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TMI Blog2005 (3) TMI 810X X X X Extracts X X X X X X X X Extracts X X X X ..... sparent and is therefore liable to be struck down as being violative of Article 14 of the Constitution of India. 2. The matter was heard and an interim order was passed on 24.3.1995 calling upon the financial Corporation to file counter-affidavit and it was directed that in the meanwhile the auction shall not be finalized without considering the objection of the petitioner. Pursuant to the said interim order, a decision was taken by the respondent financial Corporation on 22.4.1995 in the meeting of a Committee of the Corporation whereby it was resolved that since the Corporation had already entered into a lawful agreement with the respondent No. 3 M/s Dass Cold Storage Ice Factory through Shri K.P. Agrawal, and since the said purchaser had already complied with the terms and conditions and possession has also been handed over to him, there was no ground for the Corporation to resume the proceedings. The Committee also recorded that the offer of the petitioner Shri Subhash Chand (royal was received very late i.e. on 14.3.1995 after the sale was finalized on 13.3.1995 in favour of the respondent No. 3, as such, it decided to reject the offer of the petitioner and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Shri Mahesh Agrawal, Advocate. Since the counsels for the respondent No. 3 thereafter did not appear on the dates fixed, this Court passed an order on 28.9.2004 for putting the respondent No. 3 to notice by publication in the news-paper which order was complied with. Thereafter, on 16.11.2004 Shri Mahesh Agrawal, Advocate, appeared for the respondent No. 3 and he was commanded by this Court to disclose the status of the property as on date. The matter was taken up on 5.1.2005 and after hearing the parties, this Court in order to ascertain the bonafide of the petitioner on the objections raised by the counsel for the U.P. Financial Corporation, passed an order permitting the learned counsel for the petitioner to make a deposit of ₹ 50 Lacs by way of bank Draft payable to the Registrar General of this Court. The order is quoted herein below:- List on 8.2.2005. Sri P.S. Baghel, learned counsel for the U.P. Financial Corporation .states that to show his bonafide the petitioner may be directed to deposit a sum of ₹ 50,00,000/- (fifty Lacs) by way of Bank Draft with the Registrar General of this Court on or before 6.2.2005 to which the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Nos. 5 6 whereafter the judgment was reserved. The aforesaid facts have been narrated to indicate the pains which this Court had to undergo to persuade the conclusion of the hearing in this pending matter. 8. Having heard the learned counsel for the parties and having perused the record as produced by the U.P. Financial Corporation, we proceed to deal with the arguments advanced by them. 9. Shri P.S. Baghel, Advocate for the respondent Nos. 1 and 2, made a request to deal with his primary submission to the effect that the writ petition ought to be dismissed as not maintainable in view of the fact that the petitioner is no-one-else but a person set up by the respondent No. 4 - M/s Seema Cold Storage, the principal borrower, whose writ petition No. 7300 of 1995 had been dismissed on 25.2.1997 and the second writ petition filed by the borrower being writ petition No. 37362 of 1997 had also been dismissed for want of prosecution on 27.1.2004. The contention of Shri Baghel is that the idea of filing the present writ petition in effect is mooted by respondent No. 4, who some how the other, wanted the proceedings under Section 29 to be forestalled. To but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the respondent Nos. 1 and 2. The merits of the claim of the petitioner, therefore, are independent of any such rights as were claimed by the respondent No. 4 in the writ petition filed by it. Even otherwise since the petitioner was not a party to the said proceeding, the aforesaid decisions do not in any way bind the petitioner and the petitioner in our considered opinion has every right to maintain the instant writ petition. The objection of Shri P.S. Baghel, therefore, on this account is rejected. 12. Before advancing to deal with the legal submissions, it would be appropriate to narrate the facts which form the basis of our findings given hereinafter. The facts stated in the pleadings are also supplemented by the facts that we have gathered from the record produced before us by the learned counsel for the respondent -financial Corporation dealing with the entire transaction. 