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Judgment
Srinivasan, J.—Though in our view the reference to the Full Bench is unnecessary in this case, we have proceeded to hear the appeal as the
entire case is placed before us. We have also taken into account the fact that the parties would be put to unnecessary hardship, if we return the
reference. The appellant borrowed a sum of Rs. 2,10,000/- from the first respondent Corporation for the purchase of a lorry to be plied as a
public carrier with a National permit. The loan was sanctioned subject to the terms and conditions specified and the appellant accepted the same.
The entire loan was disbursed in three installments as follows:
5-3-1987 Rs. 1,71,500.00
13-3-1987 Rs. 28,564.25
24-4-1987 Rs. 9,935.75
The amount was to be repaid in 56 monthly installments commencing after three months from the date of first disbursement. A Schedule of
repayment was stipulated in the sanction order as follows:
First 10 monthly installments of Rs. 4600 46,000
Next 10 monthly installments of Rs. 4300 41,000
Next 10 monthly installments of Rs. 4200 42,000
Next 10 monthly installments of Rs. 4100 41,000
Next 10 monthly installments of Rs. 3200 32,000
Last 6 monthly installment of Rs. 1000 6,000
Total 2,10,000
It was agreed that interest at the rate of 14.5% per annum with a rebate of 2% per annum for prompt payment, should be paid along with the
principal. The repayment commenced from 1-7-1987 and was to end on 1-3-1992. The vehicle, which was purchased bearing registration
number TCY 5425 was given as a security under a hypothecation bond dated 23-2-1987.
The appellant admittedly did not adhere to the schedule of repayment. He was making payments irregularly. The lowest payment was Rs.
413.90/- and the highest payment was Rs. 20,000/-. He was not making payments every month. He chose to pas as and when he pleased. Thus,
the appellant had been committing default from the beginning. But the Corporation had (sic) taken any steps to enforce the repayment schedule. By
notice dated 29-8-1991, the Corporation informed the appellant that a sum of Rs. 1,93,601.81 was due to wa(sic) principal and a sum of Rs.
25,756.25 was towards interest as on 20-8-1991 and he was required to pay the same. The notice called upon him to intimate the Corporation
within a fortnight of the receipt those of if there was any discrepancy in the figures mentioned as per his records, failing which it would be construed
that the liability to the Corporation as stated in the notice had been accepted by him. There was no response and admittedly the appellant did not
make any payment after that notice. The Corporation seized the lorry on 1-10-1991 by exercising its powers under Cl. 10 of the hypothecation
agreement, which empowered the Corporation to take possession of the hypothecated assets in default of payment of monies and/or installments
due to the corporation. Thereafter, the appellant made a payment of Rs. 15,000 on 4-10-1991 According to the Corporation, he promised to pay
the entire amount due within one month there from. The appellant gives (sic) different version to which we will make reference a little later. The fact
remains that no amount was paid thereafter by the appellant to the Corporation A notice was issued on 14-11-1991 by the Corporation styling
itself as foreclosure notice. The appellant was called upon to pay the entire amount due under the transaction within 15 days from the receipt
thereof. The appellant was informed that if there was a failure on his part to clear the dues, the Corporation would, without any further intimation or
reference to him, proceed to enforce the rights reserved under hypothecation deed including the right to exercise the power of sale etc, under the
provisions of the State Financial Corporations Act. The last paragraph of the notice reads thus.
Please note that we will be constrained to take action under, S 29 and/or S. 32G of the S.F.C. Act without prejudice to our other rights of
recovery of your failure to repay the amount as indicated above.
The appellant claims to have sent a letter by registered post on 26-11-1991 praying for grant of one month''s time to pay the balance and chose
the account. According to the Corporation, it did not receive such a letter. The Corporation made a newspaper publication on 6-12-1991 that the
lorry would be sold in public auction on 12-12-1991. The auction was held on 12-12-1991 and the third respondent herein was the highest bidder
for Rs. 2,58,500. His bid was accepted by the Corporation and the sale was confirmed in his favor as he had complied with the terms of auction
and paid the entire amount.
