the petitioners have involved the PICUP in litigation and by obtaining the interim orders prevented the PICUP from recovering the amount inaccordance with law. With the aforesaid observation, writ petition bearing No. 2131 (MB)/1991 filed by the petitioner was dismissed withcosts to the opposite party-1, which was quantified as Rs. 5000/- and a direction was issued to the office to prepare a decree or formal order within one month and transmit the same ot the learned District Judge. Luckno where the opposite parly No. I may lake appropriate proceedings to realise the same. Interim order dated 6th June, 1991 was also vacated.

17. It was averred in the counter - affidavitfiled in writ petition bearing No. 371 (MB)/1996filed by Shyam Kishore Gupta, one of theDirectors of M/s. Tripati Plywood Pvt. Ltd. thateven after the dismissal of the aforesaid threewrit petitions, PICUP waited for almost sixmonths in which the petitioner company wasgiven opportunity to clear their outstanding duesof the respondent-Corporation. But when theCompany was unable to pay its dues, noticeunder Section 29 of the Act was issued, on 23-1-1993. In the said notice another opportunity wasgiven to the said Company, to clear off the duesamounting to Rs. 8,09,500.00, failing which thephysical possession of the factory will be takenover by the respondent-Corporation. As the Company failed to pay the dues, the possassionof the Company was laken over by the PICUP on26-2-1993.

18. In the pending writ petitions, a grievance has also been raised by some of the petitioners that the inventory of the assets of the Company was not prepared. In the counter-affidavit, it was submitted lhat when the officer of the respondent Corporation went to altach the factory of the petitioner-company, Sri Rajan Gupta, Managing Director of the petitioner-company spilt a chemical in the factory premises called Formaline used as raw material for preparation of tear gas/ shells, to prevent the officers of the respondent: Corporation to enter into the factory. Thereafter, with the help of the District Authorities, and the Police, the respondent-Corporation was able toto take over physical possession and control of the petitioner Company by the respondent. When the inventory of the assets lying in the factory was prepared. Managing Director who was present at that time, refused to sign the list of Articles prepared by the Corporaiion, as a result of which inventory was prepared and signed by all persons present at that time. The documents pertaining to the preparation of inventory, have been annexed with the counter-affidavit.

19. Even after the dismissal of the three writ petitions, mentioned above, Sri Rajan Gupta, Managing Director of the said Company, filed a regular suit bearing No. 31 of 1993 before the Civil Judge, Lakhimpur Kheri and also moved an application for temporary injunction. On 17-3-1993, in the aforesaid suit, ex-parte injunction was granted by the Civil Judge, Kheri, directing the Corporaiion to open the lock of the factory in presence of the Advocate Commissioner who was also authorised to break open the lock with police force, if required. The Company was, however required lodcposit a meagre amount of 1-1/2% of the entire outstanding dues.

20. Being aggrieved against the aforesaid order of injunction, PICUP preferred First Appeal From the Order, before this Court. F.A.F.O. No. 51 of 1993 was allowed on 27-4-1993, with the direction to the petitioner-Company to deposit Rs. 10 Lacs within a week from the date of passing of the judgment in the appeal and to deposit another Rs. 7 Lacs within a period of two months. It was further directed that only after 17 Lacs would be paid by the Company to the PICUP, the Corponion would open the lock of the Company and thereafter, the petttioner-Company will be allowed to carry on its work. Petitioner-Company was further directed to pay a sum of Rs. 3 Lacs every month towards repayment of the outstanding amount due to the respondent-Corporation. The first instalment of Rs.3 Lacs shall be paid by the petitioner-Company on the expiry of two months from the opening of the lock as directed in the judgment and shall continue to pay the instalments of Rs. 3 Lacs every month thereafter. In the event of default in payment of instalment as directed in the judgment, it was also provided that the respondent Corporation will be entitled to take necessaryaction as provided under Section 29 of the State Financial Corporaiion Act.

21. Instead of complying with the directions of this Court in F.A.F.O. No. 51 of 1993, a Review Petition bearing No. 2 of 1993 was preferred, which was also dismissed, on 6-5-1993.

