ORDER
1. The petitioner-Company has its registered office at Hyderabad. It has a pharmaceuticals manufacturing unit at Sarigam in Gujarat State. For the purpose of establishing the said manufacturing unit, the petitioner obtained a loan to the tune of Rs.149.00 lakhs from the first respondent. Initially, Tor some time, the petitioner alleges, that he paid the instalments due on the above said loan amount to the first respondent regularly and admittedly from 1995, the payments became irregular. It appears that on 26-10-1997, the first respondent took possession of the properties belonging to the petitioner in exercise of the powers under Section 29 of the State Financial Corporations Act, 1951. Subsequently, after some negotiations between the petitioner and the first respondent, on 2-11-1997 the property was handed over to the petitioner-Company.
2. The case of the first respondent is that the petitioner had not honoured the commitments made in his letter dated 4-11-1997 which letter was given during the negotiations referred to above. Therefore, again the first respondent exercised its powers under Section 29 of the State Financial Corporations Act, 1951, and took possession of the manufacturing unit of the petitioner-Company on 12-2-1998.
3. Questioning the decision of the first respondent, the petitioner herein filed Writ Petition, Spl.C.A.No.1134 of 1998 on 17-2-1998 before the Gujarat High Court. It appears, initially on 18-2-1998, an interim order was passed in favour of the petitioner by a learned single Judge of the Gujarat High Court. Aggrieved by the same, the first respondent carried a Letters Patent Appeal before the Division Bench of the Gujarat High Court. The Division Bench stayed the order of the learned single Judge by its order dated 27-2-1998.
4. In the meanwhile on 22-4-1998, the first respondent issued an advertisement inviting tenders for the disposal of the property of the petitioner. By letter dated 24-4-1998, the
petitioner was informed that the assets of the petitioner were put in auction under Section 29 of the State Financial Corporations Act and the petitioner was also informed that the assets were valued at Rs.1,88,80,916/-. It was further informed to the petitioner that if either the petitioner or his nominee wished to purchase the property, they could submit an offer in a scaled envelop on or before 9-5-1998 alongwith necessary Earnest Money Deposit, to which letter, the petitioner responded by his letter dated 2-5-1998 stating that the property in issue was grossly under valued and that the petitioner would like to receive the details of the valuation to verify the same.
5. Subsequently, the petitioner received another letter dated 16-5-1998 from the first respondent which reads as follows:
“Gujarat Industrial Investment Corporation Limited
(A Government of Gujarat Under taking)
GIIC/RR/SM/ASP/1172 May 16, 1998 By Registered A.D.
M/s Pfimax Pharmaceuticals Ltd.,
4-1-1240 King Kothi Road,
Hyderabad-500001.
Sub :–Notice regarding offers received for sale of M/s. Pfimex Pharmaceuticals Ltd.at GIDC, Sarigam District.
Valsad.
We refer to our letter No.GIIC/PBS/ ASP/24498/611, dated 24-4-1998 containing notice inviting offer/s from you and your nominee for purchase of assets situated at Plot No.1608/1609, GIDC Estate Sarigam Tal. Umbergaon District, Valsad, pursuant to action initiated by GIIC under Section 29 of the SFC Act.
We have observed that you or your nominee has not offered any bid as per the advertisement. We hereby inform you that
as per the latest valuation report obtained by GIIC, the assets are valued as under:-
Land
Rs.13,04,100.00
Building
Rs.53,03,161.00
Plant & Machineiy
Rs.1,22,73,655.00
Total
Rs. 1,88,80,916.00
We have received the highest offer of Rs. 176.00 lakhs for purchase of assets and the bidder has intimated to pay 30% of the above amount within 30 days and remaining 70% in 60 days on acceptance of the offer by GIIC. The amount due and outstanding to be recovered against the valuation report received by GIIC the offer is reasonable and deserves to be accepted.
We will proceed to Sell the assets after 15 days of the receipt of this letter by you. In case you or your nominee are willing to offer equivalent or higher offer you or your nominee may do so within 15 days of the receipt of this letter by remitting the amount of offer in full by demand draft drawn on Bank at Ahmedabad in favour of GIIC Ltd.