The writ petition, out of which this appeal arises, was presented in this Court by the appellant on 6-1-1992. In the affidavit filed in support of the
petition, the appellant admitted that he had not been paying the instalments within the stipulated time limits. According to him, the lorry was seized
on 3-10-1991 without any prior notice of seizure or a memo calling upon him to repay the amount due within a stipulated time limit. He proceeded
to state in the affidavit as follows:
However, immediately after seizure, I had gone to the office of the second respondent and met him personally on 4-10-91. I had explained my
inconvenience and grievances in detail and requested him to release the vehicle on payment of Rs.15.000. He had agreed to release the vehicle on
payment of the said amount and I paid the amount on 5-10-91. After the payment of Rs. 15,000 made by me, the second respondent refused to
release the vehicle and asked me to pay a further sum of Rs. 50,000 for the release of the vehicle granting me 3 weeks time. Accordingly, I had
gone to the office of the second respondent with a sum of Rs. 50,000 and met him on 17-11-91 But, he refused :to accept the said amount and
asked me to bring a further sum of Rs. 35,000/- Thus he asked me to pay a total sum of Rs. 85,000 for the release of the vehicle. 1 requested him
to accept the amount of Rs. 50,000/- at first, But, for no reasons slated, he had refused to accept it. Hence, I turned hack vexatiously. While I was
making arrangement for collecting a further sum of Rs. 35,000/- a notice dated 14-11-91 in Ref. No. TllC/TRX/Rc/Legal 91-92 was served on
ma by registered post with acknowledgment due for closing the loan and calling upon me to pay to the first respondent within 15 days from the
date of receipt of the said notice, a sum of Rs. 2,12,337-16 being the entire principal amount of the loan and the interest, etc., thereon up to 13-
11-91 and other charges and dues amounting to Rs. 200 aggregating to Rs. 2,12,537.16 with further interest and additional interest at the
prevailing rates till the date of payment and other charges and dues. In the said notice it had been stated that a sum of Rs.1,90,601.81 being the
instalments of principal and a sum of Rs. 18,735.35 being the interest up to 13-11-91 were over dues besides commitment charges, sundry dues,
expenses and other charges. I humbly submit that the above said notice was served on me on 19-11-91 and immediately after receiving the same I
had forwarded a letter dated 26-11-91 by registered post with acknowledgement due to the second respondent herein agreeing to repay the entire
amount due to be paid to the first respondent within 30 days as 15 days time granted by the second respondent was not sufficient. I have not yet
received the acknowledgement from the second respondent. After forwarding the above dated letter, I had been making arrangements for the
entire payment due to the first respondent Corporation.
He claimed to have gone to the office of the second respondent on 16-12-1991 to make the entire payment due and get the vehicle released,
where he was informed that the vehicle was sold in public auction on 12-12-1991. According to him, he requested the second respondent to
cancel the auction accepting the entire amount from him. but the latter refused to do so. It was stated in the affidavit that he went again on 20-12-
1991 and 23-12-1991 to meet the second respondent. According to him, on 23-12-1991 the second respondent refused to accept his offer of
payment and directed the third respondent to pay the balance due as per the auction terms.
A reference was made thereafter to the petition given by the appellant to the General Manager (Follow up) of the first respondent Corporation
on 31-12-1991 requesting him to except the balance of money and return the lorry to him. According to him, his offer was not accepted and hence
he moved this Court with the writ petition under Art. 226 of the Constitution of India. The prayer in the writ petition was to issue a writ of
Mandamus directing respondents 1 and 2 to accept the outstanding amount due from the petitioner and release the lorry by declaring the auction
conducted by the second respondent as null and void and illegal.
Before proceeding further, it is necessary to point out that the averments made by the appellant in the affidavit filed in support of the writ petition
were not true as is evident from the records placed before us. The passage in the affidavit extracted above is one relating to the happenings
between 4-10-1-91 and 17-11-1991. According to the aforesaid portion, when a sum of Rs. 15,000/- was paid by him after the seizure of the
lorry, he was directed to pay a sum of Rs. 50,000/-, in the first instance and then a further sum of Rs. 35,000/- when he took the sum of Rs.
50,000/- to be paid to the second respondent. He had given a different story in his letter dated 31-12-1991 written to the General Manager
(Follow up) of the first respondent. A copy of the fetter has been produced by the appellant himself and included in his typed set. According to the
said letter, the payments made by him before 3-10-1991 were sufficient only to meet the interest. After the seizure of the lorry on 3-10-1991, he
met the Branch Manager, who wanted him to pay a sum of Rs. 25,000/- and he paid the same. He was directed to pay a further sum of Rs.
75,000/- and before he could make the money ready, the lorry was sold for a low price and that the Branch Manager was not willing to give the
lorry in spite of his offer to pay the entire balance. The letter bears the date 31-12-1991 and the affidavit in the writ petition bears the date 6-1-
1992. Within an interval of a week, the appellant has chosen to give two different versions contradictory to each other. Hence, the appellant is not
entitled to invoke the extraordinary jurisdiction of this Court under Article 226 of the Constitution of India, as he has failed to disclose the facts
truthfully and correctly.
