2012 (10) TMI 295 - SC - Indian Laws

Off-set price of property was not valued before the conduct of auction - Offer afresh the benefit of One-Time Settlement Scheme (OTS) - No opportunity for repayment of loan after auction as per Court s direction - non compliance of State Financial Corporation Act (SFC) - Held that - The procedure laid down under Section 29 of SFC Act has been followed by the Corporations. The independent valuer submitted his report on 17.09.2010 and the off-set price of the unit was fixed after getting it valued by an independent valuer. It was based upon the valuation report that the off-set price of the unit was fixed at ₹ 1,77,45,000/- on 17.09.2010. Sale notice was published in the News Papers on 18.09.2010 and the auction was conducted on 29.09.2010. Thus the High Court has committed an error in holding that off-set price of property was not valued before the conduct of auction and that there was no due publication of auction. Sale notice, it is seen, was published in the Samaj a vernacular paper and also in the New India Express a widely circulated English newspaper on 18.09.2010 and the Corporation had received nine offers and after protracting negotiations with all the bidders, the offer of the appellant was accepted being the highest. The Corporation before putting the appellant in possession again issued a notice dated 21.9.2010 to 1st respondent enquiring whether he would match the offer. 1st Respondent did not avail of that opportunity as well. It is under such circumstances that sale letter dated 1.10.2010 was issued to the appellant with a copy to all the Directors/Promoters/Guarantors of 1st respondent company. The appellant paid the balance consideration of ₹ 5,65,20,000 on 11.10.2010 and the Sale Memo was extended on that date and the property was also delivered. Thus no illegality in the procedure adopted by the Corporation, since 1st respondent had failed to comply with the directions issued by the co-ordinate Bench of the Orissa High Court which gave liberty to the Corporations to proceed in accordance with Section 29 of SFC Act - Section 29 of the State Financial Corporation Act, 1951 - Rights of Financial Corporation in case of default - Respondent-hotel failed to repay loan to Orissa State Financial Corporation (OSFC) repeatedly according to order of High Court - On writ, High Court directed respondent to deposit stipulated amount and on its failure gave liberty to OSFC to take action under Act - Division Bench of High Court had overlooked vital facts as well as binding judgment of a coordinate Bench in writ petition and had wrongly reopened a lis and issued wrong and illegal directions, decision of Division Bench was to be set aside

Summary

Issues Involved:
1. Justification of the Division Bench of the Orissa High Court in directing OSFC and IPICOL to offer the One-Time Settlement Scheme (OTS) afresh to the respondent.
2. Legitimacy of the High Court's order for dispossession of the appellant (auction purchaser) and reinstatement of the respondent.

Detailed Analysis:

Issue 1: Justification of the Division Bench of the Orissa High Court in directing OSFC and IPICOL to offer the OTS afresh to the respondent.

The Supreme Court was called upon to determine whether the Division Bench of the Orissa High Court was justified in directing the Orissa State Financial Corporation (OSFC) and Industrial Promotion and Investment Corporation of Odisha Ltd. (IPICOL) to offer the benefit of the One-Time Settlement Scheme (OTS) afresh to the respondent, M/s Hotel Torrento Limited. The respondent had previously been offered the OTS benefits via communications dated 18.3.2006 and 3.4.2006 but failed to comply with the stipulated terms and conditions.

The respondent had defaulted on the repayment of loans disbursed by OSFC and IPICOL, leading to multiple recall and demand notices. Despite the waiver of substantial amounts by OSFC and IPICOL, the respondent did not comply with the conditions of the OTS schemes introduced in 2006 and 2007. Consequently, both corporations withdrew the OTS offers.

The respondent then filed a writ petition (No. 13376 of 2008) to quash the demand notice and sought consideration under the OTS scheme. The High Court directed the respondent to deposit Rs. 50,00,000/- each with OSFC and IPICOL by 20.6.2010, failing which the corporations were permitted to take action under the State Financial Corporation Act (SFC Act). The respondent did not comply with this order, leading OSFC to issue a loan recall notice and subsequently seize the property under Section 29 of the SFC Act.

The Division Bench of the Orissa High Court, in the impugned judgment, overlooked these facts and the binding judgment of a co-ordinate Bench in writ petition No. 13376 of 2008. The Supreme Court noted that the Division Bench had wrongly reopened a lis that had attained finality due to non-compliance with the earlier directions.

Issue 2: Legitimacy of the High Court's order for dispossession of the appellant (auction purchaser) and reinstatement of the respondent.

The Supreme Court also examined whether the High Court was right in ordering the dispossession of the appellant (auction purchaser) and putting the respondent back in possession. The appellant had emerged as the highest bidder in the public auction conducted by OSFC, and the sale was concluded as per the rules. The appellant paid the entire consideration, and possession of the property was delivered.

The Division Bench of the Orissa High Court quashed the cancellation of the OTS, the sale letter, and the public sale notice, directing OSFC and IPICOL to place a fresh demand with the respondent regarding the OTS amount. The Supreme Court found that the Division Bench had ignored the compliance with Section 29 of the SFC Act and the steps taken by OSFC and IPICOL as permitted by the earlier judgment.

The Supreme Court emphasized that the fairness required of the corporations could not be carried to the extent of disabling them from recovering what was due. The procedure laid down under Section 29 of the SFC Act had been followed, including issuing a recall notice, seizing the property, and conducting a public auction with due publication.

The Supreme Court concluded that the Division Bench of the High Court had committed an error in holding that the offset price of the property was not valued before the auction and that there was no due publication of the auction. The auction was conducted transparently, and the highest bid was accepted after protracted negotiations.

Conclusion:
The Supreme Court allowed the appeals, set aside the judgment of the Division Bench of the Orissa High Court, and upheld the actions taken by OSFC and IPICOL under Section 29 of the SFC Act. The Court found no illegality in the auction process and emphasized that the Division Bench had overlooked vital facts and binding judgments, leading to wrong and illegal directions. There was no order as to costs.