ORDER
1. The West Bengal Cement Ltd. and Mr. B. K. Sahani, the Chairman of the West Bengal Cement Ltd. and also a share-holder for self and on behalf of the share-holders of the West Bengal Cement Ltd. have filed this writ petition for a writ of mandamus challenging the notices dated 9-10-1987 and 13-11-87 issued by the respondent No. 3 as ultra vires, bad in law and void and for a writ in the nature of mandamus directing the respondents to forbear from proceeding on the basis of or in pursuance of the said notice or any identical notice of such nature and to withdraw and/or to cancel them and also of a writ of mandamus commanding the respondents to forbear from giving any effect and/ or further effect and / or proceeding on the basis or in pursuance of the said two notices and for consequential reliefs.
2. The facts which are material for the purpose of this writ petition may be briefly stated as follows :–
The petitioner No. 1, West Bengal Cement Ltd. was under the management of the respondent No. 2, West Bengal Industrial Development Corporation Ltd. As the Cement Company virtually became a sick unit by reasons of mis-management, with a view to
rehabilitate the otherwise unviable project, the financial partnership of private sector was found to be the only alternative by the then management of the Cement Company and as such, the respondent No. 2 sought the help of the private sector to rehabilitate the cement company and its Kalyani Unit. M/s. Byford Ltd. a company which was new to the nature of manufacturing activity of the Cement Company but having complete faith in respondent No. 2, the respondent No. 1, the State of West Bengal and fully relying upon and believing in various representations and the offers to render all possible help made by their representatives, the said M/s. Byford Ltd., volunteered to rehabilitate the Cement Company in complete good faith, not only with the hope of rehabilitation but also relying upon positive assurances for active allround assistance from respondents Nos. 2 and 3, namely, the West Bengal Financial Corporation. The respondent No. 2 made promise to the petitioner No. 2 to extend all assistance/conces-sions which may be necessary for the rehabilitation and implementation of the project, by initial moratorium, rephasement of repayment schedule and various other concessions, benefits and relaxations under various laws to wipe off the debt burden and make necessary effort for making the unit a viable and profitable one in the industrial interest of the State of West Bengal. The then Chairman of the respondent No. 2, late T. Ghosh, had assured the petitioner No. 2 of all help from respondent No. 2 in the revival of two sick units, namely, the cement company and the West Bengal Scooters Ltd. the petitioner No. 2 took the assurance and promises at the face value in the positive belief that they would be honoured and took the task of making the said two sick units viable in the light of the understanding arrived at by and between the petitioner No. 2 and the respondent No. 2 and after many deliberations, a Memorandum of Understanding was drawn in the meetings held on March 23, 1984, a copy of which is annexed as Annexure’ A-4. It was agreed that the Cement Company should amalgamate/-merge in M/s. Byford Ltd. It was noted in the
was noted in the said Memorandum that the net worth of the Cement Company was minus Rs. 10 lakhs; and that M/s. Byford Ltd. should pay 20% of the total paid up value i,e. Rs. 10.20 lakhs for the entire equity of Rs. 51 lakhs held by respondent No. 2 at the time of transfer of shares in the Cement Company to the petitioner No 2 or his nominees. The respondent No. 2 agreed to rephase certain loans. The various promises made by the respondent No. 2 acting through its representatives were not specifically mentioned in the said Memorandum of Understanding, at the instance of the representatives of respondent No. 2 with a view to avoid embarassment to the respondent No. 2 and public criticism; but informally many assurances were made to petitioner No. 2 for rendering all necessary financial assistance and other statutory con-cesions. Relying upon the aforesaid assurance and aforesaid memorandum of Understanding and at the instance of respondent No. 2 M/s. Byford Ltd. merged with the cement company under S. 395 of Companies Act 1956 with effect from 21st June 1984. The said agreement was approved by the Board of Directors of the respondent No. 2:
3. After the merger, various steps were made for rehabilitation of the company arid; its unit at Kalyani. In anticipation of the reliefs promised by the respondent No. 2, the new management spent over 1.2 crores between July 1984 and August 1985 in order to revive the unit. But in order to make the unit a viable one the petitioner fourid certain defects in the machinery which have been specified in paragraph 6 of the writ petition. Pointing out these difficulties the petitioners requested vide their letter dated August 26, 1985 to the respondent No. 2 that it would be more appropriate and pertinent that the petitioner No. 1 be declared a Relief Undertaking under the West Bengal Relief Undertaking (Special Provisions) Act, 1972 at least for one year for the time being, to save the company from the harassment and in order to implement the revival programme but there was no response to the said requests made by the petitioners.