Thanking you,
Yours faithfully,
For GIIC Ltd.,
Sd/-
AS Parikh
Sr.Manager(R&R)
6. The said letter, according to the petitioner was received on 23-5-1998, to which he replied by his letter dated 4-6-1998 which reads as follows:
“Sir,
This has reference to the Corporation’s letter dated 16th May, 1998, received on 23rd May, 1998.
We, on behalf of our nominee offer an amount of Rs.1,88,80,916.00. On the same terms and conditions as offered by the highest bidder, which as per your letter “1st reasonable and deserves to be accepted.”
This offer of Rs. 1,88,80,916.00 is higher than the amount of Rs. 1,76,00,000.00 offered by your highest bidder for the purchase of the assets situated at Plot No.1608/1609, GIDC Sarigam. Our offer is equivalent to your own valuation of the unit as mentioned in your above dated letter. We request you to confirm your acceptance.”
7. The first respondent rejected the offer made by the petitioner to his letter referred to above, by its letter dated 9-6-1998 which was received by the petitioner on 19-6-1998.
8. In the circumstances, the petitioner filed the present writ petition with a prayer as follows:
“For the reasons enumerated in the accompanying affidavit, the petitioner herein prays that this Honourable Court may be pleased to issue a writ of Mandamus or any other appropriate Writ, Order, or Direction, directing the respondents herein to accept the offer of the nominee of the Petitioner. Sri M. Krishna Prasad, son of Narsaiah Choudary, for a sum of Rs.1,88,80,916/-on condition that he makes 30% of the offer within 30 days and 70% with in 60 days and direct the respondents to put my nominee in possession of the land, building, plot and machinery situated at Plot No.1608/1609, GIDC Estate, Sarigam, Taluq Umbergaon, District Valsad, in the State of Gujarat and pass such other orders as may be deemed fit in the circumstances of the case.”
The respondents filed a counter-affidavit dated 3-8-1998, for which a reply-affidavit dated 4-8-1998 was filed by the petitioner.
9. The respondents raised two preliminary objections in their counter-affidavit:
(1) that this Court lacks necessary territorial jurisdiction under Article 226 of the Constitution of India, to deal with the issue involved in the writ petition, as according to the respondents, no part of the cause of action arose within the territories in relation to which this Court exercises its jurisdiction;
(2) that the writ petitioner having approached the High Court of Gujarat by way of petition under Article 226 of the Constitution of India, cannot be permitted to approach this Court for a relief which is substantially the same as the relief that had been prayed from the Gujarat High Court.
10. Elaborating his first submission, the learned Counsel for the respondents submitted that having regard to the facts of the case, the entire cause of action arose in the State of Gujarat, as the petitioner’s manufacturing unit is situated in Gujarat State; the respondents’ offices are located in Gujarat; the loan-the default in payment of which resulted in the present litigation was sanctioned and disbursed in Gujarat; the action of the respondents under Section 29 of the State Financial Corporations Act, 1951, was taken in Gujarat; the mere fact that the decisions of the respondents to take various steps contemplated under Section 29 of the State Financial Corporations Act, 1951, were addressed and communicated to the petitioner whose office is situated in Hyderabad and received by the petitioner at Hyderabad does not necessarily mean that the cause of action partly arose in Hyderabad or within the territories over which the Writ of this Court runs.
