Judgment:
D.P. Wadhwa, J.
(1) The first petitioner, a partnership firm of petitioners 2 and 3, seeks reliefs as under :-
'A)That this Hon'bel.- Court may be pleased to issue an appropriate writ, order or direction in the nature of mandamus directing the respondents Nos. 1 and 2 to release the credit facilities to the petitioners in terms of the sanction to the tune of Rs.31.58 lakhs and implement the nursing programme/scheme with respect to the unit of the petitioners. b) That this Hon'ble Court may be pleased to issue an appropriate writ, order or direction in the nature of certiorari quashing the conditions imposed by the petitioners as enumerated by respondent No.2 in letter dated 24th July 1990 or any other communication; c) Pass appropriate writ, order or direction including a writ of prohibition restraining the respondents not to recall and/or enforce the recovery of any amount that may be found payable by the petitioner with respect to the credit facilities which were being enjoyed and/or slay the operation of the notice dated 25111 June, 1991 as immediate recovery would stumble and deprive the sick unit of the petitioner and result in liquidation of the unit; d) Issue appropriate writ, order or direction including a writ of mandamus directing the respondents to credit the account of the petitioner with interest debited to their account from the dale of sanction till the rehabilitation scheme is implemented; e) Issue appropriate writ, order or direction awarding the petitioner compensation for delay in implementing the nursing programme.'
(2) There are three respondents. First two respondents are State Bank of India (S.B.I.) respectively sued through its Chief General Manager/Chairman-cum-Managing Director with Local Head Office at Parliament Street, New Delhi, and through its Deputy General Manager, Lauries Hotel, Partappura, Agra. The third respondent is Reserve Bank of India (R.B. I.), Parliament Street, New Delhi, It will at once be seen that head office of the S.B.I, and the R.B.I, are at Bombay. The Branch of the S.B.I, which is to grant relief to the petitioners in terms of the prayers is, however, not a party before us.
(3) The case of the petitioners in short, is that they had a certain unit of small scale industry duly registered with the appropriate authority of the state Government. A scheme to rehabilitate the unit of the petitioner was examined and it was found that the unit was viable and technically and economically needed nursing at the hands of the S.B.I. The scheme of rehabilitation was accepted by the. S.B.I, in October 1988 and it agreed to release facilities to the tune of Rs.31.58 lakhs. Since the facilities have not been provided, this writ petition has been filed. It is stated instead of providing the facilities the S.B.I, served a notice dated 15 April 1991 recalling its carrier loan amounting to Rs.15,47,922.68. This amount the S.B.I, has claimed by way of balance under the Cash Credit Account, Medium Term Loan and interest, etc. Petitioners say in terms of certain directions issued by the R.B.I., the S.B.I, was competent and bound to grant facilities of 31.58 lakhs as aforementioned and also could not demand return of the amount as contained in its legal notice dated 25 June 1991.
(4) Respondent No.3. has not appeared in spite of service. Respondents 1 and 2 have raised various preliminary objections, like delay, lack of territorial jurisdiction, non-impleading of the party and bad conduct of the petitioners. S.B.I, admits the instructions of the R.B.I, but says these are neither statutory nor have any mandatory force. It says these instructions are merely guidelines and it will he for the S.B.I, to see that the loan advanced by it to any party is properly secured by execution of documents and otherwise. It is stated, in the present case the petitioners declined to give proper security to the S.B.I. and to agree to certain other terms proposed by the S.B.I., these being (i) conversion of M/s. National Iron Foundry from a partnership concern to H.U.F. unit; (ii) submission of the required affidavits by the sisters of Shri Raman (second petitioner), disowning their claims in the property in question; (iii) registered mortgage of' the property offered as collateral security and the bank will consider financing stamp duty and registration charges thereof if a request is made by Shri Raman therefore; and (iv) abstention of present market value of the properly from an acceptable valuer. It is slated that these terms were though agreed by the second petitioner but nothing has been done even though the S.B.I, agreed to provide funds for purchase of stamp duty required on the mortgage deed. The S.B.I, has also staled that it has already filed a suit for recovery of the amount due to it from the petitioner in the court of Civil Judge, Agra, it being Suit No. 18 of 1992.
