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REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 51 OF 2015 (Arising out of SLP(C) No.22775 of 2012)

M/s Swati Ferro Alloys Pvt. Ltd. … APPELLANT

VERSUS

Orissa Industrial Infrastructure  Development Corporation (IDCO) & Ors.     … RESPONDENTS

J U D G M E N T  

SUDHANSU JYOTI MUKHOPADHAYA,J.

Leave granted.

2. This appeal has been preferred by the appellant-M/s. Swati  

Ferro Alloys Pvt. Ltd. against the judgment dated 18th April,  

2012 passed by the Division Bench of High Court of Orissa at  

Cuttack in WP(C) No.16790 of 2008. By the impugned judgment, the  

High Court observed and held as follows:

“Admittedly the land in question belongs to IDCO  and  the  same  was  leased  out  in  favour  of  one  M/s  Prachi Vanijya (P) Ltd. for manufacturing of Konark  Fans, which was mortgagable right in favour of OSFC  and other financial institutions.

Latter on M/s Prachi Vanijya changed its name to  M/s Eastern Fan.  Opposite parties 3 to 6 are the  legal heirs of one Satya Narayan Swain, who was stated  to be one of the partners of said M/s Eastern Fan and  according to the petitioner, said Satya Narayan Swain  had  agreed  to  transfer  the  land  in  favour  of  the  petitioner.

Learned counsel for the IDCO seriously disputed  the aforesaid transaction and submits that though the

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opposite parties 3 to 6 are the legal heirs of one of  the  partners  of  the  M/s  Eastern  Fan,  the  said  M/s  Eastern Fan has not been made a party.

Counsel  for  the  opposite  parties  3  to  5  also  dispute transaction.  Learned counsel for OSFC submits  that they have no role to play as the land till date  belongs to IDCO.

This writ application is full disputed facts and  the  prayer  made  in  the  writ  application  cannot  be  granted  in  a  proceeding  under  Article  226  of  the  Constitution of India as factual disputes cannot be  decided in this proceeding.

The writ application is accordingly dismissed. It is open for the parties to approach the Civil  

Court, if it so desires.”

3. The factual matrix of the case is as follows:

The  1st respondent-Orissa  Industrial  Infrastructure  

Development  Corporation  (‘IDCO’  for  short)  allotted  Plot  no.  

C/9,  Industrial  Estate,  Cuttack  on  18.3.1982  in  favour  of  a  

partnership firm-M/s Prachi Vanijya (P) Ltd. on hire-purchase  

basis.   A  mortgage  in  favour  of  2nd respondent-Orissa  State  

Financial Corporation by M/s Prachi Vanijya was allowed by the  

1st respondent to secure loan. The 1st respondent intimated the 2nd  

respondent on 27.11.1986 that the plot is transferred in favour  

of M/s Prachi Vanijya (P) Ltd. subject to payment of outstanding  

amount of Rs.97,888/- as on 30.11.1986.  

4. The case of the appellant is that the assets of M/s Prachi  

Vanijya (P) Ltd. comprising of land and building, shed and fan  

machines  situated  at  C/9,  Industrial  Estate,  Cuttack  were  

purchased along with a loan liability of Rs.6,60,000/- of the 2nd  

respondent by M/s Eastern Fans on 5.12.1987, of which Sri Satya  

Narayan  Swain  was  the  Managing  Partner.  M/s  Prachi  Vanijya

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requested the 1st respondent to give no objection to change its  

name as M/s Eastern Fan.  The 1st respondent vide its letter  

dated 5.12.1987 informed that it has no objection to change of  

the  name  subject  to  receipt  of  recommendation  from  the  2nd  

respondent.   

5. The  2nd respondent  on  16.12.1987  intimated  that  it  has  

agreed to a change in name of M/s Prachi Vanijya to M/s Eastern  

Fans.  Thus, Plot No. C/9, Industrial Estate, Cuttack along with  

the  loan  liability  was  transferred  in  the  name  of  the  M/s  

Eastern Fans, a partnership firm. Ever since the transfer of  

assets in favour of Eastern Fans, the unit was non-functional  

and the loan amount of 2nd respondent against Eastern Fans had  

mounted and it had become impossible for Sri Satya Narayan Swain  

to run M/s Eastern Fans due to excessive paucity of funds.  Sri  

Swain thus approached and persuaded Sri Purushottam Lal Kandoi,  

Director of the appellant company-M/s Swati Ferro Alloys Pvt.  

