Bihar State Financial ... vs Upendra Kumar Sinha
2021 Latest Caselaw 651 Jhar

                                          1                      L.P.A. No. 350 of 2018


           IN THE HIGH COURT OF JHARKHAND AT RANCHI

                             L.P.A. No. 350 of 2018

     1. Bihar State Financial Corporation, a Corporation under BSFC Act, having
        its registered office at Frazer Road, P.O. G.P.O., P.S. Kotwali, District-
        Patna-800 001
     2. Managing Director, Bihar State Financial Corporation, having its office at
        Frazer Road, P.O. G.P.O., P.S. Kotwali, Town and District- Patna-800 001
        (Bihar)
     3. Branch Manager, Bihar State Financial Corporation, having its office at
        64-P, Industrial Area, Kokar, P.O. Kokar, P.S. Sadar, Town and District-
        Ranchi                                    ... Respondents/Appellants
                                 -Versus-
        Upendra Kumar Sinha, son of Late Maheshwari Prasad Singh, resident of
        House No.16, Road No. 12, P.O. & P.S. Rajendra Nagar, District- Patna,
        Bihar through its Power of Attorney Holder Dr. Rakesh Kumar Singh, son
        of Sri Amaresh Kumar Singh, resident of village Pandoi, P.O., P.S. &
        District- Jehanabad, Bihar, at present residing in the premises of M/s. K.P.
        Automobiles Services Centre, Koker Industrial Area, Koker, P.S. Sadar,
        Town and District- Ranchi                 ... Writ Petitioner/Respondents

                    .........

CORAM: HON'BLE THE CHIEF JUSTICE HON'BLE MR. JUSTICE SANJAY KUMAR DWIVEDI .........

For the Appellants       :   Mr. Ashok Kumar Yadav, Advocate
For the Respondent       :   Mr. A.K. Sahani, Advocate
                             Mr. Vikesh Kumar, Advocate
                    .........

C.A.V. on: 07/09/2020                                  Delivered on: 11/02/2021
Per Sanjay Kumar Dwivedi, J:

1. Heard Mr. Ashok Kumar Yadav, learned counsel for the appellants and

Mr. A.K. Sahani, learned counsel for the respondent.

2. This Letters Patent Appeal has been heard through Video Conferencing in

view of the guidelines of the High Court taking into account the situation arising

due to COVID-19 pandemic. None of the parties have complained about any

technical snag of audio-video and with their consent this matter has been heard.

3. The instant intra-court appeal has been filed under Clause 10 of Letters

Patent against the judgment dated 19.02.2018 passed in W.P.(C) No. 5298 of

2008, whereby, the writ petition has been allowed with direction to the

respondents/appellants to take a final decision in terms of the observations and

directions made in the order dated 19.02.2018 within a period of one month from

the receipt of a copy of that order and the writ petitioner/respondent was directed

to pay the amount so calculated within a period of 15 days from the date of

receipt of the communication, failing which, the benefits under one time

settlement will stand withdrawn.

4. The brief facts of the case, as per the pleadings made in the writ petition,

are described herein below for proper adjudication of the lis :-

"M/s Neel Kamal Engineering and Body Builder (P) Ltd., Ranchi

was granted a term loan by respondent no.1/appellant no.1. When the

said unit failed to pay the dues, the Executive Committee of

respondent no.1/appellant no.1 by its order dated 22.07.1995,

decided to take possession and sale the mortgage of the aforesaid

company and, accordingly, proposed sale of the said unit was

advertised inviting tenders on 14.12.1995. On 22.07.1998, the

Executive Committee of respondent no.1/appellant no.1, vide Item

No. 5789 in the meeting, decided to sell the mortgaged assets of M/s

Neel Kamal Engineering and Body Builder (P) Ltd., for total

consideration of Rs.35 Lakhs. On 04.01.1999, the writ

petitioner/respondent made a representation before respondent

no.2/appellant no.2 intimating that he was ready to deposit the

amount subject to condition of waiver of interest and passing on

good title free from any liability and encumbrances as a condition of

contract. He also requested respondent no.2/appellant no.2 to take

immediate steps before the Debts Recovery Tribunal to get the

property released from all liabilities. By letter dated 11.02.2000 i.e.

after lapse of 13 months, the Deputy Manager, Zone-IV of

respondent no.1/appellant no.1 intimated the writ

petitioner/respondent that the Corporation has absolute right to sell

the mortgaged assets and he advised the writ petitioner/respondent to

pay the initial cash down amount of sale in terms of the sale order

dated 17.08.1998 within 21 days from the date of issuance of the

letter. Although the sale order was issued on 17.08.1998, but the

matter remained pending in the hands of the Corporation till

11.02.2000 and, thereafter, the writ petitioner/respondent complied

with the final decision communicated to him on 11.02.2000 by

depositing initial cash down payment. On 28.02.2000, the writ

petitioner/respondent deposited the required amount. On 12.07.2000,

the writ petitioner/respondent submitted a draft copy of guarantee,

hypothecation, agreement etc. for execution which was duly received

in the office of respondent no.3/appellant no.3 on 21.07.2000. On

26.07.2000, an agreement for sale-cum-payment of balance loan was

executed by and between respondent no.1/appellant no.1 and the writ

petitioner/respondent. In Clause-5 of the said agreement, it was

indicated that the interest would be calculated and realized on

quarterly/rest basis from the date of execution of the sale agreement.

