IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.7119 OF 2009 (Arising out of S.L.P. (C) No.6613 of 2007)

Punjab Financial Corporation & Anr.        ...Appellant(s)

Versus

M/s. Garg Steel & Anr.                    ...Respondent(s)

O  R  D  E  R

Heard learned counsel on both sides.

Leave granted.

By consent, matter taken up for final hearing and  

disposed of.

This  appeal  has  been  filed  by  Punjab  Financial  

Corporation  against  the  judgement  and  order  dated  22nd  

February,  2007, delivered  by the  Division Bench  of the  

Punjab and Haryana High Court in the case of  M/s. Garg  

Steel vs.  Punjab  Financial  Corporation  &  Ors. [C.W.P.  

No.14882 of 2003].

The  facts  giving  rise  to  this  appeal  are  as  

follows:

Respondent  No.1  herein  [`Borrower',  for  short]  

instituted  Writ  Petition  No.14882  of  2003  in  the  High  

Court by which it prayed for writ of mandamus directing  

Punjab  Financial  Corporation  [for  short,  “P.F.C.”]  to  

release  the balance  loan amount  immediately in terms of

...2/-

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the contract.  In the writ petition filed before the High  

Court,  the  said  Borrower  also  prayed  for  damages  with  

interest  on  the  ground  of  breach  of  contract  by  not  

disbursing the loan(s).  The Borrower further prayed that  

the interest due from it on the outstanding(s) be also  

waived.   According  to  the  said  Borrower,  it  had  made  

investments on its venture on the basis of the contract  

under which P.F.C. had agreed to sanction and disburse the  

loan to enable it to set up its Project and on account of  

failure to disburse further amounts, it has suffered huge  

losses for which damages were sought.

This Court had issued notice to Respondent No.1 at  

the admission stage as this Court was, prima facie, of the  

view  that  writ  petition  filed  in  the  High  Court  was  

misconceived.  Accordingly, we heard the parties at length  

on the averments made in the original writ petition.  On  

going  through  the  writ  petition,  the  following  

circumstances  are  alleged:  That  a  loan  application  was  

made for an amount of Rupees thirty lakhs, including Soft  

loan, which was accepted by P.F.C.; that Rs.21.25 lakhs  

was agreed to be disbursed in advance against collateral  

security of commercial plots and residential plot; that  

the loan was granted at the contractual rate of interest  

at 15.5 per cent; that the loan consisted of the Term loan  

and the Soft loan; and that there was a back-to-back re-

finance  arrangement  between  P.F.C.  and  Small  Industries  

Development Bank of India [Respondent No.2 in the original  

writ petition] in respect of the Soft loan.  This last  

circumstance  of  back-to-back  re-finance  arrangement  is  

important, particularly  in view of  the fact that by this

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writ  petition,  the  Borrower  is,  in  effect,  seeking,  

indirectly,  enforcement  of  the  said  back-to-back  

transaction between P.F.C. and S.I.D.B.I.  Further, there  

was  no  privity  of  contract  between  the  Borrower  and  

S.I.D.B.I.  Lastly, the point to be noted is that, as on  

the  date  of  the  filing  of  the  original  writ  petition,  

Respondent No.1 was a Debtor to P.F.C..  It also appears  

from  the  averments  in  the  original  writ  petition  that  

P.F.C. had also insisted on execution of documents by the  

said Borrower in respect of further disbursals of the Term  

loan which the Borrower refused.

Time has come when this Court needs to emphasise  

that  in  cases  where  writ  of  mandamus  is  sought,  High  

Courts should be very particular in finding out from the  

averments of the writ petition whether there exist proper  

pleadings.  In the present case, arguments are advanced on  

the  basis of  promissory estoppel,  waiver and  breach of  

contract without proper averments being made in the writ  

petition.  Be that as it may, the facts indicate that, by  

this writ petition, the original petitioner [Borrower] has  

sought damages and enforcement of contractual commitments  

which,  in  our  view,  were  beyond  the  scope  of  a  writ  

petition.  Adjustment of accounts and enforcement of back-

to-back transactions with a party with whom there was no  

privity of contract coupled with the claim for damages are  

all  contractual  matters  un-enforceable  by  way  of  writ  

petitions.

For the afore-stated reasons, we are of the view  

that the High Court should not have entertained the writ  

petition, particularly when contractual disputes requiring  

evidence existed between the Borrower and Lender.   

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Before  concluding,  we  may  state  that  learned  

counsel  for  Respondent  No.1  placed  reliance  on  the  

judgement  of  this  Court  in  the  case  of  Gujarat  State  

Financial  Corporation vs.  M/s.  Lotus  Hotels  Private  

Limited, reported in 1983 [3] S.C.C. 379, which has no  

application to the facts of this case.  At the outset, it  

may be stated that, in the present case, it was agreed by  

and between P.F.C. and the Borrower that Soft loan would  

be  disbursed by  P.F.C. only  if S.I.D.B.I.  releases the  

amount under the re-finance arrangement between P.F.C. and  

S.I.D.B.I.  In the original writ petition, there is no  

prayer  for  specific  performance  of  the  re-finance  

agreement, assuming for the sake of argument that such a  

plea is tenable.

For  the  afore-stated  reasons,  we  set  aside  the  

impugned judgement of the High Court on the ground that  

the  writ  petition  instituted  by  the  borrower  was  

misconceived.   

Accordingly, civil appeal stands allowed with no  

order as to costs.

......................J.            [S.H. KAPADIA]

......................J.            [G.S. SINGHVI]

......................J.            [AFTAB ALAM]

New Delhi, October 22, 2009.