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AMICUS AI
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Case Number
Attorney(S)
  • N. B. Nigam and V. K. Khare
  • H. R. Misra
  • Pradeep Kumar
  • S.C.
Judges
  • M. Katju
  • R.S Tripathi, JJ.
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Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
  • N. B. Nigam and V. K. Khare
  • H. R. Misra
  • Pradeep Kumar
  • S.C.
Judges
  • M. Katju
  • R.S Tripathi, JJ.
See more information ...
Smart Summary

Structured Summary of the Opinion (M. Katju, J.)

Factual and Procedural Background

The petitioner challenged a recovery certificate dated 4-10-1994 (Annexure 12) issued by U.P. Financial Corporation ("the Corporation") and sought a mandamus directing the Corporation to prepare a rehabilitation package and submit it for consideration by the relevant authorities. The writ petition and accompanying affidavits were heard by the Court.

The factual narrative in the petition (as pleaded by the petitioner) is that the petitioner obtained a loan from the Corporation (total disbursements alleged as Rs. 9,19,600/- over about two years and one month), but suffered losses due to delayed disbursement. The Corporation issued notices from 1990 and, on 3-12-1991, issued a notice under Section 29 recalling loans and stating an amount due (Annexure 3). The Corporation threatened to take possession, and meetings between the parties occurred in February and July 1992 concerning cheques, part payments and possession.

The petitioner alleged the unit was declared sick on 20-8-1993 (Annexure 8), relied on RBI guidelines for rehabilitation and submitted rehabilitation proposals (including a package dated 27-2-1992). A State Government G.O. dated 3-5-1994 with rules for sick unit declaration and rehabilitation was cited by the petitioner. Subsequent meetings and committee decisions (including Regional Rehabilitation Committee meetings in 1997, 1998, 1999 and settlement discussions in December 1999 and March 1998) were pleaded; the petitioner alleged an agreed one-time settlement of Rs. 12 lakhs (written consent dated 23-3-1998, Annexure 15) which the Corporation nevertheless did not finalize, and alleged mala fide conduct by the Corporation in not implementing rehabilitation or settlement.

The Corporation filed a counter-affidavit denying delay in disbursement, asserting that disbursement followed completion of securities and formalities, that the petitioner delayed compliance and defaulted after 31-3-1989, and that the petitioner had submitted several cheques which were dishonoured (only one cheque was encashed). The Corporation stated that, after screening committee decisions and failure of the petitioner to make agreed part payments, a recovery certificate for Rs. 18,61,653.14 was issued on 4-10-1994.

An amendment to the writ petition recorded later developments including further committee meetings, instructions to the Corporation to prepare a rehabilitation package, and correspondence between the Joint Director of Industries and the Corporation. The Court heard counsel, examined pleadings and affidavits, and ultimately dismissed the petition.

Legal Issues Presented

  1. Whether the recovery certificate dated 4-10-1994 (Annexure 12) should be quashed.
  2. Whether the Court should issue a mandamus directing U.P. Financial Corporation to prepare and submit a rehabilitation package for the petitioner.
  3. Whether the petitioner is entitled to one-time settlement or rehabilitation (including whether RBI guidelines or State Government G.O.s give rise to enforceable rights).
  4. Whether the amounts and interest charged by the Corporation (including orders dated 24-10-2001 and 28-8-2001) should be quashed.

Arguments of the Parties

Petitioner's Arguments

  • The Corporation delayed disbursement under the loan, causing heavy loss to the petitioner (details in paras 14–20 of the writ petition).
  • The petitioner’s unit was declared sick (order dated 20-8-1993) and was covered by RBI guidelines for rehabilitation; the petitioner submitted rehabilitation proposals and applied for rehabilitation facilities and red card (application dated 6-8-1994; red card issued 17-8-1994).
  • The petitioner alleges that a rehabilitation package/one-time settlement was agreed (including a one-time settlement figure of Rs. 12 lakhs and written consent dated 23-3-1998), but the Corporation acted mala fide and failed to finalize the rehabilitation or one-time settlement despite committee directions and repeated meetings.
  • The petitioner challenged interest charged and specific orders of the Corporation (24-10-2001 and 28-8-2001) and sought quashing of the recovery certificate and direction to prepare a rehabilitation package.

