M/S SWATI FERRO ALLOYS PVT. LTD.versusORISSA INDUSTRIAL INFRASTRUCTURE DEVELOPMENT CORPORATION (IDCO) & ORS.

                    [2015) 1 S.C.R. 319

          M/S SWAT! FERRO ALLOYS PVT. LTD.                         A
                               v.
       ORISSA INDUSTRIAL INFRASTRUCTURE
     DEVELOPMENT CORPORATION (IDCO) & ORS.
            (Civil Appeal No. 51 of 2015)
                   · JANUARY 6, 2015.
                                                                   B

       [SUDHANSU JYOTI MUKHOPADHAYA AND
              V. GOPALA GOWDA, JJ.]

     Constitution of India, 1950: Article 226 - Jurisdiction C
under- Disputed question of facts - Dispute over land allotted
to appellant whicf! had mortgaged it to the Corporation - High
Court held that factual disputes cannot be decided in
proceeding u/Article 226 - Held: There is disputed question
of fact about the ownership of the plot - Therefore, the High D
Court was justified in dismissing the proceeding and directing
the parties to approach the Civil Court for resolving such
dispute - Further, prima facie neither original borrower nor the
appellant did any business on the plot in question, except for
taking loan against the land - In this background while the E
impugned judgment is upheld, the respondent-Corporation is
directed to inquire into the matter to find out as to whether the
land is properly used by one or other party for the purpose it
was open or by opening different firms or companies in
different names in same premises, they are availing loan F
mortgaging the same very land - Corporation to issue notice
to all the interested parties and pass an appropriate order.

    CIVIL APPELLATE JURISDICTION: Civil Appeal No. 51
of 2015
                                                                   G
     From The Judgment and Order dated 18.04.2012 of the
Division Bench of High Court of judicature for Orissa at Cuttack
in Writ Petition (C) No. 16790/2008.

                              319                                  H
    320       SUPREME COURT REPORTS                [2015] 1 S.C.R.


A       Dr. Rajeev Dhavan, Amit Gupta, Sarwa Mitter, Sumati
    Jumrani, Mitter & Mitter Co., for the Appellant.

        Guru Krishna Kumar, Raj Kumar Mehta, lshita Chaudhary,
    Kamaljit Kaur, Soumyajit Pani, Vinodh Kanna B., for the
    Respondents.
B
          The Judgment of the Court was delivered by.

        SUDHANSU JYOTI MUKHOPADHAYA,J. 1. Leave
    granted.
c        2. This appeal has been preferred by the appellant-Mis.
    Swati Ferro Alloys Pvt. ltd. against the judgment dated 18th
    April, 2012 passed by the Division Bench of High Court of
    Orissa Cuttack in WP(C) No.16790 of 2008. By the impugned
D   judgment, the High Court obseNed and held as follows:

          "Admittedly the land in question belongs to IDCO and the
          same was leased out in favour of one M/s Prachi Vanijya
          (P) Ltd. for manufacturing of Konark Fans, which was
          mortgagable right in favour of OSFC and other financial
E         institutions.

          Latter on M/s Prachi Vanijya changed its name to M/s
          Eastern Fan. Opposite parties 3 to 6 are the legal heirs
          of one Satya Narayan Swain, who was stated to be one
          of the partners of said Mis Eastern Fan and according to
F
          the petitioner, said Satya Narayan Swain had agreed to
          transfer the land in favour of the petitioner.

          Learned counsel for the IDCO seriously disputed the
          aforesaid transaction and submits that though the opposite
G         parties 3 to 6 are the legal heirs of one of the partners of
          the M/s Eastern Fan, the said Mis Eastern Fan has not
          been made a party.

          Counsel for the opposite parties 3 to 5 also dispute
H         transaction. Learned counsel for OSFC submits that they
SWAT! FERRO ALLOYS PVT. LTD. v. ORISSA INDUS. INFRASTRUCTURE 321
DEVELOPMENT CORPN. (IDCO) [SUDHANSU JYOTI MUKHOPADHAYA, J.]

    have no role to play as the land till date belongs to IDCO.       A

    This writ application is full disputed facts and the prayer
    made in the writ application cannot be granted in a
    proceeding under Article 226 of the Constitution of India
    as factual disputes cannot be decided in this proceeding.
                                                                      8
    The writ application is accordingly dismissed.

    It is open for the parties to approach the Civil Court, if it
    so desires."

