Supreme Court of India
M/S. MICRO HOTEL P. LTD.versusM/S. HOTEL TORRENTO LIMITED & ORS.
- Citation
- 2012 INSC 380
- Decided
- 6 September 2012
- Disposal
- Appeal(s) allowed
- Bench
- K S RADHAKRISHNAN
Holding
The Supreme Court held that the Division Bench wrongly reopened the case; the corporations had lawfully exercised powers under Section 29, complied with the Vincent Paul guidelines, and the auction and sale were valid.
Summary
The State Financial Corporation (OSFC) and IPICOL financed a hotel project of MIS. MICRO HOTEL P. Ltd. (the borrower) which defaulted on loan repayments. The corporations offered One‑Time Settlement (OTS) schemes in 2006 and 2007, which the borrower failed to meet, leading to withdrawal of the offers and a demand for full repayment. After the borrower failed to comply with court‑ordered deposits, OSFC invoked Section 29 of the State Financial Corporation Act, seized the property, valued it, published auction notices, and sold it to the appellant at a public auction. The borrower subsequently obtained a writ order quashing the OTS cancellation and the sale, directing a fresh OTS offer. The Division Bench of the Orissa High Court reopened the matter, ignoring earlier orders and facts. The Supreme Court held that the Division Bench erred, the corporations had complied with Section 29 and the guidelines of Vincent Paul, and the auction and sale were valid. Consequently, both appeals were allowed and the High Court’s judgment set aside.
Issues considered
- The Division Bench’s authority to reopen the dispute and order a fresh One‑Time Settlement despite prior orders and the borrower’s non‑compliance.
- Whether the corporations complied with the procedural guidelines laid down in Kerala Financial Corporation v. Vincent Paul and the requirements of Section 29 of the State Financial Corporation Act.
- Validity of the auction process, including valuation, notice publication, and acceptance of the highest bid.
- Whether the High Court erred in quashing the cancellation of the OTS scheme and the sale of the property.
Legislation cited
Subjects
State Financial Corporation ActSection 29One‑Time Settlementauctiondefaultprocedural fairnessjudicial proprietyre‑opening of liscompliance with court orders
Judgment
(2012] 8 S.C.R. 233
MIS. MICRO HOTEL P. LTD. A
v.
MIS. HOTEL TORRENTO LIMITED & ORS.
(Civil Appeal No. 6347 of 2012 etc.)
SEPTEMBER 6, 2012
B
[K.S. RADHAKRISHNAN AND DIPAK MISRA, JJ.]
State Financial Corporation Act, 1951 - s. 29 - Hotel
project financed by State Financial Corporation and State
Industrial Promotion and Investment Corporation - Loan c
agreement - Default - Demand Notice - Various offers by
the Corporations to the borrower for One Time Settlement
Scheme - Borrower failing to comply with the terms and
conditions of the Scheme - Order of Division Bench of High
Court giving benefit of One Time Settlement to the borrower D
failing which court giving liberty to the Financial Corporation
to take action under the Act - Failure on the part of the
borrower to comply with the order - Proceedings under s. 29
- Auction of the borrower's property - Sale of the property to
auction-purchaser - Borrower approaching court - Division E
Bench of High Court offering afresh One Time Settlement
Benefit to borrower and ordering dispossession of the auction-
purchaser - On appeal, held: High Court by impugned
judgment wrongly reopened a /is and issued illegal directions,
overlooking the facts of the case and the binding judgment F
of co-ordinate Bench - The manner in which the Division
Bench of High Court sat in judgment over the judgment of co-
ordinate Bench is disapproved - Judicial Propriety.
Respondent No. 2 (State Financial Corporation) and
respondent No. 5 (Industrial Promotion and Investment G
Corporation) jointly financed a hotel project launched by
respondent No. 1. The parties entered into loan
agreement. As there was default in payment of the loan,
•
respondent No. 2 made demand. In 2006 respondents
233 H
234 SUPREME COURT REPORTS [2012] 8 S.C.R.
A introduced One Time Settlement (OTS) Scheme. The
benefit of the Scheme was extended to respondent No.
1 waiving certain loan amount, subject to certain terms
and conditions. Since respondent No. 1 did not comply
with the terms and conditions, respondent Nos. 2 and 5
B withdrew the OTS offer. In 2007, again another OTS
Scheme was launched by respondent No. 2 and offer was
made to avail the benefit thereof. As respondent No. 1 did
not comply with the request, respondent No. 2 withdrew
the offer and demanded the entire dues.
c Respondent No. 1 filed writ petition before High
Court seeking quashing of the demand notice and for
direction to consider its claim under the OTS Scheme.
The High Court disposed of the petition directing
respondent No. 1 to deposit Rs. 50,00,000 each to each
D of the two Corporations (respondent Nos. 2 and 5) failing
which, the Corporations were given liberty to take action
under State Financial Corporation Act. As respondent No.
1 did not comply with the direction of the High Court,
respondent No. 2 made a demand for the entire
E outstanding loan amount.