Corporation's Arguments (Counter-Affidavit)

  • A loan of Rs. 9.60 lakhs was sanctioned (letter dated 10-10-1985) with an implementation schedule requiring disbursement only after raising security at site and completing formalities; the petitioner failed to comply promptly with these conditions.
  • The petitioner executed the loan agreement late (15-1-1987) and disbursement proceeded as security/formalities were completed; the Corporation denies wrongful delay in disbursement.
  • The loan agreement (15-1-1987) provided interest at 18.5% with a 5% rebate for timely payment and quarterly instalments; gestation period was 18 months from first disbursement (first instalment 28-2-1987), and petitioner defaulted after 31-3-1989.
  • The petitioner issued multiple cheques (28-2-1992, 7-3-1992, 16-7-1992, 31-3-1992) of Rs. 50,000 each; only the cheque dated 7-3-1992 was encashed and the others were dishonoured—constituting conduct that showed the petitioner had not come with clean hands.
  • The Corporation provided opportunities for repayment, informed committees and authorities as appropriate, and after the petitioner failed to meet conditions (including a requested Rs. 1 lakh payment within three months), a recovery certificate for Rs. 18,61,653.14 was issued on 4-10-1994.
  • The petitioner was not found suitable for benefits under the State Government G.O. dated 3-5-1994 according to the screening process.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Civil Misc. Writ Petition No. 6319 of 2004, Swarup Packaging & Sanitizers (India) Pvt. Ltd. v. State Bank of India (16-2-2004) [2004 (17) All Ind Cas 631] One-time settlement/rehabilitation/rescheduling of loans is within the discretion of the bank/financial institution; courts cannot direct such variations of contract. Relied upon to hold that the High Court under Article 226 cannot direct a bank/financial institution to grant one-time settlement or rehabilitation.
M.M. Accessories v. U.P. Financial Corporation [2002 (46) All LR 261 : AIR 2002 All 96] The Court under Article 226 cannot direct that a unit be rehabilitated; rehabilitation or varying loan terms is a matter for the lending institution. Cited to support the proposition that the High Court cannot direct rehabilitation of the petitioner's unit.
Civil Misc. Writ Petition No. 8483 of 2003, Shrestha Flexible Packs Pvt. Ltd. v. Regional Rehabilitation Committee (3-3-2004) RBI guidelines and State Government G.O.s are administrative/executive instructions and do not confer a legal right enforceable in court. Used to support the conclusion that RBI guidelines and State G.O.s cannot be the basis for claiming an enforceable right to rehabilitation.
Fernandez v. State of Mysore, AIR 1967 SC 1753 Purely administrative orders have no force of law and do not create enforceable rights. Cited as authority for the proposition that administrative instructions/G.Os are not enforceable by writ.
State of Maharashtra v. Lok Shikshan Sanstha ((1971) 2 SCC 410 : AIR 1973 SC 588) Administrative orders/instructions lack statutory force and do not confer legal rights. Applied as supporting authority for non-enforceability of executive instructions/G.Os relied upon by the petitioner.
Union of India v. Majji ((1977) 1 SCC 606 : AIR 1977 SC 757) Administrative instructions do not have the force of law; cannot create enforceable rights. Referenced to show established principle that administrative guidelines/G.Os are not a basis for writ relief.
Satyanarain v. Millikaijun, AIR 1960 SC 137 Administrative orders do not confer enforceable legal rights. Cited among authorities affirming that executive instructions are not judicially enforceable as statutory rights.
Abdulla Rowther v. STA, AIR 1959 SC 896 Administrative/executive orders lacking statutory force cannot be enforced by writ. Used as authority that no writ lies to enforce purely administrative orders.
Saksena v. State of M.P., AIR 1967 SC 1264 Administrative orders do not create legal rights enforceable by courts absent statutory backing. Cited for the same proposition regarding the nature of administrative instructions.
Mahendra v. State of U.P., AIR 1963 SC 1019 Administrative orders or instructions without statutory force do not confer enforceable rights. Referenced to support non-enforceability of G.Os and guidelines relied upon by petitioner.
Nagendra v. Commissioner, AIR 1958 SC 398 No writ lies for enforcement of a purely administrative order. Cited as authority reinforcing that administrative directions are not judicially enforceable.
Raman v. State of Madras, AIR 1959 SC 694 Administrative/executive instructions do not give rise to enforceable rights by writ. Applied among precedents establishing that G.Os and guidelines cannot be enforced by courts.
Haryana Financial Corporation v. Jagdamba Oil Mills ((2002) 3 SCC 496 : AIR 2002 SC 834) Financial Corporations must act fairly; borrowers have a duty to repay; decisions by State Financial Corporations to recover dues are not open to challenge unless mala fide. The Supreme Court reversed an earlier precedent in this context. Relied upon to underscore that recovery actions by financial corporations are not normally interfered with by courts unless mala fide conduct is shown.
Mahesh Chandra v. Regional Manager ((1993) 2 SCC 279 : AIR 1993 SC 935) Earlier precedent on financial corporation powers (specifically noted as reversed by the Haryana Financial Corporation decision). Mentioned as the earlier decision reversed by the Supreme Court in the Jagdamba Oil Mills case; used to explain current authoritative position.