    3. The factual matrix of the case is as follows:
                                                                      c
     The 1st respondent-Orissa Industrial Infrastructure
Development Corporation ('IDCO' for short) allotted Plot no. Cl
9, Industrial Estate, Cuttack on 18.3.1982 in favour of a
partnership firm-Mis Prachi Vanijya (P) Ltd. on hire-purchase D
basis. A mortgage in favour of 2nd respondent-Orissa State
Financial Corporation by Mis Prachi Vanijya was allowed by
the 1st respondent to secure loan. The 1st respondent intimated
the 2nd respondent on 27.11.1986 that the plot is transferred
in favour of Mis Prachi Vanijya (P) Ltd. subject to payment of E
outstanding amount of Rs.97,8881- as on 30.11.1986.

      4. The case of the appellant is that the assets of Mis Prachi
Vanijya (P) Ltd. comprising of land and building, shed and fan
machines situated at Cl9, Industrial Estate, Cuttack were             F
purchased along with a loan liability of Rs.6,60,0001- of the 2nd
respondent by Mis Eastern Fans on 5.12.1987, of which Sri
Satya Narayan Swain was the Managing Partner. Mis Prachi
Vanijya requested the 1st respondent to give no objection to
change its name as Mis Eastern Fan. The 1st respondent vide
its letter dated 5.12.1987 informed that it has no objection to       G
change of the name subject to receipt of recommendation from
the 2nd respondent.

    5. The 2nd respondent on 16.12.1987 intimated that it has
agreed to a change in name of Mis Prachi Vanijya to Mis               H
    322      SUPREME COURT REPORTS                [2015] 1 S.C.R.


A   Eastern Fans. Thus, Plot No. C/9, Industrial Estate, Cuttack
    along with the loan liability was transferred in.the name of the
    M/s Eastern Fans, a partnership firm. Ever since the transfer
    of assets in favour of Eastern Fans, the unit was non-functional
    and the loan amount of 2nd respondent against Eastern Fans
B   had mounted and it had become impossible for Sri Satya
    Narayan Swain to run M/s Eastern Fans due to excessive
    paucity of funds. Sri Swain thus approached and persuaded
    Sri Purushottam Lal Kandoi, Director of the appellant company-
    M/s Swati Ferro Alloys Pvt. Ltd. for relieving him of the loan
c   burden of 2nd respondent.

        6. Pursuant to discussion between the parties, the
    appellant company was incorporated on 22.3.1989 with three
    Directors, namely, Sri Purushottam Lal Kandoi, Sri Rakesh
    Jajodia and Sri Satya Narayan Swain with a share capital of
0
    Rs.5,00,000/-. The object of the Company was, inter alia, to
    undertake manufacturing Ferro Alloys.

        7. On the request of appellant company and M/s Eastern
  Fans, on 26.4.1989 the 1st respondent gave permission to
E accommodate the appellant company in the premises aforesaid
  for a period of 2 years. It was mutually agreed on 6. 7.1989 that
  the appellant-company will take over the term loan liability of
  M/s Eastern Fans as against the complete transfer of all its
  assets in favour of the appellant company. A Board resolution
F dated 6. 7 .1989 was passed resolving that all liabilities of M/s
  Eastern Fans with the 2nd respondent as on said date be
  taken by the appellant company along with all the assets
  including the land. The Managing Partner of M/s Eastern Fans,
  Sri Satya Narayan Swain, who was also the Director of the
G appellant company at that time w;;is authorized to negotiate and
  finalize the said matter with 2nd respondent. The Managing
  Partner of the partnership firm M/s Eastern Fan wrote letters
  dated 10.7.1989 and 11.7.1989 to the 2nd respondent
  intimating that the appellant company will take responsibility to
H clear the term loan along with accrued interest by taking over
SWATI FERRO ALLOYS PVT. LTD. v. ORI SSA INDUS. INFRASTRUCTURE 32 3
DEVELOPMENT CORPN. (IDCO) [SUDHANSU JYOTI MUKHOPADHAYA, J.)

the fixed assets of M/s Eastern Fans i.e. the land along with A
shed and the plant and machinery. 2nd respondent acted on
the letters written by Satya Narayan Swain and accordingly by
letter dated 9.1.1990 agreed that the appellant company shall
take over the entire assets and liabilities of Mis Eastern Fan.
The appellant company was asked to pay a sum of B
Rs.1,00,000/- as down payment towards the loan liability
outstanding against M/s Eastern Fan (Prachi Vanijya), which
was duly done.