Respondent No. 2 issued seizure order of the
property and the same was executed and possession
thereof was taken over. Set-off price of the unit was fixed
F on the basis of valuation report. Thereafter sale notice
was published in local as well as National newspapers.
Even after that respondent No.2 made a demand of
outstanding dues from respondent No. 1 so as to get the
assets released. Respondent No. 1 instead of clearing the
G outstanding dues, preferred Review Petition and the
same was dismissed by High Court. Thereafter the
property was auctioned and the appellant, being the
successful bidder was given possession of the property.
Thereupon, respondent No. 1 again filed writ petition
H seeking to quash the cancellation of OTS Scheme of 2007
MICRO HOTEL P. LTD. v. HOTEL TORRENTO 235
LIMITED & ORS.
and the sale to the auction-purchaser (appellant). High A
Court allowed the writ petition holding that the
respondent No. 2 - Corporation did not follow the
guidelines laid down in Kera/a Financial Corporation vs.
Vincent Paul and Anr. (2011) 4 SCC 171; and that the off-
set price of property was not valued before the conduct B
of auction; and that there was no due publication of
auction. Hence the present appeals.
Allowing the appeals, the Court
HELD: 1.1. The manner in which the Division Bench C
of the High Court has virtually sat in judgment over the
judgment of another co-ordinate Bench is strongly
disapproved. The Division Bench of the High Court
overlooked some vital facts which have considerable
bearing on the outcome of this dispute, consequently, D
reopened a /is which has attained finality, due to non-
compliance of the various directions issued by the co-
ordinate Bench of the High Court. Failure to comply with
the various directions issued by the co-ordinate Bench
in Writ Petition and the order passed in Review Petition E
was completely overlooked by the Division Bench. [Para
19] [247-B-D]
1.2. Duty is cast on all the parties who appear in a
court of law to place the correct facts so that the court
can draw correct inferences which enable it reach a F
logical, reasonable and just conclusion. Wrong facts lead
a court to wrong reasoning and wrong conclusions. Duty
is also cast on the court to take note of the facts which
are correctly placed. Wrong appreciation of facts leads
to wrong reasoning and wrong conclusions and justice G
will be the casualty. Deciding disputes involves, knowing
the facts, knowing the law applicable to those facts and
knowing the just way of applying the law to them. If any
of the above mentioned ingredients is not satisfied, one
gets a wrong verdict. A Judge has to reason out truth H
236 SUPREME COURT REPORTS [2012] 8 S.C.R.
A from falsehood, good from evil which enables him to
deduce inferences from facts or propositions. Facts are
correctly stated in the instant case but the Division Bench
wrongly understood those facts and wrongly applied the
law, consequently, wrong inferences were drawn and
B ultimately reached wrong conclusions. [Para 20] [247-E-
H]
2.1. The Division Bench, in the impugned judgment
taking the view that the Corporations had not followed
the guidelines laid down by this Court in *Vincent Paul
C case is factually incorrect. The Corporation had issued
the recall notice with a request to pay the entire
outstanding dues within 30 days otherwise, failing which,
it was stated that action u/s. 29 of State Financial
Corporation Act would be initiated against the 1st
D respondent. Seizure order was issued by the Corporation
and the entire assets of the unit were taken over under
Section 29 of the Act after the expiry of 30 days from the
date of notice. Even otherwise, the guidelines issued by
this Court in *Vincent Paul case would operate only
E prospectively and that too depends upon the facts and
circumstances of each case. [Para 26] [252-G-H; 253-A-
C]
Haryana Financial Corporation and Anr. v. Jagdamba Oil
F Mills and Anr. (2002) 3 sec 496: 2002 (1) SCR 621 - relied
on.
Mahe sh Chandra v. Regional Manager, U.P. Financial
Corporation and Ors. (1993) 2 SCC 279: 1992 (1) SCR 616;
*Kera/a Financia/Corporation v. Vincent Paul and Anr.
G (2011) 4 SCC 171: 2011 (3) SCR 862 - referred to.
2.2. The High Court has committed an error in holding
that off-set price of property was not valued before the
conduct of auction and that there was no due publication
H of auction. Sale notice, it is seen, was published in a
MICRO HOTEL P. LTD. v. HOTEL TORRENTO 237
LIMITED & ORS.
vernacular paper and also in a widely circulated English A
newspaper and the Corporation had received nine offers
and after protracting negotiations with all the bidders, the
offer of the appellant was accepted being the highest.
The Corporation before putting the appellant in
possession again issued a notice to 1st respondent B
enquiring whether he would match the offer. 1st
Respondent did not avail of that opportunity as well. It is
under such circumstances that sale letter was issued to
the appellant with a copy to all the Directors/Promoters/
Guarantors of 1st respondent company. The appellant c
paid the balance consideration and the Sale Memo was
extended on that date and the property was also
delivered. [Para 27] [253-E-H; 254-A]
2.3. There is no illegality in the procedure adopted by D
the Corporation, since 1st respondent had failed to
comply with the directions issued by the co-ordinate
Bench of the High Court in writ petition which gave liberty
to the Corporations to proceed in accordance with
Section 29 of the Act. The Division Bench of the High
Court had overlooked those vital facts as well as the E
binding judgment of a co-ordinate Bench in writ petition
and had wrongly reopened a /is and issued wrong and
illegal directions. [Para 28] [254-B-C]
Case Law Reference: F
2002 (1) SCR 621 Relied on Para 23
1992 (1) SCR 616 Referred to Para 25
2011 (3) SCR 862 Referred to Para 26
G
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
6347 of 2012.
