NAGDA PETROCHEM PRIVATE LIMITED vs UTTAR PRADESH FINANCIAL CORPORATION

A complaint under Section 36A of the MRTP Act, 1969 (the Act for brief) has been made charging the respondent, Uttar Pradesh Financial Corporation with adoption of and indulgence in unfair trade practices. It has been alleged that although the respondent sanctioned a loan of Rs. 27.75 lakhs to the applicant/complainant for setting up an oil refinery unit for refining used lubricating oil, it actually disbursed an amount of Rs. 23,73,131/- only, in instalments of Rs. 7,80,389/-, Rs. 5,22,375/-, Rs. 5,64,880/- and Rs. 3,36,310/- and Rs. 80,290/- and deducted illegally various amounts as incidental charges. The grievance of the applicant/complainant is that due to disbursement of loan in instalments and after long intervals, the applicant/complainant''s oil refinery unit did not do well and as a result it incurred heavy losses. It has been further complained that the respondent, instead of helping the applicant/complainant, issued a notice under Section 29 of the State Financial Corporations Act, 1951 threatening to take over the unit and dispose it off in order to realise the outstanding dues.

AN application under Section 12A of the Act for ex parte ad interim injunction has also been made for restraining the respondent from taking possession of the unit in pursuance of the demand notice issued under Section 29 of the State Financial Corporations Act. The above application was considered on 24th September, 1997 and by virtue of an ex parte order passed on that day, operation of the demand notice of the respondent dated the 2nd July, 1997 was stayed. The interim relief application has been under consideration for final disposal. Although the respondent''s reply to the application was submitted on 20th November, 1998, rejoinder thereto could not be filed by the applicant/ complainant. Finally arguments by the learned Advocates for the applicant/complainant as well as the respondent have been heard on 10th May, 1999. As mentioned above, ex parte ad interim relief has already been granted to the applicant/ complainant and the operation of the demand notice under Section 29 of the State Financial Corporations Act, 1951 has been stayed.

In order to determine and decide whether prima facie, any unfair trade practice has been adopted or indulged in by the respondent by issuing the demand notice, it is necessary to refer to Section 29(1) of the State Financial Corporations Act, 1951 which reads as under : "Where any industrial concern, which is under a liability to the Financial Corporation under an agreement, makes any default in repayment of loan or advance or any instalment thereof or in meeting its obligations in relation to any guarantee given by the Corporation or otherwise fails to comply with the terms of its agreement with the Financial Corporation, the Financial Corporation shall have the right to take over the management or possession or both of the industrial concern, as well as the right to transfer by way of lease or sale and realise the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation."

From the facts of the case as contained in the complaint, it appears that the applicant/ complainant is a defaulter and has not repaid the entire amount of the loan and the interest accrued thereon to the respondent, and in order to recover its dues from the applicant/complainant, the respondent has invoked the provisions of Section 29 of the State Financial Corporation Act, 1951 and issued the demand notice. It has been admitted by the applicant/complainant that loan of Rs. 27.75 lakhs was applied for and sanctioned and the amount of Rs. 25,33,638/- is still to be repaid to the respondent. It is also not in dispute that an agreement spelling out terms and conditions on which loan is sanctioned was signed by the applicant/complainant and one of the stipulations in the agreement is that in case of default, the entire amount including interest will have to be paid on demand. It appears that the relationship between the applicant/complainant and the Financial Corporation is like that of a debtor and a creditor and it is for the realisation of the outstanding amount that a demand notice was sent by the respondent. It is also not disputed that it is in pursuance of the provisions of the State Financial Corporations Act, 1951 that the respondent has initiated action for recovery of the outstanding dues. Section 29 of the State Financial Corporations Act, 1951 confers power on the respondent to take possession of the loanee''s industrial unit in case of default in repayment of loan and interest. The power has been given to the financial corporations in order to save public money from unscrupulous and inefficient entrepreneurs.

IN the present case, it is not disputed or denied that the applicant/complainant is a defaulter and the over dues amount to a little over Rs. 25 lakhs and it is for the recovery of that amount that demand notice under Section 29 of the State Financial Corporations Act, 1951 has been issued. As the relationship between, the applicant/complainant and the respondent is that of a debtor and a creditor, no prima facie case of adoption of unfair trade practices by the respondent has been made out. IN that view of the matter, the interim relief prayed for cannot be granted by this Commission. The demand notice sent by the U.P. Financial Corporation, for recovery of its dues, can by no stretch of imagination be construed to be an unfair trade practice within the meaning of Section 36 A of the Act. IN view of our aforesaid discussion, ad interim ex parte injunction granted in favour of the applicant/complainant vide order of 24th September, 1997 deserves to be and is hereby vacated with no order as to costs on the facts and in the circumstances of the case. Ex parte injunction vacated.