WA/1636/2002 of Ampro Packaging Industries Limited, Vs Andhra Pradesh Industrial Development Corporation Limited, on 31 December 2010

1. Andhra Pradesh Industrial Development Corporation Limited, rep. by its Managing Director and others

..Respondents

The Court made the following Common Judgment:

THE HONOURABLE SRI JUSTICEA.GOPAL REDDYandTHE HONOURABLE SRI JUSTICEP.DURGA PRASAD

W.A.No.1636 of 2002 & W.P.No.14136 of 2009

Common Judgment:(Per Hon’ble Sri Justice A.Gopal Reddy)

This appeal and writ petition filed questioning the sale ofproperties belonging to the guarantor under Section 29 of StateFinancial Corporations Act, 1951 (for short “the Act) were heardtogether and disposed of by this common judgment.

W.A.No.1636 of 2002 is directed against the order of thelearned single Judge dismissing W.P.No.15713 of 2002 dated 13-09-2002 filed by Ampro Packaging Industries Limited (hereinafter calledas “writ appellant”), sister concern of M/s.Ampro Acquatech Limited—petitioner in W.P.No.14136 of 2009. The appellant entered into billdiscounting agreement with Merbanc Financial Services Limited—2[nd]respondent on 02-04-1997, whereby the 2[nd] respondent agreed to grant billdiscounting facility to the appellant to the extent of 45 lakhs. In that connection, M/s.Ampro Acquatech Limited (hereinafter called as“writ petitioner”) offered 8.134 hectares (equivalent to Ac.20.10 cts.)situated in Nemam Village, Kakinada Rural Mandal towards collateralsecurity in favour of 2[nd] respondent.

The Andhra Pradesh Industrial Development Corporation Limited(APIDC)—1[st] respondent—Corporation given bill re-discountingfacility to a tune of Rs.2 crores in favour of 2[nd] respondent.

The 2[nd] respondent in turn re-discounted six bills to the tune ofRs.31,00,375/- of the writ appellant with the 1[st] respondent—Corporation by offering agricultural lands offered by the writ petitioneras collateral security in favour of 2[nd] respondent. When the 2[nd]respondent failed to make the payment to the 1[st] respondent—Corporation in terms of agreement between them towards the amountcovered by six bills rediscounting, the 1[st] respondent—Corporationaddressed a letter dated 06-11-1999 to the writ appellant informingabout the same. Thereafter, the 1[st] respondent—Corporationaddressed another letter dated 29-12-1999 to the writ appellant stating that it would take steps underSection 29 of the Act to sell the lands offered as collateral security. Since the writ appellant or the 2[nd] respondent failed to clear the duesof Rs.33,09,823/-, the 1[st] respondent—Corporation put the property,which was offered as collateral security, for sale exercising the powersconferred on it under Section 29 of the Act by publishing papernotifications dated 03-07-2000, 08-09-2000 and 22-03-2002. One K.Shiva Kumar andAssociates made an offer for Rs.34,25,000/-. The Sale NegotiationCommittee recommended to the 1[st] respondent—Corporation foraccepting the offer of K.Shiva Kumar. The Board of 1[st] respondent—Corporation passed a resolution on 24-02-2002 accepting the offer made by K.Shiva Kumar followed by

letter dated 06-06-2002 intimating him about the acceptance of theBoard for sale of the land in his favour and on the request made byK.Shiva Kumar four sale deeds were registered in favour of PenkeSrinivas Baba on 07-10-2002. Meanwhile, W.P.No.15713 of 2002 wasfiled by the writ appellant challenging the sale of property offered ascollateral security contending that the 1[st] respondent—Corporationacted mala fide against the interest of the writ appellant agreeing tosell the land offered by it as security at a price which would just aboutto clear the amount due to it (1[st] respondent) and “the 1[st] respondent—Corporation instead of giving wide publicity to the sale of property, hasinvited tenders from the interested parties thereby restricting theparticipation of the public and reducing the options available to it tomaximize the amount realizable by sale of land”. The 1[st] respondent—Corporation has also not got the property valued as any such effortwould certainly have brought to its notice the prevailing market ratesand would have enabled it to realize much better price.

The learned single Judge dismissed the writ petition at theadmission stage holding that except reiterating what was averred inthe affidavit filed in support of the writ petition no further informationwas given about the nature of publicity to be given by the 1[st]respondent—Corporation and the 1[st] respondent being the statutoryCorporation in exercise of its statutory right sold the property towardsthe recovery of the amounts due to it. Hence, do not see any reason tointerfere with the transaction.

Aggrieved by the dismissal of writ petition the writ appellantfiled the above writ appeal. Later he filed W.A.M.P. No.1843 of 2008 toimplead Penke Srinivasa Baba as third respondent to the writ appeal stating that there is no contract between the 1[st] respondent—Corporation and the appellant.