From the Judgment & Order dated 25.10.2011 of the High
H
238 SUPREME COURT REPORTS [2012] 8 S.C.R.
A Court of Orissa at Cuttack in Writ Petition (Civil)No. 17711 of
2010.
C.A.Sundaram, S. Aggarwal, Rohini Musa, Yogesh, V.K.,
Zafar lnayat, Suruchii Aggarwal, Shubhranshu Padhi, Nirnimesh
Dube, Ashok Panigrahi, Surjit Bhaduri for the Appearing
8
parties.
The Judgment of the Court was delivered by
K.S. RADHAKRISHNAN, J. 1. Leave granted.
c 2. Common questions arise for consideration in both these
appeals and hence we are disposing of both the appeals by a
common judgment.
3. We are, in these appeals, called upon to consider the
D question whether the Division Bench of the Orissa High Court
was justified in directing Orissa State Financial Corporation
(OSFC) and Industrial Promotion and Investment Corporation
of Odisha Ltd. (IPICOL) to offer afresh the benefit of One-Time
Settlement Scheme (OTS) to Mis Hotel Torrento Limited, 1st
E respondent herein, which had earlier been offered vide
communications' dated 18.3.2006 and 3.4.2006, but was not
availed off by complying with the terms and conditions stipulated
therein. The further question is whether the High Court was right
in ordering dispossession of the appellant (auction purchaser)
F and put 1st respondent back in possession.
4. This case has a chequered history, therefore, it is
necessary to examine the facts at some length to appreciate
the real controversy between the parties and to reach a proper
and just decision, on facts as well as on law. OSFC, 2nd
G respondent herein, disbursed a term loan of Rs.51,27,200/- and
loan in lieu of subsidy of Rs.23.30 lakhs to 1st respondent for
establishing a hotel project at Janugarji, Balasore in the State
of Odisha. The project was jointly financed by OSFC and
IPICOL, for which 1st respondent had entered into a loan
H
MICRO HOTEL P. LTD. v. HOTEL TORRENTO 239
LIMITED & ORS. [K.S. RADHAKRISHNAN, J.]
agreement and mortgaged the title deeds and extended a A
registered lease deed dated 8.2.1988. Lease was valid for a
period of 25 years with a renewable clause. There was default
in repayment of the loan amount, which led OSFC issuing a
demand notice to 1st respondent on 7.2.1991, followed by a
recall notice dated 30.11.1991. The respondent was also B
served with a show cause notice dated 16.12.1994 followed
by recall notices dated 4.1.1995 and 13.3.1996.
5. 1st respondent then filed a Writ Application No. 2513
of 1996 on 20.3.1996 before the High Court of Orissa to quash
the recall notice dated 13.3.1996 and for rehabilitation. The C
High Court disposed of that writ application with a direction to
respondents 2 and 5 (OSFC & IPICOL) to consider the request
of 1st respondent for rehabilitation package. On 9.3.2006, an
OTS scheme was introduced by OSFC and 1st respondent
applied for settlement of its loan account under that scheme. D
On 18.3.2006, the benefit of the scheme was extended to 1st
respondent by OSFC and agreed in principle to settle the term
loan account on payment of Rs.1, 16,21,200/- on or before
18.4.2006, subject to certain terms and conditions which were
as follows: E
1. The settlement amount shall either be paid in one
lump sum on or before DI. 18.04.06 (within 30 days
of this settlement order) with 3% discount on the
settlement amount. F
OR
Installments as per the sequence mentioned below:
(a) Up front payment of Rs.23,61,400.00 G
(Rupees twenty three lakh sixty one thousand
four hundred only) (i.e.25% of settlement
amount less initial deposit) shall be paid
along with the acceptance letter (format
H
240 SUPREME COURT REPORTS [2012] 8 S.C.R.
A enclosed herewith) on or before DI. 16.04.06,
within 30 days.
(b) The balance settlement amount of
Rs.87,15,900.00 (75%) shall be paid on or
before DI. 15.06.06.
B
2. Any other expenses chargeable/incurred/debited in ·
the loan accounts towards misc. expenses on LIA
with effect from DI. 11.07.05 (date of application)
till the final settlement of loan accounts shall be paid
C by you along with the settlement amount.
3. It may be noted that (NOC) can only be issued in
your favour after liquidation of all the loans availed.
4. You shall have to submit the consent/decree/
D permission/withdrawal order (wherever applicable)
before issue of No Due Certificate (NOC).
In case of failure on payment of the aforesaid amount
within the stipulated dates, the one time settlement of dues
E considered in your favour including relief and concession
thereon shall be withdrawn without further reference to
you."
