JUDGMENT
C.K. Thakkar, J.
1. This petition is filed by the petitioners for quashing and setting aside the action of Gujarat Industrial Development Corporation (`Corporation’ for short) of selling of unit of petitioner No.1 situated at Plot No.8 at Sonal Industrial Estate, Veraval and for further direction that the decision of the Corporation of accepting the offer of respondent No.2 and handing over possession of the unit to him is arbitrary, illegal and contrary to law.
2. The case of petitioner No.1 is that it is a limited company registered under the Companies Act, 1956. It purchased assets consisting of land bearing plot No.8 of Sonal Industrial Estate, Veraval and installed plant and machinery thereon. According to the petitioners, after taking over possession of the factory, it realised that the machinery in question was of inferior quality and hence, a complaint was made to the Corporation. The petitioners made part payment, but because of inferior quality of machinery, and recessionary trend of the market, it could not pay remaining amount within the stipulated period. The resultant effect was that the Corporation treated petitioner No.1 as a defaulter and took over possession of the unit on July 23, 1998 in purported exercise of powers under Section 29 of the State Finance Corporations Act, 1951 (hereinafter referred to as “the Act”) . On 23rd March, 1999, the first respondent issued an advertisement to sell the unit of petitioner No.1 . Respondent No.2 made an offer to purchase the property for Rs. 7.75 lacs which was accepted by the Corporation. The Corporation informed petitioner No.1 about the offer of respondent No.2 vide its letter dated April 3, 1999. It was also stated in the said letter that unless higher offer was received from petitioner No.1, the property in question will be sold to respondent No.2 Rs. 7.75 lacs. It is asserted by petitioners that on 26th April, 1999, a letter was written by petitioner No.2 as a nominee of petitioner No.1 and similar letter was also written petitioner No.1 on 10th May, 1999 inter alia stating that petitioner No.2 was ready and willing to purchase the unit for Rs. 8.21 lacs and called upon the Corporation to confirm the said bid. But there was no response from the Corporation. That action of the Corporation was illegal, arbitrary and unreasonable and it deserved to be quashed and set aside. It was also stated that respondent No.2 has yet not commenced any activity on the plot in question and merely possession was handed over on 14th June, 1999. Since the Corporation did not act in accordance with law, both the petitioners were constrained to approach this Court for reliefs prayed in the petition.
3. I have heard Mr. Ashish Mashruwala for Mr. Mihir Joshi for the petitioners and Mr. R.M. Desai (on caveat) for first respondent-Corporation.
4. Learned counsel for the petitioners raised several contentions. He submitted that the Corporation is `State’ within the meaning of Article 12 of the Constitution and it is expected to act legally, fairly and reasonably. Since there is no fairness and reasonableness in the action of the Corporation in selling the unit to second respondent , it deserves to be quashed and set aside.
5. It was also contended that petitioner No.1 has paid substantial amount and the said fact ought not to have been ignored by the public authority like the Corporation. Even if there was some default on the part of petitioner No.1, acting as a public authority in its true spirit, it ought to have considered the difficulties of the petitioner and ought not to have taken drastic action.
6. Exercise of power under Section 29 of the Act in the facts and circumstances of the case, was arbitrary, illegal, ultra vires and unreasonable.
7. When petitioner No.1 in its capacity as holder of the unit and petitioner No.2 as a nominee of petitioner No. l, had offered to pay an amount of Rs. 8.21 lacs, it ought not to have been ignored by the Corporation and the unit ought not to have been disposed of for Rs. 7.75 lacs to the second respondent.
8. The Corporation has committed illegality in handing over possession to respondent No.2, though it was aware that suits were pending in competent courts and the matter was sub judice. Undue haste on the part of instrumentality of `State’ has vitiated the action which requires to be condemned and the petitioners are entitled to reliefs as prayed.
9. The price for which the property is sought to be disposed of is unreasonably low. In the year 1992, valuation was put at Rs. 1.76 lacs for land, Rs. 8.90 lacs for construction and Rs. 28 lacs for machinery as per the advertisement of the Corporation in February, 1993 . A judicial notice may be taken that there is increase in price of property. No reasonable man in the facts and circumstances would consider Rs. 7.75 lacs for lnad, construction and machinery as proper and adequate price and the action taken by the Corporation deserves to be deprecated.
10. Mr. R.M.Desai for the Corporation , on the other hand, supported the action taken by the authorities. He raised a preliminary objection regarding locus standi of petitioner No.2. He submitted that the unit in question was held by petitioner No.1. So far as petitioner No.2 is concerned, there was a privity of contract between him and the Corporation. He, therefore, cannot file a petition by invoking Article 226 of the Constitution.