11. The learned Counsel for the petitioner strongly relied, in support of his submissions
that the mere fact of the service of the notices in Hyderabad is not sufficient to ‘constitute’ part of the cause of action contemplated under Article 226 of the Constitution of India, on a judgment of the Supreme Court reported in State of Rajasthan v. Ms Swaika Properties, . The facts of the case are that the State of Rajasthan initiated proceedings for the acquisition of certain lands under the Rajasthan Urban Improvement Act, 1959. The owners of one of the pieces of the said land were residents of Calcutta. In accordance with the procedure contemplated under the said Act, initially a notice under Section 52(2) of the Act, was served on the owners calling upon them to submit their objections, if any, for the said proposal of acquisition. In response to the said notice, the owner of the land appeared before the authorities in Jaipur, submitted his objections. The authority considered the objections and came to the conclusion that the objections arc not tenable, therefore it issued a final notification under Section 52(1) in the Gazette of Rajasthan. By virtue of which notification, the property was vested in the State Government free from all encumbrances. Questioning the said final notification under Section 52(1) of the Act, a writ petition was filed in the Calcutta High Court. The Calcutta High Court entertained the writ petition, passed ex parte interim orders. The matter was carried in appeal to the Supreme Court. The Supreme Court while dealing with the case, at para 7 of its judgment held:
“7. Upon these facts, we are satisfied that the cause of action neither wholly nor in part arose within the territorial limits of the Calcutta High Court and therefore the learned single Judge had no jurisdiction to issue a rule nisi on the petition filed by the respondents under Article 226 of the Constitution or to make the ad-interim ex parte prohibitory order restraining the appellants from taking any steps to take possession of the land acquired. Under sub-section (5) of Section 52 of the Act the appellants were entitled to require the
respondents to surrender or deliver possession of the lands acquired forthwith and upon their failure to do so, take immediate steps to secure such possession under sub-section (6) thereof.”
The reason given by Their Lordships for such conclusion is further contained in para 8:
“8. The expression ’cause of action’ is tersely defined in Mulla’s Code of Civil Procedure;
“The ’cause of action’ means every fact which, if traversed, it would be necessary for the plaintiff to prove in order to support his right to a judgment of the Court.”
In other words, it is a bundle of facts which taken with the law applicable to them gives the plaintiff a right to relief against the defendant. The mere service of notice under Section 52(2) of the Act on the respondents at their registered office at 18-B, Brabourne Road, Calcutta i.e. within the territorial limits of the State of West Bengal, could not give rise to a cause of action within the territory unless the service of such notice was an integral part of the cause of action. The entire cause of action culminating in the acquisition of the land under Section 52(1) of the Act arose within the State of Rajasthan i.e. within the territorial jurisdiction of the Rajasthan High Court at the Jaipur Bench. The answer to the question whether service of notice is an integral part of the cause of action within the meaning of Article 226(2) of the Constitution must depend upon the nature of the impugned order giving rise to a cause of action. The notification dated February 8, 1984 issued by the State Government under Section 52(1) of the Act became effective the moment it was published in the official Gazette as thereupon the notified land became vested in the State Government free from all encumbrances. It was not necessary for the respondents to plead the service of notice on them by the Special Officer,
Town Planning Department, Jaipur under Section 52(2) for the grant of an appropriate writ, direction or order under Article 226 of the Constitution for quashing the notification issued by the State Government under Section 52(1) of the Act. If the respondents felt aggrieved by the acquisition of their lands situate at Jaipur and wanted to challenge the validity of the notification issued by the State Government of Rajasthan under Section 52(1) of the Act by a petition under Article 226 of the Constitution, the remedy of the respondents for the grant of such relief had to be sought by filing such a petition before the Rajasthan High Court, Jaipur Bench, where the cause of action wholly or in* part arose.”
From the above two paragraphs, it can be seen that Their Lordships never laid down any absolute principle in the said judgment that the service of notice in a given case dees not form an integral part of the cause of action. On the other hand, Their Lordships opined that whether in a given case the service of notice is an integral part of the cause of action within the meaning of Article 226(2) of the Constitution depends on the nature of the impugned order action.
12. On the other hand, the learned Counsel for the writ petitioner relied on a judgment of this Court reported in M/s. C.R. Engineering & Constructions (P) Ltd v. Chief Engineer PWD, 1991 (1) An WR263, wherein a Company belonging to Andhra Pradesh participated in certain tender proceedings of the Maharashtra Government and became the successful tenderer, however, subsequently, the said Company could not fulfil one of the conditions i.e., submission of performance security as required under UK tender conditions in time. Therefore, the authorities of the Maharashtra Government forfeited the earnest money deposit and notification of the award of the contract was cancelled. Questioning the same, a writ petition was filed in this Court.