The said agreement for sale and even the letter dated 11.02.2000 did

not contain any clause of imposing any interest for the period in

between sale order and agreement for sale. The Power of Attorney

holder of the writ petitioner/respondent on 26.07.2000 requested for

revision of repayment schedule and intimated that the said agreement

was subject to objection of the date of initial payment. The said letter

was duly received in the office of respondent no.3/appellant no.3 on

26.07.2000. In terms of such agreement, the writ

petitioner/respondent deposited a sum of Rs.9,65,665/- in the form of

22,000 $ (Dollar) to respondent no.1/appellant no.1. In pursuance of

the said agreement and settlement between respondent no.1/appellant

no.1 and the writ petitioner/respondent, the mortgaged assets of M/s

Neel Kamal Engineering and Body Builder (P) Ltd. were handed

over by respondent no.1/appellant no.1 to the writ

petitioner/respondent. After taking possession and in between

31.12.1998 to 31.01.2006, the writ petitioner/respondent paid a total

sum of Rs.56,76,911/- inclusive of Rs.9,65,665/- against the total

settled amount of Rs.35 Lakhs. All of a sudden, the writ

petitioner/respondent came to know from a news item published in

"Prabhat Khabar" on 21.09.2007 that amongst others, the unit of the

writ petitioner/respondent has also been put on auction sale, for

which, offers have been invited from intending purchasers. The unit

of the writ petitioner/respondent was mentioned at Serial no.3 of the

said notice showing outstanding dues of Rs.15,45,174/-. The writ

petitioner/respondent preferred a writ petition being W.P.(C) No.

5498 of 2007 for quashing the tender notice dated 21.09.2007. A

Scheme was evolved by respondent no.1/appellant no.1 vide office

order dated 09.03.2002, whereby, it was intimated that the

application may be submitted for liquidation of dues in terms of the

said Scheme after deposit of 5% of the total dues. On 11.10.2007, the

writ petitioner/respondent made an application along with a cheque

of Rs.1,70,000/- as application money for settlement of dues under

the said Incentive Scheme dated 09.03.2002. The said application

was duly received in the office of respondent no.3/appellant no.3 on

11.10.2007 along with cheque. On 10.04.2008, the writ

petitioner/respondent further deposited a sum of Rs.10 Lakhs against

the grant of valid receipt No.2806 dated 10.04.2008. On 06.06.2008,

the writ petitioner/respondent requested respondent no.3/appellant

no.3 to communicate him further amount payable by him under the

said Incentive Scheme dated 09.03.2002 on deposit of

Rs.11,70,000/-. As per auction notice, total dues calculated and

shown in the tender notice was Rs.15,45,174/-. Against the said

amount, the writ petitioner/respondent already deposited

Rs.11,70,000/-. By letter dated 07.07.2008, respondent

no.3/appellant no.3 purported to have re-casted the accounts showing

an arbitrary amount of dues asking the writ petitioner/respondent to

pay the said amount without taking into consideration the terms and

conditions of the agreement for sale. On 11.08.2008, the writ

petitioner/respondent raised objection against the said illegal demand

as contained in letter dated 07.07.2008 contending, inter alia, that

after settlement of the said order, agreement for sale was executed on

26.07.2000 and in terms of the said agreement, the writ

petitioner/respondent already paid the amount and, therefore, there is

no justification on the part of the respondents/appellants to demand

interest for the period in between 17.08.1998 to 26.07.2000. The said

objection was duly received in the office of respondent

no.3/appellant no.3. By way of reminder dated 26.08.2008, the writ

petitioner/respondent requested respondent no.3/appellant no.3 to

communicate the decision to the competent authority on the

objection raised by him on 11.08.2008. The respondents/appellants

did not take any step upon the application made by the writ

petitioner/respondent in terms of the Incentive Scheme and the

objection raised by him against the arbitrary demand made in letter

dated 07.07.2008. Being aggrieved with the letter dated 07.07.2008,

the writ petitioner/respondent preferred a writ petition being W.P.(C)

No. 5298 of 2008, which was allowed by the learned Single Judge."

5. It was the case of the respondents/appellants that the mortgaged assets of

M/s Neel Kamal Engineering Body Builders Pvt. Ltd. was sold in favour of the

writ petitioner/respondent and the sale order was issued vide Memo No.275 of

1998-99 dated 17.08.1998 at a total consideration amount of Rs.35 Lakhs and the

purchaser was required to pay Rs.8.75 Lakhs including earnest money of

Rs.20,000/- within one month from the date of issue of sale order. The balance

amount of Rs.26.25 Lakhs was ordered to be converted into term loan repayable

within a period of 7 years in 28 quarterly installments of Rs.93,750/- and the

payment of installment was to be started from 31.12.1998 and the last payment of

installment was to be paid on 30.09.2005. In terms of the sale order dated

17.08.1998, the writ petitioner/respondent was required to make payment of

interest @ 18% with 2% penal interest, if any, on the balance consideration

amount. As per the sale order, the process of execution of sale agreement and

handing over the possession of the assets of the unit was to be completed within a

period of one month from the date of credit of payment made by the purchaser

and interest was to be realized from the date of execution of sale agreement.

Subsequently instead of making payment within 30 days from the date of

issuance of the sale order, the writ petitioner/respondent vide letter dated

16.09.1998 made a request for extension of time for payment of initial amount in

terms of the sale order and as per the request made by the purchaser, the

Managing Director of the Corporation extended time for making payment of the

aforesaid initial cash down payment in terms of the sale order with a condition

that interest @ 18% shall be chargeable on the consideration amount after one

month from the date of issuance of sale order and, accordingly, the said decision

of the Corporation was communicated to the writ petitioner/respondent vide

Memo no. 403/98-99 dated 03.11.1998. The initial amount could not be deposited

by the writ petitioner/respondent within the extended period and again sought for

extension of time for making payment from time to time. Instead of making

payment in terms of sale order, the writ petitioner/respondent continued to raise

issues about the title of the land in view of the ex-parte decree against the

erstwhile promoter in favour of State Bank of India, Ranchi Branch by the Debts

Recovery Tribunal, Ranchi. The respondents/appellants vide letter dated

11.02.2000 informed the writ petitioner/respondent that the Corporation has

absolute right to sale the mortgage assets of the concern and as such the writ

petitioner/respondent was advised to pay the initial cash down amount of sale as

communicated vide sale order dated 17.08.1998 within 21 days from the date of

issuance of letter, failing which, the sale order finalized in favour of the writ