22. Petitioner-Company without mentioningthe fact that the review petition was pendingbefore this Court, filed a S.L.P. bearing No.941111 of 1993 before Hon'ble Supreme Courtagainst the order passed in F.A.F.O. No. 51 of1993. On 2-7-1993, S.L.P. filed by the petitionerwas dismissed.

23. Petitioner's effort to stall the recovery of the loan amount, did not stop even after the S.L.P. was dismissed. M/s. Tripati Plywood Pvt. Ltd. filed another writ petition bearing No. 3518 (MB)/ 1993 before this Court for quashing the auction notice, which ws issued in pursuance of the taking of possession of the factory under Section 29 of the State Financial Corporation Act. The said Company also prayed for the preparation of an inventory through the Commissioner, appointed by the Court, of all the goods and' materials which have been taken possession of by the respondent-Corporation in exercise of the powers under Section 29 of the State Financial Corporation Act, 1951 and to return back all the goods, which have been taken possession of by PICUP, but, ultimately the writ petition was dismissed on 9-12-1993. Two other writ petitions bearing No.2715(MB)/1993 and No.5801 (MB)/ 1993 were also filed by M/s. Tripati Plywood Pvt. Ltd., through its Director Sri Rakesh Kumar Gupta by means of which they assailed the claim of the District Industries Centre and U.P.S.E.B. against the dues.

24. Thereafter, Sri Shyam Kishore gupta, one of the Directors of the said Company filed the present writ petition bearing No. 371 (MB)/1996 for quashing the recovery certificate issued by the PICUP and the notice dated 27-1-1996 issued by Tehsildar, Sadar District Lakhimpur - Kheri. Sri Shyam Kishore Gupta has filed this writ petition in his own name arraying M/s. Tripali Plywood Pvt. Ltd., as respondent No. 4. It was also prayed that the respondents be directed not to initiate the recovery proceedings against the petitioner, till all the outstanding dues areappropriated or adjusted from the assets of the Company, which is the principal borrower, and not to attach the properties of the petitioner as well as to issue directions to the opposite parties to release the Bus bearing the registration No. USH 6565, which has been attached by the opposite party No. 3 on 30th January, 1996. They have also prayed that the respondents be commanded not to charge any further interest on the outstanding dues with effect from the date the physical possession of the said Company had been taken over under Section 29 of the Act.

25. It is pertinent to mention here that Sri Shyam Kishor Gupta is not only the Director of the said Company, but he is also a guarantor for the payment of loan and is signatory of the hypothecation deed.

26. M/s. Tirputi Plywood Product Pvt. Ltd., itself filed a writ petition bearing No. 656/96 through its Managing Director Sri Rajey Gupta, praying for a direction to the PICUP to first dispose of the unit of the petitioner company which is in their possession since 1993 before initiating any recovery proceedings against the Directors promoters for recovering the outstanding from them, and to restrain the opposite parlies from making any recovery in pursuance of the cilation notice issued against the petitioner Rajey Gupta, Managing Director of the said Company.

27. Similar writ petitions bearing No. 1670(MB)/1996 and 1669(MB)/1996 were filed by Sanjay Gupta and Smt. Gayatri Devi, respectively, the Directors and guarantors of the said Company.

28. Main thrust of the petitioners in the present writ petitions mentioned in the foregoing paragraph, is that once the unit has been taken over under Section 29 of the Act. for the purposes of realisation of the dues of the said Financial Corporation by disposing of the assets of a sick industrial unit and by retaining the possession without the production to go on, the respondents cannot be allowed to saddle the promotors and Directors of the Company with the liabilities and they cannot be permitted to saddle the liabilities with the petitioner as they, themselves, after taking over the factory failed to sell the unit and realise the dues. It was also submitted that as the unit was taken over threeyears before, the respondents cannot be permitted to charge the intereston the existing term loan as it was incumbent upon the respondents first to dispose of the assets of the unit to satisfy the dues against the Unit and only thereafter, if any balance remained, it could be recorvered from the Direclors. Guarantors and Promotors.

