B. P. Jeevan Reddy, J. - (1.) The appeal is directed against the judgment and order of a Division Bench of the Allahabad High Court allowing writ petition 20544 of 1986 with certain directions. The first respondent-Gem Cap (India) Pvt. Ltd. is a private limited company. Second respondent is its Managing Director. At the request of the respondents, the appellant, U.P. Financial Corporation, sanctioned a loan of Rs. 29.70 lakhs. The terms and conditions of loan and the manner of repayment of the loan are contained in the agreement and hypothecation deeds executed in 1981. Suffice it to note that loan was repayable in certain specified instalments along with interest. A sum of Rs. 26,29,578/- was released to the respondents. The first respondent went into production in December 1982. Within a few months i.e., in March 1983 its operations ceased. By an order dated February 21, 1984 the first respondent-unit was declared a sick unit. The respondents did not make any repayment as stipulated in the agreement and hypothecation deeds whereupon the Corporation took steps to take over the unit under S. 29 of the State Financial Corporations Act, 1951 for recovering an amount of Rs. 38.57 lakhs due to it by that date vide notice dated July 10, 1984. Then started a series of Writ Petitions by the respondents, all designed to stall the appellant from taking over and/or recovering the amount due to it. It is not necessary to trace the course of the several writ petitions except the one from which the present appeal arises.
(2.) Writ petition 20544 of 1986 was filed questioning the taking over of the first respondent-unit by the appellant-Corporation under S. 29 of the Act and for a direction to the appellant to reschedule the repayment of debt in accordance with the earlier orders of the High Court. The writ petition has been allowed with the following directions: "(1) Having regard to the discussion made above we direct the U.P. Financial Corporation: (1) to consider expeditiously the resolution dated 29-1-1986 aimed at the rehabilitation of the industrial concern in question in the light of the feasibility report of the U.P. Industrial Consultants Ltd. The Financial aid forthcoming from the Bank of Baroda and other financial institutions and the reports of the managing director of the corporation dated 18-12-85 and 29-1-1986; (2) to restore back possession of the unit to the petitioner No. 1 forthwith. The notice dated 11-6-1986 issued by the Corporation under S. 29 of the State Financial Corporations Act, 1951 shall, however, remain alive, it being open to the Corporation to proceed further in pursuance thereof in case the rehabilitation deal is given a fair trial but does not bear fruit. The petition is allowed accordingly with no order, however, as to costs."
(3.) With great respect to the learned Judges who allowed the writ petition we feel constrained to say this:a reading of the judgment shows that they have not kept in mind the well-recognised limitations of their jurisdiction under Art. 226 of the Constitution. The judgment reads as if they were sitting as an Appellate Authority over the appellant-Corporation. Not a single provision of law is said to have been violated. The exclusive concern of the court appears to be to revive and resurrect the respondent-Company, with the aid of public funds, without giving any thought to the interest of public financial institutions. The approach is:"the Corporation is supposed to act in the best interest of the industrial concern with the object primarily to promote and advance the industrial activity without, of course, undue involvement or risk of its financial commitments......It needs no emphasis to say that the Corporation is conceived as Regional Development Bank with the principal object to accelerate the industrial growth in the State by providing financial assistance mainly to small and smaller of the medium scale industries. The approach has to be business like in conformity with the declared policy of the State Govt. If the unit is potentially viable or such as may be capable of being rehabilitated, it would deserve being administered proper treatment and not lead to its liquidation." Here was a company which drew substantial public funds and became sick within three months of its going into production. One of the main reasons for its sickness appears to be the internecine fight between the two groups controlling the company. The unit was closed. It was not paying a single pie in repayment of the loan - neither the principal nor the interest. Already a huge amount was due to the appellant. There was no prospect of its recovery. And yet other financial corporations were being asked by the court, four years after its closure, to sink more money into the sick unit. Though a passing reference is made to the financial risk of. appellant, this concern was not translated into appropriate directions. The Corporation was not allowed to sell the unit when it wanted to in 1984-85. Now, it is difficult to sell it, because it has been lying closed for about 8 years and more. The machinery must have become junk. While the Company could not be revived, the appellant-corporation now stands to lose more than a crore of rupees all public money - in this one instance.;