petitioner/respondent shall be treated as cancelled. Thereafter, the writ

petitioner/respondent deposited a worldwide draft of $20,000 dated 28.12.1998

on 29.02.2000 to the respondents/appellants for encashment. The rupees

equivalent of the aforesaid demand draft was Rs.9,45,664/-. Thereafter, a

direction was issued by the head office of the appellants dated 06.06.2000, by

which, the period of execution of the sale agreement and handing over the

possession of the unit was to be completed by 30.06.2000. The branch office of

the respondents/appellants issued letter dated 13.07.2000 to the writ

petitioner/respondent, whereby, the writ petitioner/respondent was informed that

the process of the execution of the sale agreement and handing over the

possession of the unit was to be completed up to 31.07.2000. The sale agreement

was executed on 26.07.2000, but in the sale agreement the schedule for

repayment of loan component has been mentioned that the repayment of schedule

of loan shall commence from 31.12.2000 and end on 03.09.2007 and the period

and amount of installment was kept same as was in the sale order. The writ

petitioner/respondent continued to make default in making payment of

installments in terms of the agreement as a consequence whereof, a notice under

Sections 29 and 30 of the State Financial Corporation Act, 1951 vide reference

dated 09.11.2002 was issued to the writ petitioner/respondent, whereby, the writ

petitioner/respondent was directed to liquidate the dues of the Corporation,

failing which, the Corporation will initiate action under Section 29 of the State

Financial Corporation Act, 1951 for sale of the assets of the company. The writ

petitioner/respondent was again requested to make payment of dues of the

Corporation vide letter dated 12.07.2003. The application made by the writ

petitioner/respondent for settlement of dues under Incentive Scheme was

considered by the Corporation and, accordingly, a revised demand notice for

payment of balance outstanding dues was communicated to the writ

petitioner/respondent vide letter dated 07.07.2008. During the course of

verification of account by the Account Section of the Corporation, it was found

that interest on the consideration amount has not been charged for the period

17.09.1998 to 25.07.2000 and it was further stated that as per the sale order dated

17.08.1998, the writ petitioner/respondent to complete the sale process within one

month from the date of issue of sale order and interest has to be charged after one

month from the date of issue of sale order i.e. interest was to be charged w.e.f.

17.09.1998 and, hence, interest from 17.09.1998 to 25.07.2000 has to be charged

and posted in the account and, accordingly, the account has been re-casted. The

balance outstanding amount as on 29.02.2008 was shown to be Rs.74,763,83/-

and further interest after 29.02.2008 shall be charged till liquidation of account

after crediting of the subsequent payment made by the writ petitioner/respondent.

The writ petitioner/respondent raised objection against the said demand vide

letter dated 11.08.2008, which was duly replied by the Corporation vide letter

dated 30.10.2008, wherein, it was clarified that in terms of the sale order dated

17.08.1998 the initial amount was to be paid within one month from the date of

the sale order and agreement was to be executed one month from the date of

payment of initial amount stipulated in the sale order and interest was to be

charged @ 18% with penal interest with effect from the date of execution of sale

agreement. After issuance of sale order, instead of making payment and

execution of agreement, the writ petitioner/respondent requested for extension of

time to make payment of the initial amount vide letter dated 16.09.1998 and after

considering the request made by the writ petitioner/respondent, the Managing

Director of the appellants allowed time for payment of initial amount with a

condition that interest @ 18% would be charged on the consideration amount

after one month from the date of issue of sale order, which was duly

communicated to the writ petitioner vide letter dated 03.11.1998. Instead of that,

the writ petitioner/respondent made delay in payment of initial amount. The

agreement was executed on 26.07.2000, however the time for payment of initial

amount and execution of agreement, resulting into fixation of date for charging of

interest remained same as given in the sale order, whereas, the delay in payment

of initial amount and execution of agreement was not properly elaborated in the

agreement. It was contended that the demand has been raised in terms of the sale

order issued in favour of the writ petitioner/respondent and only because of the

clerical mistake in the sale agreement, the writ petitioner/respondent cannot

derive any benefit from the same. The prayer of the writ petitioner/respondent for

acceptance of the application dated 10.11.2007 for liquidation of dues under

Incentive Scheme 2002 can be extended to the writ petitioner/respondent only

after making payment of the balance outstanding dues in terms of the fresh

demand issued vide letter dated 07.07.2008. The writ petitioner/respondent was

required to make the entire payment in terms of the Scheme and thereafter the

writ petitioner/respondent is entitled to get the benefit of waiver of penal interest

to the extent of Rs.25,000/- only from the total balance outstanding and since the

writ petitioner/respondent has failed to make the entire payment in terms of the

fresh demand for payment under the Incentive Scheme 2002, the benefit may not

be extended in favour of the writ petitioner/respondent.

6. On the above pleadings, the learned Single Judge vide judgment dated

19.02.2018 decided the lis and allowed the writ petition with direction to the

respondents/appellants to take a final decision in terms of the observations and

directions made in the order dated 19.02.2018 within a period of one month from

the receipt of a copy of that order and the writ petitioner/respondent, as per the

undertaking given by him, was directed to pay the amount so calculated within a

period of 15 days from the date of receipt of the communication, failing which,

the benefits under one time settlement will sand withdrawn. Being aggrieved with

this judgment, the respondents/appellants have preferred this Letters Patent

Appeal.

7. Mr. Ashok Kumar Yadav, learned counsel for the appellants assailed the

impugned order on the ground that extension of time was on the basis of the

condition that the writ petitioner/respondent will make payment of interest from

one month after issuance of sale order and the interest continued to accrue from

one month after the date of issuance of sale order dated 17.09.1998 and merely

because the said clause could not be incorporated in the agreement dated

26.07.2000, the respondents/appellants will not lose interest for the said period.

