- (1.) T. S. Misra, J. The facts giving rise to this petition are these:- On 29-3-1976 the U. P. Financial Corporation (hereinafter called the Corporation) published in the 'national Herald' newspaper an advertisement, the relevant portion of which is extracted below:- "we provide with pleasure loans for land, plant and machinery, stamps and registration, consultancy and interest during construction period. Margin money assistance for self-employment of educated persons to the extent of 10% of the total cost of the project, to assist you to meet preliminary and preoperative expenses, working capital margin and margin of fixed capital. "
(2.) THE petitioner had obtained a diploma in Mechanical Engineering in First Division in the year 1969. He joined the Irrigation Department of the U. P. State Government as Junior Engineer (Mechanical ). After perusing the aforesaid advertisement in the newspaper dated 29-3-1976 the petitioner applied for a loan of Rs. 7. 18 lakhs to the Corporation for setting up an industry in tools etc. THE amount of loan was subsequently reduced to Rs. 4,11,000/ -. Going ahead with his project the petitioner applied on 1-4-1976 for a piece of land to set up his manufacturing unit to the U. P. State Industrial Development Corporation at Amausi. THE land was allotted to him on 8-4-1976. THE Corporation sanctioned a loan of Rupees 3,70. 000/- against the demand of Rs. 4,11,000/- and communicated the sanction to the petitioner by letter dated 27-9-1976. THE terms and conditions of the loan were mentioned in Annexures Nos. 1 and 2 attached to that letter. THE purpose for which the amount of loan was to be utilised was as follows:- (i) (a) For land direct payment to U. P. S. T. D. C. and balance to be paid by the party. Rs. 46,000/- (b) For construction of factory building. Rs. 54,000/- (c) For purchase of plant and machinery. Rs. 2,40,000/- (d) For other expenses, viz. interest during construction period and mortgage expenses. Rs. 30,000/- Total Rs. 3,70,000/- The value of investment at each stage of disbursement, which was not to be less than 15% was as under:- (2) (a) Land Rs. 54,000/- (b) Building Rs. 60,000/- (c) Plant and Machinery Rs. 2,56,000/- (d) Contingencies and Escalation Rs. 29,000/- (e) Preliminary and pre-operative expenses Rs. 17,000/- (f) Interest during construction period Rs. 19,000/- Total Rs. 4,35,000/- The recovery schedule was as under :- (3) (a) Total period years (b) Gestation period years (c) First half yearly Rs. 12,000/- (d) Four half-yearly instalments of Rs. 9,500/- each Rs. 38,000/- (e) Subsequent 16 equal instalments of Rs. 20,000/- each Rs. 3,20,000/- Total Rs. 3,70,000/- The petitioner sent a formal letter of acceptance. Thereafter he resigned from the Government service on 6-7-1977 with an avowed object of establishing a manufacturing concern and run his own business. An agreement was then executed on 11-7-1977 between the petitioner and the Corporation for the release of Rs. 90,000/- against a bank guarantee given by the Punjab National Bank for a period of nine months. The Corporation then released a sum of Rupees 90,000/- in favour of the petitioner on 23-7- 1977. Thereafter on 11-1-1978 an agreement was executed between the petitioner and the Corporation for a term loan of Rs. 3,70,000/- requiring the petitioner inter alia to create equitable mortgage of land and building by depositing the title does and also to hypothecate the moveable assets. A deed of hypothecation was required to be executed to secure the said loan. A copy of the said agreement is Annexure No. 2 to the writ petition. The deed of hypo-thecation was executed on 11-1-1978. The Petitioner, as required, also executed a pronote in favour of the corporation for a sum of Rs. 3,70,000/- and executed an irrevocable power of attorney in favour of the Corporation. The petitioner invested the amount of Rupees 900,00/- for setting up the project. The progress of the project was found to be satisfactory and a certificate in that behalf was given by the Corporation. A building was constructed to install the machinery. Further money was then needed by the petitioner for the purchase of the grant and machinery etc. He, therefore, asked for disbursement of Rs. 1,13,000/- out of the sanctioned loan amount for purchasing plant and machinery vide his letter dated 21-3-1978 (Annexure No. 4 ). He also demanded a sum of Rs. 46,000/- for making payment towards the cost of the land. The petitioner also had an interview with the Corporation authorities to secure the release of the amount. The Corporation, however, released a sum of Rs. 2,500/ -. The Corporation had also remitted a sum of Rs. 46,200/- on 31- 3-1978 on behalf of the petitioner to the U. P. State Industrial Development Corporation against the cost of the land. But it did not disburse the balance amount demanded by the petitioner alleging that he had not created sufficient assets so as to give stipulated margin for disbursement as per terms and conditions of the agreement deed. The contention of the corporation was that in view of the condition No. 23 of the agreement deed margin of security at each stage of disbursement should, not be less than 15% and the borrower should also invest proportionate amount for completion of the scheme. According to the Corporation the condition imposed vide Clause No. 23 of the agreement deed was a condition precedent and in absence of the fulfillment of the said condition loan amount could not be released. The petitioner on the other hand contended that he had performed all the requirements which he was required to do under the agreement, and that he had invested his share of contribution towards the project; hence he was entitled to the release of the amount of Rs. 1,13,000/ -. The Corporation did not agree to that view. The petitioner pointed out to the Corporation that by not releasing the amount in question the Corporation had committed breach of agreement causing substantial injury to him inasmuch as the petitioner could not procure the machinery within