13. The respondent -- financial Corporation had extended a loan to the respondent No. 4. On a failure to discharge the aforesaid debts, proceedings were initiated by the U.P. Financial Corporation to put the assets of the respondent No. 4 to sale by taking recourse to proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny offer as stated in para under reply. The other allegations regarding collusion is also totally false and as such vehemently denied. The averments stated by petitioner in para under reply are vague, misconceived and as such denied. 5. That, in reply to the contents of paragraph Nos. 7 and 8 of the writ petition, it is submitted that the offer of Sri Vinod Kumar Agrawal and Shiv Kumar were received on 8.3.1995 without any pay order amount of earnest money to the answering respondent Corporation, then they were informed by the answering respondent Corporation, that their offer can not be considered because the sale has already been finalized on 2.3.1995 by the Negotiation Committee of the answering respondent Corporation in favour of Respondent No. 3, who made highest offer. After the aforesaid proposed acceptance, the offer was forwarded for finalisation by negotiation Committee of the answering respondent Corporation, the answering respondent Corporation issued a letter on 4.3.1995 in compliance of decisions of Hon'ble Supreme Court, to respondent No. 4, to submit his own offer of the same amount or to bring some buyer of the said amount or higher amount. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m to bring a third person with an offer higher than the offer already accepted by the Corporation subject to the condition that the said third person, should deposit the sale price within 7 days from the date of issuance of the letter. The said notice/ letter dated 4.3.1995 has been appended as Annexure-6 to the writ petition. 17. The file and the records of the Head-Office and the Regional Office have been perused by us. The minutes of 94th negotiation Committee meeting held on 2.3.1995 at the Head Office of the Corporation at Kanpur chaired by Shri Navneet Sahgal, General Manager, as Chairman with 3 other members is extracted herein below: SALE PROPOSAL OF M/S SEEMA ICE COLD STORAGE (P) LTD. AGRA The proposal for sale of above noted unit in favour of Sri K.P. Agarwal C/o M/s K.P. Cold Storage was placed before the Committee. The representative of the purchasing concerned was also present. The matter was also discussed with R.M., Agra on phone and it was reported that notice under Section 29 was issued against borrower. The total outstanding in this case was reported as under:- Term Loan -- UPFC with Intt. ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Managing Director by the Deputy General manager and the aforesaid proposal was countersigned on 6.3.1995 itself by the General manager Shri Navneet Sahgal, IAS, and the Managing Director Shri R.M. Sethi, IAS. During the course of arguments, we had pointed this out to Shri P.S. Baghel, learned counsel for the financial - Corporation, who stated that the approvals are given by putting the signatures which have been done in the instant case. Shri Baghel, however, contended that the aforesaid approval was tentative subject to the letter dated 4.3.1995. Neither the note sheet nor the minutes dated 2.3.1995 indicate any such thing as suggested by Shri Baghel. However, this matter shall be dealt with us later on. 19. From the records it transpires that an agreement to sell was made in writing which is dated 13.3.1995 between the respondent Nos. 1, 2 3. The Stamp Paper for the said agreement to sell was purchased on 10.3.1995. The aforesaid agreement to sell is not a registered document. 20. The petitioner alleges to have tendered his offer on 8.3.1995 and it is further alleged by him that since the Regional Office did not accept the same by hand, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as received on 14.3.1995, there was no question of considering his claim as according to respondents, the offer was received very late . 22. The respondents have further disclosed that they finalized the deal on 13.3.1995. To explain their conduct and the averments made in the counter-affidavit of Shri R.K. Srivastava, an application has been filed on behalf of the respondent Nos. 1 and 2 along with a supplementary-counter-affidavit stating that the earlier counter-affidavit mentions the wrong date of finalization as offer as 2.3.1995. It has been asserted that as matter of fact, the date of finalization is 13.3.1995 and, as such, the date 2.3.1995 as mentioned in the counter-affidavit be deleted and its place the same be read as 13.3.1995. This application was filed after 5 years of the filing of the writ petition on 14.2.2000. No orders were passed on the said application and it was directed to be placed on the record. No prayer has been made in the prayer clause of the said application for substituting the date as suggested in the accompanying Affidavit. 