This aspect of the matter has not been properly appreciated by the learned Single

Judge. He submitted that the learned Single Judge has not appreciated the terms

of the agreement, wherein, the charging of interest from 17.09.1998 on the basis

of the order issued by the Managing Director of the Corporation could not be

incorporated. He further submitted that the learned Single Judge has not

considered the delay in making payment of the initial cash down payment by the

writ petitioner/respondent. He also submitted that even in terms of the sale order,

the payment of the installment was to begin from 31.12.1998 itself, which was

delayed only on the request of the writ petitioner/respondent and for that the

respondents/appellants cannot be blamed. He further submitted that the extension

of time was the conditional extension, which was duly conveyed to the writ

petitioner/respondent and it was never objected by the writ petitioner/respondent

that they are not ready and willing to comply with the said condition for

extension for time. He further submitted that there cannot be presumption of law

that if a particular condition was inadvertently imposed upon the writ

petitioner/respondent and it could not be recorded in the agreement, then it

becomes finality and no claim can be raised on the basis of inadvertence or

mistake committed by either of the parties. The initial cash down payment was

delayed solely on the request of the writ petitioner/respondent. No fault lies on

the part of the respondents/appellants. The writ petitioner/respondent never raised

any objection. He further submitted that the learned Single Judge has erroneously

come to the conclusion that the subsequent agreement entered into between the

parties did not provide for charging of any interest for the period from 17.09.1998

to 26.07.2000. He further submitted that as per the Incentive Scheme of the

Corporation, the entire account has to be waived by the Account Section and then

only the final demand has to be raised for the purpose of making payment and,

accordingly, the Corporation has acted on the basis of the Scheme. The learned

Single Judge has not considered these aspects of the matter while deciding the lis

in the writ petition.

8. Mr. Yadav, learned counsel for the appellants relied upon the judgment

delivered by the Hon'ble Supreme Court in the case of Karnataka State

Industrial Investment & Development Corpn. Ltd. v. Cavalet India Ltd.,

reported in (2005) 4 SCC 456.

9. Paragraph 19 of the said judgment is quoted herein below:

"19. From the aforesaid, the legal principles that emerge are:

(i) The High Court while exercising its jurisdiction under Article 226 of the Constitution does not sit as an appellate authority over the acts and deeds of the Financial Corporation and seek to correct them. The doctrine of fairness does not convert the writ courts into appellate authorities over administrative authorities.

(ii) In a matter between the Corporation and its debtor, a writ court has no say except in two situations:

(a) there is a statutory violation on the part of the Corporation, or

(b) where the Corporation acts unfairly i.e. unreasonably.

(iii) In commercial matters, the courts should not risk their judgments for the judgments of the bodies to which that task is assigned.

(iv) Unless the action of the Financial Corporation is mala fide, even a wrong decision taken by it is not open to challenge. It is not for the courts or a third party to substitute its decision, however, more prudent, commercial or businesslike it may be, for the decision of the Financial Corporation. Hence, whatever the wisdom (or the lack of it) of the conduct of the Corporation, the same cannot be assailed for making the Corporation liable.

(v) In the matter of sale of public property, the dominant consideration is to secure the best price for the property to be sold and this could be achieved only when there is maximum public participation in the process of sale and everybody has an opportunity of making an offer.

(vi) Public auction is not the only mode to secure the best price by inviting maximum public participation, tender and negotiation could also be adopted.

(vii) The Financial Corporation is always expected to try and realise the maximum sale price by selling the assets by following a procedure which is transparent and acceptable, after due publicity, wherever possible and if any reason is indicated or cause shown for the default, the same has to be considered in its proper perspective and a conscious decision has to be taken as to whether action under Section 29 of the Act is called for. Thereafter, the modalities for disposal of the seized unit have to be worked out.

(viii) Fairness cannot be a one-way street. The fairness required of the Financial Corporations cannot be carried to the extent of disabling them from recovering what is due to them. While not insisting upon the borrower to honour the commitments undertaken by him, the Financial Corporation alone cannot be shackled hand and foot in the name of fairness.

(ix) Reasonableness is to be tested against the dominant consideration to secure the best price."

By way of relying this judgment, Mr. Yadav learned counsel for the

appellants submitted that the writ Court may not exercise its power under Article

226 of the Constitution of India as an appellate authority.

10. Learned counsel for the appellants further relied upon the judgment

rendered by the Hon'ble Supreme Court in the case of Micro Hotel Private

Limited v. Hotel Torrento Limited, reported in (2012) 10 SCC 290.

11. Paragraph 22 of the said judgment is quoted herein below:

"22. Litigations in courts are won or lost mainly on facts more on law. Duty is cast on all the parties who appear in a court of law to place the correct facts so that the court can draw correct inferences which enable it to reach a logical, reasonable and just conclusion. Wrong facts lead a court to wrong reasoning and wrong conclusions. Duty is also cast on the court to take note of the facts which are correctly placed. Wrong appreciation of facts leads to wrong reasoning and wrong conclusions and justice will be the casualty. Deciding disputes involves, according to Dias on Jurisprudence, knowing the facts, knowing the law applicable to those facts and knowing the just way of applying the law to them. If any of the abovementioned ingredients is not satisfied, one gets a wrong verdict. A Judge has to reason out truth from falsehood, good from evil which enables him to deduce inferences from facts or propositions. The facts are correctly stated in the instant case but the Division Bench wrongly understood those facts and wrongly applied the law, consequently, wrong inferences were drawn and ultimately reached wrong conclusions."

By way of relying this judgment, learned counsel for the appellants

submitted that litigations in Courts are won or lost mainly on facts more on law.

12. Learned counsel for the appellants further relied upon the judgment

delivered by the Hon'ble Supreme Court in the case of Kerala Financial

Corporation v. Vincent Paul, reported in (2011) 4 SCC 171.