Court's Reasoning and Analysis

The Court examined the pleadings, counter-affidavit and later amendments. It focused on the petitioner's conduct and the legal limits of the High Court's powers under Article 226. The Court's reasoning proceeded along these principal lines:

  1. Clean hands doctrine: The Court found that the petitioner had issued multiple cheques which were dishonoured (only one was encashed). The Court considered this as demonstrating that the petitioner had not come to Court with "clean hands" and stated that the petition "deserves to be dismissed on this ground alone."
  2. Limits on judicial power to alter loan contracts: Citing prior decisions, the Court reiterated that one-time settlements, rehabilitation or rescheduling of loan terms amounts to varying the contract and is within the discretion of the lending bank/financial institution; a court cannot direct such variations under Article 226. The Court relied on the decisions in Swarup Packaging and M.M. Accessories to support this principle.
  3. Administrative guidelines and G.Os: The Court held that RBI guidelines and State Government G.Os are administrative/executive instructions without statutory force and therefore do not confer individual enforceable rights. The Court cited a series of precedents (Fernandez, Lok Shikshan Sanstha, Majji, and others) to support the proposition that no writ lies to enforce purely administrative orders.
  4. Standard for interfering with recovery actions: The Court referred to the Supreme Court's decision in Haryana Financial Corporation v. Jagdamba Oil Mills to observe that financial corporations must act fairly but their decisions to recover dues cannot be challenged unless mala fide. The Court treated the Corporation's actions as not shown to be mala fide on the record before it.
  5. Policy consideration and judicial restraint: The Court expressed concern about judicial over-activism interfering with recoveries by banks and financial institutions, noting potential adverse economic consequences if recoveries are routinely stayed. This formed part of the Court's reasoning to exercise restraint in interfering with the Corporation's recovery steps.

Based on these considerations—the petitioner's conduct (bounced cheques and alleged lack of clean hands), the limitations on the Court's power to order rehabilitation or settlement, and the non-enforceability of administrative guidelines—the Court concluded that the petition lacked merit.

Holding and Implications

PETITION DISMISSED.

Direct effect: The petitioner's challenge to the recovery certificate dated 4-10-1994 and the request for a mandamus directing the Corporation to prepare and submit a rehabilitation package were denied; the writ petition was dismissed.

Broader implications (as stated by the Court): The opinion reiterates established legal principles rather than announcing new law—specifically that (a) courts cannot direct a bank or financial institution to grant a one-time settlement or to rehabilitate a unit (such actions amount to varying contractual terms and are within the institution's discretion), (b) RBI guidelines and State Government G.Os that are purely administrative do not confer enforceable rights, and (c) recovery actions by financial corporations are not ordinarily open to challenge unless mala fide conduct is demonstrated. The Court also endorsed judicial restraint in matters affecting recoveries by financial institutions, citing potential adverse economic consequences from excessive judicial intervention.

This summary is drawn exclusively from the text of the provided opinion and does not add or infer facts beyond those stated in the opinion.

Show full summary ...

    Maria Plasto Pack (P) Ltd. v. Managing Director, U.P Financial Corporation, Kanpur And Others

    M. Katju, J.:— By means of this petition the petitioner has prayed for quashing the impugned recovery certificate dated 4-10-1994 Annexure 12 to the writ petition and for a mandamus directing the respondent No. 1 U.P Financial Corporation to prepare a rehabilitation package of the petitioner and to submit it to the respondent No. 3 for placing it before respondent No. 4.

    2. Heard learned counsel for the parties. We have carefully perused the writ petition and counter and rejoinder affidavits.

