1997 (7) TMI 679 - SC - Indian Laws

Summary

Issues Involved:
1. Validity of the seizure and sale of the unit by the Andhra Pradesh State Financial Corporation.
2. Communication of the concession granted by the Corporation.
3. Compliance with procedural requirements for the sale.
4. Conduct of the 1st respondent in relation to the sale.
5. Estoppel and acceptance of the sale by the 1st respondent.

Issue-wise Detailed Analysis:

1. Validity of the Seizure and Sale:
The Corporation sanctioned a term loan of Rs. 10,09,080 to the 1st respondent on 28.11.1979, which remained unpaid by the due date, 13.2.1987. There were multiple defaults in repayment, leading the Corporation to exercise its power under Section 29 of the State Financial Corporations Act and seize the unit on 17.12.1992. Despite several opportunities and rescheduling, the 1st respondent failed to comply with repayment terms. Consequently, the Corporation issued recall-cum-sale notices and eventually sold the unit to M/s. Vasant Organics for Rs. 26 lakhs, which was approved by the Board on 13.5.1995.

2. Communication of the Concession Granted:
The 1st respondent argued that the Corporation did not communicate the concession granted on 27.12.1993, which precluded them from complying with the conditions or bringing another purchaser. However, affidavits filed by the Corporation stated that the decision was communicated to the Managing Director of the 1st respondent, Mr. Vijaya Kumar, on 27.12.1993. The endorsement on the representation dated 27.12.1993 corroborated this, stating, "Discussed with the party. Please accept Rs. 0.30 lakhs as OTP for lifting the seizure subject to party making a further payment of Rs. 0.50 lakhs in March 1994."

3. Compliance with Procedural Requirements:
The Division Bench of the High Court found that there was "no independent" notice at the second stage, which was required as per the ruling in Maharashtra Financial Corporation v. M/s. S. Board Mills. However, the Supreme Court noted that the 1st respondent did not plead or prove that no fresh opportunity was given upon its representation dated 27.12.1993. The Corporation's affidavits and internal evidence from the endorsement indicated that sufficient opportunity was provided.

4. Conduct of the 1st Respondent:
The 1st respondent's conduct, including the dishonoring of multiple cheques and failure to comply with repayment terms, was highlighted. The Corporation's affidavits detailed repeated opportunities given to the 1st respondent, which were not availed. The 1st respondent's Managing Director's actions on 27.12.1993 and subsequent failure to meet the agreed terms further demonstrated non-compliance.

5. Estoppel and Acceptance of the Sale:
The 1st respondent was estopped from questioning the sale due to its conduct. The Vysya Bank's certificate dated 3.7.1995 indicated that the 1st respondent accepted the sale and requested the Corporation to pay the Bank from the balance sale proceeds. The Supreme Court found that the 1st respondent's actions, including the request to the Vysya Bank, precluded it from challenging the sale.

Conclusion:
The Supreme Court allowed the civil appeals, set aside the judgment of the Division Bench, and dismissed the writ petition filed by the 1st respondent with costs. The Court found that the Division Bench erred in its findings, as there was no pleading or evidence to support the 1st respondent's claims regarding the communication of the decision on 27.12.1993. The 1st respondent's conduct and acceptance of the sale further precluded it from challenging the sale. The costs were quantified at Rs. 10,000 to be shared equally by the appellants.