23. After the passing of the interim order on 24.3.1995 in the instant petition, the respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... residual amount has not been remitted to the Bank. The significance of this letter is to be noted while considering the aspect of reasonableness of the actions of the financial Corporation in proceeding to obtain the best possible price as held by the Apex Court in the decisions referred to hereinafter. 26. Shri Baghel has further drawn our attention to the records of the earlier writ petition filed by the principal borrower, the respondent No. 4 herein, wherein he had failed to succeed in getting the proceedings quashed. He further submits that the case has also to be judged on the basis of another fact namely that the principal borrower had been given an opportunity vide letter dated 4.3.1995 and also had the opportunity to avail of the interim order passed in his writ petition on 24.3.1995 quoted herein above, whereby the borrower had been given the liberty to make the entire deposit of sale. The aforesaid facts have been brought to our notice by Shri Baghel to contend that the aforesaid correspondence related to the petitioner and in essence the said writ petition were for the benefit of the petitioner and, therefore, the present writ petition deserves to be dism ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xplanation forthcoming the court can assume that the impugned action was improper (See: M/s. Pannalal Binjraj and Ors. v. Union of India and Ors). Doubtless some of the restrictions placed on State Financial Corporations exercising their powers under Section 29 of the State Financial Corporation Act, as prescribed in Mahesh Chandra v. Regional manager, U.P. Financial Corpn. are no longer in place in view of the subsequent decision in Haryana Financial State corporation v. Jagdamba Oil Mills. However, in over ruling the decision in Mahesh Chandra, this Court has affirmed the view taken in Chairman and Managing Director, SIPCOT, Madras v. Contromix Pvt. Ltd. and said that in the matter of sale under Section 29, the State Financial Corporation must act in accordance with the statute and must not act unfairly i.e. unreasonably. If they do their action can be called into question under Article 226. Reasonableness is to be tested against the dominant consideration to secure the best price for the property to be sold. This can only be achieved when there is a maximum participation in the process of sale and every body has an opportunity of making an offer. Public auction after adequate p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not open to challenge He further submits that in cases where more than one choice is available to the authority, the Authority would be competent to exercise its discretion and which cannot be questioned under Article 226 of the Constitution of India inasmuch as it is not for the Courts to substitute the decision of the financial Corporation, however, more prudent, it may be. The decisions relied upon by Shri Baghel are in the case of U.P. Financial Corporation v. Gem Cap (India) Pvt. Ltd. and Ors. (1993) 2 SCC 299 (paras 11 12) and U.P. Financial Corporation and Ors. v. Naini Oxygen Acetylene Gas ltd. and Anr. : (1995) 2 SCC 754 (para 21). We have examined the aforesaid decisions and we find that both the petitions related to the conduct of the principal borrower who were persistent defaulters. The Apex Court ruled that at the instance of a dishonest borrower, who has no intention to pay, the courts should be loath to sit in appeal and interfere in the decisions of the financial Corporation. 33. However, the case of Mahesh Chandra (supra) was distinguished in the following manner in Gem Cap's case (supra) which is quoted herein below:- 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... error apparent on the face of the record was well set out in Satyanarayan Laxminarayan Hegde v. Mallikarijun Bhavanappa Tirumale. It was held that the alleged error should be self-evident. An error which needs to be established by lengthy and complicated arguments or an error in a long-drawn process of reasoning on points where there may conceivably be two opinions cannot be called a patent error. In a writ of certiorari the High Court may quash the proceedings of the tribunal, authority or court but may not substitute its own findings or directions in lieu of the one given in the proceedings forming the subject matter of certiorari. 