    3. The petitioner took a loan from the U.P Financial Corporation and paid certain amount as stated in paragraph 14 of the writ-petition. In paragraph 16 of the writ petition it is stated that the Corporation disbursed a total of Rs. 9,19,600/- to the petitioner in a period of two years one month. The details as alleged by the petitioner are given in paragraphs 14 to 20 of the writ petition which need not be repeated here. It is alleged by the petitioner that as a result of the disbursement schedule the petitioner suffered heavy loss as the corporation delayed disbursement. Since 1990 the Corporation started issuing notices to the petitioner that the loan of the Corporation should be paid immediately and on 3-12-1991 the Corporation issued notice under Section 29 of the Act recalling all the loans of the Corporation and directing that a sum of Rs. 12,34,529/- was due vide notice dated 3-12-1991 Annexure 3 to the writ petition. Thereafter on 25-2-1992 the Corporation again wrote to the petitioner that the possession of the petitioner's unit will be taken over by the Corporation and if the petitioner wishes to discuss the matter he may contact the Corporation on any working day. On 28-2-1992 the petitioner's representatives went to the Assistant Regional Manager of the Corporation and deposited four cheques and promised to deposit further amounts. True copy of the letter of the Corporation dated 25-2-1992 is annexure 5 to the writ petition. True copy of the letter of the petitioner dated 28-2-1992 is Annexure 6 to the writ petition. The petitioner then received a letter dated 3-7-1992 from the Corporation stating that the possession of the unit would be taken on 10-7-1992 vide Annexure 7 to the writ petition.

    4. In paragraph 29 of the writ petition it is alleged that the petitioner has been declared as a sick unit vide order dated 20-8-1993 vide Annexure 8 to the writ petition. It is alleged in paragraph 30 of the writ petition that the Reserve Bank of India has issued guidelines with regard to rehabilitation of sick small scale units and the unit of the petitioner is covered by the guidelines. Photocopy of the guidelines is Annexure 10 to the writ petition. In paragraph 31 of the writ petition it is alleged that the petitioner has submitted the rehabilitation package on 27-2-1992 and pressed the respondent-Corporation for acceptance of the same. The petitioner submitted an application to the respondent No. 3 on 6-8-1994 and a red card was issued to the petitioner on 17-8-1994. It is alleged in paragraph 32 of the writ petition that the State Government has taken a policy decision and issued a G.O dated 3-5-1994 wherein the State Government has framed rules for declaration of a unit as a sick unit and for a rehabilitation scheme. The petitioner applied for rehabilitation but to no avail and instead a recovery certificate has been issued.

    5. An amendment application has also been filed by the petitioner. In this amendment application reference has been made to several developments subsequent to the filing of the writ petition. It is alleged in paragraph 36-D that the Regional Rehabilitation Committee held a meeting on 10-3-1997 and the petitioner had submitted a rehabilitation proposal to it dated 17-3-1997. Thereafter on 24-1-1998 a meeting was again held under the Chairmanship of Commissioner, Kanpur Division and the committee took a decision to rehabilitate the petitioner's unit and appointed the Corporation as the operating agency to finalise the rehabilitation package vide Annexure 14. It is alleged in paragraph 36-E that the Joint Director of Industries on 31-8-1998 directed the petitioner to contact the Corporation as the Corporation was not agreeing to the amount of one time settlement submitted by the petitioner. It is alleged in paragraph 36-F that a meeting was held in which the petitioner, General Manager, Chief Recovery Officer and Senior Manager (Law) of the Corporation participated and a one time settlement was decided to be Rs. 12 lacs and on 23-3-1998 the petitioner had given written consent with regard to this amount vide Annexure 15. It is alleged in paragraph 36-G that despite the one time settlement and written consent the Corporation has written a false letter dated 13-8-1998 to the Joint Director of Industries. In paragraph 36-H it is mentioned that on 14-6-1999 the Joint Director of Industries again wrote to the Managing Director of the Corporation directing him to submit a rehabilitation package of the determined amount of one time settlement.

    6. In paragraph 36-1 it is stated that on 8-10-1999 a meeting of the Regional Rehabilitation Committee took place in which the Corporation was represented by the Regional Manager, Kanpur. The Chairman of the Committee enquired from the Regional Manager of the Corporation regarding the petitioner's proposal for rehabilitation and the Regional Manager replied that the proposal is under consideration. The committee took a decision that the Corporation should prepare a package for rehabilitation according to the relevant G.O Copy of the minutes of the meeting dated 8-10-1999 is Annexure 18. In paragraph 30-J it is stated that in pursuance of the decision of the meeting dated 8-10-1999 the petitioner participated in the settlement meeting dated 13-12-1999 with the Deputy General Manager of the Corporation and on 14-12-1999 certain decisions were taken for payment of Rs. 12,50,000/- within three years, etc. Thereafter on 21-2-2000 another meeting of the Regional Rehabilitation Committee took place. The minutes of the meeting is Annexure 20. Thereafter also meetings were held but it is alleged in paragraph 36-R that the Corporation acted mala fide in not finalising the one time settlement or the rehabilitation package despite the directives of the Regional Rehabilitation Committee.