4. Despite all the odds, the petitioners had taken aggressive measures for overall
improvement of the plant which has been set out in paragraph 7 in the writ petition. The petitioners vide letter dated November 20, 1985 informed the respondent No. 2 about all steps taken by the petitioners and requested for the reliefs as mentioned in paragraph 8 of the writ petition. But the respondent No. 2 did not make any response to that letter. The petitioners have thereafter approached the respondent No. 1 the State of West Bengal in a meeting held on July 3, 1986 with the Hon’ble Minister of Industry and Secretary, Department of Industries, Govt. of West Bengal. The petitioners clearly explained the present position, developments and efforts that were made by the petitioners for pulling the unit out of sickness after the change of management. The said meeting was followed by the letter dated July 5, 1986 from the petitioners to the Hon’ble Minister of Industry, Government of West Bengal in which the petitioners explained the difficulties which the petitioners were facing in running the factory and made the proposal for diversification of the company and asked for immediate release of undisbursed portion of sanctioned interim loan of Rs. 32 lakhs granted as per WBIDC’s letter dated 27th March 1984, release of Sales Tax Loan of Rs. 2.5 lakhs, for power subsidy of Rs. 2.51 lakhs,
captive power generator subsidy of Rs.2.75 lakhs. The petitioners had earnestly requested for support of the respondent no. 1 for taking the unit out of sickness. But the respondents have not rendered any assistance nor have granted any relief though they are obliged to. On the contrary the petitioners have received a letter dated November 10, 1986 from the respondent No. 3 requiring the petitioners to attend their Advisory Committee (Default Accounts) meeting passed(?) on November 20, 1986 to review the affairs of the company. Upon receipt of the said letter, the petitioners requested the respondent no. 2 vide their letter dated November 20/21, 1986 to represent on their behalf suitably in the meeting so that the respondent No. 2 could represent the case of the petitioners before the respondent No. 3 to obtain the support of the State Level Financial Institution in the same spirit with which the unit had been handed over to the
petitioner No. 2 for expeditious revival. Certain reliefs asked for in the previous letters were also apprised. However, in the meantime, the respondent No. 3 has insisted on repayment of the principal and imerest due to it for which the respondent No. 3 addressed a letter dated December 2, 1986 to the respondent No. 2 with a copy to the petitioners. By the said letter the respondent No. 3 refused revision of the rate of interest to 6,5% as proposed by the petitioners. However, the respondent No. 3 asked for the comments from the respondent No. 2 on various points raised by the petitioners in the letter dated November 20/21, 1986 addressed to the respondent No. 2. The officials of the petitioner No. 1 called on the officials of respondent No. 3 and in their meeting held on December 9, 1986 explained the various matters concerning the unit and during the discussions, submitted various documents, in support of their contentions. The respondent No. 3, however, insisted for a definite date of commencement of repayment of principal and interest. The representative of the petitioner No. 1 pointed out to the respondent No. 3 that the present management had already invested Rs. 1.45 crores including payment of the respondent No. 2 towards the shares held by the Cement Company without any return so far; that even at 100% capacity utilisation of the plant, the cash generated was not sufficient to meet the fixed overheads; and as such, no firm commitment could be made for repayment unless there was sufficient cash generation out of the operation of the Kalyani Unit; that the petitioners made several representations to the respondents Nos. 2 and 3 requesting for assistance and various measures; and as such unless the issues are settled in favour of the petitioners thereby reducing the debt burden of the company, the company might not be in a position to commit at that stage any repayment of the dues to any financial institution.
