TaxTMI 
TaxTMI 
2005 (3) TMI 810
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....erefore liable to be struck down as being violative of Article 14 of the Constitution of India. 2. The matter was heard and an interim order was passed on 24.3.1995 calling upon the financial Corporation to file counter-affidavit and it was directed that in the meanwhile the auction shall not be finalized without considering the objection of the petitioner. Pursuant to the said interim order, a decision was taken by the respondent financial Corporation on 22.4.1995 in the meeting of a Committee of the Corporation whereby it was resolved that since the Corporation had already entered into a lawful agreement with the respondent No. 3 M/s Dass Cold Storage & Ice Factory through Shri K.P. Agrawal, and since the said purchaser had already complied with the terms and conditions and possession has also been handed over to him, there was no ground for the Corporation to resume the proceedings. The Committee also recorded that the offer of the petitioner Shri Subhash Chand (royal was received "very late" i.e. on 14.3.1995 after the sale was finalized on 13.3.1995 in favour of the respondent No. 3, as such, it decided to reject the offer of the petitioner and refund the earnest money deposi....
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.... respondent No. 3 thereafter did not appear on the dates fixed, this Court passed an order on 28.9.2004 for putting the respondent No. 3 to notice by publication in the news-paper which order was complied with. Thereafter, on 16.11.2004 Shri Mahesh Agrawal, Advocate, appeared for the respondent No. 3 and he was commanded by this Court to disclose the status of the property as on date. The matter was taken up on 5.1.2005 and after hearing the parties, this Court in order to ascertain the bonafide of the petitioner on the objections raised by the counsel for the U.P. Financial Corporation, passed an order permitting the learned counsel for the petitioner to make a deposit of ₹ 50 Lacs by way of bank Draft payable to the Registrar General of this Court. The order is quoted herein below:- "List on 8.2.2005. Sri P.S. Baghel, learned counsel for the U.P. Financial Corporation .states that to show his bonafide the petitioner may be directed to deposit a sum of ₹ 50,00,000/- (fifty Lacs) by way of Bank Draft with the Registrar General of this Court on or before 6.2.2005 to which the learned counsel for the petitioner has no objection." 5. Thereafter, the matter was heard o....
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....onclusion of the hearing in this pending matter. 8. Having heard the learned counsel for the parties and having perused the record as produced by the U.P. Financial Corporation, we proceed to deal with the arguments advanced by them. 9. Shri P.S. Baghel, Advocate for the respondent Nos. 1 and 2, made a request to deal with his primary submission to the effect that the writ petition ought to be dismissed as not maintainable in view of the fact that the petitioner is no-one-else but a person set up by the respondent No. 4 - M/s Seema Cold Storage, the principal borrower, whose writ petition No. 7300 of 1995 had been dismissed on 25.2.1997 and the second writ petition filed by the borrower being writ petition No. 37362 of 1997 had also been dismissed for want of prosecution on 27.1.2004. The contention of Shri Baghel is that the idea of filing the present writ petition in effect is mooted by respondent No. 4, who some how the other, wanted the proceedings under Section 29 to be forestalled. To buttress his submission, he has further invited our attention to the fact that the respondent No. 4, who "has not put any appearance in the present writ petition, filed a separate writ petitio....
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.... the petitioner was not a party to the said proceeding, the aforesaid decisions do not in any way bind the petitioner and the petitioner in our considered opinion has every right to maintain the instant writ petition. The objection of Shri P.S. Baghel, therefore, on this account is rejected. 12. Before advancing to deal with the legal submissions, it would be appropriate to narrate the facts which form the basis of our findings given hereinafter. The facts stated in the pleadings are also supplemented by the facts that we have gathered from the record produced before us by the learned counsel for the respondent -financial Corporation dealing with the entire transaction. 13. The respondent -- financial Corporation had extended a loan to the respondent No. 4. On a failure to discharge the aforesaid debts, proceedings were initiated by the U.P. Financial Corporation to put the assets of the respondent No. 4 to sale by taking recourse to proceedings under Section 29 of the State Financial Corporation Act. Negotiations were made with some intending purchasers; to name one of them M/s Ramesh Ice and Cold Storage through Ramesh Chandra Gupta whose offer was accepted. Since they failed t....