    7. The petitioner has also disputed the amount of interest charged and has prayed for quashing of the orders dated 24-10-2001 and 28-8-2001 issued by the Regional Manager of the Corporation and has prayed that the rehabilitation package should be prepared for rehabilitation of the unit.

    8. A counter-affidavit has been filed by the Corporation and we have perused the same. In paragraph 3 it is stated that a loan of Rs. 9.60 lacs was sanctioned to the petitioner by the Corporation vide letter dated 10-10-1985. In the sanction advice implementation schedule was drawn according to which disbursement was to be lifted within a period from December 1985 to June 1986 after raising the security at the site and complying with the other terms and conditions of the sanction advice. However, this was not done by the petitioner. The petitioner made an agreement with the Corporation on 15-1-1987 and the Corporation made disbursement as mentioned in paragraph 3 of the counter-affidavit.

    9. In paragraph 4 of the counter-affidavit it is stated that the Corporation made disbursement as and when security was given by the petitioner and he completed other formalities. In paragraph 5 it is stated that according to the loan agreement executed on 15-1-1987 the interest was to be charged at 18.5% with a rebate of 5% on timely payment and the interest was to be paid in quarterly instalments. In paragraph 10 it is stated that the gestation period was of 18 months from the date of first disbursement of the loan instalment. The first instalment was given to the petitioner on 28-2-1987 and hence the gestation period expired on 28-8-1988. In paragraph 11 it is stated that the petitioner did not pay any dues to the Corporation after 31-3-1989. In paragraph 13 it is denied that the Corporation committed any delay in disbursement of the loan. However, it is stated that the Corporation cannot disburse the amount, without raising security at site and completing the entire formalities. The actual position of disbursement is given in Annexure C.A 1 to the counter-affidavit. The Corporation disbursed the amount of Rs. 9,19,600/- to the petitioner and the balance amount could not be disbursed to the petitioner as no security was made at site. In paragraph 20 it is stated that the delay was done by the petitioner who executed the agreement with the Corporation very late and also failed to pay the instalments in time and did not raise the complete security for the disbursement of the full amount. In paragraph 24 it is stated that the Corporation provided ample opportunity to the petitioner for repayment of the dues but the petitioner failed to clear the same. The Corporation provided an option to the petitioner to come and discuss the matter and the petitioner's representatives met the Assistant General Manager of the Corporation on 26-2-1992 and requested to give time till 20-3-1992 for part payment and stated that they will submit a fresh proposal for payment of the rest amount up to 27-2-1992 but the petitioner did not submit any proposal and instead submitted forged cheques dated 28-2-1992, 7-3-1992, 16-7-1992 and 31-3-1992 each of Rs. 50,000/-. Only cheque dated 7-3-1992 was encashed and the remaining cheques were dishonoured by the petitioner's banker.

    10. In our opinion this petition deserves to be dismissed on this ground alone that the petitioner gave cheques which bounced. Hence the petitioner has not come with clean hands to this Court. In paragraph 27 it is stated that as per guidelines of the State Government dated 3-5-1994 the petitioner was not found suitable for the benefit in that G.O In paragraph 29 it is stated that a screening committee was held on 20-10-1993 under the Chairmanship of the Managing Director of the Corporation in which it was decided that no additional loan for installation of plant and machinery should be considered, and the company shall pay part payment of dues in the next few months. When the unit did not make repayment within time as per the decision of the screening committee and also did not submit any sanction letter of the bank the Corporation issued recovery certificate, for Rs. 18,61,653.14 on 4-10-1994 and also informed the Division Udyog Bandhu Committee in its meeting on 10-10-1994. In paragraph 30 it is alleged that the interest has been charged as per the policy of the Corporation for which an agreement was executed with the petitioner on 15-1-1987. In paragraph 31 it is stated that the petitioner is not entitled for rehabilitation facility.