The writ petition was dismissed in limine by a learned single Judge of this Court on 7-9-1992. The learned Judge held that the foreclosure notice
dated 14-11-1991 issued by the Corporation (sic) sufficient in law for the purposes of S. 29 of the State Financial Corporation Act 1951 and
rejected the contention of the appellant that the principles of (sic) justice had been Violated. It was the held by the learned Judge that after by third
respondent had purchased the vehicle in the auction, it was not for this Court to interfere with the exercise of (sic) parties flowing from the bilateral
merely because one of the parties to be a State Undertaking and the remedy of the appellant was only to (sic) his rights if so advised, before some
other forum in accordance with law Obviously the learned judge meant that the appealer had to approach only the civil court (sic) had any right to
be vindicated.
Aggrieved by the dismissal of the writ petition, the appellant preferred the appeal. When it came for admission(sic) Division Bench of this Court
admitted the same and ordered notice to the rest on dents, But, at the same time, the Division Bench passed an order referring the appeal to a
larger Bench and directed to records to be placed before the (sic) the Chief Justice for posting the case before a Full Bench. The order made by
the Division Bench reads as follows
Sitting alone to dispose of Writ (sic) 12959 of 1989, one of us observed whit(sic) to S. 29 of the State Financial come rations(sic) follows: -
Whether action has been taken under S. 29 the Act or not however, is a difference(sic) But without giving any formal notice to the(sic) (sic) in
default and thus without complying the requirements of principles of mutual(sic) a contention may naturally arise, whether in Corporation infringed
any legal right of the (sic) toner or not This question however has the answered by a Division Bench of this court (K Vidhya Kumari v. Managing
Director the Tamil Nadu Industrial investment company saying that the very terms of the borrowing for pelted (sic) the borrower to make payment
and it will not be proper to insist that these, should be a format notice before action is taken I am not writ Appeal No. 530 of 1990(sic) Judgment
dated 11-6-1990. Since reported in 1993 Writ 1.R. 26 ever bound by the said pronouncement of the Bench, but. feel like observing that it is one
thing to say that the terms of the borrowing contemplate action in the event of default under S. 29 of the Act. But it will be against the rules of fair
play, if it is always assumed that the Corporation committed no wrong even if it (which) ignored the defense of the borrower and decided to take
action under S. 29 of the Act, Proper procedure to be adopted for the purpose of realization of its claims from the borrower would be to first give
a notice and if default is unexplainable take action under S. 29. The case in hand is one in which such a plea may arise. Parties are at dispute as to
whether there has been any default in the payment of the installments or not. How to assume that Corporation is right and the borrower is wrong in
asserting that there has been a default or there has been no default ? On a notice being given to the petitioner informing him that he had fallen in
default and that Corporation intended to proceed against him under S. 29 of the Act, the petitioner would have brought to the notice of the
competent authorities in the Corporation that there was no deliberate default and that the Financial Corporation would not be justified in taking
action against the petitioner in accordance with S. 29 of the Act. While some Courts in India have taken the view that S. 29 excludes the
application of the principles of natural justice, some courts have taken the view that S. 29 does not exclude the application of principles of natural
justice See M/s. Kbaravela Industries Pvt. Ltd. v. Orissa State Financial Corporation AIR 1985 Qrisial 53. In view of the conflict arising on
account of the Beach decision of this Court. I would have decided to refer the case to a Division Bench, had I been satisfied that the
Corporation''s action falls under S. 29 of the Act.
The instant appeal is one, in our opinion, in which this Court should give an authoritative judgment. Accordingly we refer the appeal to a larger
Bench.
Frankly speaking, we are unable to appreciate the course followed by the Division Bench. The writ petition was dismissed in limine without
notice to the respondents and there was no opportunity to the respondents to place the facts before the Court. When the appeal was admitted and
notice was directed to the respondents, in the normal course, the Court should have waited for the service of notice and given an opportunity to the
respondents to state their case before deciding the scope of the lis or formulating the questions which arose for consideration in the appeal.
Without doing so, the Division Bench has chosen to make a reference straightway to a Full Bench observing that an authoritative judgment should
be given in this appeal. A reference to a Full Bench can be made if there is a conflict of opinions already between the judgments of this Court or if
a question of law of general importance arises, which requires to be decided by a Bench comprising more than two Judges.