13. While coming to the conclusion that a writ petition is maintainable in this Court, the learned Judge held as follows:
“9. All though it is doubtful whether the order of acceptance dated 21-3-1990 was received at the New Delhi address or at Visakhapatnam address of the petitioner-Company, there is little doubt that the letter dated 21-5-1990, by which the earnest money deposit in the form of bank guarantee for Rs.5,38,000/- was forfeited and the contract cancelled was received at the Visakhapatnam office of the petitioner-Company. The consequence of the forfeiture and cancellation fell in Visakhapatnam, a part of the State of Andhra Pradesh and therefore, this Court has jurisdiction to entertain the writ petition since part of the cause of action has arisen in this State.”
It can be seen from the above, ultimately it all depends on the facts of the case and what is required by this Court in entertaining the writ petition is to see whether some part of the cause of action arises within the jurisdiction of this Court. In the present case, the case of the writ petitioner is that notwithstanding the fact that a substantial portion of the cause of action, as contended by the learned Counsel for the respondents arose in the State of Gujarat, some portion of the cause of action which led to the filing of the present writ petition did arise in the State of Andhra Pradcsh in view of the fact that the communication of the respondents dated 16-5-1998 and 9-6-1998 were addressed to the petitioner’s office situated in Hyderabad and the consequences of the decision taken by the respondents in those letters would be felt at Hyderabad, in the scnce, the profit or loss arising out of such decisions of the respondents would be felt at Hyderabad.
14. The expression ’cause of action’ is judicially expounded as already noticed in State of Rajasthan v. M/s Swaika Properties (supra) and other judgments.
“It is a bundle of facts which taken with the law applicable to them gives the plaintiff a right to relief against the defendant.”
Therefore, it appears that what constitutes to cause of action must necessarily depend upon the relief that is claimed in a given case. The relief claimed in the present case is a direction to the respondents to accept the offer of the nominee of the petitioner and put him in possession of the property in dispute. So, the bundle of the facts and the relevant law are: that the petitioner borrowed money from the respondents and committed default in repayment of the same, that the respondents in exercise of its powers under Section 29 of the State Financial Corporations Act, 1951 took possession of the properties of the petitioner and brought them to sale, that while conducting the sale under Section 29 of the State Financial Corporations Act, 1951, the respondents are under a legal obligation to follow certain guidelines laid down by the Supreme Court reported in Mahesh Chandra v. Regional Manager, VPFC, , one of those guidelines is that if the unit holder is willing to offer the sale price offered by the successful tenderer, the unit-holder shall be given the option to purchase the unit on the same terms and conditions on which it was offered by the highest bidder, that in compliance with the said legal requirement, the first respondent made an offer to the petitioner by its registered letter dated 16-5-1998 addressed to the petitioner herein at their registered office in King Kothi Road, Hyderabad and the same was received by the petitioner at Hyderabad, in response to the said offer, the petitioner informed the respondents that the petitioner’s nominee is willing to purchase the unit at a price higher than the one fetched by the auction (vide letter dated 4-6-1998) that the said proposal was rejected and communicated by registered letter dated 9-6-1998 by the respondents to the petitioner which was addressed and received at the registered office of the petitioner at Hyderabad.
15. Whatever be the concerned Court to obtain a relief as claimed in the present writ petition, each and every one of the facts mentioned above should be pleaded and established. The fact that the respondents made an offer by their letter dated 16-5-1998 and rejected the consequential suggestion made by the petitioner by their letter dated 9-6-1998 are two crucial facts in the entire bundle. The offer by the letter dated 16-5-1998 was addressed and communicated to the petitioner’s office at Hyderabad.
16. The Division Bench of the Madras High Court in its decision reported in Ahmad Bux v. Fazal Karim, AIR 1940 Mad. 49, held that the posting of an offer from a particular place cannot be regarded as part of the cause of action. According to the Division Bench, the offer is made at the place where it is received and if it is made by post or telegram, the place of despatch is not material and similarly in the case of rejection of an offer. The notice of rejection in either of the cases must be taken to have be given the place where the letter is received.
17. In the circumstances the first preliminary objection must be held against the respondents and this Court has the necessary jurisdiction to entertain the present writ petition, as part of the cause of action as explained above arises within the territories over which this Court exercises its jurisdiction.