    11. In paragraphs 42 and 43 of the counter-affidavit it is stated that it was decided that no loan can be provided for the additional machinery but resettlement can be done if the petitioner unit pays Rs. One lac within three months, but the petitioner did not make the said payment within the stipulated time and no solution could be finalised and no rehabilitation could be done and the same was informed to the Joint Director of Industries vide letter dated 18-10-1994.

    12. In our opinion there is no merit in this petition. The petitioner has not come to this Court with clean hands as his cheques have bounced. No one has a right to get one time settlement or rehabilitation as held by this Court in Civil Misc. Writ Petition No. 6319 of 2004, Swarup Packaging and Sanitizers (India) Pvt. Ltd. v. State Bank of India decided on 16-2-2004: (reported in 2004 (17) All Ind Cas 631). It was held in that decision that one time settlement or rehabilitation or fixing instalments is really rescheduling of the loan and this can only be done by the Bank or financial institution which granted the loan in its discretion. Granting of one time settlement or rehabilitation or fixing instalments is really varying the contract between the parties which cannot be done by the Court. It can only be done by the mutual consent of the parties. This Court under Article 226 cannot direct grant of one time settlement as held by a Division Bench of this Court in M.M Accessories v. U.P Financial Corporation, 2002 (46) All LR 261 : (AIR 2002 All 96). The Court under Article 226 cannot direct that a unit be rehabilitated. There are well settled limitation on the High Court's power to issue writs. The High Court can interfere only when there is violation of law or error of law apparent on the face of the record.

    13. In our opinion the R.B.I Guidelines or G.Os of the State Government are purely administrative orders and hence the petitioner cannot claim any right on their basis as held by this Court in Civil Misc Writ Petition No. 8483 of 2003 Shrestha Flexible Packs Private Limited v. Regional Rehabilitation Committee decided on 3-3-2004. I In our opinion these Government Orders are only executive instructions and confer no right on the petitioner as they are not statutory orders. It is well settled that purely administrative orders, which have no statutory force, are not enforceable in a Court of law vide Fernadez v. State of Mysore, AIR 1967 SC 1753 (para 12); State of Maharashtra v. Lok Shikshan Sanstha, (1971) 2 SCC 410 : AIR 1973 SC 588 (para 27); Union of India v. Majji, (1977) 1 SCC 606 : AIR 1977 SC 757 (paras 31-36) etc. Such administrative orders do not have the force of law, and hence confer no legal right on anyone, vide Satyanarain v. Millikaijun, AIR 1960 SC 137 (142); Abdulla Rowther v. STAT, AIR 1959 SC 896 (899); Saksena v. State of M.P, AIR 1967 SC 1264 (1267); Mahendra v. State of U.P, AIR 1963 SC 1019 (1035). Hence no writ lies for enforcement of a purely administrative order vide Nagendra v. Commissioner, AIR 1958 SC 398 (412-13); Abdulla v. STA, AIR 1959 SC 896 (Paras 11, 18); Raman v. State of Madras; AIR 1959 SC 694 (700) etc.

    14. Hence the petitioner cannot claim any benefit or right on the basis of the RBI guidelines or a Government Orders of the State Government. These guidelines or G.Os are only for the internal guidance of the authorities, but no one can claim any right on their basis.

    15. In Haryana Financial Corporation v. Jagdamba Oil Mills (2002) 3 SCC 496 : (AIR 2002 SC 834) the Supreme Court held that while the Financial Corporations have to act fairly, the borrowers have a corresponding duty to repay in time. The decision of the State Financial Corporation taken with intention of recovery of its dues is not open to challenge unless it is mala fide. The Supreme Court reversed its earlier decision in Mahesh Chandra v. Regional Manager (1993) 2 SCC 279 : (AIR 1993 SC 935).

    16. In our opinion the Court should observe Judicial restraint in such matters and not embarrass the Financial Institutions or banks. Due to over-activism of the Courts tens of thousands of crores of recoveries have been stayed, which is having an adverse impact on the economy. When a loan is recovered it is advanced to new units, but if it is not recovered new units cannot be set up. Moreover, it is well known that unfortunately in our country many unscrupulous business borrow money from banks or financial institutions and divert it to secret accounts, and declare their unit sick.

    17. In this way the scarce financial resources of the country are siphoned off. This Court cannot approve of such malpractices.

    18. For the reasons given above this petition is dismissed.

    19. Petition dismissed.

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    Comments

    Maria Plasto Pack (P) Ltd. v. Managing Director, U.P Financial Corporation, Kanpur And Others
    (Mar 12, 2004)