36. To appreciate the argument on the question of the decision making process right from the advertisement to the date on which the offer of the petitioner has been received, as alleged by the respondent, has to be carefully noted which is as follows:- 24.2.1995 Advertisement 2.3.1995 Meeting of the negotiation committee at the head Office, Kanpur, accepting the offer of the respondent No. 3 of ₹ 47 Lacs. 4.3.1995 Notice issued by the Corporation to the borrower either to clear all the dues himself or bring a th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt. Ltd. and Ors. (1997) 1 SCC 53 (para 7) which is quoted herein below:- In the circumstances, we affirm the judgment of the Division Bench in writ appeal on the grounds stated above and direct that fresh tenders may be floated in the light of the observations made in this judgment. We reiterate that whatever procedure the Government proposes to follow in accepting the tender must be clearly stated in the tender notice. The consideration of the tenders received and the procedure to be followed in the matter of acceptance of a tender should be transparent, fair and open. While a bona fide error or error of judgment would not certainly matter, any abuse of power for extraneous reasons, it is obvious, would expose the authorities concerned, whether it is the Minister for Excise or the Commissioner of Excise, to appropriate penalties at the hands of the courts, following the law laid down by this Court in Shiv Sagar Tiwari v. Union of India (In re, Capt. Satish Sharma and Sheila Kaul). 39. It is further to be noted that the Apex Court has held that it is imperative to get the goods valued before putting it to sell in the case of Gajraj Jain v. State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld have disclosed the aforesaid terms and conditions accepted by it. The only inference that can be drawn is that the Corporation had already completed its negotiation with the respondent No. 3 and did not want the said fact to be disclosed to a third party for the reasons best known to it. Upon a specific question having been raised by us during the course of argument, Shri Baghel, learned counsel for the Corporation, urged that this was a uniform practice of the financial - Corporation and the secondly in spite of the aforesaid notice which was in conformity with Mahesh Chandra's case the borrower failed to comply with the same and the offer of the petitioner had not been received in time. We find ourselves unable to accept the aforesaid contention of the learned counsel for the financial - Corporation in as much as, if such alleged uniform practice prevents any other intending purchaser to make an offer on the same terms and conditions, then such an approach by the U.P. Financial Corporation, in our opinion, is unreasonable, unfair and non-transparent thereby violative of Article 14 of the Constitution of India. 41. There is no explanation as to what prevente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to sell is admittedly not a registered document. Shri Baghel tried to convince us that in view of the provisions of Section 29(2), no such registration is required. We failed to understand as to under what provision of law is the registration of such an agreement which intends to convey immovable property worth ₹ 47 Lacs is exempted from registration. Admittedly the instrument purports and seeks to convey the property in question on the terms and conditions stated therein. The contention of Shri P.S. Baghel, therefore, on this score has to be rejected. Shri Shashi Nandan, Senior Advocate, who appeared for the respondent No. 3, conceded that it did require registration but at the same time nonregistration thereof will simply render the instrument in admissible in evidence and nothing more. He further submitted that non-registration of the instrument would not invalidate the negotiations already finalized. It is admitted to the parties that no further instrument was executed until the sale-deed was finally executed and registered on 5.7.1996. At the best the only argument that could be advanced would be the plea of defence available under Section 53A of the Transfer of Property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nger to Baroda so that they may be delivered to the appellant in Baroda? Or that the officer concerned would come to Baroda himself and hand the same over to the appellant in Baroda? The only reasonable and proper way of dealing with situation was that the payment would be made by cheques which the- Government would send to the appellant at Baroda by post. According to the course of business usage in general which appears to have been followed in this case, the parties must have intended that the cheques should be sent by post which is the usual and normal agency for transmission of such articles. If that were so, there was imported by necessary implication an implied request by the appellant to send the cheques by post from Delhi thus constituting the Post office its agent for the purposes of receiving those payments. (page 247) 9. Admittedly, there was no express stipulation of the mode of payment of the consideration or that the cheque would be sent by post. However, according to the ordinary course of business usage the only reasonable and proper inference is that the payment of such large amount would be made by cheque issued by the Centr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts sought by the petitioner as late as by an Affidavit