18. The next preliminary objection raised by the respondents is that the petitioner having already approached the Gujarat High Court by way of a writ petition for a relief, which according to the respondents, is substantially the same. The petitioner is debarred from approaching this Court by way of this present writ petition in view of the provisions under Order 2 Rule 2 of the Code of Civil Procedure or on jurisprudential principle underlying in the said provision.
19. As already noticed, the petitioner here in approached the Gujarat High Court by way
of Special CA No. 1134 of 1998 on 7-2-1998. The prayer in the said case is as follows:
“14. The petitioners, therefore, pray that this Hon’ble Court be pleased-
(a) To issue a writ of mandamus and or direction quashing and setting aside the action on the part of the respondents in taking over possession of the factories of the petitioner No.1 Company situated at Plot No.1608/1609, GIDC Estate Sarigam, & Plot No. A/21, M.P. Shah Udyognagar, Jamnagar, as illegal, arbitrary, null and void, and to direct the respondents, their officers, agents, servants etc., to permit the petitioner Company to continue its manufacturing activity at its factories situated at Plot No.1608/1609, GIDC Estate, Sarigam and at Plot No.A/21, M.P. Shah Udyognagar, Jamnagar as if the impugned action has not been taken.
(b) To restrain the respondents, their officers, agents, etc. from proceeding ahead with the action under Section 29 of the State Financial Corporation Act and direct them not to dispose of the property of the petitioner Company including petitioner’s factories situated at 1608/1609, GIDC Estate Sarigam and at Plot No.A/21, M.P. Shah Udyognagar, Jamnagar by way of sale or any other manner by conducting action etc.
(c) Pending admission, final hearing and disposal of this petition to direct the respondents, their officers, agents, etc. to hand over possession of the petitioner’s factories situated at 1608/ 1609, GIDC Estate, Sarigam and at Plot No.A/21, M.P. Shah Udyognagar, Jamnagar to the petitioner Company and to permit the petitioner Company to continue with the manufacturing activity at the aforesaid factory premises.
(d) Pending admission, final hearing and disposal of this petition to restrain the
respondents, their officers, agents, etc. from transferring the properties belonging to the petitioner Company including petitioner’s factories situated at 1608/1609, GIDC Estate, Sarigam and at Plot No.A/21, M.P. Shah Udyognagar, Jamnagar in any manner whatsoever to any third person.
(e) To pass any other and further orders as may be deemed fit and proper.
(f) To provide for the costs of this petition.
20. An examination of the above case filed in the Gujarat High Court discloses that the cause of action for the said case arose at an earlier point of time from the same transaction which gave rise to the cause of action in the present writ petition.
21. The Supreme Court in Gurbux Singh v. Bhooralal, , held as follows:
“…..
(6) In order that a plea of a bar under Order 2 Rule 2(3), Civil Procedure Code should succeed the defendant who raises the plea must take out (1) that the second suit was in respect of the same cause of action as that on which the previous suit was based; (2) that in respect of that cause of action the plaintiff was entitled to more than one relief; (3) that being thus entitled to more than one relief the plaintiff, without leave obtained from the Court omitted to sue for the relief for which the second suit had been filed. From this analysis it would be seen that the defendant would have to establish primarily and to start with, the precise cause of action upon which the previous suit was filed, for unless there is identity between the cause of action on which the earlier suit was filed and that on which the claim in the later suit is based there would be no scope for the application of the bar.No doubt, a relief which is sought in a plaint could ordinarily be traceable to a particular cause of action but this might,
by no means, be the universal rule. As the plea is a technical bar it has to be established satisfactorily and cannot be presumed merely on basis of inferential reasoning.”
22. It was held in Payana Reena Saminathan v. Pana Lana Palaniappa, 41 Indian Appeals 142 that the same transaction could give rise two different cause of action, when a suit is based on the first cause of action is dismissed, a second suit on the basis of the other cause of action was, held, maintainable.