Here, there was no pre-existing conflict of opinions The observations contained in the judgment in W. P. No. 12959 of 1989, 1993 Writ L.R.
made by a single judge and referred to in the Order of Reference were obiter dicta and unnecessary for the judgment in that case as is evident
even from the passage extracted in the Order of Reference. In the said case, there was a seizure of R.C. Book of a hypothecated vehicle by a
Tahsildar of the Corporation, which was held by the learned single judge to be not an action falling under S. 29 of the State Financial Corporations
Act. The learned judge said clearly that he was bound by the pronouncement of the Bench in K. Vidhya Kumari v. Managing Director, The Tamil
Nadu Industrial Investment Corporation and another. W.A. No. 530 of 1990. Since reported in 1993 Writ L.R. 267. He proceeded to dispose of
the writ petition on the footing that S. 29 of the said Act was not applicable to the action taken by the Tahsildar of the Corporation and the same
was without jurisdiction Consequently, he allowed the writ petition and directed the return of the R.C. book to the writ petitioner therein without
delay. There was an appeal against the said order in W.A. No. 104 of 1991 1993 Writ L.R.272. A Division Bench, one of the members of which
was a party to the earlier judgment in K. Vidya Kumari v. Managing Director, Tamil Nadu Industrial Investment Corporation and another W.A.
No. 530 of 1990. Since reported in 1993 Writ L.R. 267, dismissed the appeal without admitting it, holding that there was no dispute before them
that there was no sanction in law for the seizure of the R.C. Book of the vehicle. As the proposition of law laid down by the learned single judge
that the seizure of R.C. Book of a vehicle did not fall under S. 29 of the Act, was not challenged before the Bench, the latter dismissed the appeal
after recording the fact that the direction given by the learned single Judge to return the book had been complied with by the appellants before
them.
Thus there was no conflict between the judgment of the Division Bench in K. Vidhya Kumari v. Managing Director, Tamil Nadu Industrial
Investment Corporation and another W.A. No. 530 of 1990, Since reported in 1993 Writ L.R. 267. and any other judgment of this Court. A
reference was made to the judgment of the Orissa High Court in Kharavela Industries Pvt. Ltd. Vs. Orissa State Financial Corporation and
Others, in the order made in W.P. No. 12959 of 1989 1993 Writ L.R. 272. If the Division Bench in the present case had opined that the view
taken by this Court in K. Vidhya Kumari v. Managing Director, Tamil Nadu Industrial Investment Corporation and another W.A. No. 530 of
1990, Since reported in 1993 Writ L.R. 267. was in conflict with the view taken by the Orissa High Court and that the Division Bench preferred
to agree with the view of the Orissa High Court, it should have stated so in the Order of Reference. We do not find any such statement either in the
Order of Reference or in the order of the single judge in W. P. No. 12959 of 1989 Kharavela Industries Pvt. Ltd. Vs. Orissa State Financial
Corporation and Others, . In the absence of any expression of an opinion which would run counter to the decision taken in K. Vidhya Kumari v.
M Inaging Director, The Tamil Nadu Industrial Investment Corporation and another W.A. No. 530 of 1990, Since reported in 1993 L.R. 267. by
a Division Bench of this Court, which is binding on this Court until it is overruled by a larger Bench, no question of reference to a Full Bench will
arise.
It is also not stated in the Order of Reference that even if there is no conflict of opinions, the question which arises for consideration in the
present case is one of such great importance as to be decided by a Bench comprising of more than two judges. The Division Bench has neither
decided the facts of the case, nor formulated any question of law. It is seen fro the facts that a notice had been admitted issued on 14-11-1991 to
the appellant calling upon him to pay the entire amount do within 15 days therefrom and informing him in unmistakable terms that on his failure to
do so, action will be taken under Ss. 2 and 32-G of the State Financial Corporation. Act without prejudice to the other rights recovery of the
Corporation. The learned single judge, who has dismissed the and petition in limine, has given a clear and ing that the said notice, dated 14-11-
1991 satisfies the requirements of the provision of the Act. Without considering the question whether the finding of the learned single judge is
correct or not, we are at a loss to know how a reference to a Full Bench can be made by the Division Bench. The proper course course for the
Division Bench would have been to wait for the respondents to appear before Court on receipt of notice and after ascertaining their and to decide
whether the notice, dated 14-11-1991 satisfies the requirements to the Act, and if they had differed from the view taken by the learned single
Judge, then only the Division Bench could have male a reference to a larger Bench.
However, as stated earlier, we were not inclined to return the reference, as such a course would only delay the disposal of the matter and
cause hardship to the parties. Thus, as the entire appeal has been referred to us by the Hon''ble the Chief Justice, we have hard counsel on both
sides fully on the merits of the appeal.
