TaxTMI 
TaxTMI 
1975 (4) TMI 138
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....tions on behalf of the petitioner, may briefly be stated. The writ petition schedule properties consisting of both movable and immovable properties, which are necessary for the purpose of maintaining the Khandasi Sugar factory situated at Narasmhunipeta, Bobbili Taluk, belonged to Sri Venugopal Khandasari Sugars of which the 5th respondent was the Managing Partner. The 5th respondent approached the 2nd respondent for a loan of Rs. 1,50,000. It was sanctioned upon the terms and conditions and against the security mentioned in the mortgage deed executed and registered on 26-11-1963 by the 5th respondent in favour of the 2nd respondent. The loan was subsequently reduced to Rs. 1,24,000 and the same had to be repaid by instalments. On 11-2-1966 the first instalment was paid. On 23-10-1967 the petitioner wrote a letter to the 2nd respondent stating that the petition-schedule property was sold to them and that they will be responsible for the repayment of the loan amount by instalments due to the 2nd respondent. The petitioner having thus come into possession of the property become liable to repay the loan amount, but failed to pay off the arrears. In this regard and in regard to the tra....
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....29 in selling the Khandasai unit to the 4th respondent is illegal and void. The principal grounds of attack against the validity of Section 29 of the Act are that the special procedure thereunder is more drastic and prejudicial than the procedure contemplated under Section 31, and though both these procedures cover the same filed there are no guidelines provided as to when the procedure under Section 29 can be resorted to, thereby permitting discrimination among the industrial concerns to whom the State Financial Corporation has given financial aid. The vice of discrimination, according to the learned counsel, lies in the unguided and unbridled power of singling out some industrial concerns amongst the same class of industrial concerns for being subjected to the special procedure under Section 29 which is more drastic and arbitrary. 4. To appreciate the contention of the learned counsel it is necessary to refer to the provisions of Sections 29 and 31 of the Act. Section 29 is in the following terms : "29. Rights of Financial Corporation in case of default : (1) Where any industrial concern which is under a liability to the Financial Corporation under an agreeme....
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....ent of claims by Financial Corporation : (1) Where an industrial concern, in breach of any agreement, makes any default in repayment of any loan or advance or any instalment thereof or otherwise fails to comply with the terms of its agreement with the Financial Corporation requires an industrial concern to make immediate repayment of any loan or advance under Section 30 and the industrial concern fails to make such repayment, then, without prejudice to the provisions of Section 29 of this Act and of Section 69 of the Transfer of Property Act, 1882 any officer of the Financial Corporation, generally or specially authorized by the Board in this behalf, may apply to the District Judge within the limits of whose jurisdiction the industrial concern carries on the whole or a substantial part of its business for one or more of the following reliefs, namely : (a) for an order for the sale of the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation: or (b) for an ad interim injunction restraining the industrial concern from transferring or removing its machinery or plaint or equipment from the premises of the industrial concern without the per....
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....n providing for drastic procedure will be hit by Article 14 of the Constitution, as the same suffers from the vice of discrimination. In State of West Bengal v. Anwar Ali Sarkar, the Supreme Court, while considering the constitutional validity of the West Bengal Special Courts Act, observed as follows: "A rule of procedure laid down by law comes as much within the purview of Art. 14 as any rule of substantive law and it is necessary that all litigants, who are similarly situated, are able to avail themselves of the same procedural rights for relief and for defence with like protection and without discrimination. If a legislation is discriminatory and discriminates one person or class of persons against others similarly situated and denies to the former the privileges that are enjoyed by the latter, it cannot but be regarded as "hostile" in the sense that it affects injuriously the interests of that person or class." In Kathi Raning v. State of Saurashtra, , the Supreme Court, while considering the constitutional validity of the Saurashtra State Public Safety Measures (Third Amendment) Ordinance, 1949 pointed that the claims of equal protection under Art.. 14 ar....