6. IPICOL also approved the request for OTS at Rs.45 lacs
F with waiver of Rs.1,88,21,099 subject to certain terms and
conditions, which were as follows:
"(a) The OTS amount is Rs.45 lacs (Rupees forty-five
lacs only) and the resultant sacrifice(s) by way of
waiver is Rs.1,88,21,099 (Rupees one crore twelve
G lakhs seventeen thousand five hundred twenty nine
only on account of funded interest and
Rs.76,03,570/- (Rupees seventy six lakhs three
thousand five hundred seventy only) on account of
overdue interest.
H
MICRO HOTEL P. LTD. v. HOTEL TORRENTO 241
LIMITED & ORS. [K.S. RADHAKRISHNAN, J.]
(b) The OTS amount shall be paid within a period of 1 A
year from the date of this letter as per the schedule
given below:
Rs.6,75,000 towards 25% of upfront payment
(including initial payment made by you) within 30
8
days and balance 75% amounting to Rs.33,75,000/
- within a period of 1 year in 4 quarterly
installments, carrying simple interest @ 14% p.a.
on reducing balance.
(c) The above OTS is subject to cancellation, if it is C
found that you have provided incorrect details and
information or suppression of any material facts for
getting the sanction of OTS. The decision of IPICOL
is final in this regard.
D
(d) In case of non payment, IPICOL shall have the right
of requital."
7. We notice that despite of waiver of Rs.2,26,85,800 and
Rs.1,88,21,099 by OSFC and IPICOL respectively, 1st
respondent did not comply with the terms and conditions of the E
OTS scheme, consequently, OSFC and IPICOL informed 1st
respondent that they had withdrawn OTS offer.
8. We find, on 31.3.2007, yet another OTS scheme of
2007 was launched by OSFC and, again, an offer was made F
to 1st respondent to avail of the benefit of that scheme. OSFC,
on 4.10.2007, requested 1st respondent to pay the settlement
amount of Rs.1, 16,21,200 with delayed payment of interest
within 10 days. 1st respondent did not comply with that request
as well, consequently, OSFC, on 28.12.2007, withdrew the offer G
and advised 1st respondent to pay the entire dues as per the
agreement, failing which 1st respondent was informed that
recovery proceedings would be initiated for realization of the
dues. Later, OSFC sent a demand notice dated 22.8.2008
stating that the total loan outstanding as on 31.12.2007 was H
242 SUPREME COURT REPORTS [2012] 8 S.C.R.
A Rs.4,52,94,691 and 1st respondent was called upon to pay the
amount, failing which it was informed that recovery proceedings
would be initiated.
9. 1st respondent then, on 10.09.2008, filed a Writ Petition
No. 13376 of 2008 before the Orissa High Court to quash the
8
demand notice dated 22.08.2008 and for a direction to consider
its claim under the OTS scheme. On 31.10.2008, OSFC had,
however, issued a notice recalling the entire amount along with
interest and informed 1st respondent that in case of failure to
make payment, further action would be taken under Section 29
C of the State Financial Corporation Act (SFC Act). Writ Petition
came up for hearing before the Orissa High Court on
4.12.2008, and the Court directed OSFC to maintain status-
quo and on 7.4.2010, the Court passed an ad-interim order
directing 1st respondent to inform as to whether they were
D willing to deposit the amount or Rs.1 Crore for consideration
of their claim under OTS. On 26.11.2008, IPICOL also made
a request to OSFC to initiate proceedings under Section 29
of SFC Act and to take over the assets of the unit.
E 10. Writ Petition No. 13376 of 2008 came up for final
hearing on 21.4.2010, and the Court enquired whether 1st
respondent was willing to pay Rs.1 Crore, as suggested by the
Court on 4.12.2008. The Court was informed that a petition had
been filed on 21.4.2010 along with a bank draft of Rs.17,50,000
F drawn in favour of the Registrar, Orissa High Court. 1st
respondent had also made a request to the Court for time up
to 26.2.1010 so as to pay the amount of Rs.1 Crore. The Court
ordered the return of the draft to the 1st respondent since the
amount was due to both OSFC and IPICOL. The Court was
G informed by OSFC that 1st respondent had not availed of the
earlier proposal for OTS and no new OTS scheme was
available, still the Court passed the following order:
"The learned counsel for the Corporations submits
that the earlier proposal for one-time settlement had been
H considered by both the Corporations and the matter had
MICRO HOTEL P. LTD. v. HOTEL TORRENTO 243
LIMITED & ORS. [K.S. RADHAKRISHNAN, J.]
been settled. But the petitioner did not pay the amount for A
which it had to be cancelled and, at present there is no
scheme for one-time settlement.
Be that as it may, the Petitioner having defaulted in
payment of huge amount we dispose of the writ petition B
directing that the petitioner may deposit a sum of
Rs.50,00,000/- (Rupees fifty lakhs) each before each of
the two Corporations by 20.6.2010 and applications shall
be filed before both the Corporation for settlement of the
dues. If any such application is filed the same shall be C
considered on its own merit by both the Corporations
either separately or jointly provided there is any scheme
available for such settlement by the Corporations.