13. Paragraphs 16, 17 and 20 of the said judgment are quoted herein below:

"16. The stand taken by the learned Senior Counsel for Vincent Paul was totally denied by KFC by submitting that the communication dated 31-10-1988 is not absolute but subject to confirmation by Vincent Paul within a week. Admittedly on receipt of the communication dated 31-10- 1988 from KFC, the plaintiff had not sent any reply in the form of confirmation of the said transaction as provided in Clause (1) of Ext. A-2. In such circumstance, it cannot be contended that there is a concluded contract between KFC and Vincent Paul. After 31-10-1988, KFC sent another letter on 5-11-1988 intimating the plaintiff that further proceedings can be finalised only after vacating of the temporary injunction ordered by the Munsif Court, Thrissur. The said letter has not been disputed by Vincent Paul. Inasmuch as KFC has agreed to sell the property in question for Rs. 8.25 lakhs subject to compliance with three conditions mentioned in Ext. A-2, unless the other party to the contract, namely, Vincent Paul conveys his willingness within a week with regard to the terms stipulated therein, he cannot take advantage of mere remittance of a sum of Rs. 10,000 towards earnest money deposit as stipulated in Ext. B-1.

17. These aspects have been correctly appreciated by the trial court and it rightly dismissed the suit filed by Vincent Paul. On the other hand, the High Court, on an erroneous assumption as to the communication dated

31-10-1988 concluded that there was a valid contract and granted a decree for specific performance. We are unable to accept the reasoning of the High Court for granting decree for specific performance in favour of Vincent Paul.

xxx xxx xxx

20. We have already concluded that the decree for specific performance granted by the High Court cannot be sustained. We also observed in the earlier part of our judgment that though KFC has initiated proceedings under Section 29 of the Act, admittedly, the State has not framed rules or guidelines in the form of executive instructions for sale of properties owned by them. Till such formation of rules or guidelines or orders as mentioned above, we direct KFC to adhere to the following directions for sale of properties owned by it:

(i) The decision/intention to bring the property for sale shall be published by way of advertisement in two leading newspapers, one in vernacular language having sufficient circulation in that locality.

(ii) Before conducting sale of immovable property, the authority concerned shall obtain valuation of the property from an approved valuer and in consultation with the secured creditor, fix the reserve price of the property and may sell the whole or any part of such immovable secured asset by any of the following methods:

(a) by obtaining quotations from the persons dealing with similar secured assets or otherwise interested in buying such assets; or

(b) by inviting tenders from the public; or

(c) by holding public auction; or

(d) by private treaty.

Among the above modes, inviting tenders from the public or holding public auction is the best method for disposal of the properties belonging to the State.

(iii) The authority concerned shall serve to the borrower a notice of 30 days for sale of immovable secured assets.

(iv) A highest bidder in public auction cannot have a right to get the property or any privilege, unless the authority confirms the auction-sale, being fully satisfied that the property has fetched the appropriate price and there has been no collusion between the bidders.

(v) In the matter of sale of public property, the dominant consideration is to secure the best price for the property to be sold. This can be achieved only when there is maximum public participation in the process of sale and everybody has an opportunity of making an offer. It becomes a legal obligation on the part of the authority that property be sold in such a manner that it may fetch the best price.

(vi) The essential ingredients of sale are correct valuation report and fixing the reserve price. In case proper valuation has not been made and the reserve price is fixed taking into consideration the inaccurate valuation report, the intending buyers may not come forward treating the property as not worth purchase by them.

(vii) Reserve price means the price with which the public auction starts and the auction-bidders are not permitted to give bids below the said price i.e. the minimum bid at auction.

(viii) The debtor should be given a reasonable opportunity in regard to the valuation of the property sought to be sold, in absence thereof the sale would suffer from material irregularity where the debtor suffers substantial injury by the sale."

14. Per contra, Mr. A.K. Sahani, learned counsel for the writ

petitioner/respondent submitted that admittedly on 26.07.2000, an agreement was

executed between the parties, wherein, both the parties agreed inter alia in

Clause-5 that interest will be realized from the date of execution of sale

agreement i.e. 26.07.2000. In view of such bilateral agreement, demand of

interest from 17.09.1998 to 26.07.2000 is not only unjust, but illegal, arbitrary

and unreasonable. The said demand is in violation of Article 14 of the

Constitution of India. He further submitted that in view of this arbitrariness on

the part of the respondents/appellants, the writ petition is maintainable before this

Court. He also submitted that appellant no.1 is the instrumentality of the State

under Article 12 of the Constitution of India. The respondents/appellants are

required to act fairly, legally and specifically in terms of the agreement, therefore,

the demand made by the respondents/appellants in the impugned letter dated

07.07.2008, contained in Annexure-11 of this Letters Patent Appeal is wholly

illegal, arbitrary and unjust enrichment. He further submitted that it is well settled

that in the matter of travelling and business activities of Public Enterprises,

privilege possessed by the Government is subject to fundamental rights and in

furtherance of the provisions of the State Policy. The contract entered into those

Public Enterprises and Government Company shall not be unfair and opposed to

Public Policy. To buttress his argument, Mr. A.K. Sahani, learned counsel for the

writ petitioner/respondent relied upon the judgment delivered by the Hon'ble

Supreme Court in the case of Central Inland Water Transport Corpn. V. Brojo

Nath Ganguly, reported in 1986 3 SCC 156.

15. Paragraph 93 of the said judgment is quoted herein below:

"93. The normal rule of Common Law has been that a party who seeks to enforce an agreement which is opposed to public policy will be non- suited. The case of A. Schroeder Music Publishing Co. Ltd. v. Macaulay however, establishes that where a contract is vitiated as being contrary to public policy, the party adversely affected by it can sue to have it declared void. The case may be different where the purpose of the contract is illegal or immoral. In Kedar Nath Motani v. Prahlad Rai reversing the High Court and restoring the decree passed by the trial court declaring the

appellants' title to the lands in suit and directing the respondents who were the appellants' benamidars to restore possession, this Court, after discussing the English and Indian law on the subject, said:

"The correct position in law, in our opinion, is that what one has to see is whether the illegality goes so much to the root of the matter that the plaintiff cannot bring his action without relying upon the illegal transaction into which he had entered. If the illegality be trivial or venial, as stated by Williston and the plaintiff is not required to rest his case upon that illegality, then public policy demands that the defendant should not be allowed to take advantage of the position. A strict view, of course, must be taken of the plaintiff's conduct, and he should not be allowed to circumvent the illegality by resorting to some subterfuge or by misstating the facts. If, however, the matter is clear and the illegality is not required to be pleaded or proved as part of the cause of action and the plaintiff recanted before the illegal purpose was achieved, then, unless it be of such a gross nature as to outrage the conscience of the court, the plea of the defendant should not prevail."