29. It was asserted by the petitioners that the unit was taken over on 26-2-1993 but till now the respondents failed to dispose of the said unit with a view to realise the outstanding dues. It was asserted that the land, and plant of the Unit, arc worth of several crores of rupees and the term loan along with the interest could have easily been realised but the respondents, instead of realising the amount from the Unil, itself, have been harassing and humiliating the petitioner.

30. Taking a cue from certain observation ofHon'ble Supreme Court in Mahesh Chandra v.Regional Manager U.P. Financial Corportion.1992 All LJ 1202 : (AIR 1993 SC 935) it wassubmitted that the object of the State FinancialGorportions, is to promote industrialisation andthe Corporation has to act as a trustee, it's actionmust be fair, honest, just -- and reasonable,wherein it was held (Para 16) :--'Sub-section (4) of Section 29 treated theCorporation to be a trustee of the debtor or personclaiming title through him. It Saddles theCorporation or the officer concerned with inbuiltduties, responsibilities and obligations towardsthe debtor in dealing with the property and entailshim to act as a prudent and reasonable manstanding in the shoes of the owner.'

It was further observed (Para 18) :--

'The Corporation or its officers or servants, as trustee are bound to exercise the 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. Therefore, 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 a 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.

31. Il was urged that the respondents could have secured maximum price after selling theunit to liquidate the liabilities incurred by the Unit, hut instead of doing so. and performing their statutory obligation, they have been issuing recovery certificate against the promoters.

32. In that regard, they placed reliance upon the observation of Hon'ble Supreme Court in Union Bank of India v. Munku Narayana. AIR 1487 SC 1078. wherein it was observed:

'Where the decree in execution is a composite decree personally against the principal debtor and the guarantor and also against the mortgaged property, and a portion of the decreed amount is covered by the mortgage, the decree-holder Bank has to proceed against the mortgaged property first and then proceed against the guarantor.'

33. In Union Bank of India (AIR 1987 SC 1078) (supra). Hon'ble Supreme Court, distinguished the case of Bank of Bihar Ltd. v. Damodar Prasad (AIR 1969 SC 297). wherein it was observed:

'Under Section 128 save unprovided in the contract the liability of the surety is co-cxtensive with that of the principal debtor. The surety thus becomes liable to pay the entire amount. His liability is immediate. It is not deferred until the creditor exhausts his remedies against the principal debtor. In the absence of some special equity the surety has no right to restraint an action against him by the creditor on the ground that the principal is solvent or that the creditor, may have relief again st principal in some other proceedings. Likewise where the creditor has obtained a decree against the surety and the principal, the surety has no right to restrain execution against him until the creditor has exhausted his remedies against the principal.

It was further held (Para 6);

'It was the duty of the surety to pay the decreetal amount. On such payment he would be subrogatcd to the rights of the creditor under Section MO. The security would become useless if rights against the surety could he so easily cut down. The direction in the decree could not he justified under Order 20. Rule. 11 (1). Assuming that apart from Order 20, Rule 11(1), the Court had the inherent power under Section 151 Civil Procedure Code to direct postponement of execution of the decree against the surety, the ends of justice did not require such postponement.'

34. Learned counsel for the petitioners, placingreliance in Govind Prasad v. U.P. Financial Corporation. Kanpur. (1990) to All LR 574 : (1990 All LJ 580) urged that after taking possession of the Unit under Section 29 of the State Financial Corporations Act. the respondents cannot proceed against the petitioner, so long as the property is not sold or released. Following excerpt was cited in support of the aforesaid contention (Para 3):

'We think the Corporation could not legallyand at any rate ought not in all fairness to proceedagainst the petitioners while keeping the propertymortgaged with them under its control. TheCorporation having decided to proceed againstthe borrowers and having taken possession oftheir assets could not turn around and proceedagainst the petitioners without attempt ing to sealthe assets seized from the borrowers. It shouldnot be forgotten that the Corporation is aninstrumentality of the State. It must, therefore, utall times act reasonably and fairly. There isnothing to indicate that value of the propertyseized by the Corporation is less than the amountremaining the from the borrowers. The impugnedaction against the petitioners is hence plainlyunjust and unfair.