The main contention urged by learned counsel for the appellant is that the principles of natural justice had been violated and before any action
under S. 29 of the State Financial Corporations Act, a notice should be given to the borrower as to the proposed action and adequate opportunity
should be given to him to make his representations. Reliance is placed on the judgment of the Orissa High Court in Kharavela Industries Pvt. Ltd.
Vs. Orissa State Financial Corporation and Others, for the proposition that S. 29 of the Act does not exclude the application of the principles of
natural justice and unless the said principles are complied within a particular case, the action taken by the Corporation is null and void. According
to him, the seizure of the vehicle in this case was without any notice and it was, therefore, illegal. It is argued that as the seizure was illegal, the
auction sale of the vehicle is null and void and the respondents are bound to hand over the vehicle to the appellant after accepting the entire amount
due. It is also submitted that the instructions contained in the Legal Manual issued by the Corporation have not been followed in the present case
and, therefore, the auction held by the respondents is vitiated. It is further submitted that the appellant has been repeatedly making attempt''s to pay
the amounts due, after the seizure of the vehicle and the respondents had high handedly refused to accept the same and proceeded with the auction
sale and confirmation of the same.
We have already referred to the facts chronologically and also pointed out that the version given by the appellant in the affidavit filed in support
of the writ petition is not true. We have referred to the notice dated 29-8-1991 informing the appellant the amount due as on 20-8-1991 and
calling on him to pay the arrears as well as the installments due on 1-9-1991. The appellant was also told by the notice that if he disputed the
figures mentioned therein on the basis of his records, he should intimate the Corporation within a fortnight of the receipt thereof. In spite of the
receipt of such notice, the appellant did not take steps to make any payment. That is an admitted fact. It is only thereafter, the respondents seized
the vehicle on 1-10-1991, while, in the affidavit filed in support of the writ petition the appellant has stated that the vehicle was seized on 3-10-
1991, in a letter dated 18-2-1992 written by him to the Motor Vehicles authority, he has given the date as 2-10-1991. A copy of that letter is
included in the typed set by the appellant himself. That letter is written after the admission of the Writ Appeal There is no explanation for the
discrepancy in the dates given by him. However, it does not matter whether the vehicle was seized on 1-10-1991 or 2-10-1991 or 3-10-1991.
The grievance of the appellant is that the vehicle was seized without a notice of seizure. As rightly pointed out by learned counsel for the
respondents, if a notice of seizure had been given, the vehicle would have disappeared from the normal area of operation. The appellant would
have taken it beyond the reach of the respondents, anywhere in the country as he is holding a National permit. There is substance in the contention
that the leisure is illegal in the absence of notice of seizure. Cl. 10 of the hypothecation deed provides expressly for seizure of the hypothecated
assets in the event of default in the payment of amounts due to the Corporation. The Corporation is certainly entitled to exercise its powers and
enforce the terms of the contract.
There is nothing in S. 29 of the State Financial Corporation Act which would prevent the Corporation from enforcing the terms of the contract
by seizure of the hypothecated assets, without notice of seizure.
It should be remembered at this stage that one of the objects of the State Financial Corporations Act is to enable financial institutions to
recover the money invested by an advancement of loans as speedily as possible. Before the Act was passed, financial institutions were finding it
difficult to freely invest their money in industrial concerns as they were required to adopt lengthy and cumbersome procedure of sale through courts
in cases of defaults by the borrowers. Thus, the funds of the financial institutions were getting locked up for a long time and were not available to as
many industrial concerns and as quickly as possible. For the purpose of quick industrial progress it was felt necessary that the flow of credit
remained smooth, unimpaired and quick. It was for that reason, the Parliament enacted the State Financial Corporations Act and incorporated Ss.
29 to 31 conferring certain rights on the Corporation. The scheme of the Act shows that the Parliament wanted special financial institutions to be
established for giving financial accommodations to industrial concerns and at the same time confer on them special rights for recovery of their dues
in case of defaults by the borrowers. Such recovery is made possible even without an adjudication by judicial authorities. S. 29 of the Act confers
particular rights to take over the management or possession or both of the industrial concern and to realize the properly pledged, mortgaged,
hypothecated or assigned by transfer, either by lease or sale.