The types of contracts to which the principle formulated by us above applies are not contracts which are tainted with illegality but are contracts which contain terms which are so unfair and unreasonable that they shock the conscience of the court. They are opposed to public policy and require to be adjudged void."

By way of relying this judgment, learned counsel for the writ

petitioner/respondent submitted that test of reasonableness and fairness is theory

recognized in law of Contract. The Courts will not enforce and will not call upon

to do so and will strike down unreasonable demand in contract.

16. Mr. Sahani, learned counsel for the writ petitioner/respondent further relied

upon the judgment delivered by the learned Single Judge of this Court in identical

matter of the present appellant i.e. Bihar State Financial Corporation in the case

of Sudist Narain Thakur v. Bihar State Financial Corpn., reported in 2003 SCC

Online Jhar 435.

17. Paragraphs 6 and 7 of the said judgment are quoted herein below:

"6. It is well settled that in the matter of trading and business activities of the Public Enterprises, the immunities and privileges possessed by the Government Companies or Corporation are subject to fundamental rights and in furtherance of the Directive Principles of State Policy. The contract entered into by these Public Enterprises and the Government Company shall not be unconscionable, unfair, unreasonable and opposed to Public Policy. Law in this regard has been settled by the Supreme Court in the case of Central Inland Water Transport Corporation v. Brojo Nath Ganguly, reported in (1986) 3 SCC 156 : (AIR 1986 SC 1571). Their Lordships observed that the test of reasonableness or fairness of a clause in a contract where there is inequality of bargaining power is another theory recognized in the sphere of law of contracts. The Courts will not enforce and will, when called upon to do so, strike down an unfair and unreasonable contract, or a clause in a contract entered into between

parties who are not equal in bargaining power.

7. Admittedly in the instant case the auction of the premises was held on 1-9-94 and the petitioner deposited the amount so directed by the Corporation. Thereafter, final deed of agreement was executed by and between the Corporation and the petitioner and possession of the premises was delivered to the petitioner on 31-1-95. The petitioner, after taking possession of the premises, started carrying on business and also started depositing instalments. In my considered opinion, therefore, the petitioner would be liable to pay interest from the date when the possession of the premises was delivered to the petitioner. The Managing Director rightly issued office order (Annexure 2) directing all the officers of the Corporation to charge interest, from the date when possession of the premises is delivered to the auction purchaser. The clause contained in the agreement is, therefore, unfair, unreasonable and against the public policy and violative of Section 23 of the Contract Act."

By way of relying this judgment, learned counsel for the writ

petitioner/respondent submitted that clause in the agreement is unfair,

unreasonable and against the public policy of India and in violation of Section 23

of the Contract Act.

18. Learned counsel for the writ petitioner/respondent further submitted that in

the present case, Clause-5 of the agreement itself provided that interest shall be

charged from the date of agreement and in that view of the matter, the impugned

letter dated 07.07.2008 demanding interest from the date of decision of sale to the

date of agreement is dehors the agreement and cannot sustain in the eyes of law

as the same is unfair, unreasonable and against public policy and in violation of

Section 23 of the Contract Act as well as Article 14 of the Constitution of India.

He further submitted that it is an admitted fact that the decision for sale of the

assets of the writ petitioner/respondent was taken on 17.08.1998, but due to

pendency of dispute with previous borrower in Debts Recovery Tribunal, the

respondents/appellants could not execute the agreement and deliver possession of

the assets to the writ petitioner/respondent in spite of his request made vide

Annexure-2 dated 04.01.1999. Ultimately only on 26.07.2000, agreement was

executed and possession of the assets was delivered to the writ

petitioner/respondent, therefore, charge of interest for the period between

17.09.1998 and 26.07.2000 is illegal. He further submitted that it is also an

admitted fact that the Incentive Scheme was floated by the respondents/appellants

asking for deposit of 5% amount for settlement of dues in principal amount as

well as in the interest amount. Admittedly, the writ petitioner/respondent opted

for such settlement in terms of Incentive Scheme on 11.10.2007 vide Annexure-

11 with deposit of Rs.1,70,000/- through Demand Draft and, thereafter, on

10.04.2008, he further deposited a sum of Rs.10 Lakhs. Such payments were

received by the respondents/appellants without any objection and instead of

settlement of the dues in terms of the Incentive Scheme, the respondents/

appellants illegally and arbitrarily came out with their illegal demand through the

impugned letter dated 07.07.2008, which was challenged in the writ petition. He

also submitted that it is also an admitted fact that legal formalities for sale were

not completed till 26.07.2000 in respect of execution of agreement for sale for the

said assets in favour of the writ petitioner/respondent. Therefore, the question of

taking any amount of interest for the period prior to 26.07.2000 i.e. the date of

agreement, is illegal in terms of the decision rendered by the Hon'ble Supreme

Court in the case of Narandas Karsondas v. S.A. Kamtamand, reported in AIR

1977 SC 774.

19. Paragraphs 35 and 37 of the said judgment are quoted herein below:

"35. The mortgagor's right to redeem will survive until there has been completion of sale of by the mortgagee by a registered deed. In England a sale of property takes place by agreement but it is not so in our country. The power to sell shall not be exercised unless and until notice in writing requiring payment of the principal money has been served on the mortgagor. Further Section 69 (3) of the Transfer of Property Act shows that when a sale has been made in professed exercise of such a power, the title of the purchaser shall not be impeachable on the ground that no case had arisen to authorise the sale. Therefore, until the sale is complete by registration the mortgagor does not lose right of redemption.

xxx xxx xxx

37. In view of the fact that only on execution, of conveyance, ownership passes from one party to another it cannot be held that the mortgagor lost the right of redemption just because the property was put to auction. The mortgagor has a right to redeem unless the sale of the property was complete by registration in accordance with the provisions of the Registration Act."