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....7 and 8 of the writ petition, it is submitted that the offer of Sri Vinod Kumar Agrawal and Shiv Kumar were received on 8.3.1995 without any pay order amount of earnest money to the answering respondent Corporation, then they were informed by the answering respondent Corporation, that their offer can not be considered because the sale has already been finalized on 2.3.1995 by the Negotiation Committee of the answering respondent Corporation in favour of Respondent No. 3, who made highest offer. After the aforesaid proposed acceptance, the offer was forwarded for finalisation by negotiation Committee of the answering respondent Corporation, the answering respondent Corporation issued a letter on 4.3.1995 in compliance of decisions of Hon'ble Supreme Court, to respondent No. 4, to submit his own offer of the same amount or to bring some buyer of the said amount or higher amount. The answering Corporation further stated in letter dated 4.3.1995, that if the Respondent No. 4 failed to comply the direction of said letter within 7 days then the offer of Respondent No. 3 will finally be confirmed by the answering respondent Corporation. It is further important to state here that the....
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....the records of the Head-Office and the Regional Office have been perused by us. The minutes of 94th negotiation Committee meeting held on 2.3.1995 at the Head Office of the Corporation at Kanpur chaired by Shri Navneet Sahgal, General Manager, as Chairman with 3 other members is extracted herein below: "SALE PROPOSAL OF M/S SEEMA ICE & COLD STORAGE (P) LTD. AGRA The proposal for sale of above noted unit in favour of Sri K.P. Agarwal C/o M/s K.P. Cold Storage was placed before the Committee. The representative of the purchasing concerned was also present. The matter was also discussed with R.M., Agra on phone and it was reported that notice under Section 29 was issued against borrower. The total outstanding in this case was reported as under:- Term Loan -- UPFC with Intt. ₹ 45.00 Lacs Payment to Farmers ₹ 20.00 Lacs Bank Liability ₹ 16.00 Lacs Electricity Liability ₹ 4.00 Lacs ______________ TOTAL = ₹ 85.00 Lacs ______________ Thus, the total liabilities shall be ₹ 85.00 Lacs. The valuation of cold storage is around ₹ 66.00 Lacs. After protracted negotiation, the purchaser agreed to purchase cold storage for sale consideration of &#....
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....the aforesaid approval was tentative subject to the letter dated 4.3.1995. Neither the note sheet nor the minutes dated 2.3.1995 indicate any such thing as suggested by Shri Baghel. However, this matter shall be dealt with us later on. 19. From the records it transpires that an agreement to sell was made in writing which is dated 13.3.1995 between the respondent Nos. 1, 2 & 3. The Stamp Paper for the said agreement to sell was purchased on 10.3.1995. The aforesaid agreement to sell is not a registered document. 20. The petitioner alleges to have tendered his offer on 8.3.1995 and it is further alleged by him that since the Regional Office did not accept the same by hand, therefore, he was compelled to dispatch the same by registered speed-post to the Head office vide letter dated 10.3.1995 accompanied by the requisite amount of demand draft. The aforesaid speed post letter along with the envelope is also available in the records produced before us. The same has been dispatched on 10.3.1995 as is evident from post office stamp thereon. The envelope, however, on the left hand side endorses a No. 199 dated 14.3.1995. The said endorsement does not bear any initials and is in ink. The....