The lands belonging to the guarantor were offered as collateralsecurity; therefore, it is not permissible to proceed against the saidproperty offered as collateral security except by filing a suit against the2[nd] respondent. At no point of time the properties of the guarantorwere mortgaged in favour of the 2[nd] respondent except the propertiesof the principal borrower. Hence, the 1[st] respondent—Corporationcannot proceed against the properties of a guarantor. The impleadpetition was ordered on 05-03-2009.

M/s.Ampro Acquatech Limited (guarantor) filedW.P.No.14136 of 2009 on 14-07-2009 questioning the sale inter alia contending that creditor and debtor relationship existedbetween the writ appellant and the 2[nd] respondent on one hand andthe 1[st] respondent—Corporation and 2[nd] respondent on the otherhand. As far as petitioner is concerned, it is not indebted to therespondents 1 and 2 in the capacity of principal borrower and it wasonly a guarantor who offered its properties by way of collateral securityto the bills discounted initially by the 2[nd] respondent and later by the1[st] respondent—Corporation.

The writ petitioner was not served with any notice by the

1[st] respondent—Corporation about proposing sale of its propertiesand 1[st] respondent—Corporation went ahead with the auction inpursuance of the sale notification dated 03-07-2000 and got certainoffers from the interested parties. As those offers are not accepted,another notification was issued on 22-03-2002. In response to such notification it appears that the 1[st]respondent—Corporation received an offer for Rs.34,25,000/- fromK.Shiva Kumar. The Sale Negotiation Committee participated byManaging Director and Vice Chairman of the 1[st] respondent—Corporation found that the offer made by K.ShivaKumar is feasible and placed it before the Board of Directors and onapproval of the same, the 1[st] respondent—Corporation appears tohave issued a letter dated 06-06-2002 confirming the sale in favour ofK.Shiva Kumar at whose request the property was registered in favourof the 3[rd] respondent by executing four sale deeds dated 07-10-2002. Therefore, the entire action of the 1[st] respondent—Corporation inselling the lands of the writ petitioner by invoking the provisions ofSection 29 of the Act as illegal, arbitrary and unsustainable in view oflaw declared by the Supreme Court in KARNATAKA STATE FINANCIALCORPORATION v. NARASIMAHAIAH[[1]], wherein it was clearly held that theproperties of a guarantor cannot be brought to sale by invoking Section29 of the Act and only remedy available to the creditor is to proceedunder Section 31 of the Act. It was specifically pleaded in para-8 of theaffidavit that petitioner’s sister concern viz., M/s.Ampro PackagingIndustries Limited (Writ appellant) has already filed W.P.No.15713 of2002 questioning the sale of property. On dismissal of the said writpetition, W.A.No.1636 of 2002 has been filed. The writ petitioner wasunder the bona fide impression that since the action of the 1[st]respondent—Corporation is questioned by its sister concern (writappellant), which is the principal borrower, there is no need to file aseparate writ petition. The writ petitioner after obtaining detailed legalopinion in this respect, wherein it was advised that unless it questionsthe action of the 1[st] respondent—Corporation it cannot get the relief in the pending writ appeal. There is no negligence or acquiescence onthe part of the petitioner and the petitioner was advised that there is nolimitation for filing the writ petition and this Hon’ble Court hasdiscretion to entertain the writ petition even after a considerable periodbasing upon the facts of the case, extent of rights involved and theinjustice meted to the aggrieved party. Hence, the sale notification isliable to be set aside.

A detailed counter affidavit has been filed by the 1[st]respondent—Corporation stating about extending of billdiscounting facility to the 2[nd] respondent for a sum of Rs.2 crores. As security for the said facility extended by the 2[nd]respondent, the principal debtor/borrower (writ appellant) offered theproperties belonging to the writ petitioner. The bills discounted by theprincipal borrower with the 2[nd] respondent were in turn re-discountedby the 2[nd] respondent with the 1[st] respondent—Corporation to a tune of Rs.31,00,378 and the 2[nd]respondent sub-mortgaged the said property as security for the bills ofthe principal borrower re-discounted with the

1[st] respondent—Corporation. The said security was created pursuantto the letter addressed by the writ petitioner, who is the owner of thesaid property, on 13-06-1997 to the 1[st] respondent—Corporation agreeing and authorizing the 2[nd] respondent to offer the said property as security to the extent ofRs.40 lakhs against not only the bills drawn by the principal borrowerdiscounted by the 2[nd] respondent and re-discounted by the 1[st] respondent—Corporation but also any otherbills re-discounted by the 2[nd] respondent with the 1[st] respondent—Corporation within the limit of Rs.40 lakhs.