It was further held (Para 4) :

'The upshoet of the foregoing discussion, is that so long as the property in possession of the Corporation is not sold or released by the Corporation, it would he unfair and unjust for the Financial Corporation to proceed against the petitioner. The Corporation, may therefore, either sell the properties and recover the balance from the petitioners or it may release the property and proceed against the petitioners.'

35. Before dealing with the question as to whether the term loan and interest can he realised from the petitioner, particularly when the Unit is in possession of the Corporation, which is neither sold nor released hy the Corporation, we have to look into the conduct of the petitioner as well.

36. We have already indicated in the body of the Judgment that the petitioners have involved the PICUP in a seriesof litigation before the Civil Court. High Court as well as Hon'ble Supreme Court. Undoubtedly, as stated above, the possession of the Unit was taken by the authorities of the PICUP on 26-2-1993 and till now, it has neither been sold nor released.

37. The respondents have very categorically blamed the petitioners in creating impediments or hurdles in the way of the PICUP authorities to dispose of the progeny. No buyer would he willing to purchase a property, which is subject to litigation. We have already narrated the circumstances that when the PICUP authorities went to take over the Unit, the impediment and hurdles were created by the petitioners and it was only due to intervention of the District Administration, that the PICUP authorities could enter into the premises of the Unit. When the inventory of the assets were prepared. Managing Director refused to sign over it and filed writ petition before this Court alleging that no inventory was prepared and urged the Court to appoint the Advocate Commissioner to prepare the inventory. It WHS averred in the counter-affidavit that the PICUP made number of efforts after taking over physical possession of M/s. Tripali Plywood Product Pvt. Ltd., to sell the writ by advertising the same into the national dailies. Whenever any party became interested in purchasing the unit after making the local inspection of the factory premises, the prospective purchasers were encountered by the Directors of the Company, who are local resident of Lakhimpur. The threatened the prospective purchaser with the dire consequences in case they opted to purchase the factory, which stood attached under Section 29 of the Act, by the PICUP. In consequence of such threats, the purchasers dropped the idea of purchasing such factory and all the efforts made by the PICUP were foiled.

38. It was further submitted in the counter-affidavit that on number of occasions, the Corporation had to register the F.I.R. against the activities of the Directors of the said Company. On 21-9-1993, an F.I.R. was registered against the Directors for committing a theft of the assets of M/s. Tribunal Plyood Product Pvt. Ltd. with the connivance of the security agency, namely Vikas Security Service, Lucknow. The F.I.R. has been annexed with the counter-affidavit.

39. It was also stated in the counter-affidavit that when the PICP was left with no alternative, it opted to invoke personal guarantee of the Directors to realise the outstanding amount due against M/s. Tripali Plywood Product Pvt. Ltd. A registered notice was sent to the Directors andGuarantors of the said Company to pay off the dues. When no response Was received from the Directors and Guarantors of the said Company. then the Corporation was left with only one alternative to take recourse to invoke the personal guarantee of the Directors and accordingly, the recovery certificates were issued.

40. We are of the view that since the beginning, there was no intention on the part of the petitioners to clear off the term loan and the interest accrued thereon. Even the concession granted by the Courts to pay off the outstanding dues in instalments, were not honoured by the petitioners. By filing successive writ petitions, they not ony involved the PICUP into unnecessary litigation, bul also frightened the prospective purchasers. The effort of the PICUP to dispose of the Unit and thereby, to realise the term loan as well as the interest accrued thereon, was frustated by the petitioners, leaving nooption to the PICUP except to recover ilsdues from the Directors, Guarantors and Promoters. The petitioners, themselves, are responsible in creating hurdle and impediment in the way of PICUP authorities from realising the outstanding dues. Being the guarantors/the petitioners cannot escape their liability to pay off the dues in view of the Bond of guarantee which they, themselves, had willingly executed.