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....ions, observed : "There are cases where the legislature itself makes a complete classification of persons or things and applies to them the law which it enacts, and others where the legislature merely lays down the law to be applied to persons or things answering to a given description or exhibiting certain common characteristics, but being unable to make a precise and complete classification, leaves it to an administrative authority to make a selective application of the law to persons or things within the defined group, while laying down the standards or at least indicting in clear terms and underlying policy and purpose, in accordance with, and in fulfilment of, which the administrative authority is expected to select the persons or things to be brought under the operation of the law. Whether an enactment providing for special procedure for the trial of certain offences is or is not discriminatory, and violative of Art. 14 must be determined in each case as it arises, for, no general rule applicable to all cases can safely be laid down. In the case of such a statute it could make no difference in principle whether the discretion which is entrusted to the exe....
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.... to the discretion of the Government to select or classify the persons or things for applying these provisions according to the policy or the principle laid down by the statute itself for guidance of the exercise of discretion by the Government in the matter of such selection or classification." Their Lordships further observed : "In the tempo of the prevailing conditions in modern society events occur which were never foreseen and it is impossible for Parliament or any legislature to anticipate all events or to provide for all eventualities and, therefore, it must leave the duty of taking the necessary action to the appropriate Government." 8. The learned counsel for the petitioner not only referred to the above mentioned decisions but also relied on Jyoti Pershad v. Union Territory of Delhi, , and contended that where there are two procedures, one being more drastic, operating in the same field the provision providing for such a drastic procedure should be struck down, particularly when there are no guidelines. In the above mentioned decision their Lordships, after referring to Ram Krishna Dalmia v. Justice Tendolkar, pointed out that : "It is manifest tha....
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....electing a prejudicial procedure, out of the two open for selection, is hit by Art. 14 of the Constitution." Again in paragraph 5 of the judgment it is observed : "If the two sets of rules were in operation at the material time when the enquiry was directed against the respondent and by order of the Governor, the enquiry was directed under the Tribunal Rules which are "more drastic" and prejudicial to the interests of the respondent, a clear case of discrimination arises and the order directing enquiry against the respondent and the subsequent proceedings are liable to be struck down." It may be noticed that their Lordships were referring to a case of clear discrimination resorted to without any reasonable basis. The learned counsel for the petitioner also relied on Northern India Caterers (Pvt) Ltd., v. State of Punjab, . The majority in that case took the view that : "If the ordinary law of the land and the special law provide two different and alternative procedures one more prejudicial than the other, discrimination must result if it is left to the will of the authority to exercise the more prejudicial against some and not against the rest." 10. But t....
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....o get possession of the property quickly and the other which would be prolonged one, to resort to that latter. Administrative officers, no less that the courts, do not function in a vacuum. It would be extremely unreal to hold that an administrative officer would in taking proceedings for eviction of unauthorised occupants of Government property or Municipal property resort to the procedure prescribed by the two Acts in one case and to the ordinary Civil Court in the other. The provisions of these two Acts cannot be struck down on the fanciful theory that power would be exercised in such an unrealistic fashion. In considering whether the officers would be discriminating between one set of persons and another, one has got to take into account normal human behaviour and not behaviour which is abnormal. It is not every fancied possibility of discrimination but the real risk of discrimination that we must take into account. This is not one of those cases where discrimination is writ large on the face of the statute. Discrimination may be possible but is very improbable. And if there is discrimination in actual practice this Court is not powerless. Furthermore, the fact that the Legisla....
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....conditions in the modern society it is impossible for any legislature to anticipate all events or to provide for all eventualities. So the legislature can validly leave it to the discretion of the Executive Body to select a particular procedure. The discretion conferred on official agencies in such circumstances cannot be condemned outright as an unguided discretion if the statute indicates the guidance for the Executive for exercising such a discretion. Such guidance, although it is not there in the statute in the form of specific provisions, can as well be inferred from the preamble, surrounding circumstances and the provisions of the statute themselves explained and amplified by affidavits. It is only in such cases where there are no guidelines specifically in the statute and where the necessary guidance cannot also be gathered from an examination of the aforesaid aspects, the power conferred on the administrative body to choose one procedure or the other, can be condemned in an unguided one and the provision of law providing for such an unguided power suffers from the view of discrimination. But a statute which satisfied these tests cannot suffer from the vice of unconstitution....