(5) The S.B.I, has then given a brief history as to how the petitioners have conducted themselves in giving security of a certain properly in Agra to cover facilities granted earlier to the first petitioner. It is stated that earlier the second petitioner and his father were partners of the first petitioner when certain facilities were provided by the S.B.I. on mortgage of the said property. This property for the first time was mortgaged with the S.B.I, by the father of the second petitioner on 17 March 1973 who claimed to be owner of this properly. On enhancement of the limits at various stages, father of the second petitioner wrote letters to the S.B.I, for extending the mortgage already created and he confirmed that he was the sole owner of the property. Last such letter he wrote was on 5 December 1981. In the meanwhile, in 1976 without the knowledge of the S.B.I, a suit was filed in the court of the Civil Judge, Agra, by the minor sons of the second petitioner through their mother saying that the property mortgaged was joint Hindu family property. Father of the second petitioner accepted these allegations and the suit was decreed. S.B.I. says it was a collusive suit. A decree was passed on 9 November 1978 declaring that the property in the hand of the father of the second petitioner was joint Hindu family properly. The S.B.I, was never informed of this. The S.B.I, says this was done in order to dilute the rights of the S.B.I, against this properly. Again a suit was filed by brother of the second petitioner, it being Suit No. 1 162 of 1982 in the Court of the Civil Judge, Agra, for declaring that he was the co-owner and enjoyed possession of the said property to the extent of 1/3 share therein. Both the second petitioner and his father were the parties. Again a compromise decree was passed on 10 March 1983 dividing the mortgaged properly into three portions. The S.B.I. contends that this suit was again collusive and to harm the S.B.I. The suit was decreed in 1984. It is slated that it was contended in that suit that the mortgaged property was owned by Hira Lal, grand father of the second petitioner, whereas property bad in lad been purchased by his father in 1934. S.B.I, contends that this was fraudulent act on the part of the petitioners and it says that the partition decree obtained is void and is of no effect as far as the S.B.I, is concerned. Then the S.B.I, says that when the rehabilitation programme was accepted by the Bank on 26 October 1988 one of the conditions was creation of the mortgage to sufficiently secure the amount to be advanced in the name of the petitioners. The second petitioner offered to create mortgage of 1/3 share in the property on the basis of the declaratory decree and partition decree mentioned above but S.B.I . says it had already filed a mortgaged suit for recovery against the petitioners and is pending in the court before the Civil Judge, Agra, where all the rights and claims of the respective parties would be determined. S.B.I, says because of these complications it received the legal advice that any of the alleged coparceners may raise objection on a subsequent dale and to overcome such problems the petitioners be required to execute a registered mortgage in which all the major coparceners may be required to join and for the minor coparceners proper permission may be obtained from the District Judge as per law. The petitioners also did not comply with the terms(i) to (iv) mentioned above. Since these requirements were not met the S.B.I, did not release the loan. The principal question that arises is if the S.B.I, in these circumstances is bound by the guidelines issued by the R.B.I.
(6) Mr. Gupta said that once the rehabilitation package scheme had been approved the S.B.I. was bound to grant the necessary funds for rehabilitation of the first petitioner. He also referred to various directions issued by the R.B.I, in the compilation called 'Circulars relating the industrial and export credit department July 1986 - June 1989'. He said the R.B.I, had adversely commented upon the inordinate delays in the banks giving effect to rehabilitation packages even after they conveyed their agreement and particularly when more than one bank was involved. Reference was also made to the instructions issued by the R.B.I, on the recommendations of the Working Group of the R.B.I. Ill this compilation of circulars the R.B.I, had made the. following observations :-
'OCCASIONS have arisen where certain banks have sought to keep themselves away from rehabilitation efforts on Iliac pica that such measures were not in accordance with their corporate philosophy, or that the extension of relicts and concessions will further erode their already poor profitability, or that they have a serious liquidity constraint. Rehabilitation efforts cannot succeed without the whole-hearted participation of the financing banks and institutions, promoters, other agencies including the State and central Government, as well as the labour. Rehabilitation of sick industrial units which are potentially viable, is the declared policy of the Government and, as such, there should be no occasion for banks to dissociate themselves from rehabilitation efforts where the potential viability of the unit has been established and the rehabilitation package which has been drawn up has the acceptance of the financial institutions and the two banks having the largest share.'
(7) As to how the advances could be recalled it is mentioned in para 25 of the compilation. This para was cited perhaps to answer the plea of the S.B.I, that a suit had been filed by the bank against the petitioners for recovery of the loan granted earlier. Mr. Gupta said the whole scheme envisages rehabilitation of the industry, and the R.B.I, is failing in its statutory duly in not providing the necessary finances. In support of his submission Mr. Gupta also referred to a decision of the Supreme Court in Maharastra Tubes Ltd. v. State Industrial & Investment Corporation of Maharashtra Ltd. and another, : [1993]1SCR340 . Mr. Gupta said that conditions now imposed by the bank were arbitrary and were devised to deny the petitioners the finances as per the rehabilitation scheme which was binding on the hunk. He had some more decisions of the High Courts to cite on this aspect of the matter, but because of the view which we are taking it is not necessary for us to refer to any of these decisions. Mr. Gupta also criticised the opinion given by the legal adviser of the S.B.I, which asked for compliance for certain formalities as being incorrect.