In the event, the Petitioner fails to deposit the
aforesaid amount by 20.6.2010, both the Corporations D
shall be at liberty to take such action as permissible
under law under the State Financial Corporation Act."
(emphasis added)
11. 1st respondent did not comply with even the above E
mentioned order. OSFC then issued a registered notice dated
8.7.2010 to 1st respondent pointing that since it had failed to
comply with the above mentioned order of the Court, OSFC
would be at liability to initiate proceeding under the SFC Act.
The 1st respondent was, therefore, asked to liquidate the entire F
outstanding amount as on 30.6.2010, failing which 1st
respondent was informed that OSFC would be initiating action
under Section 29 of SFC Act. Later, OSFC issued a seizure
order dated 2.8.2010 of the property and that order was
executed on 15.9.2010 and the possession of the unit was G
taken over "as is where is" basis.
12. OSFC, during seizure, got prepared a valuation report
dated 17.09.2010 from its panel valuer. Based upon that
valuation report, off-set price of the unit was fixed at H
244 SUPREME COURT REPORTS (2012] 8 S.C.R.
A Rs.1,75,45,000. Later, the sale notice was published in the
Daily newspapers, Samaj and the New Indian Express on
18.9.2010. On 21.9.2010, again, OSFC issued a notice to 1st
respondent to clear the outstanding dues with up to date interest
of Rs.6, 18,62,238/- collected up to 30.6.2010 before Default-
s cum-Disposal Advisory Committee (DDAC) on 29.9.2010 so
also to get the assets released. 1st respondent was informed
of the sale notice published in the daily newspapers requesting
to clear up the dues before the DDAC meeting scheduled to
be held on 29.9.2010. 1st respondent was also informed that
c in the event of non-payment of dues, it could still match or better
the highest bid price. 1st respondent, however, did not take any
steps to clear the outstanding dues, but preferred a Review
Petition No. 99 of 2010 for reviewing the order passed by the
Orissa High Court on 21.4.2010 in Writ Petition No. 13376 of
D 2008. The Court rejected the review petition on 22.9.2010. The
Court, after noticing that 1st respondent had not deposited any
amount in pursuance to its order dated 21.4.2010, held as
follows:
"Apart from the above, from the conduct of the petitioner,
E we find that the petitioner did not pay any amount when
the account was settled under the scheme earlier and
waited for another demand notice. Even in the writ petition
though the petitioner was directed to deposit
Rs.50,00,000/- (Rupees fifty lakhs) each with the two
F Corporations, the same was not complied with. In course
of hearing of this review petition, the petitioner has offered
only Rs.40,00,000/- (Rupees forty lakhs) to be deposited
with the two Corporations against the outstanding dues of
more than seven crore. We are, therefore, of the view that
G the petitioner has no intention to clear the dues of the two
Corporations which had financed for establishing a hotel.
In the meantime possession of the said hotel has been
taken by OSFC under section 29 of the State Financial
Corporation Act and the same has been advertised for
H sale. The sale notice, a copy whereof was produced
MICRO HOTEL P. LTD. v. HOTEL TORRENTO 245
LIMITED & ORS. [K.S. RADHAKRISHNAN, J.]
before us shows that the loanee can appear before the A
DDAC on the date fixed i.e. 29th of September, 2010 for
the purpose of getting release the seized asset."
(emphasis added)
13. 1st respondent then submitted a proposal to DDAC, B
which was considered by DDAC on 29.9.2010 and the order
was communicated to the 1st respondent.
14. DDAC, in pursuance to the auction notification in the
newspapers, received altogether 9 bids and, after negotiations c
with the auctioneers, the offer of the appellant was found to be
the highest at Rs.774 lacs, which was accordingly accepted
OSFC delivered the possession of the land, building and
machinery/furniture and fixtures to the appellant vide possession
letter dated 11.10.2010. D
15. 1st respondent, as already stated, then approached
the Orissa High Court and filed the present writ petition No.
17711 of 2010 to quash the cancellation of the OTS dated
28.12.2007, sale letter dated 1.10.2010 and also for other
consequential reliefs, which were granted by the Division Bench E
of the Orissa High Court, the operative portion of which reads
as follows:
"For the reasons stated supra the writ petition is allowed.
Rule issued. The letters dated 28.12.2007 and 1.10.2010 F
(Annexure-5 & Annexure-8 series) cancelling the proposal
for OTS and rejecting the representation dated 29.9.2010,
the public sale notice dated 19.9.2010 (Annexure-6), the
sale letter dated 1.10.2010 (Annexure-8 series), the sale
agreement dated 11.10.2010 (Annexure-A/5) and the G
alleged delivery of possession are hereby quashed. The
Orissa State Financial Corporation and IPICOL are
directed to place fresh demand with the petitioner, within
four weeks from the date of receipt of this order, with
regard to the amount of OTS offered in the communications H
246 SUPREME COURT REPORTS (2012] 8 S.C.R.
A dated 18.3.2006 and 3.4.2006 of the OSFC and IPICOL
along with interest at the rate of 9% on the said amount
from that date till the date of payment or at the rate of
interest, stipulated under the OTS Scheme,. 2007 in case
of similarly placed persons. The petitioner is directed to
B make payment within six weeks thereof. Thereafter the
possession of the property shall be delivered to the
petitioner within a reasonable time. If the petitioner fails to
deposit the amount, as directed, the OSFC and IPICOL
are at liberty to proceed in the matter in accordance with
c law."