dated 30.12.1999. The respondent -- financial Corporation had ample opportunity during the past 9 years to rebut the said document from the post office but no effort appears to have been made in this regard. Shri Baghel, however, from the records pointed out towards the envelope, which is still retained, containing the offer of the petitioner and a perusal thereof clearly indicates that the letter was dispatched on 10.3.1995 but it bears an endorsement on the left hand side at the front of the envelop the digits 199/14.3.1995. The aforesaid endorsement does not bear any initial or stamp of the post office. There is no explanation forthcoming as to who and why the aforesaid endorsement was made. The respondent - financial Corporation through out in the Affidavits have maintained that the offer was received only on 14.3.1995. In our opinion, there is no credible evidence worth any probative value to accept the contention of Shri Baghel made on behalf of the respondent - financial Corporation in that regard. The only inference that can be drawn is that the offer of the petitioner had been received in time and we accordingly hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enior Counsel, on behalf of the petitioner in the case of Huda and Anr. v. Dr. Babeswar Kanhar and Anr. (2005) 1 SCC 191, would be apposite. Paragraph 5 of the said decision is extracted herein below:- 5. What is stipulated in Clause 4 of the letter dated 30.10.2001 is a communication regarding refusal to accept the allotment. This was done on 28.11.2001. Respondent 1 cannot be put to loss for the closure of the office of HUDA on 1.12.2001 and 2.12.2001 and the postal holiday on 30.11.2001. In fact he had no control over these matters. Even the logic of Section 10 of the General Clauses Act, 1897 can be pressed into service. Apart from the said section and various provisions in various other Acts, there is the general principle that a party prevented from doing an act by some' circumstances beyond his control, can do so at the first subsequent opportunity (see Sambasiva Chari v. Ramasami Reddi) The underlying object of the principle is to enable a person to do what he could have done on a holiday, on the next working day. Where, therefore, a period is prescribed for the performance of an act in a court or office, and that period expires on a holiday, then the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r thoughtful consideration to the aforesaid decision of the financial Corporation which has also been placed before us. The Corporation has not dealt with the objections of the petitioner at all in the manner in which it ought to have been done. On the contrary the word late is prefixed by an adverb very . The said word Very is often used to emphasize a noun denoting tine. It means extremely; exceedingly; greatly; and to a great extent. To our mind the use of the aforesaid adverb by the Corporation establishes either a poor understanding of the Language or as in the present case a clear deliberate attempt to define the word late so as to exclude the possibility of even a remote consideration of the offer of the petitioner. We fail to understand as to how an offer, according to the respondents which was received one day late, can be termed to be very late. On the contrary, in our opinion, the decision to sell the property in favour of the respondent No. 3 was taken too early i.e. on 6.3.1995 and in an absolutely unreasonable manner as explained hereinabove. The aforesaid decision of the financial Corporation by rejecting the objection of the petitioner is, therefore, unsustai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequent encumbrancers and ultimately for the mortgagor. (See Rajah Kishendatt Ram v. Rajah Mumtaz Ali Khan.) Section 29(1) contemplates, therefore, a sale for distribution of sale proceeds and not a sale for distribution of property charged with the debt. It also implies that the first charge-holder must act in a manner which protects not only its own interest but also the interest of the subsequent charge-holder and the mortgagor. This in turn implies that the first charge-holder is bound to obtain the best possible price must, in the context, mean the fair market value. 