By way of relying this judgment, learned counsel for the writ

petitioner/respondent submitted that right to redeem would survive until there has

been completion of sale by the mortgagee/Corporation by a deed.

20. Learned counsel for the writ petitioner/respondent further submitted that

the findings recorded by the learned Single Judge are based upon the pleadings

and documents available on record. He emphasized upon the observations made

in paragraph 5 of the impugned judgment delivered by the learned Single Judge,

whereby, the learned Single Judge has found and held that the agreement has

specific clause for realization of interest from the date of agreement i.e.

26.07.2000. It has also been observed by the learned Single Judge that fault in

execution of agreement beyond stipulated period is on the part of the

respondents/appellants. The respondents/appellants never raised any plea of

perversity in the impugned judgment in the entire memo of appeal. He further

submitted that in ground no. (f) of the memo of appeal at page 40, the

respondents/appellants admitted that inadvertently the particular condition could

not be recorded in the agreement. He also submitted that from this plea it is clear

that the agreement does not contain any clause of charging interest prior to the

date of agreement. He further relied upon the judgment rendered by the Hon'ble

Supreme Court in the case of Indian Explosive Ltd. v. Central Coalfields

Limited, reported in (2019) 16 SCC 258.

21. Paragraph 9 of the said judgment is quoted herein below:

"9. It is, therefore, our considered view that the supplementary clause constitutes a novation of the contract which could not have been done unilaterally and such unilateral action on the part of Coal India Ltd. violates Article 14 of the Constitution of India and, therefore, liable to correction in exercise of the writ jurisdiction. No question of appreciation of evidence can and does arise to answer the above question which to us is self-evident from a mere examination of the two clauses in question. If the action of the State is per se arbitrary as we are inclined to hold in the present case, we do not think it to be in consonance with the cause of justice to relegate the aggrieved party to an alternative remedy as has been done by the High Court. To secure justice is the ultimate aim of all principles of law and we must hold accordingly."

By way of relying this judgment, learned counsel for the writ

petitioner/respondent submitted that a private contract entered by the State, so

long as it discloses a public law element would have to meet the test of Article 14

of the Constitution of India so far as its terms and conditions and application

thereof are concerned.

22. Learned counsel for the writ petitioner/respondent further relied upon the

judgment rendered by the Hon'ble Supreme Court in the case of Surya

Constructions v. State of Uttar Pradesh, reported in (2019) 16 SCC 794.

23. Paragraphs 3 and 4 of the said judgment are quoted herein below:

"3. It is clear, therefore, from the aforesaid order dated 22-3-2014 that there is no dispute as to the amount that has to be paid to the appellant. Despite this, when the appellant knocked at the doors of the High Court in a writ petition being Writ Civil No. 25216 of 2014, the impugned judgment dated 2-5-2014 dismissed the writ petition stating that disputed questions of fact arise and that the amount due arises out of a contract. We are afraid the High Court was wholly incorrect inasmuch as there was no disputed question of fact. On the contrary, the amount payable to the appellant is wholly undisputed. Equally, it is well settled that where the State behaves arbitrarily, even in the realm of contract, the High Court could interfere under Article 226 of the Constitution of India (ABL International Ltd. v. Export Credit Guarantee Corpn. of India Ltd.)

4. This being the case and the work having been completed long back in 2009, we direct Uttar Pradesh Jal Nigam to make the necessary payment within a period of four weeks from today. Given the long period of delay, interest @ 6% p.a. may also be awarded."

By way of relying this judgment, learned counsel for the writ

petitioner/respondent submitted that where the State behaves arbitrarily, even in

the realm of contract, the High Court could interfere under Article 226 of the

Constitution of India.

24. It is admitted case of the respondents/appellants as well as the writ

petitioner/respondent that agreement in question was entered into between the

parties on 26.07.2000. In the aforesaid backdrop, a moot question which falls for

consideration before the learned Single Judge as to whether in terms of Clause-5

of the agreement, the Corporation was entitled to charge interest for the period

from 17.09.1998 to 25.07.2000 or not?

25. The learned Single Judge after considering the facts came to the conclusion

in paragraph 5 of the impugned judgment that there is specific clause for

realization of interest from the date of execution of sale agreement. The sale

agreement was not executed within the stipulated time. The demand of interest

for the period from 17.09.1998 to 25.07.2000 has been made by referring to the

sale order contained in memo no.275/98-99 dated 17.08.1998. The learned Single

Judge came to the conclusion that the basis of demand of interest in the impugned

letter for the said period on the basis of sale order is not sustainable in law.

26. This Court, while considering the aforesaid findings of the learned Single

Judge and the submissions advanced by the learned counsel for the parties,

deemed it fit and proper to examine following questions:-

(i) Whether Clause-5 of the agreement can be overlooked;

(ii) Whether the Court of law can grant any realization in the terms and

conditions of the sale process; and

(iii) Whether the respondents/appellants can take an advantage of their

mistake and can charge interest for the period from 17.09.1998 to

25.07.2000.

Since all these questions are co-related, they are taken up simultaneously.

It is well settled proposition of law that if an agreement is signed by the

parties, all the conditions stipulated in the agreement are required to be followed

by the parties.

It is also well settled proposition of law that the Court of law cannot grant

any realization in the condition stipulated in the agreement. Admittedly, the

agreement for sale was entered into on 26.07.2000, wherein, Clause-5 of the said

agreement stipulates as under:

"5. Interest will be calculated and realised on quarterly/rest basis. Interest

will be realised from the date of execution of sale agreement."

By the impugned letter dated 07.07.2008, the demand of interest has been

made w.e.f. 17.09.1998 to 25.07.2000 on the basis of the sale order issued vide

letter dated 17.08.1998, wherein, it was condition precedent to complete the

process of sale within one month from the date of issue of sale order. By

invoking this clause by way of impugned letter dated 07.07.2008, interest w.e.f.

17.09.1998 to 25.07.2000 has been taken from the writ petitioner/respondent.