16. Shri C.A. Sundram, learned senior counsel appearing
for the appellant (auction purchaser) submitted that the High
Court has completely misread and misunderstood the facts of
the case which resulted in incorrect reasoning, leading to wrong
D conclusions. Learned senior counsel also submitted that the
judgment in writ petition No. 13376 of 2008 as well as the order
in Review Petition No. 99 of 2010 had attained finality and,
consequently, the orders dated 28.12.2007 and 01.10.2010
cancelling the proposal for OTS cannot be questioned. Learned
E senior counsel also pointed out that the conditions stipulated
in the above mentioned orders were also not complied with by
1st respondent, consequently, the only course open to 1st
respondent was to pay the entire amount demanded by OSFC
and IPICOL. The 1st respondent did not pay the amount
F demanded, hence, Section 29 of SFC Act was rightly invoked.
17. Ms. Shubhranshu Padhi, learned counsel appearing
for the appellant in SLP(C) No. 1125 of 2012 fully supported
the arguments advanced by the learned senior counsel Shri
G C.A. Sundaram and explained the various steps taken by
OSFC which resulted in invoking Section 29 of SFC Act.
18. Shri Ashok Panigrahi, learned counsel appearing on
behalf of the respondent, however, supported the judgment of
the Hon'ble Court and submitted that there is no justification in
H interfering with the judgment of the Hon'ble Court, since the
MICRO HOTEL P. LTD. v. HOTEL TORRENTO 247
LIMITED & ORS. [K.S. RADHAKRISHNAN, J.]
conditions laid down in OTS Scheme were onerous and that A
procedures were not followed for the sale of the mortgaged
properties.
19. We express our strong disapproval of the manner in
which the Division Bench of the High Court has virtually sat in
B
judgment over the judgment of another co-ordinate Bench. We
are of the view that the Division Bench of the High Court
overlooked some vital facts which have considerable bearing
on the outcome of this dispute, consequently, reopened a lis
which has attained finality, due to non-compliance of the various C
directions issued by the co-ordinate Bench of the High Court.
Failure to comply with the various directions issued by the co-
ordinate Bench in Writ Petition No. 13376 of 2008 and the
order passed in Review Petition No. 99 of 2010 was
completely overlooked by the Division Bench.
D
Appreciation of Facts
20. Litigations in courts are won or lost mainly on facts
more on law. Duty is cast on all the parties who appear in a
court of law to place the correct facts so that the court can draw E
correct inferences which enable it reach a logical, reasonable
and just conclusion. Wrong facts lead a Court to wrong
reasoning and wrong conclusions. Duty is also cast on the
Court to take note of the facts which are correctly placed. Wrong
appreciation of facts leads to wrong reasoning and wrong
conclusions and justice will be the casualty. Deciding disputes
F
involves, according to Dias on Jurisprudence, knowing the
facts, knowing the law applicable to those facts and knowing
the just way of applying the law to them. If any of the above
mentioned ingredients is not satisfied, one gets a wrong verdict.
A Judge has to reason out truth from falsehood, good from evil G
which enables him to deduce inferences from facts or
propositions. Facts are correctly stated in the instant case but
the Division Bench wrongly understood those facts and wrongly
applied the law, consequently, wrong inferences were drawn
and ultimately reached wrong conclusions. H
248 SUPREME COURT REPORTS [2012] 8 S.C.R.
A 21. Following are the facts and conclusions overlooked by
the Division Bench:
(1) OSFC introduced an OTS scheme in the year 2006
and 1st respondent had applied for settlement of
its loan account under that scheme. On 18.03.2006,
B
the benefit of the scheme was extended to 1st
respondent and OSFC agreed in principle to settle
the term loan account on payment of
Rs.1, 16,21,200/-, subject to certain conditions.
IPICOL also approved the request of 1st
c respondent for OTS at Rs.45 lacs with waiver of
Rs.1,88,21,099/-, subject to certain conditions.
(2) OSFC and IPICOL, therefore, waived an amount of
Rs.2',26,85,800/- and Rs.1,88,21,099 and gave the
D benefit of the OTS scheme to 1st respondent,
subject to few other conditions like period of
payment, interest etc.
(3) The 1st respondent had failed to comply with those
conditions imposed, consequently, OSFC and
E
IPICOL had to withdraw the benefits extended
under the OTS scheme.
