- (1.) The subject-matter of challenge in this appeal is an order passed by the Division Bench of the Orissa High Court on a writ petition filed by Respondent 1 against the appellant Bank and Respondent 2 which is Orissa State Financial Corporation (OSFC, for short). In the impugned judgment the High Court noted, inter alia, that Respondent 1 had been granted loans by the appellant Bank and OSFC but Respondent 1 was unable either to repay the same or to run its industrial unit successfully. OSFC had taken action under Section 29 of the State Financial Corporations Act, 1951 against Respondent 1 and seized the unit of Respondent 1. Respondent 1 filed a writ petition and pursuant to the interim order passed therein, the industrial unit was returned to Respondent 1.
(2.) After this, there were negotiations between OSFC and the appellant for reviving Respondent 1 and a revival scheme was in fact sanctioned under which both OSFC and the appellant were to further disburse finances to Respondent 1. It was found that the appellant did not release the amount which it was required to do under the revival package. Respondent 1 again defaulted in repaying the dues both to OSFC and the appellant. The High Court was of the view that this failure to pay was largely due to the non-release of funds under the revival package. Accordingly the second notice which was issued under Section 29 of the State Financial Corporations Act by OSFC and the action thereon by OSFC in taking possession of Respondent 1's unit were held by the High Court to be an exercise of power which was not reasonable and not in accordance with the principle laid down by this Court in Mahesh Chandra v. U.P. Financial Corpn., 1993 2 SCC 279 The order by which OSFC had taken possession of the unit was accordingly struck down. The Court was also of the view that the appellant Bank should not have been non-cooperative and it was because of the inaction on the part of OSFC and the Bank that the industry in question could not be revived. Accordingly, it was directed: (i) that the industrial unit should be returned to Respondent 1 forthwith, (ii) OSFC and the appellant Bank should take steps for releasing the balance amount as contained in the revival package (subject to the scrutiny as to its appropriate utilisation within two months from the date of receipt of the order), (iii) the repayment schedule would have to be re-phased, and (iv) Respondent 1 could approach both OSFC and the appellant Bank for any additional financial assistance, if required.
(3.) The unit was returned by OSFC to Respondent 1 on 20-8-1994. No further appeal has been preferred by OSFC from the order of the High Court. The Bank, however, has impugned the decision. On its special leave petition on 2-12-1994, this Court directed an interim stay of the operation of the order of the High Court. That interim order is still operating.;