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....the Board of Directors and shall be assisted by an Executive Committee and the Managing Director. As we find in Sen. 10, very responsible and highly placed persons will be the Directors of the Board. Section 24 days with the 'general duty of the Board' and lays down that the Board is discharging its functions under the Act shall act on business principles, due regard being had by it to the interests of industry, commerce and the general public. Again under Section 25 it is the Corporation as managed by the Board, that is empowered to grant loans or advances to the industrial concern, repayable within a period not exceeding 20 years. Section 27 empowers the Financial Corporation to impose such conditions as it may think necessary or expedient for protecting the interests of the Financial Corporation and securing that the accommodation granted by it is put to the best use by the industrial concern. Now having regard to the scheme of the Act and these general provisions, Sections 29 and 31 are incorporated for safeguarding the interests of the Corporation. As already mentioned the two procedures mentioned in Sections 29 and 31 are different and there are no provisions by way o....
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....erred for investigation by the Commission would not be discriminatory". However, the petitioner has no right to say that the Corporation should have no choice of proceedings when such a course is not barred from withdrawing its own application filed under Section 31 of the Act. As long as Section 29 is a valid piece of legislation, the Corporation has every right to proceed under Section 29, unless it is shown that it has acted arbitrarily or maliciously. Having held that Section 29 of the Act is not violative of Article 14 of the Constitution, now it remains to be seen whether in the instant case the Corporation has acted arbitrarily. 17. As already mentioned, the petitioner wrote a letter to the 2nd respondent on 23-10-1967 mentioning that they have agreed to purchase the Khandasari unit from the 5th respondent and they are agreeable to pay the amount due to the 2nd respondent in instalments. On 28-11-1967 the 2nd respondent wrote to the petitioner complaining that the petitioner did not furnish their said partnership deed and other records to enable the 2nd respondent to take further action and also requested the petitioner to take immediate action, so that the affairs could ....
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....of 1972 on 10-8-1972. As already mentioned, during the pendency of the O.P. also the attempts of the 2nd respondent to safeguard the interests of the Corporation were not fruitful. The petitioner, in spite of being in possession and running the unit failed to make the payment of the arrears due and thus committed wilful default. The proceedings in O.P. 47 of 1972 disclose that the matter dragged on till 27-8-1973. During the pendency of the O.P. the 2nd respondent-Corporation being anxious to safeguard its own interests, brought the matter before the Board of Directors at a meeting held on 27-7-1973 and the Board after considering the facts and circumstances authorised the Managing Director to take action under Section 29. A true copy of the resolution attested by the Managing Director is placed before us and the resolution is numbered as 25 (e) which reads as follows: "25 (e) SRI VENUGOPALA KHANDASAI SUGARS NARASIMHUNIPETA, BIBBILI TALUK PROCEEDINGS FILED UNDER SECTION 31 OF THE STATE FINANCIAL CORPORATIONS ACT -- PENDING THIRD PARTIES INTERESTED IN PURCHASE OF THE UNIT -- UNDER SECTION 29 OF THE STATE FINANCIAL CORPORATION ACT AND SELL THE SAME SOUGHT. ---------....
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.... any amendments thereof made from time to time. Clause VII (6) authorises the Corporation to take all the actions permissible including taking over the management as well as the right to sell. The language of the said clause is in substance the same basis found in Section 29. When the parties by way of an agreement, have agreed for such a course which is permissible under Section 29, a valid provision of law, the petitioner who got into the shoes of the 5th respondent who was a party to this agreement cannot complain that he was not given notice of the proposed action under Section 29. As already mentioned, the Corporation under the statute can choose either of the procedures and having regard to the language of Section 29 and clauses VI (23) and VII (6) of the agreement, the question of putting the petitioner on notice does not arise. 19. But in this case we are satisfied that the petitioner in fact was informed and he had knowledge of the likelihood of the Corporation proceeding under Section 29. In A.K. Kraipak v. Union of India, it was held that "The concept of natural justice has undergone a great deal of change in recent years. What particular rule of natural just....