5. But in spite of repeated requests made by the petitioners and their sincere efforts to revive the unit, which was made sick by the respondent No. 2, even by injecting heavy amounts by the petitioners with no return, the respondents have kept silent. Having received no response for a considerable time, the Secretary of the petitioner No. 1 went to see
the Chairman of the respondent No. 2 on February 12, 1987 but the Chairman refused to listen to his representation. Then the petitioners have made representations dated February 13, 1987 to the Hon’ble Chief Minister of West Bengal stating all the positions and asked for his intervention in the matter. The Hon’ble Chief Minister appreciated efforts made by the petitioners in revival of the unit and assured necessary help to the petitioner No. 2; but no help, however, has come forward from the responents. As in spite of repeated requests no further relief for assistance was received from the respondents, the petitioners have informed the respondents by the letter dated 15th May, 1987 that they were left with no option but to close down the Kalyani unit with full consequential losses and implications being exclusively on account of respondent No. 2 — Copies of such representation dated May 6, 1987 were sent to the Hon’ble Chief Minister of Industry, Minister of Labour, Secretary to the Department of Industry, Government of West Bengal, the respondent No. 3 and the Labour Commissioner, Government of West Bengal. The respondent no. 2 responded to the letter only on May 20, 1987 in which high handed allegations against the petitioner were made which were false and false to the knowledge to the respondent No. 2. However, the respondent No. 2 proposed to discuss with the representative of the petitioners and finalise rephasing programme in respect of the term loans ‘shortly’. The petitioner No. 2, in the meantime, met the Hon’ble Chief Minister in a meeting held on June 10, 1987 who expressed the support/help required by the petitioners. The petitioners thereafter by a letter dated June 11, 1987 made comprehensive representation to the respondent No. 2 and prayed for various reliefs and assistance on priority basis as per norms set by the Reserve Bank of India. On June 22, 1987 a meeting was held between the officials of Allahabad Bank and of respondent No. 2 on extension of reliefs/concessions for rehabilitation of the petitioner No. 1 and a copy of the Minutes thereof was sent to the petitioner No. 1 by the respondent No. 2 in a covering letter dated June 29, 1987 annexed as Annexure ‘A-18’. The said Minutes showed that the Allahabad Bank had indicated that they would like to know the decision taken by
the Financial institutions in regard to the request of the petitioner No. 1 for package of reliefs finalising their decision to grant any further advantage to the petitioners. But the respondent No. 2 has nothing to say about the decision and the decision that was taken was that the company, the petitioner No. 1 should bring further funds if required. Thereafter the respondent No. 2 vide his letter dated July 21, 1987 extended certain so-called reliefs to the petitioner No. 2. The petitioners have evaluated the reliefs/concessions, and after careful examination it was realised that the reliefs fell miserably short of the need and would not be helpful to the unit and that even after two years it would not be generating enough fund to repay the loan and interest accumulated. The alleged four concessions/reliefs have been subject to four stringent conditions. The petitioners replied to the respondent No. 2 in response to the several so-called reliefs by the letter dated August 4, 1987 in which it was clearly indicated that after taking into consideration the various subsidies offered, the Company would be incurring loss of Rs. 11.58 lakhs per year. The so-called belated reliefs and concessions having been considered inadequate, the petitioners intimated to the respondent No. 2 that the so-called assistance was not acceptable. In the meantime, the Kalyani Unit was closed down with effect from 1st August 1987. The petitioners issued a notice dated July 30, 1987 for permanent closure of operations in the undertaking of the company situated at Kalyani explaining the circumstances under which the petitioners were compelled to close down and to make the permanent closure of the Kalyani unit. The petitioners thereafter received from the respondent No. 3 a letter dated October 9, 1987 alleging that the petitioners have defaulted in payment of principal and interest and other dues calculated upto June 1987 and called upon the petitioners to make payment of total amount of Rs. 34,60,736.16.
6. It was further threatened in the said letter that in case of default in making payment of the said amount, the respondent No. 3 would enforce the provisions of security deeds and other provisions of State Financial
Corporation Act, 1951. The said letter was replied to by the petitioners vide their letter dated October 28, 1987 explaining the position. Since the time of the closure of the Kalyani unit the petitioners have been requesting the respondents to provide assistance and reliefs as were necessary which were being earlier provided to the petitioners but no action whatsoever was taken.
7. Notwithstanding the fact that the respondents failed to assist the petitioners and even went back on their own positive specific assurance for help, assistance and reliefs, the respondent No. 3 has by its letter dated 13-11-1987 threatened that by 30-11-87 on any date the respondent No. 3 shall take possession of the premises/ buildings, plant, machinery and all other items of fixed assets without taking over the management liabilities in purported exercise of the powers under S. 29 of the State Financial Corporation Act, 1951 alleging untruly default in repayment by the petitioner No. 1. It appears that the respondent No. 2 issued a letter or notice dated 13-11-87 under and/or by invoking S. 29 of the State Financial Corporation Act, 1951.
8. The petitioners challenge that the impugned notice is illegal. Having taken the fullest advantage of the said S. 29 of the said Act, the respondent No. 3 in a colourable exercise of power wrongfully and illegally issued the said letter/notice threatening to take possession of the premises/building, plant and machinery and all other items etc. without assigning any reason and for no reason whatsoever. The respondent No. 3 had issued the said notice taking for granted that the said section confers an unfettered and uncanalised power to the authority concerned to take over the management and/or realise the property pledged, mortgaged etc. issue notices therefor under the said section at their whims. The respondent No. 3 has exercised their power arbitrarily, capriciously and in utter discriminatory manner and in utter disregard of the fundamental principles of natural justice. The petitioners also challenge the impugned notices to be mala fide and in order to make the petitioner a scapegoat and/ or in any event to put illegal pressure on
the petitioners to act at the dictate of the respondent No. 3.