In our view, Ss. 29 to 31 of the Act should be read together. S. 29 thereof enables the financial Corporation to take over the management or
possession or both of the industrial concern, which is under a liability to the Corporation under an agreement and which nukes a default in
repayment of loan or advance or any installment thereof or in meeting its obligations an relation to any guarantee given to the Corporation. The
section also provides that the Corporation has a right to transfer by way of lease, or sale and realize the property pledged, mortgaged,
hypothecated or assigned to it. S. 30 of the Act provides hat not withstanding anything in any agreement to the contrary, the Financial Corporation
may, by notice in writing, require any industrial concern to which it has granted any loan or advance to discharge forthwith in full its liabilities to the
Financial Corporation. The contingencies in which such notice may be issued are set out in Cls. (a) to (f). Suffice it to refer to clauses (b) and (f)
thereof. CI. (b) reads :
if the industrial concern has failed to comply with the terms
of its contract with
the financial Corporation the matter of the loan or advance
Cl. (f) reads:
''if for any reason it is necessary to (sic) he interests of the Financial Corporation Under S. 31 of the Act, the Corporation in apply to the District
Judge within the(sic) of whose jurisdiction the industrial concert carries on the whole or a substantial part its business for one or more of the (sic)
set out in the Section. Such a light apply to the District Judge is without. prejudice to the provisions of S. 29 of the Act the S. 69 of the Transfer of
Property Act (sic) right may be exercised where an industrial concern in breach of any agreement (sic) any default in repayment of any (sic)
advance or installment thereof or otherwise fails to comply with the terms of the requirement, or where the Financial corporation requires an
industrial concern to the immediate repayment of any loan (sic) Vance under S. 30 of the Act, and the (sic) fails to make such repayments (sic) S.
31 of the Act shows that if (sic) issued under S. 30 of the Act and not(sic) plied with, the Corporation is compared to exercise (1) its rights under
S. 29 (sic) Act, (2) its rights under S. 69 of the (sic) for of Property Act, and (3) its nights under S. 31 of the Act. The Corporation (sic) choose
any one of them.
It is seen from the facts (sic) present case that a notice of(sic) has been issued under S. 30 of the Act an the imputed auction has been held the
after sufficient time has elapsed after receipt of such notice by the appeal The notice was admittedly received(sic) appellant on 19-11-1991. The
auction sale was announced and advertised by (sic) newspapers on 6-12-1991.The auction(sic) fixed to take place on 12-12-1991. The lant had
23 days after the receipt of the closure notice, to pay the a mount and the auction. Even according to (sic) wanted only a month''s time for payment
of the entire amount and he wrote a letter praying for grant of such time on 26-11-1991 If he had made an attempt to pay the money or a
substantial part there of before 12-12-1991, the Corporation would certain have accepted the same and stopped the auction. Even after the
publication of the notice of public auction, the appellant did not take any step to pay the amount due. Hence, there is no illegality whatever in the
auction held by the respondents on 12-12-1991.
As pointed out already, there was no necessity for a notice of seizure before the lorry was seized. But, factually there was a notice calling upon
the appellant to pay the amount due as on 1-9-1991. That notice was dated 29-8-1991. In spite of the notice to pay, the appellant did not move
his little finger. Naturally, the Corporation was obliged to take action in order to protect the interests of the Corporation by seizing the lorry. There
was no violation of any principle of natural justice in the seizure of the lorry, particularly when the Corporation was oily enforcing the terms of the
contract and exercising its power under Cl. 10 of the hypothecation deed.
The judgment of the Orissa High Court cited by the appellant''s counsel does not lay down any absolute proposition of law as contended by
him. The facts in that case wire somewhat peculiar. A notice was given by the Financial Corporation to the industries as to the default position and
its decision to take over possession on failure of the industries to pay the installments. Subsequently, the industries made some payments and the
earlier order to take over possession was not given effect to. Again, another order for taking possession of the industries was passed, without
giving any notice, though substantial payments had been made by the industries. In those circumstances, the Division Bench held that the
Corporation had failed in its duty to give reasonable notice to the industries that it was going to take over the concerns and a minimum opportunity
to the concerns to put forth their case before the Corporation ought to have been given. It was held that the earlier order of the Corporation
complied with the principles of natural justice, but the subsequent order failed to give any opportunity whatsoever and, therefore, the action taken
by the Corporation was struck down. However, the Bench took care to observe that in a given case, whether the rules of natural justice have been
complied with or not depends upon the facts and circumstances of that case Hence, it cannot be stated as an absolute proposition of law that in
every case an action taken by the Corporation under S. 29 of the Act without notice to the borrower is contrary to the principles of natural justice
and vitiated thereby. It has to be decided in each case by the Court whether the particular action taken by the Corporation required the issue of a
prior notice to the borrower. Such decision will naturally depend on the exigencies of the situation and the nature of the hypothecated assets.