The said letter was also filed along with the counter. As the principalborrower did not pay the amounts due pursuant to the letter dated 06-11-1999, the 1[st] respondent—Corporation addressed a letter dated 29-12-1999 to the 2[nd] respondent as well as the principal borrower (writappellant) informing them that a sum of Rs.33,09,823/- is due as on 30-11-1999. In spite of the said letter dated 29-12-1999 there was noresponse from the principal borrower or from the 2[nd] respondent.Therefore, another letter was addressed on 10-04-2000 to the 2[nd] respondent, principal borrower and also to thewrit petitioner calling upon them to pay the amount of Rs.35,91,903/-due as on 31-03-2000. If the said amount is not paid within 10 daysfrom the date of receipt of the said letter, the 1[st] respondent—Corporation would be constrained to invoke the provisions of Section29 of the Act and sell the property.

The said letters have been returned with postal endorsement“addressees have left without leaving any instructions”. Therefore, the1[st] respondent—Corporation requested the 2[nd] respondent to furnishthe correct address of the writ petitioner and accordingly the 2[nd]respondent through its letter dated 04-05-2000 furnished the address of M.Srinivasa Rao, who isDirector/Promoter on the Board of both the principal debtor/borroweras well as the writ petitioner. On furnishing the address, the 1[st]respondent—Corporation once again dispatched copy of the letterdated 10-04-2000 to the principal debtor/borrower and the writpetitioner on 12-05-2000 to the address furnished by the 2[nd]respondent. But the said letters were returned with postal acknowledgement “addressees have refused to receive the same”. The said letters were also filed along with the counter. Thereafter, the1[st] respondent—Corporation in exercise of power under section 29 ofthe Act seized the property on 07-06-2000 under a seizurepanchanama and issued sale notification dated 03-07-2000 inEconomic Times and Eenadu news papers inviting offers. Pursuant tothe said notification, two offers were received for Rs.20,10,000 andRs.30,50,250/- from S.Veerabhadra Rao and A.Bulli Abbayi Reddyrespectively and the Sale Negotiation Committee after negotiationswith the tenderors/participants, the offers were improved toRs.31,15,500/- and 32,00,000/- respectively. Thereafter, further tendernotification was issued and pursuant to the same the 1[st] respondent—Corporation received highest offer of Rs.34,25,000/- from K.ShivaKumar. Once again Sale Negotiation Committee negotiated withMr.K.Shiva Kumar, who deposited the sale consideration andrequested the

1[st] respondent—Corporation to register the property in the name of 3[rd]respondent and accordingly sale deeds were executed in favour of 3[rd]respondent, who in turn leased out the property by creating third partyrights and huge amounts have been spent for development of the saidproperty, as stated by him in the counter filed in W.A.No.1636 of 2002,and the writ petitioner is not entitled to any relief as he slept over for 7long years. Further, it is contended that the Government of India issueda notification (mistakenly stated as resolution) extending the provisionsof the Act to the 1[st] respondent—Corporation duly empowering it(Corporation) to recover its dues under the provisions of the Act. Thesaid notification dated 11-12-1986 was filed along with counter.

The 3[rd] respondent filed a separate counter stating that he is a bona fide purchaser of the land under four sale deeds. The 1[st]respondent—Corporation issued paper publication for sale of land inEconomic Times and Eenadu on 03-07-2000. Further publication wasmade on 08-09-2000 in Economic Times. As required offers were notreceived, advertisement was again made in Eenadu and Hindu on 21-03-2002 and 22-03-2002 respectively. The principal borrower andguarantor did not deliberately respond to the auction notice. Theprincipal borrower challenged the sale in W.P.No.15713 of 2002,which was dismissed. On dismissal of said writ petition, sale deedswere executed in favour of 3[rd] respondent on 07-10-2002 and onlyafter pronouncement of judgment of the Supreme Court on 13-03-2008 in KARNATAKA STATE FINANCIAL CORPORATION v.NARASIMAHAIAH (1 supra) the present writ petition is being filed on 13-07-2009 for setting aside the sale deeds. The 3[rd] respondent being thebona fide purchaser developed the land by investing huge money andfor further development leased out the property in the year 2006 andgifted away some of the lands in the year 2010 by creating third partyrights. Therefore, the above writ petition, which was filed with sevenyears delay, cannot be entertained and prays for dismissal of writpetition.

Submissions:

Sri Vedula Srinivas, learned counsel for the appellant andwrit petitioner made the following three submissions.

1. The 1[st] respondent—Corporation can invoke Section29 of the Act for sale of property belonging to theprincipal borrower but not the guarantor.29 of the Act for sale of property belonging to theprincipal borrower but not the guarantor.

2. Once the Board resolved to sell the property to K.Shiva Kumar, execution of sale deeds in favour of 3[rd]respondent is invalid without there being anyresolution for sale of said property in his favour.