9. The petitioners further state that the purported letter dated 13-11-1987 and the letter dated 9-10-1987 under S. 30 of the 1951 Act are highly arbitrary, unreasonable and were issued in colourable exercise of power of the respondent No. 3 in utter disregard of the mandatory provisions inter alia of S. 24 of the said Act. The petitioners, therefore pray that the impugned notices be quashed and/or set aside and/or declared void and of no effect.
10. The respondents Nos. 2 and 3 contested the writ petition by filing an affidavit-in-opposition separately. To such affidavits-in-opposition the writ petitioners have filed affidavits-in-reply.
11. The contentions raised by the respondent No. 2 may be stated briefly as follows :
The impugned notices have been issued by the respondent No. 3 to which the respondent No. 2 has no concern and the writ petitioners have unnecessarily impleaded them in this proceeding. The respondent No. 2 contends that the terms and conditions under which the West Bengal Cement Ltd. have been merged with M/s. Byford Ltd. have contained in the Memorandum of Understanding dated 23rd March 1987 and the said Memorandum of Understanding does not contain a single term made by or assurance given by the respondent No. 2 to M/s. Byford except to the extent that the loan granted by the respondent No. 2 to the petitioner No. 1 other than under refinance scheme of I.D.B.I, may be reasonably rephased subject to the condition that interest would be paid as and when due in future after the merger of Byford Ltd. with the petitioner No. 1. Apart from the above mentioned assurance given by the respondent No. 2 to Byford Ltd., as contained in the said Memorandum of Understanding, no other assurance or promise for help was given or made by the respondent No. 2. It is absurd to suggest that oral promises were made and oral assurances were given and on the basis of such oral assurances or promises, Byford Ltd. purchased the shares in the said company. After the transfer of shares to Byford Ltd. the new
management commenced stable production from September 1985, and the company’s production was gradually increasing. In February 1987 it produced 930 tonnes but it was at this stage the company suddenly decided to close down the unit. The respondent No. 2 took up the matter with the petitioner No. 1 vide its letter dated 20/22nd May 1987 and the petitioner No. 1 finally served a notice of permanent closure of the factory of the petitioner No. 1 with effect from 1st August 1987, The respondent No. 2 has all along been prepared to consider the company’s reasonable request for rephasement and relief. Although a number of letters to this effect were written by the respondent No. 2 to the petitioner No. 1, the matter was never seriously pursued by the petitioner No. 1. The petitioner No. 1 was not keeping its commitment to pay the current dues of interest and instalments. The respondent No. 2 by the letter dated 1/2 January 1986 to the petitioner No. 1 asked for some clarifications and/or details in order to consider the request of the petitioner No. 1 for help and concessions but the petitioner No. 1 did not bother to reply to the said letter or to furnish the necessary clarifications and/or information. The petitioner No. 1 again approached the respondent No. 2 on 11th June 1987 vide letter of the same date with a request for considering rehabilitation package and the respondent No. 2 by the letter dated 21st July 1987 extended the reliefs and/or concessions which are mentioned in paragraph 4(10) of the affidavit-in-opposition. As the factory of the petitioner No. 1 remained closed and the petitioners did not open the factory to take relief and/or concessions, the respondent No. 2 requested the petitioner No. 1 to take urgent action in this regard but in spite of requests of the respondent No. 2 the factory of the petitioner No. 1 was permanently closed down and the respondent No. 2 was left with no alternative but to withdraw the package of relief/concessions. The respondent No. 2 further contends that since the takeover of the petitioner No. 1, the new management never displayed any sincerity either to keep their commitment as made in the meeting held on 23rd March 1984 to pay .
the current dues or to ensure a stable and viable level of operations at the Unit and that the petitioner No. 1 took this effective decision to close down the factory without even consulting the directors on its Board and the decision was solely taken by Sri B. K. Sahni, the Managing Director of the petitioner herein, and the petitioners’ move to close down the unit was initiated almost in a pre-planned manner at a time when the factory was operating reasonably well and the workers were extending co-operation to the management and more particularly when a comprehensive package of reliefs/concessions had been finalised in consultation with the representatives of the petitioner No. 1.