Referring to the judgment of the Orissa Bench, a Division Beach of the Gujarat High Court in Alka Ceramics Vs. Gujarat State Financial
Corporation and Others, , observed as follows:- ""However, we wish to make it clear that merely because there is some subsequent payment, it
would not nullify the earlier notice and action u/s. 29 unless the payment is substantial; say about one third of the outstanding and there is concrete
and reasonable proposal and promise to pay the balance within a reasonable period. If such substantial payment and proposal are made, the
Corporation has 10 Consider afresh whether to proceed under S. 29 after taking into account the reasonableness and reliability of the offer.
Therefore, it is clear that the Orissa Bench has not laid down any proposition of law in the abstract without any reference to the facts of the case.
At this stage it is worthwhile referring to the dictum of the Supreme Court in Union of India and Another Vs. Tulsiram Patel and Others, on the
principles of natural justice. The relevant passages are as follows:-
Though the two rules of natural justice namely, nemo judex in cause sua and audi alteram partem, and have now a definite meaning connotation in
law and their content and implications are well understood and firmly established, they are none the less not statutory rules. Each of these rules
yields to and changes with the exigencies of different situations. They do not apply in the same manner to situations which are not alike. These rules
are
not cast in a rigid mould nor can they be put in a legal strait-jacket. They are not immutable but flexible.
X X X
X X X
X X X
So far as the audi alteram partem rule is concerned, both in England and in India, it is well established that where a right to a prior notice and an
opportunity to be heard before an order is passed would obstruct the taking of prompt action, such a right can be excluded. This right can also be
excluded where the nature of the action to be taken, its object and purpose and the scheme of the relevant statutory provisions warrant its
exclusion; nor can the audi alteram partem rule be invoked if importing it would have the effect of paralyzing the administrative process or where
the need for promptitude or the urgency of taking action so demands, as pointed out in Mrs. Maneka Gandhi Vs. Union of India (UOI) and
Another,
Therefore, it is Futile to contend that though S. 29 of the Act does not provide for issue of notice before taking action there under, principles of
natural justice require such a notice to be issued in every case before any kind of action is taken. The fact that the Legislature has made a provision
for notice in S. 30 but has omitted to do so in S. 29 is not without significance.
Reliance is placed by learned counsel on the judgment of the Supreme Court in Mahesh Chandra v. Regional Manager, U.P. Financial
Corporation & Ors Judgments Today (1992) 2 S.C. 326. 1992-2-L.W. 708.. It was a case in which the Financial Corporation did not disperse
the loan fully and when the industrial concern was in need of funds, the Corporation acted indifferently and took action under S. 29 of the Act.
Condemning the action taken by the Corporation in the context of the facts of the case, the Supreme Court laid down that the basic philosophy
enshrined in S. 24 of the Act should be kept in mind before any action is taken under S. 29 of the Act. The Court also prescribed the guidelines for
exercising the power under S. 29 of the Act. S. 24 of the Act to which reference was made by the Supreme Court requires the Board of Directors
of the Financial Corporation to discharge its functions business principles, due regard having been had to the interests of industry, comment a and
the general public. It was hold by the Court that on the feats of the (sic) it was clear that the interests of the industry were completely ignored by
(sic) Financial Corporation. The following pas sage is referred to by learned counsel
S. 29 confers very wide power on (sic) Corporation to ensure prompt payment by a(sic)ing it with effective measure to realize the. arrears.
But the simplicity of the language not an index to enormous power stored (sic) From notice to pay the arrears, it extends (sic) taking over
management and even possessed with a right to transfer it by sale Every with power, the exercise of which has far reach(sic) repercussion, has
inherent limitation on should be exercised to effectuate the purple the Act. In legislations enacted for general benefit and common good the
responsibility far graver. It demands purposeful approach. The exercise of discretion should be objectives Test of reasonableness is more strict.
The (sic) functionaries should be duty conscious (sic) than power charged. Its actions and decision which touch the common man have to be tested
on the touchstone of fairness and justice. That which is not fair and just is and reasonable. And what is unreasonable is (sic) rary. An arbitrary
action is ultra vires. (sic) not become bona fide aud in good faith (sic) because no personal gain or benefit to the person exercising discretion
should be established. An action is mala fide if it is contrary to the put pose for which it was authorized to be excised. Dishonesty in discharge of
duty vital the action without anything more. An action bad even without proof of motive of dishonored if the authority is found to have acted
con(sic) to reason. Power under S. 29 of the Act to (sic) possession of a defaulting unit and transfer it by sale requires the authority to act causal.