23. Section 29 of the State Financial Corporations Act reads as follows:
“29. Rights of Financial Corporation in case of default :–(1) Where any industrial concern, which is under a liability to the Financial Corporation under an agreement, makes any default in repayment of any loan or advance or any instalment thereof (or in meeting its obligations in relation to any guarantee given by the Corporation) or otherwise fails to comply with the terms of its agreement with the Financial Corporation, the Financial Corporation shall have the (right to take over the management or possession or both of the industrial concern) as well as the (right to transfer by way of lease or sale) and realise the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation.
(2) Any transfer of property made by the Financial Corporation, in exercise of its powers under sub-section (1) shall vest in the transferee all rights in or to the property transferred (as if the transfer) had been made by the owner of the property.
(3) The Financial Corporation shall have the same rights and powers with respect to goods manufactured or produced wholly or partly from goods forming part of the security held by it had with respect to the original goods.
(4) (Where any action has been taken against an industrial concern under the provisions of sub-section (1), all costs (charges and expenses which in the opinion of the Financial Corporation have been properly incurred) by it (as incidental thereto) shall be recoverable from the industrial concern and the money which is received by it shall, in the absence of any contract to the contrary, be held by it in trust to be applied firstly, in payment of such costs, charges and expenses and, secondly, in discharge of the debt due to the Financial Corporation, and the residue of the money so received shall be paid to the person entitled thereto.)
(5) (Where the Financial Corporation has taken any action against an industrial concern) under the provisions of subsection (1), the Financial Corporation shall be deemed to be the owner of such concern, for the purposes of suits by or against the concern, and shall sue and be sued in the name of (the concern).”
24. The action under Section 29 of the State Financial Corporations Act is in two parts:
(1) The Corporation has a right to take over the management or possession or both of a defaulting industrial concern;
(2) The Corporation has a right to transfer either by way of lease or sale.
25. Both these parts deal with different aspects of their right.
26. It is possible that in a given case, the Corporation may simply take over the management, run the industry for some time, realise the amounts due to it, from the defaulting Company and then hand over the management back. In the alternative in a given case, the Corporation may only take possession of the property and may not take over the management. In either case, the further right of the Corporation to transfer by way of a
lease or sale is a further option given to the Corporation. Each one of these alternative decisions, though originating from the same transaction of there being a loan from the Corporation and the loanee defaulting in repayment, in my view, creates a different cause of action. A defaulter has a cause of action to question the decision to take over the management or possession or both. When so questioned, the cause of action is complete. It is equally open in a given case for a defaulter not to question such a decision, but however, may have objections about the decision taken by the Corporation either to sell or lease the property, in which case such decision constitutes a separate cause of action.
27. In view of the judgment of the Supreme Court in Mahesh Chandra ‘s case (supra) while conducting the sale contemplated under Section 29 of the State Financial Corporations Act, 1951 is required to follow certain guidelines. The violation of all or each or some cumulatively of these guidelines, in may view, creates a distinct cause of action. A defaulter may not have any objection for the take over of the unit, he may not have any objection for the sale of the unit, but he may have an objection about the manner in which the sale was conducted. All these are distinct and different aspects of the same transaction, which according to me, give rise to different causes of action.
28. Applying the principles laid down by the judgments referred earlier and having regard to the discussion, the petitioner when he approached the Gujarat High Court was aggrieved by the decision of the State Financial Corporation to take possession of the properties of the petitioner-Company, (he prayer in the said case, which is already noticed earlier, clearly indicates the same, whereas the prayer in the present writ petition pertains to the non-observance of the guidelines laid down by the Supreme Court in Mahesh Chandra’s case (supra) To test the logic, if the writ petition filed in the Gujarat High Court were to be dismissed by the date of the filing of the present
writ petition and the present writ petition, were to be filed in the Gujarat High Court, could the respondents have taken an objection that the present writ petition is not maintainable on the ground that it is barred by Order 2 Rule 2 CPC. To my mind, the answer is a clear No because the petitioner when he filed the writ petition though was aggrieved by the decision of the Corporation to take possession of the properties of the petitioner would not and need not anticipate that the Corporation in dispossessing of the property of the petitioner-Company would not adhere to the guidelines edumberated by the Supreme Court. His grievance at that point of time was limited only to the decision to take possession of the property, if the matter were to be decided on the same day on which it was filed, assuming for the sake of arguments against the petitioner, there is nothing in law, which precludes the petitioner to offer to question the subsequent proceedings of the transaction. I am therefore of the opinion that the present writ petition is not barred by the rule contained in Order 2 Rule 2 of the Code of Civil Procedure.