time and the very existence of the project had come in danger. The petitioner therefore asked by his letter dated 17-5-1978 for the release of a sum of Rupees 2,31,500/- i. e. , the balance of the term loan of Rs. 3,70,000/- within ten days and informed the Corporation that if it would not do so the petitioner would be absolved from his liabilities under the agreement and would be entitled to be compensated by the Corporation for the losses sustained by him. In its reply dated 2-6-1978 the Corporation denied the allegations of the petitioner and reiterated that it had released more disbursement to the petitioner than he was eligible to and that there was no breach on its part. It also asked the petitioner to create further assets in terms of the sanction letter so that the further disbursement could be released. That letter was replied to by the petitioner on 12-6-1978 reiterating his previous averments and asserting that under Cl. 23 of the agreement deed the creation of the assets was not a condition precedent to the release of the fund but the disbursement of the funds was to be made first by the Corporation and the Petitioner would invest this disbursement towards the Project together with proportionate contribution. He, therefore again requested the Corporation to release the balance amount Rupees 2,31,500/- and informed it that on failure to do so the petitioner would be absolved of his liabilities under the agreement. The Corporation sent a letter dated 16-7-1978 which was replied to by the Petitioner on 24- 7-1978, in which the petitioner inter alia stated that the agreement dated 11-1-1978 was no more operative and all the documents executed in pursuance of the said agreement had become void for want of consideration. Further correspondence ensued between the parties. The Corporation wrote a letter on 14-8-1978 reiterating its stand and the petitioner wrote a letter on 4-9-1978. It may be mentioned here that the first instalment of the principal amount of loan was due to be paid in July, 1979. The Corporation, however, by its letter dated 16-6-1979 recalled the entire loan advanced to the petitioner with interest. That letter was served on the Petitioner on 8-8-1979. The amount claimed in that letter was Rs. 1,62,382. 31. The petitioner sent a notice on 26-6-1979 to the Corporation claiming an amount of Rs. 1,89,710/- as compensation and stated that after adjustment of the amount of Rs. 1,38,500/and Rs. 7,700/- paid out of the sanctioned term loan and margin money loan an amount of Rs. 43,510/- was due to the petitioner from the Corporation. The petitioner, therefore, asked for the return of the title deeds. However, on 3-9-1980 the petitioner received a notice of that date from the Tahsildar, Lucknow, asking him to deposit an amount, of Rupees 2,31,440. 83 p. for the recoveries sent by the Corporation. The original notice is Annexure No. 14 of the Writ Petition. The petitioner has filed this writ petition under Art. 226 of the Constitution impugning the validity of the said notice and praying that the notice be quashed. He has also asked for a writ in the nature of mandamus directing the Corporation to return the title deeds of the property deposited by him as also the hypothecation deed in respect of the machinery and plant executed by him duly discharged. He has also asked for a writ in the nature of prohibition restraining the respondents from realising any amount from him by way of collection charges. The petition has been opposed and a counter-affidavit has been filed by the Corporation. The Corporation, opposite party No. 1, has reiterated in its counter-affidavit that it has committed no breach of the terms of the agreement of loan. According to it the very important condition of the loan was condition No. 23 of the sanction letter which is a part of the agreement for project, loans which the petitioner had executed in favour of the Corporation. It provides that the margin of security at each stage of disbursement shall not be less than 15% and in order to enable the Corporation to make payment of Rs. 2,500/- to the petitioner and Rs. 45,000/- directly to U. P. S. I. D. C. , against the cost of project this ratio of margin of money was reduced to 10% at the request of the petitioner. Thus, the Corporation released more disbursement in favour of the petitioner than to which he was really entitled in accordance with the terms and conditions of the sanction advice. The Corporation further stated in the counter-affidavit that vide its letter dated 2-6-1978 which was in reply to the petitioner's letter dated 17-5-1978 it had assured the petitioner that if he created further assets loan amount would be disbursed without any delay. The Corporation denied that the Condition No. 23 of the sanction advice mentioned only an average margin of 8. 1%. The Corporation disputed the calculations made by the petitioner in that behalf. The petitioner was sanctioned a loan of Rs. 3,70,000/- and the total cost of project came to Rs. 4,35,000/ -. Thus according to the Corporation the margin of security came to about 15%. In this connection the Corporation pointed out that the petitioner had ignored a sum of Rs. 30,000/- while calculating the margin and if that amount was taken into account while calculating the margin it came to about 15%. So according to the Corporation further advancement of loan could not be made as the petitioner had not created sufficient Assets which was a condition precedent vide Cl. 23. The Corporation has also averred in the counter-affidavit that the recall notice was issued on 16-6-1980 when the petitioner refused to clear overdue interest and even did not allow the Technical Officer of the Corporation to inspect his unit by taking the plea that the U. P. Financial Corporation had violated the terms of agreement. The Corporation also denied that the petitioner has suffered any losses. It, however, admitted that a recovery certificate was issued on 14-4-1980 for Rs. 2,10,398. 94 including Rs. 19,127,17 as collection charges.