(4) OSFC lodged another OTS scheme in the year
2007. Opportunity was given to 1st respondent
F again to avail of the benefit of that scheme. OSFC
on 04.10.2007 requested 1st respondent to pay the
settlement amount of Rs.1, 16,21,200/- with delayed
payment of interest within 10 days. The benefit of
the said scheme was not availed of by 1st
G respondent, consequently OSFC on 28.12.2007
withdrew that offer as well and advised 1st
respondent to pay the entire dues as per the
agreement, failing which it was informed that
recovery proceedings would be initiated.
H
MICRO HOTEL P. LTD. v. HOTEL TORRENTO 249
LIMITED & ORS. [K.S. RADHAKRISHNAN, J.]
(5) 1st respondent filed a Writ Petition No.13376 of A
2008 to quash the demand notice dated
22.08.2008 where it was pointed out by OSFC that
1st respondent had not availed of all the benefits
of the OTS scheme extended by the Corporation,
consequently they had to cancel the said scheme. B
Further, it was also stated that in spite of public
notification and their intimation and frequent
requests, 1st respondent did not apply for the OTS
2007 Scheme.
(6) When Writ Petition came up for hearing on
c
07 .04.2010, the Court had enquired whether 1st
respondent would be still willing to deposit the
amount of Rs. 1 crore for consideration of their
claim under OTS. The matter again came up for
hearing before the Division Bench on 21.04.2010 D
on which the Court disposed of the writ petition
directing 1st respondent to deposit Rs.50,00,000/
- each before each of the two Corporations by
20.6.2010, failing which it was ordered that the
Corporations would be at liberty to take such action E
as permissible under law under the State Financial
Corporation Act.
(7) OSFC issued a loan recall notice to 1st respondent
on 8.7.2011, since it did not comply with the F
directions in WP No. 13376 of 2008 with a request
to pay the entire outstanding amounts within 30
days, failing which the 1st respondent was informed
that action would be taken under Section 29 of SFC
Act. G
(8) OSFC issued a seizure order on 02.08.2010 and
during seizure, a valuation report dated 17.09.2010
was prepared. Based upon the valuation report, off-
set price of the unit was fixed at Rs.1,75,45,000/-.
Sale notice was published in the Daily newspapers H
250 SUPREME COURT REPORTS [2012] 8 S.C.R.
A "Samaj" and the "New Indian Express" on
18.09.2010. On 21.09.2010, again OSFC issued
a notice to 1st respondent to clear the outstanding
dues with up-to-date interest of Rs.6, 18,62,238/-.
(9) Review Petition No. 99 of 2010 filed by 1st
B
respondent in writ petition No. 13376 of 2008 came
up for hearing before the Division Bench on
22.9.2010. While dismissing the Review Petition,
the Bench found that 1st respondent had no
intention to clear the dues of the Corporations
c which had financed for establishing a hotel. The
court also noticed that the mortgaged properties
were taken over by OSFC invoking Section 29 of
SFC Act and advertised for sale.
D (10) 1st Respondent filed a representation before
DDAC on 29.9.2010 which was rejected and the
order ol rejection was communicated vide letter
dated 1.10.2010 and 1st respondent was informed
that the assets were already taken over under
E Section 29 of SFC Act on 15.9.2010 and was put
to public auction, with due intimation.
(11) Auction was concluded as per rules and ultimately,
the appellant was found to be the highest bidder at
Rs.774,00,000 which was accepted and sale letter
F dated 1.10.2010 was issued to the appellant, who
had paid the entire amount by 11.10.2010.
(12) Sale Memo, Agreement to Sale was executed with
the appellant on 11.10.201 O and possession was
G handed over to the appellant on that date.
(13) 1st respondent then on 11.10.2010 filed the present
WRIT Petition No. 17711 of 2010.
22. We are of the view that the above mentioned facts had
H considerable bearing for rendering a just and proper judgment
MICRO HOTEL P. LTD. v. HOTEL TORRENTO 251
LIMITED & ORS. [K.S. RADHAKRISHNAN, J.]
in writ petition No. 17711 of 2010, but those vital facts were A
completely overlooked by the Division Bench and it had also
ignored the binding judgment of the co-ordinate Bench
rendered in writ petition No. 13376 of 2008 and the order
passed in Review Petition No. 99 of 2010 and the steps taken
by the Corporations as permitted by the Division Bench. B
23. A 3-Judge Bench of this Court in Haryana Financial
Corporation and Another v. Jagdamba Oil Mills and Another,
(2002) 3 SCC 496 while dealing with the scope of Section 29
of SFC Act held as follows:
c
"6. The Corporation as an instrumentality of the State deals
with public money. There can be no doubt that the
approach has to be public oriented. It can operate
effectively if there is regular realization of the instalments.
While the Corporation is expected to act fairly in the matter D
of disbursement of the loans, there is corresponding duty
cast upon the borrowers to repay the instalments in time,
unless prevented by unsurmountable difficulties. Regular
payment is the rule and non-payment due to extenuating
circumstances is the exception. If the repayments are not E
received as per the scheduled time frame, it will disturb
the equilibrium of the financial arrangements of the
Corporations. They do not have at their disposal unlimited
funds. They have to cater to the needs of the intended
borrowers with the available finance. Non-payment of the F
instalment by a defaulter may stand on the way of a
deserving borrower getting financial assistance."