29. The learned Counsel for the respondents, however, brought to my notice that the petitioners have in fact filed two applications filed in the Gujarat High Court and which petitions if allowed would virtually cover the same cause of action which forms the basis for the present writ petition. The material portion of the prayer insofar as it is relevant for our purpose in the above two applications are as follows:
“(b) Pending admission, final hearing and disposal of Special Civil Application No. 1134 of 98 to restrain the respondents, their officers, agents, etc., from acting in furtherance to the advertisement at Annexure ‘B’ for disposing of the property of the petitioner-Company situated at 1608/ 9, GIDC Sarigam, District. Valsad and at A/21, M.P. Shah Udyognagar, Jamnagar.”
“Pending admission, final hearing and disposal of Special Civil Application
No.1134 of 98 to restrain the respondents, their officers, agents, etc., from handing over possession of the assets of the petitioner-Company to the highest bidder pursuant to the letter dated 16-5-1998 at Annexure “B” to this petition.”
30. From the above, it can be seen that as an interim measure pending a decision in the main case, it was prayed that the property of the petitioner which was ‘seized’ may not be disposed of in furtherance of the advertisement, is the subject-matter of one application and the second application was filed at a later point of time after the auction was conducted, praying that the possession of the property may not be handed over to the successful bidder. These prayers have nothing to do with the requirement of the law on the part of the respondents-Corporation to offer the property to the original owner on the same conditions on which the highest bidder in the auction is willing to purchase. Therefore, even on this count, the objection of the respondents must fail.
31. The submission of the learned Counsel for the petitioner on merits is that in view of the judgment of the Supreme Court reported in Mahesh Chandra’s case (supra), that the Corporation i.e., the respondents are under obligation:
“(4)(a) If unit holder is willing to offer the sale price, as the tenderer, then he should be offered same facility and unit should be transferred to him. And the arrears remaining thereafter should be rescheduled to be recovered in instalments with interest after the payment of last instalment fixed under the agreement entered into as a result of tendered amount.
(b) If he brings third parties with higher offer it would be tested and may be accepted.
and according to the petitioner, the letter of the respondents dated 16-5-1998 whereby they
informed the petitioner that in the auction, the highest bidder offered Rs.176 lakhs and the highest bidder was willing to pay 30% of the amount within 30 days and the remaining 70% within 60 days after the acceptance of the offer by the respondents. The respondents further in the same letter, offered the petitioner that in case either the petitioner or his nominee is willing to offer the equivalent or more price than quoted by the highest bidder, they were at liberty to do so; however, the respondents stipulated that in case of any such proposal, the entire amount should be paid by way of a demand draft within 15 days from the date of receipt of the said letter. The said letter, according to the petitioner is in violation of the guidelines to be followed under Section 29 of the State Financial Corporations Act, 1951 as edumberated by the Supreme Court.
32. The learned Counsel for the respondents on the other hand argued that no doubt the requirement of law laid down by the Supreme Court is that if the unit-holder should be offered the same facility, if he is willing to offer the sale price as it fetched in the auction. However, if the unit holder brings a 3rd party with a higher offer, the same need not automatically be accepted, but it must be tested and accepted, which by necessary implication, means that if only the Corporation is satisfied with the genuineness of a higher offer made by the 3rd party, the Corporation is under obligation to accept the same. Apart from that, according to the learned Counsel for the respondents, the obligation to offer the same facility “is only with respect to the unit-holder and not with regard to the 3rd parties.” He further submitted that no doubt, the respondents called upon the petitioner to deposit the entire amount by way of a demand draft if the petitioner or his nominee is willing to purchase the unit at a price offered by the highest bidder or at a higher price, but that did not preclude the respondents from depositing 30% of the amount within 30 days and the balance amount within 60 days after acceptance was offered and agitate his legal
rights. On the other hand, from the correspondence, it could be seen that the petitioner never wanted to purchase the unit, therefore, the question of extending the same facility as is extended to the highest bidder to the petitioner did not arise in the facts of this case. The question of offering the same facility to a 3rd party did not arise because the Corporation never had an opportunity for testing the genuiness of the offer of the 3rd party, for the reason that the petitioner never indicated in his letter dated 4-6-1998 as to who was the 3rd party who was willing to make higher offer, nor did the 3rd party nominated by the petitioner never approached the Corporation with the offer, nor any material to test the genuineness of the offer of the said 3rd party, is placed before the respondents.