(3.) IN his rejoinder-affidavit the petitioner reiterated the averments made in the writ Petition. He Pointed out that the term 'margin of Security' had been defined in the Vivran Patrika published by the respondent No. 1 as "entrepreneurs' contribution" expressed as percentage of the total cost of project. It has been alleged in the rejoinder-affidavit that while reckoning the margin of security at any stage, the investment towards the various components of the total cost of the project was to be taken into account. The petitioner had already invested his share of investment at the stage of disbursement; hence the Corporation was liable to pay the entire amount of sanctioned loan under the agreement dated 11-1-1978. However, the Corporation failed to advance further loan and committed breach of the agreement in consequence whereof the sole purpose of the agreement for which the loan was advanced was frustrated and as such the petitioner was not liable to refund any amount under the agreement. So, from a perusal of the writ petition, counter-affidavit and there joinder-affidavit it appears that the petitioner had entered into an agreement with the Corporation for advancement of loan. The petitioner submitted his project for establishing a factory. The Corporation sanctioned a loan of Rupees 3,70,000/- to the petitioner against the demand of Rs. 4,11,000/ -. A sum of Rs. 90,000/- was released by the Corporation against the bank guarantee on 23-7-1977. Another sum of Rs. 48,500/- was also released on 31-3-1978 in the manner that Rs. 46,000/- were paid directly by the Corporation to the U. P. State Industrial Development Corporation towards the cost of the land and Rs. 2,500/- were paid in cash to the petitioner. In this way a total sum of Rs. 1,38,500/- had been advanced to the petitioner by the Corporation as loan. The petitioner then asked for the release of further sum of Rs. 2,31,500/- being the balance of the sanctioned loan of Rs. 3,70,000/ -. The Corporation told the petitioner that in view of the condition No. 23 of the sanction advice further loan amount would be disbursed only after taking stipulated margin of security and that the margin of each security should not be less than 15%. The borrower should also invest proportionate amount from his own resources towards the completion of the scheme. The Corporation assured the petitioner that if he created further assets further loan amount would be disbursed without any delay. On the other hand the petitioner contended that he was entitled to the release of further amount of loan and as the Corporation had failed to do so it had committed breach of the agreement. The Corporation asked for payment of overdue interest which the petitioner had act paid Ultimately the Corporation exercised its right to recall the entire amount of loan with interest and gave a notice in that behalf saying that the petitioner had committed breach of the terms of agreement. So, each party alleged that the other had committed breach of the agreement. Significantly, by letter dated 24-7-1978 the petitioner informed the Corporation that as the Corporation had committed breach of the agreement, the agreement of 11-1-1978 was no more operative and the petitioner was absolved of all his liabilities under the agreement and he was also entitled to be compensated for the losses and damages which he had suffered due to the said breach. He also asked for the return of his title deeds. We Corporation denied that it had committed breach of agreement vide reply dated 14-8-1978 and stated in no unmistakable terms that the petitioner would not be entitled to further disbursement until he created further assets from his own resources or alternatively furnished a suitable bank guarantee for a period of at least six months from any scheduled bank. The petitioner was asked to choose any of the alternatives. The petitioner refuted these allegations and then on 6-8-1979 a notice recalling the entire loan already advanced was given by the Corporation to the petitioner on the ground that the petitioner had failed to abide by the terms of the mortgage deed and had not deposited the overdues relating to loan advanced by the Corporation. Thus the petitioner put an end to the contract alleging that the Corporation had committed breach thereof by refusing to perform its promise in its entirety. The Corporation on the other hand rescinded the contract alleging that the petitioner had faded to abide by the terms thereof and had not deposited the over-dues relating to interest on loan advanced to him. Whoever may have committed breach of the contract one fact is certain that the contract has been put to an end. The petitioner says that in the circumstances of the case he is absolved from his liability of making payment of any amount to the Corporation and is entitled to the release of his title deeds. The Corporation on the other hand insists for the recovery of the entire amount paid to the petitioner as loan together with interest in terms of the contract and says that as the petitioner has failed to repay the loan it is perfectly entitled to recover the same as an arrear of land revenue by sale of the property and other prescribed modes.;