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....as offer as 2.3.1995. It has been asserted that as matter of fact, the date of finalization is 13.3.1995 and, as such, the date 2.3.1995 as mentioned in the counter-affidavit be deleted and its place the same be read as 13.3.1995. This application was filed after 5 years of the filing of the writ petition on 14.2.2000. No orders were passed on the said application and it was directed to be placed on the record. No prayer has been made in the prayer clause of the said application for substituting the date as suggested in the accompanying Affidavit. 23. After the passing of the interim order on 24.3.1995 in the instant petition, the respondent -- financial Corporation rejected the offer of the petitioner vide resolution dated 22.4.1995, the extract whereof is quoted herein below: "In compliance of the aforesaid directions of the Hon'ble High Court, facts and background of the case were examined by the Committee in detail. The Committee, after detailed deliberation and considering the fact that Corporation has already entered into a legal agreement with the purchaser M/s Dass Cold Storage & IC Factory, has received a sum of ₹ 10.00 Lacs being part sale consideration, the ....
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....sis of another fact namely that the principal borrower had been given an opportunity vide letter dated 4.3.1995 and also had the opportunity to avail of the interim order passed in his writ petition on 24.3.1995 quoted herein above, whereby the borrower had been given the liberty to make the entire deposit of sale. The aforesaid facts have been brought to our notice by Shri Baghel to contend that the aforesaid correspondence related to the petitioner and in essence the said writ petition were for the benefit of the petitioner and, therefore, the present writ petition deserves to be dismissed as the petitioner is no-one-else than a person set up by the respondent No. 4. 27. Having traced the aforesaid facts, which are necessary for the adjudication of the controversy and having perused the entire record produced by the respondent - financial Corporation, we now proceed to deal with legal submissions advanced on the basis thereof. 28. The first submission to be dealt with, is, with regard to the scope of interference by way of judicial review in such matters. Shri Baghel relying on the decision of Haryana Financial Corporation and Anr. v. Jagdamba Oil Mills and Anr. 2002 (3) SCC 49....
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....romix Pvt. Ltd. and said that in the matter of sale under Section 29, the State Financial Corporation must act in accordance with the statute and must not act unfairly i.e. unreasonably. If they do their action can be called into question under Article 226. Reasonableness is to be tested against the dominant consideration to secure the best price for the property to be sold. "This can only be achieved when there is a maximum participation in the process of sale and every body has an opportunity of making an offer. Public auction after adequate publicity ensures participation of every person who is interested in purchasing the property and generally secures the best price". Adequate publicity to ensure maximum participation of bidders in turn requires that a fair and practical period of time must be given to purchasers to effectively participate in the sale. Unless the subject matter of sale is of such a nature which requires immediate disposal, an opportunity must be given to the possible purchaser who is required to purchase the property on "as us where is basis' to inspect it and to give a considered offer with the necessary financial support to deposit the earnest money an....
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....ated to the conduct of the principal borrower who were persistent defaulters. The Apex Court ruled that at the instance of a dishonest borrower, who has no intention to pay, the courts should be loath to sit in appeal and interfere in the decisions of the financial Corporation. 33. However, the case of Mahesh Chandra (supra) was distinguished in the following manner in Gem Cap's case (supra) which is quoted herein below:- "13. On behalf of the appellant reliance has been placed upon the decision of this Court in Mahesh Chandra v. Regional manager, U.P. Financial Corporation. We have perused the decision. That was a case where the debtor was anxious to pay off the debt and had been taking several steps to discharge his obligation. On the facts of that particular case it was found that the corporation was acting reasonably (sic unreasonably). In that context certain observations were made. The decision also deals with the procedure to be adopted by the corporation while selling the units taken over under Section 29. That aspect is not relevant in this case. We are, therefore, of the opinion that the said decision is of no help to the appellant herein. 34. A perusal of the afo....