3. The 1[st] respondent—Corporation (APIDC) is not anotified body under the Act for invoking Section 29and the whole proceedings are untra vires.

In support of his contentions strong reliance is placed on the judgmentof the Supreme Court in KARNATAKA STATE FINANCIAL CORPORATION v.NARASIMAHAIAH(1 supra). He further contends that in spite of specificplea taken that there is no Board resolution to sell the property infavour of 3[rd] respondent and the 1[st] respondent—Corporation cannotinvoke the provisions of Section 29 of the Act, the same has not beenrepelled. Therefore, the bona fide purchaser (3[rd] respondent) is notentitled to any equity as held by the Gujarat High Court in NEETABEN U.

CHOKSHI v. GUJARAT STATE FINANCIAL CORPORATION[[2]]andNARAYANBHAI RAICHANDDAS PATEL v. MANAGING DIRECTOR[[3]].He alsocontends that mere delay does not bar the relief. For the saidproposition reliance is placed on the judgments of the Supreme Courtin RAMACHANDRA SHANKAR DEODHAR v. STATE OF MAHARASHTRA[[4]]andSTATE OF RAJASTHAN v. D.R.LAXMI[[5]].

Sri Sriram Reddy, learned Standing Counsel for

Conclusion

the 1[st] respondent—Corporation (APIDC) contends that sale wasconducted in the year 2002; principal borrower filed W.P.No.15713 of2002 questioning the sale, which was dismissed at the admissionstage; only on 1[st] respondent—Corporation filing counter with regardto maintainability of writ petition without impleading the auctionpurchaser and only after delivery of the Supreme Court judgment in NARASIMAHAIAH’ s case(1 supra), WAMP No.1843 of 2008 has beenfiled to implead the auction purchaser to over come the plea of the 1[st] respondent—Corporation. The writ petitioner suppressed allmaterial facts stating that there is no privity of contract between the writpetitioner and 2[nd] respondent. In fact, the writ petitioner addressed aletter dated 13-06-1997 agreeing and authorizing the 2[nd] respondentto offer the said property as security to the extent of Rs.40 lakhs but inthe affidavit filed in support of W.P.No.15713 of 2002, it appears thatthe 2[nd] respondent rediscounted the bills and sub-mortgaged theproperty offered by the writ appellant and the said affidavit has beensigned by M.Srinivas Rao whereas the writ petition is filed by one ofthe directors of M/s.Ampro Aquatech Limited. The 1[st] respondent—Corporation (APIDC) is a notified financial institution and in exercise ofpower under sub-section (1) of Section 46 of the Act the CentralGovernment extended the provisions of the Act to the 1[st] respondent—Corporation. Hence, it is always open for the 1[st] respondent—Corporation to invoke the provisions of the Act. For the saidproposition reliance is placed on the judgments of the Supreme Courti n HARYANA FINANCIAL CORPORATION v. JAGDAMBA OIL MILLS[[6]]andPUNJAB SMALL SCALE INDUSTRIES & EXPORT CORPN. LTD. v. JHUJHARSINGH[[7]]. He further contended that restrictions placed on the power ofSFCS under Section 29 in MAHESH CHANDRA v. REGIONAL MANAGER,UPFC[[8]]have been overruled in HARYANA FINANCIAL CORPORATION v.JAGDAMBA OIL MILLS(6 supra). Therefore, the writ appeal was initiallyfiled questioning the sale contending that the Corporation has notfollowed the procedure enumerated in MAHESH CHANDRA’ s case (8supra) and only after pronouncement of Supreme Court judgment in NARASIMAHAIAH’s case(1 supra) knowingly that the grounds availableto challenge therein is not available got filed the present writ petitionthrough one of the Directors which is liable to be dismissed on theground of laches. To support the same, reliance is placed on thejudgments of the Supreme Court in PUNJAB SMALL SCALE INDUSTRIES &EXPORT CORPN. LTD. v. JHUJHAR SINGH(7 supra) and K.D.SHARMA v.SAIL[[9]].

Sri S.Ramachandra Rao, learned senior counsel appearingfor the 3[rd] respondent (auction purchaser) contends that on dismissalof W.P.No.15713 of 2002 on 30-09-2002, the above writ appeal wasfiled and only after pronouncement of Supreme Court judgment inNARASIMAHAIAH’ s case(1 supra) on 13-03-2008, the present writpetition was filed on 13-07-2009 for setting aside the sale. In writappeal, the appellant can canvas the correctness of the dismissalorder made in W.P.No.15713 of 2002, which was mainly filed on theground that wide publicity for sale of the property has not been given,which restricted participation of public, and the Corporation has not gotthe property valued to arrive the correct valuation.