     8. A revised sanction letter was issued by 2nd respondent
on 21.3.1990 further clarifying that the appellant company was       C
allowed to take over the entire assets and liabilities along with
the accrued interest and other statutory dues.

      9. According to the appellant, pursuant to the aforesaid
letters dated 9.1.1990 and 21.3.1990, the appellant company D
became the owner of Plot No.C/9, Industrial Estate, Cuttack.
All the assets and liabilities of Mis Eastern Fan were taken over
by the appellant company on 31.3.1990 by making a down
payment of Rs.1,00,000/-. The assets of M/s Eastern Fan
became the assets of the appellant company which were E
reflected in the balance sheet of the appellant company.

      10. Further case of the appellant is that the appellant
company took additional term loan from 2nd respondent for
Rs.11,37 ,000/- which was sanctioned on 31.3.1992 on the said
basis the appellant company has full rights over the p1ot in F
question. A memorandum of deposit of title deeds for
mortgaging the assets of the appellant company to 2nd
respondent was executed on 25.7.1992. On the very same day
i.e. on 25. 7.1992 a deed of hypothecation was signed between
the appellant company and the 2nd respondent to furnish G
security towards the loan of Rs.20,48,284.14/-. According to
appellant the said deed of hypothecation was on the basis of
security of (a) an equitable mortgage of borrower's property with
all buildings and structures thereon and fixed machineries
situated at Industrial Estate, Khapuria, Cuttack and (b) H
    324      SUPREME COURT REPORTS                   (2015] 1 S.C.R.


A   hypothecation of all tangible moveable property. The said deed
    covers the first term loan in consequence of takeover of M/s
    Eastern Fans of Rs.9, 11,284.00/- and the additional term loan
    of Rs.11,37,000/- for new Ferro Alloys Plant of the appellant,
    both amounting to Rs.20,48,284.14/- and clearly refers to the
B   Plot No.C/9, Industrial Estate, Cuttack with land and building.
    Thus, according to appellant, for all purposes the appellant
    company was treated as an owner of the Plot No.C/9, Industrial
    Estate, Cuttack.

         11. From the record we find that the appellant company
c   has also setup a fresh unit for making Ferro Alloys in aluminium
    thermic process on 27.5.1997 and also taken facility of Letter
    of Credit from State Bank of India for Rs.1,50,000/- in the year
    1992, which was renewed every year. It has also been
    sanctioned cash credit limit of Rs.40 lakhs by the State Bank
D   of India in the year 1992 and the same was extended every
    year, as apparent from letter dated 27.5.1997.

          12. 2nd respondent also accepted the execution of
    Tripartite Agreement with the State Bank of India by letter dated
E   29.1.1998. The Tripartite Agreement clearly states that 2nd
    respondent had in its custody the title deeds relating to the
    property of the appellant company. It appears that the appellant
    persuaded the 2nd respondent for transfer of lease right and
    title of the appellant since it has taken all the assets of the
F   partnership firm of Mis Eastern Fans. In support of this, the
    appellant company relied upon letter dated 23. t.2.2003 issued
    by the 2nd respondent duly recommending the transfer of title
    of the plot in favour of the appellant. The grievance of the
    appellant company is that despite several representations
G   made to 1st respondent between 2003 and 2008 no action
    was taken by it to transfer the title of the said plot in favour of
    the appellant company.

         13. As no action was taken, the appellant company moved
    before the High Court seeking transfer of the right in their favour,
H
SWATI FERRO ALLOYS PVT. LTD. v. ORISSA INDUS. INFRASTRUCTURE 325
DEVELOPMENT CORPN. (IDCO) [SUDHANSU JYOTI MUKHOPADHAYA, J.)


wherein the aforesaid observation was made by the Division A
Bench of the High Court by impugned judgment dated 18th
April, 2012.

      14. Learned counsel for the appellant submits that all the
facts as were pleaded in the writ petition were not disputed by
                                                                      8
the 1st and 2nd respondents. It was contended that refusal of
1st respondent to transfer the lease of the Plot No.C/9, Industrial
Estate, Cuttack in favour of the appellant is wrong, arbitrary and
highly illegal and the same was subject to judicial review under
Article 226 of the Constitution of India and the High Court erred
in dismissing the writ petition holding disputed question of fact C
merely because 3rd to 5th respondents have opposed the writ
petition with a mala fide intention for their vested interests, which
cannot be a ground for the High Court to dismiss the writ
petition without giving any reasons.
                                                                      D
      15. Respondents have disputed the claim of the appellant
to transfer the land in the name of the appellant company.