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....en received, as alleged by the respondent, has to be carefully noted which is as follows:- 24.2.1995 Advertisement 2.3.1995 Meeting of the negotiation committee at the head Office, Kanpur, accepting the offer of the respondent No. 3 of ₹ 47 Lacs. 4.3.1995 Notice issued by the Corporation to the borrower either to clear all the dues himself or bring a third person. 6.3.1995 Approval by the General manager and the Managing Director to the decision of the negotiation committee dated 2.3.1995. 8.3.1995 The principal borrower (respondent No. 4 herein) receives the letter dated 4.3.1995 -- It is stated that the borrower and the petitioner tendered their offer before the Regional Manager, Agra, which was refused to be received. 10.3.1995 Offer of the petitioner dispatched by Speed-post to the Head Office at Kanpur -- Intimation by the borrower (respondent No. 4) dispatched to the Regional Office intimating the offer of ₹ 59 Lacs of the petitioner. 11.3.1995 A second Saturday. 12.3.1995 A Sunday. 13.3.1995 Unregistered agreement to sell entered into between the financial Corporation and respondent No. 3 giving effect to the decision taken on 2.3.1995 by the negotiation Commit....
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....e courts, following the law laid down by this Court in Shiv Sagar Tiwari v. Union of India (In re, Capt. Satish Sharma and Sheila Kaul)." 39. It is further to be noted that the Apex Court has held that it is imperative to get the goods valued before putting it to sell in the case of Gajraj Jain v. State of Bihar and Ors., reported in (2004) 7 SCC 151, (Paras 13 & 14). The respondent -- financial Corporation in the decision of the negotiation Committee have recorded the valuation of the property at that point of time as ₹ 66 Lacs. 40. In order to test the bona fides of the respondent - financial Corporation in the decision making process it is further necessary to deal with the decision of the negotiation Committee dated 2.3.1995. The aforesaid decision has been quoted herein above for ready reference, A perusal of the said decision would leave no room for doubt that the negotiation Committee had proceeded to consider the offer of the respondent No. 3 without waiting for any other offer to arrive and for all practical purposes had finalized the deal with the respondent No. 3 for ₹ 45 Lacs. It has been further indicated in the note-sheet of the records that upon negotia....
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....o make an offer on the same terms and conditions, then such an approach by the U.P. Financial Corporation, in our opinion, is unreasonable, unfair and non-transparent thereby violative of Article 14 of the Constitution of India. 41. There is no explanation as to what prevented the financial Corporation from disclosing the aforesaid terms and conditions in the notice dated 4.3.1995. In view of this, the petitioner who was a third party and who was put to invitation on the basis of the said notice could not know either from the advertisement or from the said notice about the terms of the deal in the negotiations held on 2.3.1995. 42. Coming to the next aspect of the aforesaid decision making process, it is evident from the record that even though the notice dated 4.3.1995 gave 7 days' time to submit the offer, yet the deliberation of the negotiation Committee and its decisions to accept the offer of the respondent No. 3 was approved both by the General Manager as well as by the Managing Director on 6.3.1995 itself. We had perused the records and had inquired from the learned counsel of the financial Corporation who stated that approval was given by the said Officers by putting ....
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....es that no further instrument was executed until the sale-deed was finally executed and registered on 5.7.1996. At the best the only argument that could be advanced would be the plea of defence available under Section 53A of the Transfer of Property Act. However, as held in the decision of the Apex Court in Delhi Motor Company v. U.A. Basarurkar, AIR 1968 SC 794 (Para 6), Section 53A is only meant to bring about the bar against enforcement of rights by a lessor in respect of the property of which the lessee had already taken possession, but does not give any right to the lessee to claim possession or to claim any other rights on the basis of an unregistered lease. Section 53A of the T.P. Act is only available as a defence to a lessee and not as conferring a right on the basis of which the lessee can claim rights against the lessor. Thus, the respondent No. 3 may be able to utilize the said instrument as against the U.P. Financial Corporation, that too even like a shield and not like a sword. 44. As already brought out herein above, the offer of the petitioner was dispatched on 10.3.1995 by Speed post. It is apparent from the records that the correspondence between the borrower and....