In writ appeal, while impleading the auction purchaser the appellantcannot take new plea, which was not taken in the main writ petition. Inthe absence of any plea taken in W.P.No.15713 of 2002, which is thesubject matter of writ appeal, that recourse under Section 29 of the Actcannot be taken by the Corporation to sell the properties of theguarantor, the appellant cannot be permitted to take such plea in thewrit appeal. The 3[rd] respondent paid the entire bid amount andobtained sale deeds in his favour on 07-10-2002; therefore, valuablerights have been accrued to him. The writ petition is liable to bedismissed on the ground of laches. He also contended that even if there is any illegality committed by the 1[st] respondent—Corporation(APIDC), the remedy of the writ petitioner, if any, is to work out itsremedies by way of damages or other reliefs against the 1[st]respondent—Corporation but cannot seek to set aside the sale deedsand recovery of the possession. The learned senior counsel furthercontends that any order validly made will not become void or illegal bysubsequent declaration of law. For the said proposition reliance isplaced on the judgments of the Supreme Court in STATE OF A.P. v.T.G.LAKSHMAIAH SETTY & SONS[[10]];UNION OF INDIA v. MADRASTELEPHONE SC & ST SOCIAL WELFARE ASSN.[[11]]and MAFATLALINDUSTRIES LTD. v. UNION OF INDIA[[12]]. He also contends thatdelay/laches defeats equity. For that reliance is placed on thejudgments of the Supreme Court in STATE OF A.P. v. T.G.LAKSHMAIAHSETTY & SONS (10 supra); S.S.BALU v. STATE OF KERALA[[13]];OMPARKASH v. UNION OF INDIA[[14]]and BOMBAY DYEING & MFG. CO. LTD. v.BOMBAY ENVIRONMENTAL ACTION GROUP[[15]]. He lastly contends thatmere violation of provisions of law does not automatically entitle toissuance of a writ. For the said proposition reliance is placed on thejudgments of the Apex Court in E.P.ROYAPPA v. STATE OFTAMILNADU[[16]];NETAI BAG v. STATE OF W.B.[[17]].

In the light of the above submissions, the points that arise forconsideration in this writ petition are:

1. Whether the Corporation can proceed against theproperties of the surety/guarantor under Section 29 of theAct.properties of the surety/guarantor under Section 29 of theAct.

2. Whether the writ petition filed with a delay of 7 yearsquestioning the sale of the properties hypothecated by theguarantor is liable to be allowed by setting aside the salequestioning the sale of the properties hypothecated by theguarantor is liable to be allowed by setting aside the sale or not. If not the sale can be set aside by allowing writappeal.

Point No.1:

The issue whether the properties of the guarantor can be soldin exercise of power under Section 29 of the Act is no more resintegra. The Supreme Court in NARASIMAHAIAH’s case (1 supra)affirmed the judgment and order of the Karnataka High Court dated 26-03-2003 holding that Section 29 of the Act nowhere states that theCorporation can proceed against the surety even if some propertiesare mortgaged or hypothecated by it. The right of the FinancialCorporation in terms of Section 29 of the Act must be exercised onlyon a defaulting party. There cannot be any default as is envisaged inSection 29 by a surety or a guarantor. The liabilities of a surety or theguarantor to repay the loan of the principal debtor arise only when adefault is made by the latter. After referring the legislative object andintent in enacting Section 29 held when a guarantee is sought to beenforced, the same must be done through a Court having appropriatejurisdiction. In the absence of any express provision in the statute, aperson being in lawful possession cannot be deprived thereof byreason of default on the part of a principal borrower since sub-section(4) of Section 29 of the Act lays down appropriation of the saleproceeds only refers to “industrial concern” and not a “surety” or“guarantor”.

The principal borrower filed W.P.No.15713 of 2002 againstwhich the present writ appeal arises. The only ground of challengemade to the sale was that the 1[st] respondent—Corporation did notgive sufficient publicity for sale of the property and it took possession for the default committed by the principal borrower. Obviously, themain ground of challenge was that the principles laid down in MAHESHCHANDRA’s case (8 supra) have not been followed.

The guidelines issued in MAHESH CHANDRA’s case (8 supra) run counter to the view expressed subsequently in U.P.FINANCIAL CORPN. v. GEM CAP (INDIA) (P) LTD.((1993) 2 SCC 299); U.P.FINANCIAL CORPN. v. NAINI OXYGEN & ACETYLENE GAS LTD.((1995) 2SCC 754) and KARNATAKA STATE FINANCIAL CORPN. V. MICRO CASTRUBBER & ALLIED PRODUCTS (P) LTD.((1996) 5 SCC 65).