12. The respondent No. 3 in the affidavit-in-opposition contends that after 23rd March 1984 the shares in the petitioner No. 1 were transferred by the respondent No. 2 to the nominees of Byford Ltd. On 3rd May 1984 the Byford Ltd. agreed to pay Rs. 5 lakhs to the respondent No. 3 towards the part payment of the arrears of interest and proposed to liquidate the balance outstanding including interest upto 31st March 1984 in the manner indicated in paragraph 5(f) of the said Opposition so that the dues of Rs. 30,28,081.25 would be liquidated. The respondent No. 3 accepted and approved the request of the Byford Ltd. for reschedulement of the loan as mentioned but the Byford Ltd. failed to pay to the respondent No. 3 the sum of Rs. 5 lakhs within June, 1984 but ultimately after great persuasion, paid the sum of Rs. 5 lakhs on 22nd September, 1984. The Byford Ltd. thereafter made a request to the respondent No. 3 to give its consent to the amalgamation of the said Byford Ltd. with the petitioner No. 1 and such consent was given by the respondent No. 3 after Byford Ltd. paid Rs. 5 lakhs on 22nd September 1984, and the formalities for amalgamation of Byford Ltd. with the petitioner No. 1 were completed in December 1984. After 22nd September 1984 the Byford Ltd. or the petitioner No. 1 did not pay any single paisa to the respondent No. 3 nor did they care to reply to the various letters issued by the respondent No. 3 requesting them to make payment. The respondent No. 3 decided to place the affairs of the petitioner
No 1 before the Directors of the respondent No. 3 in the meeting of the Advisory Committee (Default Accounts) scheduled to be held on November 20, 1986 and requested the petitioner No. 1 to attend the said meeting. The said meeting was however subsequently adjourned to 9th December 1986. None of the directors of the petitioner No. 1 attended the said meeting, but the petitioner No. 1 sent an officer/employee to attend the same. Thereafter the petitioner No. 1 sent a letter dated 11th December, 1986 to the respondent No. 3 in which it was mentioned that the petitioner No. 1 was not in a position to make any commitment whatsoever regarding re-payment of the loan and further, the respondent No. 3 was requested to waive interest upto the date of merger of Byford Ltd. with the petitioner No. 1 and to charge concessional rate of interest after the date of the merger. On July 30, 1987, the petitioner No. 1 issued a notice of permanent closure and in (sic) the said notice mentioned in paragraph 5(i) of the affidavit-in-opposition. It appears from the writ petition itself that the respondent No. 2 had agreed to extend a package of reliefs/ concessions to the petitioner No. 1 vide letter dated 17th August, 1987 but in spite of the same, the decision regarding permanent closure was taken by the petitioner No. 1 and that too, without convening a meeting of the Board of Directors. The Director nominated by the respondent No. 3 to the Board of the petitioner No. 1 had no prior knowledge about the said notice of permanent closure. On 9th October, 1987, the respondent No. 3 issued a notice to the petitioner No. 1 under S. 30 of the State Financial Corporations Act, 1951 recalling the entire loan. On November 13, 1987, the respondent No. 3 issued another notice to the petitioner No. I under S. 29 of the State Financial Corporation Act, 1951 and fixed 30th November, 1987 for taking over possession of the fixed assets of the petitioner No. 1.
13. On 26th November 1987, the petitioner filed a writ petition in this Court and obtained an order of status-quo and as such the respondent No. 1 refrained from giving effect to the said notice under S. 29 of the State Financial Corporation Act, 1951.
14. In the writ petition, the petitioners have alleged that the respondent No. 2 had made certain oral promises to the petitioners about financial help. Even if it is assumed that the respondent No. 2 had made the oral promises as alleged by the petitioners, the same do not concern or effect the respondent No. 3 in any way whatsoever. The loan was given to the petitioner No. 1 which is a limited company registered under the Companies Act, 1956 and as such is a legal entity. The composition of the share-holders who, for the time being, hold the shares in the petitioner No. 1, is totally irrelevant and immaterial. The respondent No. 3 denies that the impugned notices are illegal, arbitrary and mala fide.
15. I have heard the submissions made by Mr. Gautam Chakraborty, learned counsel appearing for the writ petitioners and Mr. A. K. Dhandhania, learned advoate appearing for the respondents Nos. 2 and 3. That the petitioner No. 1 had been merged with Byford Ltd. as a result of the Memorandum of Understanding that took place between the petitioner No. 2 and the respondent No. 2 dated March 23, 1984 is an admitted position, and the new management started functioning. In the Memorandum of Understanding dated March 23, 1984 there was some provision for the assistance to be given by the respondent No. 2. The petitioners in the writ petition have, however, urged that the respondent No. 2 gave certain oral promises through the then Chairman late T. Ghosh and on the basis of such oral assurance of assistance, the merger was agreed upon and the Memorandum of Understanding dated 23rd March 1984 was entered into. The respondent No. 2 in the affidavit-in-opposition firmly denied such a contention.
