WP/1382/2004 of M/s Marvel Weavers Ltd. Vs The Andhra Pradesh State Financial Corporation Ltd. on 28 December 2006

Conclusion

ORAL ORDER:

The writ petition is filed seeking a relief of a direction torespondents “ to extend/implement the benefits under ResolutionNo.28/1/99 – 99 Dt. 31.3.1999 resolved, TUFS Scheme, by theMinistry of Textiles along with subsequent circulars/notificationsissued under TUFS and Notification No.1 (44)/2003-IFI dt. 24/9/2003issued by Ministry of Finance, to the petitioner industry” and for adirection to the respondents “ to release the factory from the seizure,consequently declare the action of the respondents in seizing the unitand auction notice dt. 18.1.2004 as null, void, arbitrary, inoperative inlaw, ultra vires, bad and violative of Articles 14, 21 and 300-A of theConstitution of India and violative of principles of natural justice andpass such other order or orders as the Hon’ble Court deems fit andnecessary in the nature and circumstances of the case.”

The petitioner is a company incorporated under the provisionsof the Companies Act, 1956. It availed loans from respondents 1 and 2

for its commercial purposes. It defaulted in the repayment of the loaninstalments; as per the terms agreed upon for the purpose. Thepetitioner, of course, puts forth several reasons why it could not deliverupon the contractual obligation to repay. Adverse industrial climate,inadequate exports and the like are the reasons projected by thepetitioner-company for its default in the payment of loans torespondents 1 and 2. Exercising power under Section 29 of the StateFinancial Corporations Act, 1951 (for short ‘the Act’), the respondents1 and 2 seized the petitioner’s unit on 22.9.2003 and also issued apaper notification, notifying bids for sale of the assets. Such anotification was issued on 18.1.2004.

According to the petitioner, the schemes generated by theUnion Ministries of Textiles and Finance known as “TechnologyUpgradation Fund Scheme (TUFS) entitles the petitioner to certainbenefits in terms of the rate of interest payable to the respondents 1and 2 under the loan obtained by the petitioner from theserespondents. The petitioner states (in para 11) that the CentralGovernment in order to develop the exports and increase foreigncurrency income of the nation, framed schemes to rehabilitate thetextile industries and issued schemes and norms. The Ministry ofTextiles by a resolution dated 31.3.1999 announced TUFS.

The petitioner submitted several representations to therespondents 1 and 2 claiming benefits under the TUFS. There was noresponse from the respondents. According to the petitioner, if it weretreated as entitled to and granted the benefits under the TUFS, then its liability would come down sufficiently and the amounts paid by ittowards instalments earlier would be well within the instalmentspayable. The petitioner also has a grievance that the State of AndhraPradesh which had sanctioned investment subsidy of Rs.20 lakhs andsales tax deferment of Rs.2.70 crores to the petitioner, did not releasethe amounts. According to the petitioner, these defaults by the Statefurther accentuated the petitioner’s precarious financial position andrendered the petitioner a defaulter to the respondents 1 and 2.

The 1[st] respondent has filed a counter affidavit. This counterasserts that the petitioner failed to repay the loans as agreed upon andcommitted several defaults and is due and payable an amount ofRs.1,64,67,437/- including the principal, interest and expenses. Thepetitioner’s allegation that the assets of the company were seizedwithout following the procedure under Section 29 of the Act, is clearlyand categorically denied. This respondent controverts the petitioner’sclaim that the petitioner is entitled to the benefits under the schemes. Itis contended that the petitioner is ineligible for the benefits envisagedunder the TUFS. It is further stated that as the loans were sanctionedand disbursed by the respondents 1 and 2 in 1998 and the petitioneravailed loans w.e.f 5.2.1999, long prior to the introduction of the TUFS,the respondents are not obligated to consider the petitioner’s caseunder the TUFS. In short, the 1[st] respondent contends that thepetitioner is not eligible to claim the benefits under the TUFS. The 1[st]respondent also contends that it is no way concerned with any defaults committed by the Government with regard to the promises made by theState to the petitioner-industry in respect of investment subsidy orsales tax deferment. The petitioner, according to this respondent, isbound to pay up the loans obtained in accordance with the terms ofthe agreement between the parties and cannot plead extraneouscircumstances including default by the State, to avoid its liability to therespondents 1 and 2.

On behalf of the 2[nd] respondent, a counter affidavit is filed. Thiscounter also categorically asserts that the petitioner has defaulted. The 2[nd] respondent has also controverted the petitioner’s allegationthat the seizure of the assets, exercising power under Section 29 of theAct, was illegal or arbitrary. According to this respondent, thepetitioner is due and liable as on 29.2.2004, Rs.3,06,59,000/-.

The petitioner has not placed before this court any material topermit the conclusion that the propounded schemes of the Governmentof India providing any concessions to the petitioner are binding on therespondents 1 and 2. Under what law the schemes were propoundedby the Union; how those schemes obligate the respondents 1 and 2who are statutory financial institutions, to restructure their interest ratesin accordance with the policy underlying the schemes and which lawobligates the respondents 1 and 2 to recover the amounts and at ratesotherwise than on the terms agreed between the parties, is not statedby the learned counsel for the petitioner nor is it pleaded by thepetitioner in the writ petition. Merely because the Government propounds schemes as a part of its administrative policy, in theabsence of any legal architecture obligating compliance with suchadministrative policies of the State, no individual or institution is boundby such a policy. There has to be legal nexus between administrativepolicy and the obligation of a citizen or an institution to conform orconduct its affairs in accordance with such policy. In the absence ofsuch legal architecture, pure executive policy remains a brutumfulmen, inexecutable in law.

The respondents 1 and 2 are not a party to the schemes framedby the Ministries of Textiles and Finance, Union of India. There is noobligation disclosed under which the respondents 1 and 2 are boundto comply with the terms of those schemes or to extend benefits to thepetitioner under the schemes, deviating from their own internal policyand the terms of the agreement between the respondents 1 and 2 andthe petitioner, with regard to the repayment of the loan instalments andto avoid the consequences following upon default.

For the aforesaid reasons and on the analysis above, the reliefsought by the petitioner cannot be granted. There are no merits. Thewrit petition is accordingly dismissed. No costs.

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GODA RAGHURAM, JDate: 28.12.2006CVM