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Issues Involved:
1. Statutory Corporation's Obligations and Powers 2. Alleged Misleading Information and Non-Disbursement of Loan 3. Principle of Promissory Estoppel 4. Maintainability of Writ Petition under Article 226 Issue-wise Detailed Analysis: 1. Statutory Corporation's Obligations and Powers: The appellant is a statutory Corporation established under Section 3 of the State Financial Corporations Act, 1951. The Act empowers the Corporation to provide medium and long-term credit to industrial concerns, including those in the hotel industry. The Corporation operates under a Board of Directors with powers delineated in Chapter III of the Act, including granting loans or advances to industrial concerns, provided they are sufficiently secured. The Corporation also has the authority to impose conditions to protect its interests and ensure the loan is used appropriately. In case of default, the Corporation can take over management or possession of the industrial concern and transfer or realize the mortgaged property. The Act also allows the Corporation to demand immediate repayment under certain conditions, such as false information or the need to protect its interests. 2. Alleged Misleading Information and Non-Disbursement of Loan: The respondent, a company engaged in the hotel industry, applied for a loan of Rs. 30 lakhs, which was sanctioned by the appellant-Corporation. However, after receiving pseudonymous letters alleging that the promoter-director of the respondent was involved in illegal activities, the Corporation decided not to disburse the loan. The Corporation argued that the refusal to refinance by the Industrial Development Bank of India (IDBI) and the misleading information provided by the respondent justified their decision. The Court found this argument untenable, as the Corporation had already considered the possibility of IDBI refusing to refinance and had provided for higher interest rates in such a scenario. Moreover, the Corporation was aware of the allegations against the promoter-director before finalizing the contract and creating an equitable mortgage. 3. Principle of Promissory Estoppel: The Court invoked the principle of promissory estoppel, stating that the appellant-Corporation, after promising to advance a loan, led the respondent to alter its position to its detriment. The respondent had incurred expenses and started construction based on the promise of the loan. The Court held that the Corporation could not arbitrarily refuse to disburse the loan without rescinding the contract or releasing the mortgaged property. The Corporation's actions were not in line with sound business principles and were likely to ruin the respondent's business. 4. Maintainability of Writ Petition under Article 226: The appellant-Corporation argued that the dispute was purely contractual and should be resolved through a suit for breach of contract, not a writ petition under Article 226. The Court disagreed, stating that the Corporation was performing a statutory duty under Section 25 of the Act when it agreed to advance the loan. The relationship between the parties was not purely contractual but also statutory, as evidenced by the Corporation's powers to nominate directors and take over management under Sections 27 and 29 of the Act. The Court held that the writ petition was maintainable as the Corporation's refusal to disburse the loan was arbitrary and unfair, warranting judicial intervention under Article 226. Conclusion: The Court dismissed the appeal, upholding the single judge's order directing the appellant-Corporation to disburse the loan amount to the respondent in accordance with the agreement. The judgment emphasized the statutory obligations of the Corporation, the applicability of promissory estoppel, and the maintainability of the writ petition under Article 226.
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