33. I see substantial force in UK argument advanced by the learned Counsel for the respondents. An analysis of the judgment of the Supreme Court in Mahesh Chandra ‘s case (supra) shows that the Supreme Court laid down the various guidelines which are to be followed in conducting a sale under Section 29 of the State Financial Corporations Act, as obligations arising out of the power to take possession of the property of the defaulter and sell the same on the ground that in such a transaction, either the Corporation which is controlled by the State or the unit-holder who had invested money, time and experience in establishing a unit, must derive the benefit, but not a 3rd party who had not initially invested the money or time for establishing a unit. However, that does not mean that a defaulter who is not willing to purchase the unit, can protract the litigation and stall the proceedings under Section 29 of the State Financial Corporations Act, 1951 by merely informing to the Corporation that a nominee-whosc particulars have not been disclosed to the Corporation, is willing to offer a higher price. The Corporation would have no means of verifying the genuineness of such an offer, except by a time consuming process of further correspondence with the defaulter to find out
about such nominees and then proceed to assess the genuineness of such an offer. Persons who are carrying on business with borrowed capital, that too, from public financing institutions whose funds come from out of the exchequer which in turn come from the tax payers, cannot be permitted to take undue advantage of the system. No doubt,’they are entitled for the legal rights and benefits which are due to them in accordance with law, but while claiming such benefits, at every stage, they must exhibit bona fides.
34. The Supreme Court while it laid down the guidelines to be followed in conducting the sale under Section 29 of the State Financial Corporations Act, 1951 as legal obligations arising by necessary implication of the nature of the power conferred under Section 29, on the part of the State Financial Corporation, laid down that sub-clause 4(b):
“4 (b) If he brings third parties with higher offer it would be tested and may be accepted,”
In my view, such a legal obligation was not read into Section 29, by the Supreme Court to facilitate an unscrupulous unit holder to protract the litigation resulting in the looking up of the public funds and sometimes even private fluid, for occasionally we are to come across the cases where the unit-holder approaches the Court after the successful bidder deposited part of the amount. In my view, whenever a defaulter approaches the Court alleging that either some or all of the guidelines are not complied with while it is necessary as per the law declared by the highest Court to scrutinise the claim of the defaulter with utmost care, it is equally important to scrutinise the conduct of the defaulter in the crucial period i.e. the date on which the power under Section 29 is initially exercises by taking possession of the property to the date of the petitioners approach to the Court. In the contest of the allegation of the violation of guidelines 4(b), in the present case I am of the opinion that a mere statement of the defaulter that some undisclosed nominee
of the defaulter is wilting to offer a higher price, is certainly not a conduct which would be accepted as a fair conduct in the circumstances. On the other hand, whenever the defaulter tries to bring a 3rd party, he must necessarily intimate to the State Financial Corporation, the complete details of the 3rd party to enable the Corporation to verify the genuineness of such claim and assess the situation for the purpose of accepting or rejecting such a claim.
35. The conduct of the petitioner in writing a letter on 4-6-1998, saying that some undisclosed nominee is willing to offer an amount slightly higher than the amount offered by the highest bidder, to my mind, does not exhibit any bona fides. If the petitioner’s attempt was bona fide, he would have disclosed as to who such nominee was to enable the respondents-Corporation to verify the genuineness of such an offer.
36. In the circumstances, I see no reason
to issue a writ as prayed for and the same is accordingly dismissed with costs.