TMI Blog2006 (12) TMI 223X X X X Extracts X X X X X X X X Extracts X X X X ..... a, vide Circular No. RBI/2005-06/54 DBOD. No.BP.BC 16/21.04.048/2005-2006, dated 13-7-2005, and also holding that respondent No. 1 cannot be directed to consider the offer of the appellant to have another OTS for Rs. 520 lakhs. 2. Brief facts of the case that are necessary to decide this appeal are that the appellant is a company incorporated under the Companies Act in the year 1970. Initially, the same was promoted by the Goyal family. However, in the year 1998-99, the management of the company was transferred to the Rawat group. In the year 1999, as a consequence of the appellant having sustained huge financial losses, its net worth got completely eroded and it filed a reference under section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as "SICA"), before the Board for Industrial and Financial Reconstruction (in short "BIFR"). Vide order dated June 11, 2002, BIFR rejected the reference of the appellant as being not maintainable. Against the said order, the appellant filed an appeal before the Appellate Authority for Industrial and Financial Reconstruction (in short "AAIFR"). Vide order dated 28-12-2005, the said appeal p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt No. 1 that it had a strategic investor who was willing to pay Rs. 520 lakhs towards full and final settlement of the dues of the appellant. In the said letter, the appellant stated that respondent No. 2 was said to have offered an amount of Rs. 520 lakhs to acquire the "financial assets" of the appellant and that such an offer had been made at the behest of some business rival to destabilise the management of the company or to take over the land for development in view of rising real estate prices in the region thereby causing great prejudice to the promoters of the company. Within few days thereafter, the appellant preferred a writ petition in this Court against respondent No. 1, which has been dismissed by the learned Single Judge by way of the impugned judgment dated 21-9-2006. 6. We have heard counsel for the appellant as well for respondent Nos. 1 and 2. We have been taken through the impugned judgment dated 21-9-2006, and counsel have addressed us on the merits of the case and have also cited various judgments in support of their respective stands. 7. The appellant has mainly raised two grounds, firstly, that no notice or opportunity was given to the appellant befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant to the acceptance of the bid made by respondent No. 2 duly accepted by respondent No. 1, the sanctity of the bid had to be respected and failure to do so will have a detrimental effect on the entire process of auction and commercial transaction as finality of auction must be recognised to be in the interest of the exchequer; that respondent No. 2 was not impleaded by the appellant in the writ petition and thus the appeal preferred against respondent No. 2 is not maintainable as no leave has been sought for by the appellant for impleading respondent No. 2; that the appellant has not challenged the RBI Guidelines and thus is not entitled to any relief in this Court. It is also argued by learned counsel for respondent No. 2 that it is only that bank or financial institution who has granted the loan who is entitled to reschedule the same or fix OTS or grant instalments and that the court ought not to interfere in such matters which are contractual in nature and for which writ petition is not a proper remedy. In support of their contention, the respondents have relied upon the following judgments : ( i ) Excise Commissioner of U.P. v. Manminder Singh [1983] 4 SCC 318. ( ii ) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t with by the Supreme Court in the following two judgments : ( i ) B.O.I. Finance Ltd. v. Custodian [1997] 89 Comp. Cas. 74 1 (SC). ( ii ) Central Bank of India v. Ravindra [2001] 107 Comp. Cas. 416 2 (SC). 13. While examining the Securities Contracts (Regulation) Act and the Banking Regulation Act in B.O.I. Finance Ltd. v. Custodian [1997] 89 Comp. Cas. 74 1 (SC) the Supreme Court specifically dealt with the provisions of section 36(1)( a ) which empowers the RBI to auction or prohibit the banking companies generally or any banking company in particular against entering into any particular transaction and generally to give advice to any banking companies, and held that a circular issued by the RBI which stated that the banks were advised to follow the Guidelines given thereunder, the word "advised" cannot be read in isolation and the said document was meant to be binding on the banking companies. 