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....nary course of business usage the only reasonable and proper inference is that the payment of such large amount would be made by cheque issued by the Central Government and unless the payee went to collect the cheque personally, the cheque had to be sent by post to the payee. According to this implied term, it must be assumed that unless the cheque was collected personally by the payee it would be sent by post thereby constituting the post office as the agent of the payee for the purpose of receiving the payment. In the present case the payees did not indicate the mode of payment to them inspite of a letter received by them to indicate the mode of payment. The appellant did not even choose to reply to that letter. In these circumstances it was reasonable for the concerned authority to have waited for the cheque to be collected personally by the payee till the last date, i.e. May 31, 1995 and to have dispatched it by post on that day when no one came to collect the cheque personally from the authority. In such a situation, payment by cheque dispatched by post on may 31, 1995 amounted to tender of the payment to the payee on may 31, 1995 itself when the cheque was put in the course o....
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....in that regard. The only inference that can be drawn is that the offer of the petitioner had been received in time and we accordingly hold the same. 47. The aforesaid facts clearly indicate that the respondents had made up their mind to keep out all persons including the petitioner from participating in the offer in a free fair and transparent manner. The delivery of the possession on the same day i.e. on 13.3.1995 on which date the deal is said to be finalized clearly smacks of undue haste on the part of the respondent and, therefore, the action of the respondent -- Corporation is unreasonable. 48. With regard to the aforesaid acceptance and approval already made before the expiry of 15 days, a very peculiar application supported by an Affidavit has been moved for accepting the same on record sworn by none else by than Shri R.K. Srivastava, the senior Jaw Manager; who had also sworn the counter-affidavit earlier on behalf of financial Corporation. The counter-affidavit indicated that the deal had been finalized on 2.3.1995 and the same was sought to be clarified by the application dated 14.2.2000 after 5 years of the filing of the counter-affidavit that the date 2.3.1995 is a wr....
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....ce of an act in a court or office, and that period expires on a holiday, then the act should be considered to have been done within that period if it is done on the next day on which the court or office is open. The reason is that law does not compel the performance of an impossibility. (See hossein Ally v. Donzelle). Every consideration of justice and expediency would require that the accepted principle which underlies Section 10 of the General Clauses Act should be applied in cases where it does not otherwise in terms apply The principles underlying are lex non cogit ad impossibilia (the law does not compel a man to do the impossible) and actus curiae neminem gravabit (the act of court shall prejudice no man). Above being the position, there is nothing infirm in the orders passed by the forums below. However, the rate of interest fixed appears to be slightly on the higher side and is reduced to 9 % to be paid with effect from 3.12.2001 i.e. the date on which the letter was received by HUDA. 50. Applying the principle laid in the aforesaid decision it is apparent that the respondent - financial Corporation ought to have waited for taking a final decision after expiry of the perio....
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....f the petitioner is, therefore, unsustainable and is also set aside, 53. Shri Ravikant, Senior Advocate, has taken us extensively to the judgment of the apex Court rendered in the case of S.J.S. Business Enterprises (supra), A perusal of the decision clearly indicates that having taken note of Mahesh Chandra's case, the Apex Court has clearly ruled that the test of reasonableness to be adopted in such matters is to find out as to whether there has been a dominant consideration made by the Corporation to secure the best price for the property to be sold which should be reflected in the decision making process. This should be ensured by adequate publicity to ensure maximum participation of bidders providing with a fair and practical period of time to the purchasers to effectively participate in the sale. Again in Gajraj Jain's case the aforesaid proposition has been reiterated in paras 9 & 10 of the said decision by referring to other decisions in this regard. The Corporation according to the Apex Court hold the property in trust and the decision in Gajraj Singh's; case leaves no room for doubt that the property should be sold in such a manner that it fetches the best po....