The view taken in MAHESH CHANDRA V. REGIONAL MANAGER,UP FC (8 supra) has not been accepted by the Supreme Court inHARYANA FINANCIAL CORPORATION v. JAGDAMBA OIL MILLS(6 supra) andheld that Section 29 gives a right to Financial Corporation to sell theassets of the industrial concern and realize the property pledged,mortgaged, hypothecated or assigned to Financial Corporation. Theright accrues when the industrial concern, which is under a liability toFinancial Corporation under an agreement, makes any default inrepayment of any loan or advance or any instalment thereof or inmeeting its obligations as envisaged in Section 29 of the Act. Theguidelines issued in MAHESH CHANDRA’ s case (8 supra)placeunnecessary restrictions on the exercise of power by FinancialCorporation contained in Section 29 of the Act by requiring thedefaulting unit-holder to be associated or consulted at every stage inthe sale of the property. A person who has defaulted is hardly everlikely to cooperate in the sale of his assets. The procedure indicated in

MAHESH CHANDRA’s case (8 supra) will only lead to further delay inrealization of the dues by the Corporation by sale of assets. It is alwaysexpected that the Corporation will try and realize the maximum saleprice by selling the assets by following a procedure which istransparent and acceptable, after due publicity, wherever possible.

Admittedly, in the present case sale notice was issuedto the principal borrower, which was returned with postal endorsement“addressee left without leaving instructions”.

After taking possession of the property on 07-06-2000 under a cover ofpanchanama, publication was made on 03-07-2000 for sale of the landin Economic Times and Eenadu followed by further publication dated08-09-2000 in Economic Times and advertised the sale in newspapers, viz., Eenadu and Hindu on 21-03-2002 and 22-03-2002respectively. In response to publication, the 1[st] respondent—Corporation received two offers for Rs.20,10,000/- and 30,50,250/-from S.Veerabhadra Rao and A.Bulli Abbai Reddy and pursuant to thenegotiations made by the Tender Negotiation Committee, the twotenderers improved their offer to Rs.31,15,500/- and Rs.32,00,000/-.Pursuant to last advertisement one K.Shiva Kumar offered 34,25,000/-and the same was approved by the Board after negotiations. In theabsence of any pleading that procedure followed by the 1[st ]respondent—Corporation is not transparent and acceptable in law,mere assertion that wide publicity of sale of property has not beengiven by inviting tenders from the interested parties itself is notsufficient to hold that the procedure adopted by the 1[st] respondent—Corporation is not transparent and acceptable in law. Having regard tothe fact that 1[st] respondent—Corporation pursuant to sale notification in the first instance received only two offers and on negotiation thetenderers agreed to improve their offer to Rs.31,15,500/- andRs.32,00,000/-, as it was not acceptable, the Corporation again calledfor tender notification. Pursuant to the same, highest offer wasreceived from K.Shiva Kumar for Rs.34,25,000/-, which is more thanRs.2,25,000/- with the earlier offer made, which itself shows that the 1[st] respondent—Corporation has taken all steps to receive themaximum price. Therefore, the procedure adopted by the 1[st] respondent—Corporation for sale of the property cannot be held toirrational or arbitrary. Point No.1 is accordingly answered.Point No.2:

It is well settled that Article 226 is not intended to supersedethe modes of obtaining relief before a civil court or to deny defenceslegitimately open in such actions. (See GHAN SHYAM DAS GUPTA v.ANANT KUMAR SINHA AIR 1991 SC 2251 = (1991) 4 SCC 379).

Section 34 of the Specific Relief Act, 1963 provides a remedyto obtain declaratory decrees when revenue sale is void.

Section 41A of the Act bars institution of suit against anyaction taken by the Corporation in pursuance of Section 27 or Section32A only but the Act does not bar institution of a suit for setting asidethe sale conducted without any authority under the Act.

Article 113 of the Limitation Act, 1963 provides three yearslimitation for institution of such suit.

The Supreme Court in STATE OF A.P. v. T.G.LAKSHMAIAH

SETTY & SONS (10 supra) held any order validly made does not becomevoid or illegal by subsequent declaration of law to reopen theassessment under the Sale Tax Act already made.

In MAFATLAL INDUSTRIES LTD. v. UNION OF INDIA

(12 supra) the Supreme Court while considering the question of refundof excise and customs duty collected subsequently held to be contraryto law by virtue of decision of High Court or Supreme Court in para-79held the theory of mistake of law and the consequent period oflimitation of three years from the date of discovery of such mistake oflaw cannot be invoked by an assessee taking advantage of thedecision in another assessee’s case. All claims for refund ought to be,and ought to have been, filed only under and in accordance with Rule11/Section 11-B of Central Excise and Salt act and under no otherprovision and in no other forum. An assessee must succeed or fail inhis own proceedings and the finality of the proceedings in his owncase cannot be ignored and refund ordered in his favour just becausein another assessee’s case, a similar point is decided in favour of themanufacturer/assessee.