41. Clause (5) of the said guarantee-bond provides that the guarantors will observe and perform all the terms. Conditions and covenants contained in the mortgage' which bear on the company of the principal sum interest or any other money for the lime being due to the corporation insuch manner in which the Company is liable ibr the due observance and performance of the said terms, conditions and covenants'.

42. Clause (6) of the guarantee-bond provides that the guarantee herein contained shall be enforceable against the guarantors, notwithstanding that the securities specified in the mortgage or any of them shall at the lime. when proceedings arc taken against the guarantors, hereunder, be outstanding or unrealised.

43. Clause (7) stales that the guarantee herein contained shall be enforceable against the guarantors notwithstanding that no action of any kind has been taken by the Corporation against the Company/borrower and an intimation in writing sent to the company by the Corporationthat a default or breach has occurred, shall be treated as final and conclusive proof as to the facts stated therein.

44. Clause (9) provides that in order to give effect to the guarantee herein contained, the Corporation shall be entitled to act, as if the guarantors were the principal debtors to the corporation for all payment and covenants guaranteed by them as afore said to the Corporaton.

45. Clause (16) provides that the guarantors also hereby agree that the liability to repay the amount due to the Corporation shall arise on demand being made by the Corporation by a registered notice addressed to the guarantors on their addresses herein conferred.

46. Clause (17) further provides that the guarantors further hereby agree, lhat till such lime as the guarantee is not released by the Corporation, the guarantors and the properly of each guarantor jointly and serverally and all moneys that belong to either the guarantors or jointly to the guarantors, shall be available to the Corporation for the repayment of all moneys which shall at any time be due from the said Company/borrower subject to the limit aforesaid.'

47. After signing me aforesaid guarantee bond, by means of which they have accepted their liability jointly, and severally for the repayment of all money', which shall at any time be due to the said Company the petitioners cannot resile from the said agreement by raising technical pleas.

48. Section 128 of the Indian Contract Act, 1872 lays down that the liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract. In view of the aforesaid specific provision, the petitioners are stopped from taking a plea that the PICUP should first proceed against the properties of M/s. Triputi Plywood Products Pvt. Ltd. before invoking the guarantee of the guarantors.

49. Hon'ble Supreme Court in Maharashtra State Electricity Board, Bombay v. Official. Liquidator. High Court, Ernakulam. (1982) 3 SCC 358 : (A1R 1982 SC 1497) after considering the provisions of Sections 128. 134 and 126 of the Contract Act, observed, that by virlue of Section 128 of the Contract Act, the surety bank's liability is co-extensive with that of the principal debtor i.e. the Company. Though under Section 134 of that Act, the Bank can be discharged byrelease or discharge, of the principal debtor, but adischarge which the principal debtor may secure by operation of law in bankruptcy or in liquidation proceedings in the case of a company, does not absolve the surely of his liability. It was further indicated; 'that the Bank's liability under the guarantee in question was absolute and unconditional and did not depend upon prior proof of any default on the pan of the Company. The Electricity Board was not concerned with what the Bank did in order to reimburse itself after making payment of the amount guaranteed by it. It was the responsibility of the Bank to deal with the securities held by it in accordance with law.'

50. In Bihar State Electricity Board Patna v.M/s. Green Rubber Industries, (1990) 1 S CC 731: (AIR 1990 SC 699), Hon'ble Supreme Court inpara 23 of the report observed (Para 21, at p. 705of AIR);

'It is settled law that a person who signs a document which contains contractual terms is normally bound by them even though he has not read them, even though he is ignorant of the precise legal effect. In view of clause (4) having formed one of the stipulations in the contract along with others ilicannol be said to be nudum paclum and the maxim nudum pactum ex quo non oritur actio does not apply. Considered by the test of reasonableness, it cannot be said to be unreasonable inasmuch as, the supply of electricity to a. consumer involves incurring of overhead installation expensesby the Board which do not vary with the quantity of electrity consumed and the installation has to be continued irrespective of whether the energy is consumed or not until the agreement comes to an end.