13. In the present case, it is not in dispute that the assets of the flour mill were charged. The first charge was in favour of the Corporation; whereas the second was in favour of Central Bank of India. Under Section 29(1), the Corporation while enforcing the first charge was required to put the assets charged with the debt to sale and apply the sale proceeds in the manner stated in Section 29(4). But before doing so, it is imperative to have the assets proposed to be sold, valued. In breach of Sub-sections (1) and (4) of Section 29, after putting the assets to sale by public auction the Corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 29 of the Act. In the circumstances, we hold that the impugned agreement of sale as well as the transfer of assets in favour of Respondent 4 are in breach of Section 29(1) and Section 29(4) of the 1951 Act. 54. We have gone through the records and as indicated herein above, the letter of the Senior Branch Manager, Bank of Baroda, Main Branch, Agra dated 17.12.2004 confirms our view that the respondent -- financial Corporation has acted in clear violation of the aforesaid proposition of law extracted by us herein above and laid down by the Apex Court. The second charge over the property was that of Bank of Baroda. No effort was made to inform the Bank of Baroda or make payment to it of the proportionate assets. For the aforesaid reason also it was necessary for the Corporation to have taken all due care and precaution in fetching the best possible price. The petitioner had definitely offered a much higher price than the respondent No. 3. The dominant consideration for the Corporation ought to have been, to have accepted the offer of the petitioner of ₹ 59 Lacs which was ₹ 12 Lacs more than that of the respondent No. 3. This would have further secured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endent of contract, a very material ingredient in the question of whether a valid cause of action can be stated. The above principle was applied by this Court in detention matters in Bhut Nath v. State of West Bengal ( (1974) 3 SCR 315 : AIR 1974 SC 806). The action of the financial -- Corporation is also malafide in law in view of the law enunciated herein above by the Apex Court. 57. There is yet another manipulation which can be marginally taken note of. The offer which was made by Shri K.P. Agrawal was on behalf of M/s K.P. Cold Storage and which offer was accepted by the negotiation Committee on 2.3.1995. From the records, it appears that the offer was converted in favour of respondent No. 3 -- M/s Dass Cold Storage which firm did not make any offer within the time prescribed. The person concerned Shri K.P. Agrawal may have been representing both the firms but the offer which was made was by M/s K.P. Cold Storage and (SIC). There was no offer of M/s Dass Cold Storage at all. The transfer and conveyance of the property on 13.3.1995 was on the asking of Shri K.P. Agrawal made in favour of Dass Cold Storage. This issue, however, cannot be sidelined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eged in the Affidavit that some vital and extensive improvement have been made to the Cold Storage Plant by increasing its capacity and other such improvement which has caused the client of Shri Ravi Kiran Jain a fair amount of money. The amount has been disclosed broadly without specifying details in the Affidavit therein. As noted above, Shri Ravi Kiran Jain had made a clear statement that he did not propose to file any counter-affidavit to the writ petition. Shri Jain has pointed out the provisions of Section 51, 52, 53 of the transfer of property Act and has urged that rights of respondent Nos. 5 6 to the property in question which have accrued as a bonafide purchaser for valid consideration cannot be defeated on account of the present pending litigation. He has further urged that purchase made by his client is not hit by Section 52 of the Transfer of Property Act and that even otherwise he was never put to notice about the same. We have examined the contention advanced by Shri Jain and we find it appropriate to refer to a decision of our court in a referred matter reported in While considering the implication of Section 52 read with Section 19(b) of the Specific Relief Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affects the transferee pendente lite and Section 52 of the T.P. Act is not subject to Section 19(b) of the new Specific Relief Act. The conveyance in favour of the subsequent purchaser pending the suit brought by the plaintiff contractor for specific performance of the contract between him and the vendor is taken as if it had never any existence. 62. Applying the aforesaid principles it is evident that the respondent Nos. 5 6 are clearly bound by the aforesaid doctrine and they do not acquire any better right or title in the property than the respondent No. 3. Once the sale finalized and executed in favour of the respondent No. 3 has been found by us to be invalid, the subsequent sale in favour of the respondent No. 5 and others has also to fall through. The respondent Nos. 5 and 6 have not brought on record any document to indicate the terms and conditions on which the sale-deed had been executed in their favour. In these circumstances, this Court is not in a position to grant any protection to them. 63. In view of the findings arrived at herein above, the writ petition consequently succeeds and is allowed and the entire proceedings finalized in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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