14. In the case of Central Bank of India v. Ravindra [2001] 107 Comp. Cas. 416 2 , the Supreme Court observed that the RBI is a prime banking institution of the country entrusted with a supervisory role over banking and conferred with the authority of issui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant before disposing of its NPAs. The claim of the appellant that the said NPA is its financial asset is also without any merit for the reason that NPA is nothing but a debt owed by the appellant to respondent No. 1. As the said debt is owed by respondent No. 1, it is very well entitled to deal with the same as an asset for the purposes of resolving its NPA. It is fallacious on the part of the appellant to claim that the said NPA can be termed a financial asset of the company. 18. While dealing with the connotation of the words "non-performing assets", in the Non-performing Asset Act, 2002, a Division Bench of the Uttaranchal High Court in the case of Unique Engg. Works v. Union of India [2004] 2 BC 241, speaking through S.H. Kapadia, J. (as his Lordship then was) held that the object of the NPA Act is to enable banks and financial institutions to realise long-term assets, management of liquidity, asset liability mismatches and reduction of non-performing assets by adopting measures for recovery/reconstruction. It was further held that just as any immovable property can become a subject-matter of security interest, so also an account receivable can be transferred, assi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as High Court in Tamil Nadu Industrial Investment Corpn. Ltd. v. Millennium Business Solutions (P.) Ltd. [2005] 2 BC 79, has also held that writ petition is not a proper remedy in contractual matters and such a petition cannot be entertained for enforcing OTS upon a party unless a violation of law has been pointed out. 22. Insofar as the extent of judicial scrutiny/judicial review is concerned, the powers of the High Court under article 226 of the Constitution of India are extremely wide and it has been stated time and again that the said powers are unfettered when required to be exercised to undo any injustice wherever and whenever noticed. In a recent judgment, a Division Bench of this Court in the case of Indian Oil Corpn. Ltd. v. Dharam Chand Gupta [2006] 132 DLT 74, has held as below : "The powers of the High Court under article 226 of the Constitution of India are very wide and the same are to be exercised to effectuate the regime of law and not to abrogate it. The article 226 is couched in an comprehensive phraseology and it ex facie confers a very wide power on the High Court to reach injustice wherever it is found." 23. In the case of Calcutta Gas Co. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ana Financial Corpn. v. Jagadamba Oil Mills [2002] 110 Comp. Cas. 20, the Supreme Court held as under : "The obligation to act fairly on the part of the administrative authorities was envolved to ensure the rule of law and to prevent failure of justice. This doctrine is complimentary to the principles of natural justice which the quasi-judicial authorities are bound to observe. It is true that the distinction between a quasi-judicial and the administrative action has become thin, as pointed out by this Court as far back as 1970 in A. K. Kraipak v. Union of India [1969] 2 SCC 262. Even so the extent of judicial scrutiny/judicial review in the case of administrative action cannot be larger than in the case of quasi-judicial action. If the High Court cannot sit as an appellate authority over the decisions and orders of quasi-judicial authorities, it follows equally that it cannot do so in the case of administrative authorities. In the matter of administrative action, it is well known, more than one choice is available to the administrative authorities; they have a certain amount of discretion available to them. . . ." (p. 26) 27. We may also quote the following passage fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own calculations and advise received and on the basis of prudence and commercial calculations. By substituting the said decision by its own judgment, this Court may stray into territories which should best be kept away from. Undoubtedly, a writ will lie where there is a violation of law or where the respondent is found to act unfairly and unreasonably, but no writ lies merely for directing OTS or rescheduling of loan or fixing instalments in connection with the loan, as is the case here. 30. In our opinion, the learned Single Judge did not commit any error when he refused to interfere with the process of auction initiated by respondent No. 1 to dispose of its NPA in favour of respondent No. 2, the successful bidder. If the appellant did not avail of the offer made by respondent No. 1 vide its letter dated 10-3-2006, it cannot seek to put the blame on respondent No. 1 and make a grievance that it was not acting fairly qua the appellant or that respondent No. 1 was unfair to the appellant by not accepting its OTS. The appellant cannot be permitted to treat the OTS as a bonanza in reserve, which it may unilaterally encash at any point of time. Merely because the amount offere ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