It was further indicated;

'Every contract is to be considered with reference to its object and the whole of its terms and accordingly the whole conlext must be considered in endeavouring to colled the intention of the parties, even though the immediate objection of enquiry is the meaning of an isolated clause. This agreement with the stipulation of minimum guaranteed charges cannot be held to be ultra vires on the ground that it is incompatible With the statutory duty.'

51. In Stale Bank of India v. Messrs Indexport Registered, AIR 1992 SC 1740, Hon'ble SupremeCourt relying upon the observations of Bank of Bihar Ltd. v. Damodar Prasad, AIR 1969 SC 297, observed that Manku Narayana's case AIR 1987 SC 1078 (supra) was not correctly decided. It was observed:

'Where the money decree was against all the defendants including the guarantor and a mortgage decree against one of the defendants who had mortgaged the shop with the plaintiff bank, so far as the said shop was concerned and the decree did not put any feller on the right of the decree holder to execute it against any party whether as a money decree or as a mortgage decree, the decree-holder would be entitled to proceed against the guarantor first for the execution of the decree. Moreover, it is the right of the decree holder to proceed with it in a way he likes. Section 128 of the Indian Contract Act itself provides that the liability of the surety isco-extensive with that of the principal deblor, Unless it is otherwise provided by the contract. If on principle a guarantor could be sued without even suing the principal debtor there is no reason, even if the decretal amount is covered by the mortgaged decree, to force the decree holder to proceed against the mortgaged property first and then to proceed against the guarantor. In such a case. when the sadi decree had become final all pleas as'to the rights which the guranlor had had to be laken during trial and not after the decree while execution is being levied'.

52. We are definitely of the view lhal the contention of the petitioners that as the principal deblor was M/s. Tripati Plywood Products Pvt. Ltd., hence outstanding amount be realised first from the principal deblor and thereafter the guaranlors should be proceeded with, if the amount outstanding could not be recovered from the principal deblor. is totally misconceived in view of the law laid down by Hon'ble Supreme Court in the aforesaid cases.

53. From the side of the respondents, a preliminary objection was raised about the maintainability of the writ petitions filed on behalf of the Directors of the Company, in view of the provisions of Order 21. Rule 90 of the C.P.C. as well as Sections 433. 483 and some other provisions of the Companies Act contained in Chapter-III. Taking a hint from the observation of Calcutta High Couri in Shyamlal Purohil v. Jagannath Ray. (1970) 40 Com Cas 138 : (AIR1969 Cal 424) and Purna In vestment Ltd. v. Bank of India Ltd.. 1984 Company Gases Vol. 55 page 737, it was asserted that the share-holder has a right to participate on the distribution of the assets in case of winding up and also a right to dividend declared by the company out of the profits made by the Company by the user of the assets. In that conlexl perhaps, he has an interest in the assets of the company, but that kind of interest cannot, be said to be an interest in a particular property in respect fo which asset a share-holder has such an interest that would entitle him to intervene and object to dealing with this property independently of the company as such. Il was contended lhat before the dissolution of the Company, no share-holder can be said to have any interest in the properties or assets of the Company, hence he cannot file a writ petition on behalf of the Company without being authorised by the Company to file such a case. Il was contended that M/s. Tripuli Plywood Products Pvt. Ltd. has filed the wril petition on behalf of ils Managing Director, which is not permissible, under law as the Company, itself, has a legal identity and can sue or be sued.

54. In view of the fact that we have already heard the parties on merit and we are nol inclined to interfere into the action of the PICUP authorities to realise its outstanding dues from the guarantors through citation issued under U.P. Public Money (Recovery of Dues) Act read with Section 282 of the U.P.Z.A. & L. R. Rules, hence we desist ourselves from deciding this question.

55. Petitioners have grossly abused the process of the Court by filing series of cases and writ petitions and even failed to avail the concession given by the Court in paying the outstanding amounl in instalments. Their conduct throughout, has been as such, which disentitles them from any intervention by this Court any more. Writ petitions are devoid of merit and deserve to be dismissed.

56. In view of what has been indicated herein above, wril petitions are dismissed with costs.

57. Petitions dismissed.