(8) Mr. R.K. All and criticised the conduct of the petitioners all through and said the S.B.I, could not risk public funds unless it was fully satisfied about the security of the advances to be given by it. He did not dispute the guidelines issued by the R.B.I. but said it was for the operating bank to see that the public finances are secured. He denied there has been any violation of the R. B.I. instructions. Mr. Anand referred to a circular dated 6 February 1987 issued by the R.B.I, where it is provided as under :-
'RELIEFS and concessions for rehabilitation of potentially viable units 6. It is emphasised that only those units which are considered to be potentially viable should be taken up for rehabilitation. Norms for grant of reliefs and concessions by banks/financial institutions to potentially viable sick Ssi units for rehabilitation are furnished in Annexure II. We may add that the reliefs/concessions to the extent indicated in the Annexure are not intended to be given as a matter of course in all causes of rehabilitation of sick Ssi units; it is for the banks/financial institutions to decide on the nature and extent of concessions necessary/warranted within these parameters, depending upon the merits of each case.'
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Mr. Anand then said that first lime when the bank had dealings with the first petitioner, the property which was mortgaged as security was slated to be owned exclusively by Mr. Bal Mukand, father of the second petitioner. Bal Mukand is since dead. He had two sons, namely, second petitioner and Radhey Mohan. He had daughters as well. In 1976 sons of Raman, i.e., grand sons of Bal Mukand, filed a suit through their mother that the property was ancestral joint Hindu family property. The defendants were the grand-father Bal Mukand, father Raman (petitioner No.2) and uncle Radhey Mohan. The allegations were that grand-father had become of advanced age and wanted to squander away the property of the joint Hindu family. The three defendants filed a common written statement in effect admitting the allegation of the properly being ancestral property. In the suit an arbitrator was appointed who gave his award on 2 September 1978. which was made rule of the court on 9 November 1978. Never the less all this period Bal Mukand had been filing declarations with the S.B.I. that he was the sole owner of the property. It was obviously a collusive suit and the bank was unaware of the same. Then in December 1982 another suit was filed by Radhey Mohan against his father Bal Mukand and brother Raman (petitioner No.2). In this suit Radhey Mohan did not take the plea that the properly was ancestral properly but lie slated it was exclusively owned by him and his father and brother and that no other person had any title or claim to the property. This suit was compromised and a decree passed on 28 February 1983. Again the bank was ignorant of these proceedings. It was only in 1984 that the bank was disclosed about this. Bal Mukand is since dead. Mr. Anand relied upon a decision of the Supreme Court in Pulavarthi Venkata Subba Rao and others v. Valluri Jagannadha Rao (deceased) by his heirs and legal representatives and others, : [1964]2SCR310 , to contend that a compromise decree is not a decision by the court. It is acceptance by the court of something to which the parties had agreed. He said in this view of the matter daughters of Bal Mukand could always challenge the decree and put a cloud on the title of the property which properly the petitioners want to give as security for the advances to be given to them by the bank under the rehabilitation scheme. Mr. Anand also said that this petition has been filed too late in the day and that rehabilitation scheme was of 1988 and now in 1993 the circumstances have changed. The petition was filed in August 1991 only. Every thing has to be redone again. He says it is no fault of the bank that the petitioners have not complied with the formalities to be completed by them. Mr. Gupta, however, said that 1/3 portion of the properly which has come to the share of the second petitioner values more than the loan to be advanced and, thereforee, it was not necessary for the sisters to give any affidavit. It is for the person giving loan who is to be satisfied a bout the title of the property to be mortgaged. In seeing the conduct of the petitioners and their father and brother all through if the bank has entertained doubts and wants the affidavits of the sisters we cannot find any fault with the same. Moreover, the bank has gone by the legal advice rendered to it. However, Mr. Gupta is right in his submission that a partnership concern cannot be converted into an H.U.F. unit and to that extent the advice rendered to S.B.I, may not be correct. Mr. Gupta then said that the bank would have been aware about the fact that the properly was joint Hindu family inasmuch as in the balance sheet of the first petitioner as on 31 March 1981 filed with the bank it was mentioned Raman (petitioner No.2) son of Bal Mukand Balla, Karta, Khandan Musterka . This word 'Khandan Musterka' is of Urdu language and the expression as used in the balance sheet would mean that Raman is Karta of a Joint Hindu family. This to us itself seems to be a deceptive way of putting the things. In the income-tax law H.U.F. is a word which is legally understood and the Chartered Accountants who prepared the balance sheet did not choose to use that word. We do not know why, but it cannot be said that the bank had notice that petitioner No.2 was Karta of any joint Hindu family property, or what was that property. Taking overall view of the matter we are of the opinion that the S.B.I. is right in its submission that in the absence of proper security and proper documentation it cannot be a party to the revival and rehabilitation scheme of the first petitioner which the S.B.I. was to grant various facilities of over Rs. 31.50 lakhs. This petition, thereforee, fails and is dismissed in liming.