16. It is, however, seen that after such amalgamation the new management entered into several correspondence with the respondent No. 2 and even approached the Minister-in-Charge of Industry and the Hon’ble Chief Minister of West Bengal seeking assistance. It is complained by the petitioners that even after repeated requests were made and several representations submitted to the respondent
No. 2 and the other authorities of the respondent No. 1 that in order to make the unit a viable one the concessions as demanded by the petitioners are urgently necessary, the respondent No. 2 did not agree to accede to all these considerations but ultimately sometime before the permanent closure afforded certain reliefs/assistance. The petitioners complained that the said reliefs and assistance sought to be given by the respondent No. 2 was not at all adequate to make the Kalyani Unit viable and even if such assistance was given the unit would continue to incur a steady loss from year to year.
17. The respondent No. 2 has seriously contested the above contentions of the petitioners. It is their case that the petitioners after taking over the company started the unit, made it viable and the production had also increased but sometime in February 1987 without any rhyme or reason the petitioners decided to close the factory. It is also contended that even though some assistance was offered, the petitioner No. 2, without even taking the approval of the Board of Directors of the Company, permanently closed the factory with effect from 1st August, 1987. It is contended by the respondent No. 2 that even though under the terms of understanding the respondent No. 1 was not liable to give any further assistance except that agreed upon by the said terms of understanding, yet, some other reliefs were sought to be given to the petitioners but to the utter disregard of the interest of the workers the petitioners have made the permanent closure of the factory and as a result thereof, the respondent No. 2 has withdrawn the concessions which they have earlier offered.
18. It is urged on behalf of the respondent No. 2 that the respondent No. 3 to protect its interest and to recover its dues issued the notices impugned in this petition and the respondent No. 2 had nothing to do with the matter and so far as the present writ petition is concerned, the respondent No. 2 is absolutely unnecessary party.
19. There is no doubt that the relief that is sought for in this writ petition is against the respondent No. 3, the West Pengal Financial
Corporation. The petitioners being aggrieved by the two notices issued by the respondent No. 3 have filed this writ petition. The first notice was a demand for payment which is issued under S. 30 of the Financial Corporation Act, 1951. It is a fact that the petitioners replied to that notice but did not take any steps whatsoever to make repayment of the dues of the respondent No. 3. The petitioners cannot dispute that the petitioner No. 1 had the said dues on account of petitioner No. 1 and after the amalgamation of the petitioner No. 1 with Byford Ltd. the new management was legally bound to repay the said loan. The respondent No. 3 in the affidavit-in-opposi-tion has indicated that the repayment of the said loan has been re-scheduled. However, the petitioners do not admit that such a reschedule for repayment of the loan had been made but it could not be disputed that the petitioners had paid Rs. 5 lakhs on 22nd September 1984. It is contended on behalf of the respondent No. 3 that it is only when Rs. 5 lakhs were paid, the respondent No. 3 gave the consent to the amalgamation of the By-ford Ltd. with the petitioner No. 1. It is also an admitted position that thereafter no repayment had been made. It is also an admitted position that the respondent No. 3 convened a meeting of the Advisory Committee (Default Account) which was held on 9th December 1986. None of the Directors of the petitioner attended the said meeting. Only an officer attended that meeting. The petitioner No. 1 thereafter sent a letter dated llth December 1986 mentioning that the petitioner No. 1 was not in a position to make any commitment whatsoever regarding the repayment of the loan, and also requested to waive interest upto to the date of merger of Byford Ltd. with the petitioner No. 1 and to charge concessional rate of interest from the date of merger. The respondent No. 3 could not agree to the above request. It is, therefore, clear that after making payment of Rs. 5 lakhs the petitioner No. 1 did not take any steps whatsoever to repay the loan of the respondent No. 3 nor could the petitioner No. 1 give any definite assurance of repayment. In the meantime, there was a permanent closure of the Kalyani Unit. So there was no possibility for
the respondent No. 3 to realise the dues from the petitioner No. 1. In such circumstances, there was sufficient justification of the respondent No. 3 to issue a demand notice dated 9th October, 1987 under S. 30 of the Financial Corporation Act, 1951. It is true that the petitioners replied to that demand notice but no assurance was given by the petitioner No. 1 to make repayment of any portion of the loan granted to the petitioner No. 1 by the respondent No. 3. In the circumstances, the respondent No. 3 issued a notice under S. 29 of the Financial Corporation Act, 1951.