     16. From the bare pleading of the case and the record,
we find that there is disputed question of fact about the
ownership of the Plot No.C/9, Industrial Estate, Cuttack.            E
Therefore, the High Court was justified in dismissing the same
and directing the parties to approach the Civil Court for
resolving such dispute.

    17. From the pleading and record the following fact              F
emerges:

            (i) The 1st respondent-IDCO allotted Plot no.C/9,
            Industrial Estate, Cuttack on 18.3.1982 in favour of
            Mis Prachi Vanijya (P) Ltd. on hire-purchase basis
            subject to payment of outstanding amount of G
            Rs.9,78,880/- as on 30.11.1986. The appellant has
            pleaded that the land along with building, shed and
            fan machines situated at C/9, Industrial Estate,
            Cuttack were purchased from the 2nd respondent
            by Mis Eastern Fans on 5.12.1987, of which Sri H
                                                      ·.


    326   SUPREME COURT REPORTS                [2015] 1 S.C.R.


A          Satya Narayan Swain was the Managing Partner
           along with a loan liability of Rs.6,60,000/- of the 2nd
           respondent. It is not clear as to how M/s Eastern
           Fans purchased the land from M/s Prachi Vanijya,
           if the land was originally taken from 1st respondent
B          on hypothecation basis subject to payment of
           Rs.9,78,880/-. From letter of M/s Eastern Fan dated
           10.7.1989, Annexure P-5 (Page 31), we find that
           the said M/s Eastern Fan intended to setup plant
           of Ferro alloy in their factory premises at C/9,
c          Industrial Estate, Khapuria, Cuttack and therefore it
           was decided between themselves and M/s Swati
           Ferro Alloys Pvt. Ltd. that the appellant-Company
           will take responsibility to clear the term loan paid
           by 2nd respondent-Orissa State Financial
           Corporation along with accrued interest. In the said
D
           letter, it was intimated that Mis Eastern Fan
           intended to start manufacturing activities under the
           name and style of M/s Swati Ferro Alloys Pvt. Ltd.
           The appellant company was thereby incorporated
           by M/s Eastern Fan for the said purpose. Letter
E
           dated 9.1.1990 issued by 2nd respondent-Orissa
           State Financial Corporation to the appellant
           company shows that the appellant company was
           intimated that entire assets and liabilities of M/s
           Prachi Vanijya was transferred to the appellant
F          company and the same was agreed upon by the
           appellant company on certain terms and conditions.

           (ii) Letter dated 23.12.2003 written by 2nd
           respondent-Orissa State Financial Corporation to
G          the Managing Director, IDCO, indicates that M/s
           Eastern Fan availed loan from 2nd respondent and
           mortgaged the leasehold land in favour of 2nd
           respondent as security.

           (iii) Letter dated 26.4.1989 written by 1st
H
SWATI FERRO ALLOYS PVT. LTD. v. ORISSA INDUS. INFRASTRUCTURE 327
DEVELOPMENT CORPN. (IDCO) [SUDHANSU JYOTI MUKHOPADHAYA, J.]

                respondent-IDCO shows that the appellant-               A
                company -M/s Swati Ferro Alloys Pvt. Ltd. was
                allowed only accommodation inside the premises
                of Mis Eastern Fan for a period of 2 years and they
                have not given permission for transfer of the land.

     18. We agree with the observation of the High Court that
                                                                        8
this matter involves disputed question of fact. Despite the same,
prima facie it appears that neither original borrower nor the
present appellant does any business in the land in question,
except for taking loan against the land. In this background while
we upheld the impugned judgment dated 18th April, 2012                  C
passed by the Division Bench of High Court of Orissa at
Cuttack in WP(C) No.16790 of 2008, we are of the opinion that
the respondent-IDCO should inquire into the matter to find out
as to whether the land is properly used by one or other party
for the purpose it was open or by opening different firms or            D
companies in different names in same premises, they are
availing loan mortgaging the same very land. For such inquiry
the respondent-IDCO will issue notice to the 2nd respondent-
Orissa State Financial Corporation, appellant-Mis Swati Ferro
Alloys Pvt. Ltd., M/s Eastern Fan and any other party who may           E
be interested. On such enquiry it will be open for the competent
authority to pass an appropriate order.

     19. The appeal is dismissed with aforesaid observations.

Devika Gujral                                      Appeal dismissed •