honestly, fairly and reasonably. Default (sic)ment of loan may attract S. 29. But that alone is insufficient either to assume possession or sell the
property. Neither should be resorted unless it is imperative. Even though no n(sic) appear to have been framed nor and guiding framed by the
Corporation was placed yet the basic philosophy enshrined in S. 24 has to be kept in mind. Rationale has to be judged in the light of it. Lack of
reasonableness or even fairness at either of the two stages renders the take over and transfer invalid. Nothing in the above passage suggest that a
special notice should be issued under S. 29 of the Act. On the other hand, the Court has referred only to a notice to pay arrears, Nowhere in the
judgment of the Apex Court do we find any prescription of a special, notice being issued under S. 29 of the Act before taking action. The ruling
does not help the appellant in any mare, particularly when in this case a notice to pay has been issued on 29-8-1991 before the seizure of the lorry
and a foreclosure notice has been issued on 14-11-1991 before the auction sale informing clearly the appellant that action will be taken under Ss.
29 and 32-G of the Act.
Learned counsel for the appellant places reliance on the instructions contained in the Legal Manual issued to the officers of the Corporation.
According to him, they are Regulations within the meaning of S. 48(2) of the Act. Under S. 48 of the Act, the Board of Directors after consultation
with the Development Bank and with the previous sanction of the State Government, may make Regulations not inconsistent with the Act and the
rules made there under, to provide for all matters for which provision is necessary or expedient for the purpose of giving effect to the provisions of
the Act. Certain categories have been set out in sub-section (2) thereof, without prejudice to the generality of the power given in sub-clause (1) of
S. 48 of the Act. Cl.(1) of sub-section (2) of S. 48 of the Act provides for taking over of the management of any industrial concern on a breach of
its agreement with the Financial Corporation. Sub-section (3) enjoins that all Regulations made under the Section shall be published in the Official
Gazette and any such Regulation shall have effect from such earlier or later date as may be specified in the Regulations. Thus, if the Board makes
any Regulations, they shall be published in the Official Gazette in order to be treated as Regulations. The Legal Manual containing instructions to
the Officers of the Corporation is not admittedly a Regulation framed under S. 48 of the Act by the Board. It was not published in any official
Gazette. It is conceded that they are not Regulations as contemplated under S. 48 of the Act. But however, it is contended that the instruction
contained in the Manual confer a right on the borrowers and they are enforceable at the instance of the borrowers. We do not agree. The
instructions are merely guidelines to be generally followed by the Officers in order to avoid legal tangles. Moreover, the paragraphs in the Legal
Manual which are relied on by learned counsel relate only to taking over of industrial units and taking possession of immovable properties. We
agree with the view taken by the learned single judge in this case that the instructions contained in the Legal Manual referred to by learned counsel
for the appellant do not apply to seizure of vehicles or the sale thereof.
Learned counsel submits that a lorry or a motor vehicle is also an industrial concern as defined by the Act. We do not find any substance in the
contention. According to him, S. 2 (c) (iv) of the Act would mean a motor vehicle. The said sub-Section reads thus;
industrial concerns, means any concern engaged or to be en-gated in (iv) the transport of passengers or goods by road or by water or by air or by
ropeway or by life,
The expression used by the Section is ""concern"". The Act does not define that expression. One of the meanings of ''concern'' is a business."". A
lorry or motor vehicle is not a business, though it may be a business asset. Hence, the contention that a lorry is an industrial concern within the
meaning of the Act cannot be accepted.
Nothing has been placed before us to show that the auction is not conducted fairly or properly. On the other hand, the records show that
proper public notice was given by publication in the newspapers and several members of the public had taken part in the auction. Ultimately, the
vehicle has been sold for a sum of Rs. 2,58,500/- which is more than the amount due to the Corporation. The Corporation has stated in its counter
affidavit filed here before us that a sum of Rs. 30,000/- is remaining as a surplus, which is payable to the appellant herein. Thus, the appellant
cannot make any grievance against the auction as such. There is absolutely nothing to show that the Corporation had acted vindictively or
arbitrarily against the appellant. He was given more than ample opportunity to discharge the debt due by him. Yet, he had not availed of the same.
We find no merit whatever in the appeal. We are entirely in agreement with the view taken by the learned single Judge. The facts of the case fully
justify the dismissal of the writ petition in limine. In fine, the writ appeal suffers dismissal. In view of the fact that the appellant has made false
statements in his affidavit filed in the writ petition, we direct him to pay costs in this appeal. Counsel''s fee Rs. 1,000/-