20. On behalf of the respondents, an unreported decision dated November 28, 1988 passed by the Division Bench presided over by Suhas Chandra Seh and Baboo Lall Jain, JJ. in appeal against the Matter No. 4585 of 1987 has been cited. In that decision, the Division Bench has clearly observed as follows :
“The notice issued under Section 29 of the State Financial Corporation Act, 1951, is a statutory notice and should not be interfered with unless there are very special circumstances to do so. No case has been made out to interfere with the impugned notice under Section 29 of the State Financial Corporation Act, 1951.”
21. The Division Bench observed that the total dues of the West Bengal Financial Corporation against the Company who moved the writ petition before the learned trial Judge amounted to Rs. 10 lakhs. It was also observed that the loan has not been paid by the writ petitioners nor a definite assurance or scheme could be giver for repayment of the loan. However, in that case, the Special Officer was first appointed to run the Cold Storage. As he could not run it properly and the further liability of the West Bengal Financial Corporation arose, another Special Officer was appointed by the learned trial Judge and both of them were to run the Cold Storage jointly. Being aggrieved the West Bengal Financial Corporation moved the Division Bench in appeal challenging the appointment of the Special Officer. The learned Judge has observed that when the Special Officer failed to run the Cold Storage
and loan of the Financial Institution increased, it was not fit and proper for the learned trial Judge to appoint the Special Officer. Therefore, the appointment of the Special Officers was vacated and the Special Officers were directed to hand over the possession of the Cold Storage forthwith to the Officer appointed by the West Bengal Financial Corporation within one week’s time. The Division Bench also directed that the West Bengal Financial Corporation would be at liberty to proceed in accordance with law pursuant to the notice issued under S. 29 of the State Financial Corporation Act, 1951.
22. Mr. Dhandhania, learned Counsel appearing for the respondents urges that in this case also the huge amount of loan is oustanding and there is no definite assurance of the repayment of the loan from the petitioners and the petitioners’ own admission is that they are not in a position to give any commitment regarding the repayment of the loan. So he submits that the action was quite justified. On considering all aspects of the case I am of the view that the action taken by the respondent No. 3 by issuing notice under S. 30 calling upon the petitioners to repay the loan and thereafter the notice issued under S. 29 of the Financial Corporation Act, 1951 cannot be held to be at all mala fide or in colourable exercise of the power conferred on the respondent No. 3 under the Act.
23. On behalf of the petitioners it is pointed out that the amount mentioned in the imugned notice under S. 29 of the Act shows non-application of mind and the actual amount due has not been indicated in the said notice.
24. Mr. Dhandhania has pointed out that there is no such illegality or irregularity in the said notice justifying this Court to interfere with such notice.
25. On perusal of the same, I am not of the view that there is such defect in the notice to take this view that any special case has been made out to interfere with the statutory notice issued by the respondent No. 3 against the petitioner No, 1.
26. On behalf of the petitioners, a judgment of the Andhra Pradesh High Court , K. Subba Reddy v. Andhra Pradesh State Financial Corporation has been cited where the Full Bench of Andhra Pradesh High Court have held that for recovery of loan by the State Financial Corporation. Ss. 29 and 31 of State Financial Corporation Act, 1951 offer independent remedies but the Corporation applying under S. 31 and obtaining the decree cannot resort to the remedy under S. 29 of the Act. It is urged on behalf of the petitioners that in this case also the notice under S. 30 was issued which is a stepping stone to the action to be taken under S. 31 of the Act and in the circumstances the next notice under S. 29 is illegal and improper.
27. But the respondent No. 3 after issuing a notice under S. 30 of the Act did not initiate a proceeding under S. 31 of the Act. After issuing notice under S. 30 of the said Act, the respondent No. 3 had two courses left, either to act under S. 29 or under S. 31 of the said Act. The respondent has chosen to act under S. 29 of the Act. As they have not initiated any action underS. 31 of the Act then it cannot be held that the respondent No. 3 is debarred from issuing any notice under S. 29 of the Act. In such circumstances, the decision of the Full Bench of the Andhra Pradesh High Court has no manner of application to the facts of this case.