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....ion enters into an agreement for sale of the assets with Respondent 4 without ascertaining the market value and realizing the sale proceeds for distribution. The assets are agreed to be sold for ₹ 198.85 Lakhs merely by adding the Corporation dues and the claim of Central Bank of India. Even this sale consideration is not realized in full. The Corporation accepts downright payment of ₹ 28.85 Lakhs (its own dues) and the balance of ₹ 170 Lakhs is received by it in the form of a promise to it by Respondent No. 4 to pay the dues of Central Bank of India, which is not even a party to the arrangement. According to Kanga and Palkhiwala: Law and Practice of Income Tax (8th Edn., p.47), a promise to pay the debt at a future date is no realization. In the case of M.C. Chacko v. State Bank of Travancore it has been held by this Court, that a mere undertaking to discharge an obligation or liability of the debtor may at the highest amount to indemnity, however, it is not enough to charge the property/fund with the debt. Further, according to Mulla and Pollock: Contract Act (12th Edn., p. 106), contracting parties may confer rights or benefits upon a third party in the form of....
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....e other creditor or any other loan or debt dues against the respondent No. 4 -- borrower. The financial Corporation, therefore, having hastily gone through the deal in an absolutely unfair, unreasonable and non-transparent manner has led us to conclude that the action of the financial Corporation cannot with stand the test of Article 14 of the Constitution of India. 55. The action of the respondent can also be described as an action actuated by malice in law. An action is malafide in law if it is contrary to the purpose for which it was authorized to be exercised. It is worthwhile to quote the words of Lord Halsbury in Sharpe v. Wakefield 1891 AC 173 at P. 179: "..........when it is said that some thing is to be done within the discretion of the authorities that something is to be done according to the rules of reason and justice, not according to private opinion.........according to law and not humour. It is to be, not arbitrary, vague; fanciful, but legal and regular." Likewise, if there were no grounds, as observed by Lord Morton is Ross v. Papadopollos (1958) 2 AER 23 at p. 33, ' on which the authority concerned could be satisfied, the court might infer either that the....
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....3. In our opinion, there being no offer by M/s Dass Cold Storage, there could not have been any such acceptance in favour of the said firm and transfer of the property by the respondents in the aforesaid manner. 58. This takes us to the final stage of the case as to what relief should be extended to the petitioner. On the basis of the finding arrived at hereinabove, we are of the opinion that the entire deal in favour of the respondent No. 3 deserves to be struck down. We, accordingly, quash the entire proceeding of sale conducted in favour of the respondent No. 3 and declare it to be a nullity including the execution of the sale-deed in favour of the respondent No. 3. 59. The Apex Court has time and again ruled that the parties to litigation upon the termination thereof should be relegated to the same position as on the date of the institution of the proceeding. The following extract from the case of Beg Raj Singh v. State of U.P. and Ors. reported in (2003) 1 SCC 726 is as under.- "........... A plaintiff or petitioner having been found entitled to a right to relief, the court would as an ordinary rule try to place the successful party in the same position in which he would h....
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....ns renders a transfer made during the pendency of the suit subservient to the rights of the plaintiff seeking specific performance of a prior contract entered into by the vendor in his favour and when on account of the operation of the doctrine of lis pendens such conveyance is treated as if it had never any existence, the subsequent transferee, even though he had obtained the transfer without notice of the original contract, cannot set up against plaintiff-contractor any right; for it would defeat the rule of lis pendens which is founded upon public policy. And considered in that manner, Section 52 of the T.P. Act is not subject to S. 19(b) of the Specific Relief Act. 8. We may yet arrive to a similar conclusion in a different manner. "A judgment inter pares raises an estoppel only against the parties to the proceeding in which it is given, and their privies, for example, those claiming or deriving title under them." (Halsbury's Laws of England, Third Edition, Volume 15, para 372). The transferee pendente lite would be treated as a representative in interest of the parties to the suit and the judgment which has been pronounced, in the absence of fraud and collusion, would ha....