24. The Court again reminded of the fact that the fairness
required of the Corporations could not be carried to the extent
of disabling them from recovering what is due to them and held G
as follows:
"13 ........ The Corporation is an independent autonomous
statutory body having its own constitution and rules to
abide by, and functions and obligations to discharge. As H
252 SUPREME COURT REPORTS [2012] 8 S.C.R.
A such in the discharge of its functions, it is free to act
according to its own light. The views it forms and decisions
it takes are on the basis of the information in its
possession and the advice it receives and according to
its own perspective and calculations. Unless its action is
B mala fide, even a wrong decision by it is not open to
challenge. It is not for the courts or a third party to substitute
its decision, however, more prudent, commercial or
businesslike it may, for the decision of the
Corpora t .ion ..... ."
c 25. The Court while explaining and over-ruling Mahesh
Chandra v. Regional Manager, U.P. Financial Corporation
and Others, (1993) 2 SCC 279 held as follows:
"Indulgence shown to chronic defaulter would amount to
D flogging a dead horse without any conceivable result being
expected. As the facts in the present case show not even
a minimal portion of the principal amount has been repaid.
That is a factor which should not have been lost sight by
the courts below. It is one thing to assist the borrower who
E has intention to repay, but is prevented by insurmountable
difficulties in meeting the commitments. That has to be
esiablished by adducing material. In the case at hand
factual aspects have not even been dealt with, and solely
relying on the decision in Mahesh Chandra's cases (supra),
F the matter has been decided."
26. We are of the view that the principles laid down by this
Court in the above judgments apply to the case on hand, if the
facts are properly appreciated. The Division Bench, in the
impugned judgment, took the view that the Corporations had
G not followed the guidelines laid down by this Court in Kera/a
Financial Corporation v. Vincent Paul and Another, (2011) 4
SCC 171. In our view, this is factually incorrect. This Court, in
the above judgment, indicated that the authority concerned
should serve to the borrower a notice of 30 days for sale of
H immovable assets. In this case, Corporation had issued the
MICRO HOTEL P. LTD. v. HOTEL TORRENTO 253
LIMITED & ORS. [K.S. RADHAKRISHNAN, J.]
recall notice dated 08.07.201 Owith a request to pay the entire A
outstanding dues within 30 days otherwise, failing which, it was
stated that action under section 29 of SFC Act would be
initiated against the 1st respondent. Seizure order was issued
by the Corporation and the entire assets of the unit were taken
over under Section 29 of the Act on 15.09.2010 which was after B
the expiry of 30 days from the date of notice dated 08.07.2010.
Therefore the guidelines laid down in the above referred
judgment have also been complied with. Even otherwise, the
guidelines issued by this Court in Vincent Paul case would
operate only prospectively and that too depends upon the facts c
and circumstances of each case.
27. We have found that the procedure laid down under
Section 29 of SFC Act has been followed by the Corporations.
The independent valuer submitted his report on 17.09.2010 and
the off-set price of the unit was fixed after getting it valued by D
an independent valuer. It was based upon the valuation report
that the off-set price of the unit was fixed at Rs.1,77,45,000/-
on 17.09.2010. Sale notice was published in the News Papers
on 18.09.2010 and the auction was conducted on 29.09.2010.
In our view, the High Court has committed an error in holding E
that off-set price of property was not valued before the conduct
of auction and that there was no due publication of auction. Sale
notice, it is seen, was published in the "Samaj" a vernacular
paper and also in the "New India Express" a widely circulated
English newspaper on 18.09.2010 and the Corporation had F
received nine offers and after protracting negotiations with all
the bidders, the offer of the appellant was accepted being the
highest. The Corporation before putting the appellant in
possession again issued a notice dated 21.9.2010 to 1st
respondent enquiring whether he would match the offer. 1st G
Respondent did not avail of that opportunity as well. It is under
such circumstances that sale letter dated 1.10.2010 was issued
to the appellant with a copy to all the Directors/Promoters/
Guarantors of 1st respondent company. The appellant paid the
balance consideration of Rs.5,65,20,000 on 11.10.2010 and H
254 SUPREME COURT REPORTS [2012] 8 S.C.R.
A the Sale Memo was extended on that date and the property was
also delivered.
28. We find no illegality in the procedure adopted by the
Corporation, since 1st respondent had failed to comply with the
B directions issued by the co-ordinate Bench of the Orissa High
Court in writ petition No. 13376 of 2008, which gave liberty to
the Corporations to proceed in accordance with Section 29 of
SFC Act. We are of the view that the Division Bench of the High
Court had overlooked those vital facts as well as the binding
C judgment of a co-ordinate Bench in writ petition No. 13376 of
2008 and had wrongly reopened a lis and issued wrong and
illegal directions.
29. In the said circumstances, we are inclined to allow both
the appeals and set aside the judgment of the Division Bench
D of the Orissa High Court. However, in the facts and
circumstances of the case, there will be no order as to costs.
K.K.T. Appeals allowed.
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