28. On behalf of the respondent No. 3 Mr. Dhandhania, also refers to me another Division Bench judgment of this High Court , The West Bengal Financial Corporation v. Saroj Ku-mar Kesh. In that case loans were advanced to a partnership firm by the West Bengal Finance Corporation. Firm had been dissolved and serious disputes arose between the partners. Besides the Corporation the firm. had number of creditors. After issuing a notice under S. 29(1) of the State Financial Corporation Act, 1951, the Corporation has taken possession of the Industrial concern which was a partnership firm. The learned trial Judge by passing an interim order restrained the Corporation and its officers from selling the industrial concern, i.e. the factory
of the partnership firm and permitted one of its partners to run the factory on certain terms. Being aggrieved the West Bengal Finance Corporation preferred an appeal before the Division Bench, The Division Bench observed that (at p. 459) there is no dispute that there are many creditors of the firm, that there is no guarantee that the writ petitioner will be in a position to liquidate the claims of the creditors including the Corporation and that there is no provision of law under which the Court can allow one of the partners of the dissolved firm to carry on the business of the firm. In the circumstances, the Division Bench has set aside the interim order passed by the learned trial Judge, and has given the Corporation liberty to proceed in accordance either under S. 29(1) or under S. 39(1)(b) of the Act. The Division Bench has observed as follows (at p. 459) :
“In our opinion, the Court should not stand in the way of the West Bengal Financial Corporation to exercise their statutory right under Section 29(1) of the State Financial Corporation Act, 1951 under which the Corporation had been conferred the right to sell or grant lease of the industrial concern which has defaulted in payment of any loan or advance or any instalment thereof or in meeting of its obligation in relation to any guarantee given by the Corporation or otherwise fails to comply with the terms of its agreement with the Financial Corporation.”
29. Mr. Dhandhania urges that the facts of this case are similar to the facts of the above case. In this case also admittedly the petitioner No. I which is a public limited company had the statutory liability to repay the loans taken from the Respondent No. 3. The fact that the share-holders have been changed has nothing to do with the liability of the petitioner No. 1 a private ltd. company to discharge its liability to the West Bengal Financial Corporation. It is also true that the petitioner No. 1 has clearly indicated to the respondent No. 3 that they are not in a position to give guarantee or commitment whatsoever regarding the repayment of the loan. The petitioners have certain grievance against the respondent No. 2 and laid blame
on the respondent No. 2 for the present position of the Kalyani Unit of the petitioner No. 1 and has urged that because of non-cooperation and failure to give assistance which was urgently required to make the Kalyani Unit a viable one but the respondent No. 1 and the respondent No. 2 did not respond to the urgent request of the petitioner and that is why the petitioner no. 1 was compelled to close the factory. But so far as the respondent No. 3 is concerned it has nothing to do with any such assurance given by the respondent No. 2. The respondent No. 2 has, however, clearly challenged the contention of the petitioner that any oral assurance was given for any further assistance apart from that indicated in the terms of Settlement dated 23rd March 1984 had been given. However, it is not necessary in this case to enter into this disputed fact. The fact that any assurance was given by the respondent No. 2 to the petitioners had nothing to do with the respondent No. 3 who was only interested in getting its dues to be liquidated. As the petitioners flatly refused to pay any loan or to give any definite assurance for such repayment, the respondent No. 3 was quite justified in issuing the notice dated 9th October, 1987 under S. 30 of the State Financial Corporation Act, 1951 asking the petitioner No. 1 to repay the outstanding dues of the petitioner No. 1. As the petitioner No. 1 did not take any steps to repay the loan nor could give any assurance for such repayment there was no other alternative to the respondent No. 3 than to invoke the provision of S. 29 of the Act. I do not find any mala fide motive on the part of the respondent No. 3 in issuing the notice. As there was sufficient justification for the respondent No. 3 to issue such notices it cannot be said that the said notice was issued in colourable exercise of power. I am not in agreement with the contentions raised by the petitioners that the said notice was issued on non-application of mind. There does not appear to be any such serious irregularity in the notice under S. 29 nor is there any special circumstance for this Court to interfere in any manner with the issuing of the notice under S. 29 of the Act.
30. In the result, there is no merit in the contentions of the writ petitioners. The writ
petition is, therefore, dismissed. All interim orders are vacated. The respondent No. 3 is at liberty to proceed further in terms of the notice under S. 29 of the Financial Corporation Act, 1951 in accordance with law.
31. There is no order as to costs.
32. On the prayer of the learned Advocate appearing for the Writ petitioner the operation of this judgment and order is stayed for a period of a fortnight from date.
33. All parties are to act on a signed copy of the operative part of the judgment and order upon usual undertaking.
34. Petition dismissed.