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CASE NO.: Appeal (civil)  908 of 2000

PETITIONER: Bihar State Financial Corpn. & Ors.

RESPONDENT: M/s. Chemicot India Pvt. Ltd. & Ors.

DATE OF JUDGMENT: 24/08/2006

BENCH: S.B. Sinha & Dalveer Bhandari

JUDGMENT: J U D G M E N T

S.B. Sinha, J.

       The 1st respondent herein had set up a small scale industrial unit.  The  appellant herein is an establishment constituted under the State Financial  Corporation Act, 1951.  An application for sanction of loan in the  Corporation was submitted by the respondent-Company.   It was approved.   The necessary agreements for loan were executed in terms whereof the  properties of the 1st respondent were mortgaged.   

It was decided to expand the existing unit and procure some  machinery therefor. The  Respondent also placed orders for other and further  equipments/machinery necessary for expansion of the said scheme.   Allegedly, the Managing director of the Corporation visited the 1st  respondent’s factory on 29.1.1988 and having satisfied himself that there  existed justification for expansion of the capacity utilization had agreed to  sanction an additional term loan to the tune of Rs.15 lakhs on terms and  conditions mentioned therein, some of which are as under :

"Clause 7 :     The concern will have to submit the  following papers before the execution of the  legal documents :-          (a)     Income Tax Clearance Certificate under  section 230(A) of the Income Tax Act,  1961 in respect of the Directors. (b)     Original title deed in respect of land. (c)     Valid SSI, Registration Certificate.

Clause 24 :     The concern shall have to submit D.G.T.D.,  Registration Certificate."

       The agreement was registered on 31.3.1988, although no D.G.T.D.  Certificate had been furnished.  According to the 1st respondent, its unit  being a small one, furnishing of such certificate was not necessary and in  any event, the same was not granted by the authorities concerned.  The  Corporation refused to advance any amount on the terms that the 1st  respondent had failed to furnish the said certificate, which according to it  was necessary.  

A writ petition was filed by the respondent before the Patna High  Court which was marked as C.W.J.C. No.1691/1990.  On a finding that the  Corporation has waived its right to insist upon the Respondent to furnish   such certificate in view of the fact that the agreement was registered, the  Corporation was directed to disburse the term loan to the respondent- Company.  The Corporation is, thus, before us.

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       Mr. M.P. Jha, learned counsel appearing on behalf of the Corporation,  submitted that in view of the fact that as the respondent did not fulfil its  obligation to repay the amount in terms of agreement in respect of the loan  taken by it on 10.3.1983, 20.3.1986 and 24.3.1987, no Writ of Mandamus  could issue.  It was submitted that the Allahabad Bank, from which the 1st  respondent had also taken loan, has also filed a suit for recovery of the loan  granted to it.   

       Mr. S.B. Sanyal, learned Senior counsel appearing on behalf of the  respondent, on the other hand, contended : i)      The Corporation could not have refused to fulfil its solemn  promise to advance the additional subsidy of Rs.15 lakhs.  

ii)     The requirement of furnishing of D.G.T.D. Registration  Certificate was not applicable in the case of a Small Scale Industry and in  any event, the Corporation having registered the said documents, the order  sanctioning the amount could not have been refused to be honoured.

At the outset, we may notice that on a query made by this Court as to  whether the respondent-Company would be in a position to start the factory  and commence production of Absorbent Cotton if the amount of loan was  directed to be paid to it, an affidavit has been filed on behalf of the  respondent-Company stating that the Corporation itself was responsible for  the present state of affairs of the respondent as the sanctioned loan has not  been disbursed in time.  It was stated before us that the factory can be  revived. The Corporation, however, in its affidavit stated :

"That it is submitted that the whole factory  including the Machine rooms are in such a bad position  that there is no machine available at the site and as per  inspection done on 10.7.2006 by U.L. Karn, Branch  Manager, Bihar State Financial Corporation, the  petitioner herein, the main gate is locked for years.  No  one was seen since years as learnt from the  neighbourhood, walls and structure of the factory are in  damaged condition.  There is no one attending the  factory, there are no watch and ward staff, generators  rooms are locked; machines rooms are empty, stores are  locked, shutters are rotting in rain."  

The Respondent, however, denies and disputes the said statements.   

The Corporation is a statutory organization.  Ordinarily, the Court in  exercise of its writ jurisdiction, should not interfere with a decision taken by  it, but, it is well settled, that the doctrine of promissory estoppel would apply  as against the financial corporation if a case is made out therefor.  

In the writ petition the High Court was not concerned with the  question as to whether the respondent had complied with the terms and  conditions of the loan agreement in the matter of repaying of the  installments in time, but was concerned with the question as to whether the  Corporation being a statutory organization, could take a stand different from  the one passed in its order.  The High Court evidently proceeded on the basis  that it could not have been done.  The High Court may not be entirely  correct in its approach as the transactions were governed by a statute and  were essentially commercial in character.  Unfortunately, however, the  contentions, which have been raised before us, were not raised before the  High Court.   

This Court in exercise of its jurisdiction under Article 136 of the  Constitution of India, indisputably, can take note of the subsequent events.   Rightly or wrongly the amount of subsidy has not been paid to the  corporation for more than 15 years.  Admittedly, now the unit is lying  closed.  The High Court and this Court having not been called upon to  determine the question as to who was responsible therefor.  Even otherwise,

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it is unnecessary to go into the said question.  Fact, however, remains that no  purpose would be served by directing the Corporation to pay unto the  respondent the aforementioned amount of Rs.15 lakhs at this point of time.     There is a serious dispute in regard to the viability of revival of the entire  unit.  This Court evidently cannot determine such a disputed question of fact  in these proceedings.   

We, therefore, in the peculiar facts if this case, are of the opinion that  it would be futile to issue a writ of or in the nature of mandamus directing  the Corporation to pay the aforementioned amount of Rs.15 lakhs to the  respondent-Company.  We may, however, hasten to add that we have not  gone into the question as to whether the respondent-Company had paid any  amount to the Corporation as against the loan amount which had admittedly  been received by it.  If the respondent-Company had not done so, the  Corporation may take such steps in relation thereto, as it may be advised in  this behalf but it goes without saying that it would be open to the  respondent-Company to raise such contentions, including the payment of  additional subsidy to it and/or effect thereof in the proceedings, which may  be initiated by the Corporation.  We are, therefore, of the opinion that the  impugned judgment cannot be sustained.  It is set aside accordingly.   

The appeal is allowed with the aforementioned observations. No  costs.