Ltd. for relieving him of the loan burden of 2nd respondent.

6. Pursuant to discussion between the parties, the appellant  

company  was  incorporated  on  22.3.1989  with  three  Directors,  

namely,  Sri Purushottam Lal Kandoi, Sri Rakesh Jajodia and Sri  

Satya Narayan Swain with a share capital of Rs.5,00,000/-.  The  

object  of  the  Company  was,  inter  alia,  to  undertake  

manufacturing Ferro Alloys.

7. On the request of appellant company and M/s Eastern Fans,  

on 26.4.1989 the 1st respondent gave permission to accommodate

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the appellant company in the premises aforesaid for a period of  

2 years.  It was mutually agreed on 6.7.1989 that the appellant-

company will take over the term loan liability of M/s Eastern  

Fans  as  against  the  complete  transfer  of  all  its  assets  in  

favour  of  the  appellant  company.   A  Board  resolution  dated  

6.7.1989  was  passed  resolving  that  all  liabilities  of  M/s  

Eastern Fans with the 2nd respondent as on said date be taken by  

the appellant company along with all the assets including the  

land.   The  Managing  Partner  of  M/s  Eastern  Fans,  Sri  Satya  

Narayan  Swain,  who  was  also  the  Director  of  the  appellant  

company at that time was authorized to negotiate and finalize  

the said matter with 2nd respondent.  The Managing Partner of the  

partnership firm M/s Eastern Fan wrote letters dated 10.7.1989  

and 11.7.1989 to the 2nd respondent intimating that the appellant  

company will take responsibility to clear the term loan along  

with accrued interest by taking over the fixed assets of M/s  

Eastern Fans i.e. the land along with shed and the plant and  

machinery.  2nd respondent acted on the letters written by Satya  

Narayan Swain and accordingly by letter dated 9.1.1990 agreed  

that the appellant company shall take over the entire assets and  

liabilities of M/s Eastern Fan. The appellant company was asked  

to pay a sum of Rs.1,00,000/- as down payment towards the loan  

liability outstanding against M/s Eastern Fan (Prachi Vanijya),  

which was duly done.  

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8. A revised sanction letter was issued by 2nd respondent on  

21.3.1990  further  clarifying  that  the  appellant  company  was  

allowed to take over the entire assets and liabilities along  

with the accrued interest and other statutory dues.

9. According  to  the  appellant,  pursuant  to  the  aforesaid  

letters  dated  9.1.1990  and  21.3.1990,  the  appellant  company  

became the owner of Plot No.C/9, Industrial Estate, Cuttack. All  

the assets and liabilities of M/s Eastern Fan were taken over by  

the appellant company on 31.3.1990 by making a down payment of  

Rs.1,00,000/-. The assets of M/s Eastern Fan became the assets  

of the appellant company which were reflected in the balance  

sheet of the appellant company.

10. Further case of the appellant is that the appellant company  

took additional term loan from 2nd respondent for Rs.11,37,000/-  

which  was  sanctioned  on  31.3.1992  on  the  said  basis  the  

appellant company has full rights over the plot in question. A  

memorandum of deposit of title deeds for mortgaging the assets  

of  the  appellant  company  to  2nd respondent  was  executed  on  

25.7.1992. On the very same day i.e. on 25.7.1992 a deed of  

hypothecation was signed between the appellant company and the  

2nd respondent  to  furnish  security  towards  the  loan  of  

Rs.20,48,284.14/-.  According  to  appellant  the  said  deed  of  

hypothecation was on the basis of security of (a) an equitable  

mortgage  of  borrower’s  property  with  all  buildings  and  

structures thereon and fixed machineries situated at Industrial

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Estate, Khapuria, Cuttack and (b) hypothecation of all tangible  

moveable property. The said deed covers the first term loan in  

consequence of takeover of M/s Eastern Fans of Rs.9,11,284.00/-  

and the additional term loan of Rs.11,37,000/- for new Ferro  

Alloys  Plant  of  the  appellant,  both  amounting  to  

Rs.20,48,284.14/-  and  clearly  refers  to  the  Plot  No.C/9,  

Industrial  Estate,  Cuttack  with  land  and  building.  Thus,  

according to appellant, for all purposes the appellant company  

was treated as an owner of the Plot No.C/9, Industrial Estate,  

Cuttack.  

