Bihar State Financial Corpn. & Ors Vs. M/S. Chemicot India Pvt. Ltd.
& Ors  Insc 529 (24 August 2006)
Sinha & Dalveer Bhandari S.B. Sinha, J.
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.
necessary agreements for loan were executed in terms whereof the properties of
the 1st respondent were mortgaged.
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.
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 :
7: The concern will have to submit the following papers before the
execution of the legal documents :-
Clearance Certificate under section 230(A) of the Income Tax Act, 1961 in
respect of the Directors.
deed in respect of land.
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.
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.
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,
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.
S.B. Sanyal, learned Senior counsel appearing on behalf of the respondent, on
the other hand, contended :
could not have refused to fulfil its solemn promise to advance the additional
subsidy of Rs.15 lakhs.
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.
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 :
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.
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.
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.
Court in exercise of its jurisdiction under Article 136 of the Constitution of
India, indisputably, can take note of the subsequent events.
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, 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.
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
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.
appeal is allowed with the aforementioned observations. No costs.