Financial Corp. & ANR. Vs. M/S Garg Steel & ANR.  INSC 1671 (22
APPELLATE JURISDICTION CIVIL APPEAL NO.7119 OF 2009 (Arising out of S.L.P. (C)
No.6613 of 2007) Punjab Financial Corporation & Anr. ...Appellant(s) Versus
M/s. Garg Steel & Anr. ...Respondent(s)
O R D E R
learned counsel on both sides.
consent, matter taken up for final hearing and disposed of.
appeal has been filed by Punjab Financial Corporation against the judgment and
order dated 22nd February, 2007, delivered by the Division Bench of the Punjab
and Haryana High Court in the case of M/s. Garg Steel vs. Punjab Financial
Corporation & Ors. [C.W.P. No.14882 of 2003].
giving rise to this appeal are as follows:
No.1 herein [`Borrower', for short] instituted Writ Petition No.14882 of 2003
in the High Court by which it prayed for writ of mandamus directing Punjab
Financial Corporation [for short, "P.F.C."] to release the balance
loan amount immediately in terms of the contract. In the writ petition filed
before the High Court, the said Borrower also prayed for damages with interest
on the ground of breach of contract by not disbursing the loan(s). The Borrower
further prayed that the interest due from it on the outstanding(s) be also
waived. According to the said Borrower, it had made investments on its venture
on the basis of the contract under which P.F.C. had agreed to sanction and
disburse the loan to enable it to set up its Project and on account of failure
to disburse further amounts; it has suffered huge losses for which damages were
Court had issued notice to Respondent No.1 at the admission stage as this Court
was, prima facie, of the view that writ petition filed in the High Court was
misconceived. Accordingly, we heard the parties at length on the averments made
in the original writ petition. On going through the writ petition, the
following circumstances are alleged: That a loan application was made for an
amount of Rupees thirty lakhs, including Soft loan, which was accepted by
P.F.C.; that Rs.21.25 lakhs was agreed to be disbursed in advance against
collateral security of commercial plots and residential plot; that the loan was
granted at the contractual rate of interest at 15.5 per cent; that the loan
consisted of the Term loan and the Soft loan; and that there was a back-to-back
re- finance arrangement between P.F.C. and Small Industries Development Bank of
India [Respondent No.2 in the original writ petition] in respect of the Soft
loan. This last circumstance of back-to-back re-finance arrangement is
important, particularly in view of the fact that by this writ petition, the
Borrower is, in effect, seeking, indirectly, enforcement of the said
back-to-back transaction between P.F.C. and S.I.D.B.I. Further, there was no
privity of contract between the Borrower and S.I.D.B.I. Lastly, the point to be
noted is that, as on the date of the filing of the original writ petition,
Respondent No.1 was a Debtor to P.F.C.. It also appears from the averments in
the original writ petition that P.F.C. had also insisted on execution of
documents by the said Borrower in respect of further disbursals of the Term
loan which the Borrower refused.
come when this Court needs to emphasise that in cases where writ of mandamus is
sought, High Courts should be very particular in finding out from the averments
of the writ petition whether there exist proper pleadings. In the present case,
arguments are advanced on the basis of promissory estoppels, waiver and breach
of contract without proper averments being made in the writ petition. Be that
as it may, the facts indicate that, by this writ petition, the original
petitioner [Borrower] has sought damages and enforcement of contractual
commitments which, in our view, were beyond the scope of a writ petition.
Adjustment of accounts and enforcement of back- to-back transactions with a
party with whom there was no privity of contract coupled with the claim for damages
are all contractual matters un-enforceable by way of writ petitions.
afore-stated reasons, we are of the view that the High Court should not have
entertained the writ petition, particularly when contractual disputes requiring
evidence existed between the Borrower and Lender.
concluding, we may state that learned counsel for Respondent No.1 placed
reliance on the judgment of this Court in the case of Gujarat State Financial
Corporation vs. M/s. Lotus Hotels Private Limited, reported in 1983  S.C.C.
379, which has no application to the facts of this case. At the outset, it may
be stated that, in the present case, it was agreed by and between P.F.C. and
the Borrower that Soft loan would be disbursed by P.F.C. only if S.I.D.B.I.
releases the amount under the re-finance arrangement between P.F.C. and
S.I.D.B.I. In the original writ petition, there is no prayer for specific
performance of the re-finance agreement, assuming for the sake of argument that
such a plea is tenable.
afore-stated reasons, we set aside the impugned judgment of the High Court on
the ground that the writ petition instituted by the borrower was misconceived.
civil appeal stands allowed with no order as to costs.
......................J. [S.H. KAPADIA]
......................J. [G.S. SINGHVI]
......................J. [AFTAB ALAM]
October 22, 2009.