11. He further submitted that there was default on the part of petitioner No.1 in payment of amount, an action was taken in bona fide exercise of power under Section 29 of the Act which cannot be said to be arbitrary, unlawful or illegal. He urged that after getting valuation report prepared, a decision was taken to dispose of the property for an amount of Rs. 7.75 lacs to respondent No.2. Even at that stage, the first petitioner was informed vide a letter dated 3rd April, 1999 whether it was ready and willing to purchase the unit or to bring a nominee. The said letter stated that petitioner No.1 should make offer or bring a purchaser within 15 days. Petitioner No.1, however, failed to comply with the letter. Instead, it filed a suit challenging the action of the Corporation. It was also stated that a letter said to have been addressed by petitioner No.1 on 26th April, 1999 was in fact not addressed on 26th April, 1999 but later on which was received by the Corporation in May, 1999.
12. In view of the offer made by the second respondent, it was decided to sell the unit to him . As full payment was made by him, as a public authority, possession was handed over to him and there was no haste on the part of the Corporation. On the contrary, it was expected of an instrumentality of `State’ to act in accordance with law and when full payment was made by the bidder, there was no reason to deprive him of possession of property.
13. Finally, it was contended that when there was default on the part of petitioner No.1 and after getting valuation report, the unit was sold to the second respondent who had made full payment and possession was handed over to him, even if this Court is of the view that other view is possible, in exercise of extraordinary jurisdiction under Article 226 of the Constitution, it may not substitute its opinion for the opinion of the Corporation and interfere with the action of the Corporation. He, therefore, submitted that the petition deserves to be dismissed.
14. I have considered the rival contentions of the parties. In my opinion, it cannot be said that the action of the Corporation of selling the unit is illegal or contrary to law or deserves to be set aside. There was failure on the part of the petitioners in paying the amount due and payable . Proceedings were, therefore, initiated under Section 29 of the Act and possession of the unit was taken over. Valuation report was got prepared and the unit was decided to be sold to respondent No.2. Petitioner No.1 was specifically informed vide a letter dated 7th April 1999 asking him to give offer or to bring a purchaser within fifteen days. But petitioner No.1 failed to bring a purchaser or to make offer. On the contrary, from the record, it appears that a suit was filed by him and interim relief was sought. In these circumstances, it cannot be said that by selling the unit to respondent No.2, the Corporation has committed an unlawful act or action is arbitrary or unreasonable.
15. My attention was invited by the learned counsel for the petitioners to several decisions:
(1) Bhabagrahi Panigrahi v. Union of India AIR 1990 Orissa 42;
(2) Mahesh Chandra v. Regional Manager, U.P Financial Corporation, AIR 1993 SC 935;
(3) U.P. Financial Corporation v. M/s Gem Cap (India) Pvt. Ltd. AIR 1993 SC 1435;
(4) U.P. Financial Corporation and others v. M/s Naini Oxygen and Acetylene Gas Ltd and another, JT 1994 (7) SC 551;
(5) Karnataka State Financial Corporation v. Micro Cast Rubber, JT 1996 (6) SC 37.
16. Looking to the above decisions, in the light of the extraordinary powers of this Court under Article 226 of the Constitution, in my opinion, the law appears to be well settled. Ordinarily, in such matters, Corporation can exercise statutory powers and discharge its duties in accordance with law. It is based on commercial principles . Ordinarily, therefore, this Court does not exercise appellate power of substituting its own finding for the finding recorded by the Corporation . It is true that if the action of the Corporation is arbitrary, unreasonable or contrary to law, it can be interfered with by this Court. But in the facts and circumstances , in my opinion, it cannot be said that the action taken by the Corporation was either arbitrary or unreasonable. There was failure on the part of petitioner No.1 in repaying the amount. Powers under Section 29 were, therefore, exercised and possession was taken over from petitioner No.1. The unit was, thereafter, decided to be sold to respondent No.2. Petitioner No.1 was accordingly informed by the Corporation and an opportunity was given as to whether he was prepared to pay more price or to bring forward a purchaser who can offer the amount more than that offered by respondent No.2. For that purpose, fifteen days’ time was also granted. Petitioner No.1, however, failed to comply with the said direction. On the contrary, he approached a civil court and filed a suit. Petitioner No. 2 who had no privity of contract with the Corporation made an offer but that was also not made within the stiulated period of fifteen days. In any case, when the offer was not made by petitioner No.1 during the stipulated time and there was no interim relief restraining the Corporation from proceeding further with sale, it cannot be said that by selling the unit, the Corporation had committed any illegality. The grievance of the petitioners that there was `unholy haste’ on the part of the Corporation in handing over possession of the unit to respondent No.2 is also not well founded. When respondent No.2 had purchased the unit by making part payment and when he had shown readiness and willingness to pay the entire amount and in fact paid the amount, there was no earthly reason on the part of the Corporation to refuse to hand over possession to him. As an instrumentality of `State’; it was incumbent on the part of the Corporation to hand over possession as soon as the entire amount of consideration was paid to the Corporation. In my opinion, therefore, the grievance by the petitioners that there was undue haste by the Corporation in handing over possession to respondent No.2 is equally ill-founded.
17. Since the action of the Corporation cannot be termed as illegal, arbitrary or unreasonable, no interference is called for and the petition deserves to be dismissed.
18. For the foregoing reasons, I see no substance in any of the arguments advanced on behalf of the petitioners and the petition is accordingly dismissed. No order as to costs.