In BOMBAY DYEING & MFG. CO. LTD. v. BOMBAY ENVIRONMENTALACTION GROUP (15 supra) the Supreme Court after referring to theearlier judgments in NAWAB ZAIN-UL-ABDIN KHAN v. MOHD. ASGHAR ALIK H A N (ILR (1888) 10 Allahabad 167 (PC) = (1887) 15 IA 12)GURJOGINDER SINGH v. JASWANT KAUR ((1994) 2 SCC 368) madedistinction between the decree holder auction purchaser himself andthird party bona fide purchaser in an auction sale and observed that"the ratio behind this distinction between a sale to a decree-holder anda sale to a stranger is that the Court, as a matter of policy, will protect honest outsider purchasers at sales held in the execution of itsdecrees, although the sales may be subsequently set aside, whensuch purchasers are not parties to the suit” and held the purchasers ofthe cotton textile mills of the NTC cannot be made to suffer for no faulton their part and, thus, the High Court committed a manifest error inallowing the writ petition. The Supreme Court while observing delayand laches on the part of the petitioner in the matter of granting relief inthe writ petition quoted in approval of the observations made by it in R.AND M. TRUSTv. KORAMANGALA RESIDENTS VIGILANCE GROUP ((2005) 3SCC 91) and STATE OF MAHARASHTRA v. DIGAMBAR (1995) 4 SCC 683,wherein it was held under:

"There is no doubt that delay is a very importantfactor while exercising extraordinary jurisdictionunder Article 226 of the Constitution. We cannotdisturb a third party interest created on account ofdelay. Even otherwise also why should the courtcome to the rescue of a person who is not vigilantin his rights."

"Where the High Court grants relief to a citizen or toany person under Article 226 of the Constitutionagainst any person including the State withoutconsidering his blameworthy conduct, such aslaches, or undue delay, acquiescence or waiver, therelief so granted becomes unsustainable even if therelief was granted in respect of alleged deprivationof his legal right by the state.”

It is now fairly well settled that mere showing violation ofstatutory provisions party is not entitled to issuance of a writ in theabsence of prejudice caused by not following the said statutoryprovisions.

In the absence of any specific allegation of mala fides

attributed to the officials of the 1[st] respondent—Corporation inconducting the auction/negotiations mere violation of statutoryprovisions or safeguards issued by the Supreme Court subsequentlydoes not entitle the petitioner for issuance of writ as held by theSupreme Court in E.P.ROYAAPPA v. STATE OF TAMILNADU(16 supra).

The Supreme Court in NETAI BAG v. STATE OF W.B.

(17 supra) held the inaction of the appellants in approaching the Courtalmost after three years of the impugned lease deed is an additionalcircumstance to doubt their bona fides in challenging the impugnedaction and dismissed the appeal confirming the dismissal of writpetition by the High Court.

In the above case the Supreme Court further held appealbefore the Division Bench of the High Court or in the Supreme Courtbeing in continuation of the original proceedings in the form of writpetition cannot enlarge the scope of inquiry at that belated stage.

The writ petitioner absolutely has not shown any reasons forthe delay in approaching the Court but contrary to the same he averredthe principal borrower filed W.P.No.15713 of 2002 mainly on theground that wide publicity for sale of the property has not been given,which restricted participation of public and the 1[st] respondent—Corporation has not got the property valued to arrive the correctvaluation. In the implead petition it was pleaded that the 1[st]respondent—Corporation (APIDC) cannot take recourse under Section29 of the Act to sell the properties of the guarantor. The appellant Learned senior counsel, Sri S.Ramachandra Rao, wasemphatic in his submission that the appellant should not be permittedto take the plea that guarantor’s property cannot be sold in exercise ofpower under Section 29 of the Act after a period of 8 years.

We do not see any force in the above submission for thereason, the plea going to the root of the jurisdiction of the inferiortribunal which is based on a decision of the High Court or the SupremeCourt, which was delivered subsequent of the filing of the writ petition,can be entertained. (See M.S.M. SHARMA v. SRI KRISHNA SINHA (AIR1959 SC 395); A. ST. ARUNACHALAM PILLAI v. SOUTHERN ROADWAYS LTD.(AIR 1960 SC 1191) and BIRAJ MOHAN DAS GUPTA v. STATE OF ORISSA (AIR 1967 SC 158). But the High Court is under obligation to seewhether equitable jurisdiction can be extended in all such cases ornot.