Admittedly, the agreement was executed on 26.07.2000. Clause-5 of the

agreement itself speaks that the interest will be realized from the date of

execution of sale agreement, as quoted supra. Thus, the stand taken by the

Corporation cannot be sustainable in the eyes of law.

It is also an admitted fact that in paragraph 28 of the counter affidavit, the

respondents/appellants have stated that only because of clerical mistake in the

sale agreement, the writ petitioner/respondent cannot derive any benefit from the

same. There is no clause to raise any demand for the period from 17.09.1998 to

25.07.2000. After taking possession and in between 31.12.1998 to 31.01.2006,

the writ petitioner/respondent paid a total sum of Rs.56,76,911/- inclusive of

Rs.9,65,665/- against the total settled amount of Rs.35 Lakhs. Thus, the writ

petitioner/respondent has paid much amount, which was payable by him under

the said agreement. A chart showing the payment of the aforesaid amount has

been annexed by the writ petitioner/respondent in Annexure-8 to the writ petition.

It is also well settled proposition of law that a person would be bound by

the terms of the contract subject to course to its validity. A contract in certain

situations may also be avoided. The terms and conditions of the contract can be

altered or modified. That cannot, however, be done unilaterally unless there

exists any provision either in the contract itself or in law. Novation of contract in

terms of Section 60 of the Contract Act must precede the contract-making

process. The parties thereto must be ad idem so far as the terms and conditions

are concerned. With a view to make novation of a contract binding and in

particular some of the terms and conditions thereof, the offeree must be made

known thereabout. A party to the contract cannot at a later stage, while the

contract was being performed, impose terms and conditions which were not part

of the offer and which were based upon unilateral issuance of office orders, but

not communicated to the other party to the contract and which were not even the

subject-matter of a public notice. Moreover, when a contract has been worked

out, a fresh liability cannot be thrust upon a contracting party.

There is no doubt that the High Court restricts itself in such dispute.

However if the State behaves arbitrarily, the High Court could interfere under

Article 226 of the Constitution of India, even in the realm of contract. This aspect

of the matter has been considered by the Hon'ble Supreme Court in Surya

Constructions and Indian Explosives Ltd. (supra). Thus, the stand taken by the

respondents/appellants about the maintainability of the writ petition, is not

accepted by the Court.

27. It has been held by the Hon'ble Supreme Court in paragraph 10 of the

judgment rendered in the case of Radhakrishna Agarwal v. State of Bihar,

reported in (1977) 3 SCC 457, which is quoted herein below:

"10. It is thus clear that the Erusian Equipment & Chemicals Ltd. case involved discrimination at the very threshold or at the time of entry into the field of consideration of persons with whom the Government could contract at all. At this stage, no doubt, the State acts purely in its executive capacity and is bound by the obligations which dealings of the State with the individual citizens import into every transaction entered into in exercise of its constitutional powers. But, after the State or its agents have entered into the field of ordinary contract, the relations are no longer governed by the constitutional provisions but by the legally valid contract which determines rights and obligations of the parties inter se. No question arises of violation of Article 14 or of any other constitutional provision when the State or its agents, purporting to act within this field, perform any act. In this sphere, they can only claim rights conferred upon them by contract and are bound by the terms of the contract only unless some statute steps in and confers some special statutory power or obligation on the State in the contractual field which is apart from contract."

28. In the case in hand, it is an admitted position that there is no right of the

respondents/appellants to charge interest for the period from 17.09.1998 to

25.07.2000. It is also an admitted fact that in paragraph 21 of the counter affidavit

filed in the writ petition, the respondents/appellants have admitted that in the

agreement it is not mentioned that interest will be charged from 17.09.1998 to

25.07.2000. In this regard, reference can be made to Section 34 of the Code of

Civil Procedure, which stipulates that where no contract existed between the

parties regarding payment of interest on delayed deposit or service, interest

cannot be claimed.

29. The judgment relied by Mr. Ashok Kumar Yadav, learned counsel for the

respondents/appellant in Karnataka State Industrial Investment & Development

Corpn. Ltd. (supra) is not applicable in the facts and circumstances of the present

case as in that case, Their Lordships were considering the fact about non-

clearance of dues. The dispute in the present case is different with regard to

interest for the period from 17.09.1998 to 25.07.2000 that too in absence of any

clause to that effect. Thus, the judgment relied by the learned counsel for the

respondent/appellants is not helping the respondents/appellants. On the contrary,

this judgment is helping the writ petitioner/respondent to some extent as two

exceptions for interference by the High Court, as indicated in that judgment

covers the case of the writ petitioner/respondent.

30. The judgment relied by the learned counsel for the respondents/appellants

in Micro Hotel Private Limited (supra) is also not applicable in the facts and

circumstances of the present case as in that case, Their Lordships were examining

the direction of the High Court to offer a fresh benefit of one time settlement

scheme to M/s Hotel Torrento Limited. This is not the dispute herein.

31. The judgment relied by the learned counsel for the respondents/appellants

in Kerala Financial Corporation (supra) is also not helping the

respondent/appellants as in that case the dispute was with regard to consistent

failure of the firm to repay the loan. The interest issue was not there.

32. This Court, after giving thoughtful consideration of the facts, as discussed

herein above and after going across the findings recorded by the learned Single

Judge and after considering the entire aspects of the matter vis-à-vis legal

position and considering the terms of the agreement, is of the view that the

learned Single Judge has rightly quashed the impugned letter dated 07.07.2008

demanding interest for the period from 17.09.1998 to 26.07.2000. The Court did

not find any illegality in the judgment dated 19.02.2018 delivered by the learned

Single Judge in W.P.(C) No. 5298 of 2008.

33. We, therefore, are of the view that the said judgment cannot be

faulted with.

34. In view thereof, the appeal fails and is, accordingly, dismissed.

(Dr. Ravi Ranjan, C.J.) I agree

(Dr. Ravi Ranjan, C.J.) (Sanjay Kumar Dwivedi, J.)

Ajay/ N.A.F.R.