The writ petitioner (guarantor) has not filed any replycontroverting the fact that he had issued letter dated 13-06-2007, represented by its Managing Director, M.Srinivas Rao, to the Corporation agreeing and authorizing the 2[nd] respondent to offertheir property as collateral security to the extent of 40 lakhs. Mr.Srinivasa Rao representing both the principal borrower (writ appellant)and guarantor (writ petitioner) as Director and Managing Directorrespectively addressed the said letter. Once W.P.No.15713 of 2002 isfiled by the very same Srinivasa Rao and failed in his attempt to setaside the sale deed, filed the present W.P.No.14136 of 2009 by thepetitioner through one of the Directors to take advantage of

Facts

subsequent declaration of law stating that the petitioner is advised tosubmit there is no limitation prescribed for filing a writ petition and thiscourt has discretion to entertain the writ petition even afterconsiderable period basing upon the facts of the case and injusticemeted out to the aggrieved party. The very same Srinivas Rao filedWPMPNo.20804 of 2002 on 23-08-2002 to implead K.Shiva Kumar as 3[rd] respondent to the writpetition—W.P.No.15713 of 2002, but not pressed the same. Pendingwrit appeal, W.A.M.P.No.1843 of 2008 is filed through M.JanardhanRao, one of the Directors, to implead Penke Srinivasa Baba (thirdparty) as 3[rd] respondent to the writ appeal stating that the properties ofthe writ petitioner were offered as collateral security in favour of the 2[nd]respondent who in turn sub-mortgaged the lands which were offered toit as collateral security by a third party guarantor; the said transactionbetween the 2[nd] and 1[st] respondents was not within the knowledge ofthe writ appellant nor there is any privity of contract between the writappellant and the 1[st] respondent—Corporation. The said WAMP wasfiled on 12-08-2008 but the present writ petition is filed on 14-07-2009nearly after 11 months suppressing the fact of M.Srinivas Rao, Directoror the Managing Director of writ petition—Company, presenting theletter dated 13-06-2007 offering the properties of the writ petitioner ascollateral security to the 1[st] respondent—Corporation to the extent of40 lakhs.

It is also to be noted that the 3[rd] respondent who investedRs.34,25,000/- and obtained sale deeds with regard to immovableproperties on 07-10-2002. It is common knowledge that value ofimmovable properties has phenomenally increased during the last seven years i.e. from the date of execution of sale deed till the writpetition is filed almost 10 to 20 times.

The third respondent who invested the said amount cannot bedeprived of the fruits of escalation in the value of the lands.

The petitioner, who has almost abandoned his right and only woke upto unsettle the settled rights after the Supreme Court declared that theproperties of the guarantor cannot be sold in exercise of power underSection 29 of the Act, resorted in chance litigation, filed the present writpetition to take advantage of the law so declared. No doubt, whenfundamental or statutory rights are violated by the executive fiat, thetechnicalities of limitation will not debar the High Court in exercisingjurisdiction under Article 226 of the Constitution, but if any third partyinterest is created, the Court will be slow in exercise of equitablejurisdiction. In such cases, the proper course for the High Court is onlyto see whether the remedy of the writ petitioner under the common lawis barred by limitation; in judging the delay and laches, the High Courtin exercise of jurisdiction under Article 226 of the Constitution cannotignore the law of limitation in granting the relief.

The Supreme Court in S.S.BALU v. STATE OF KERALA (13supra) held that delay defeats equity and the same view was alsotaken in OM PARKASH v. UNION OF INDIA (14 supra)

Conclusion

Once the remedy of the writ petitioner to institute a suit forsetting aside the revenue sale is barred by law of limitation, the HighCourt in exercise of jurisdiction under Article 226 of the Constitutioncannot ignore the law of limitation in granting the relief.

In view of the same, we are not inclined to extend the equitable jurisdiction to the writ petitioner and the writ petition filed bythe petitioner 7 years after confirmation of sale is liable to be dismissedon the ground of laches. We accordingly do so.

In view of finding recorded on point No.1 that the procedurefollowed by the 1[st] respondent—Corporation in inviting tenders andnegotiations with the highest bidder is not irrational or arbitrary and thereasons in dismissing the writ petition also holds good for dismissal ofwrit appeal. Point No.2 is accordingly answered.

In the result, both the writ petition and writ appeal aredismissed. The parties shall bear their own costs.

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A.GOPAL REDDY, J.

-12-2010Murthy

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P.DURGA PRASAD,J.

[1](2008) 5 SCC 176 = 2008 (4) SCALE 82[2]AIR 2010 GUJARAT 84[3]AIR 2009 GUJARAT 24[4]AIR 1974 SC 259[5](1996) 6 SCC 445[6](2002) 3 SCC 496[7](2008) 17 SCC 668[8](1993) 2 SCC 279[9](2008) 12 SCC 481[10]1994 Supp (2) SCC 386[11](2006) 8 SCC 662[12](1997) 5 SCC 536

[13](2009) 2 SCC 479[14](2010) 4 SCC 17[15](2006) 3 SCC 434[16](1974) 4 SCC 3[17](2000) 8 SCC 262