11. From the record we find that the appellant company has also  

setup a fresh unit for making Ferro Alloys in aluminium thermic  

process on 27.5.1997 and also taken facility of Letter of Credit  

from State Bank of India for Rs.1,50,000/- in the year 1992,  

which was renewed every year.  It has also been sanctioned cash  

credit limit of Rs.40 lakhs by the State Bank of India in the  

year 1992 and the same was extended every year, as apparent from  

letter dated 27.5.1997.

12. 2nd respondent  also  accepted  the  execution  of  Tripartite  

Agreement  with  the  State  Bank  of  India  by  letter  dated  

29.1.1998.  The  Tripartite  Agreement  clearly  states  that  2nd  

respondent had in its custody the title deeds relating to the  

property of the appellant company. It appears that the appellant  

persuaded  the  2nd respondent  for  transfer  of  lease  right  and  

title of the appellant since it has taken all the assets of the

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partnership firm of M/s Eastern Fans.  In support of this, the  

appellant company relied upon letter dated 23.12.2003 issued by  

the 2nd respondent duly recommending the transfer of title of the  

plot in favour of the appellant. The grievance of the appellant  

company  is  that  despite  several  representations  made  to  1st  

respondent between 2003 and 2008 no action was taken by it to  

transfer the title of the said plot in favour of the appellant  

company.  

13. As no action was taken, the appellant company moved before  

the High Court seeking transfer of the right in their favour,  

wherein the aforesaid observation was made by the Division Bench  

of the High Court by impugned judgment dated 18th April, 2012.

14. Learned  counsel  for  the  appellant  submits  that  all  the  

facts as were pleaded in the writ petition were not disputed by  

the 1st and 2nd respondents. It was contended that refusal of 1st  

respondent to transfer the lease of the Plot No.C/9, Industrial  

Estate, Cuttack in favour of the appellant is wrong, arbitrary  

and highly illegal and the same was subject to judicial review  

under  Article  226  of  the  Constitution  of  India  and  the  High  

Court  erred  in  dismissing  the  writ  petition  holding  disputed  

question  of  fact  merely  because  3rd to  5th respondents  have  

opposed the writ petition with a mala fide intention for their  

vested interests, which cannot be a ground for the High Court to  

dismiss the writ petition without giving any reasons.

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15. Respondents  have  disputed  the  claim  of  the  appellant  to  

transfer the land in the name of the appellant company.  

16. From the bare pleading of the case and the record, we find  

that there is disputed question of fact about the ownership of  

the  Plot  No.C/9,  Industrial  Estate,  Cuttack.   Therefore,  the  

High Court was justified in dismissing the same and directing  

the  parties  to  approach  the  Civil  Court  for  resolving  such  

dispute.   

17. From the pleading and record the following fact emerges:

(i)    The  1st respondent-IDCO  allotted  Plot  no.C/9,  

Industrial Estate, Cuttack on 18.3.1982 in favour of  

M/s Prachi Vanijya (P) Ltd. on hire-purchase basis  

subject  to  payment  of  outstanding  amount  of  

Rs.9,78,880/- as on 30.11.1986. The appellant has  

pleaded that the land along with building, shed and  

fan  machines  situated  at  C/9,  Industrial  Estate,  

Cuttack were purchased from the 2nd respondent by M/s  

Eastern  Fans  on  5.12.1987,  of  which  Sri  Satya  

Narayan Swain was the Managing Partner along with a  

loan  liability  of  Rs.6,60,000/-  of  the  2nd  

respondent.  It is not clear as to how M/s Eastern  

Fans purchased the land from M/s Prachi Vanijya, if  

the land was originally taken from 1st respondent on  

hypothecation  basis  subject  to  payment  of  

Rs.9,78,880/-.  From letter of M/s Eastern Fan dated

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10.7.1989, Annexure P-5 (Page 31), we find that the  

said  M/s  Eastern  Fan  intended  to  setup  plant  of  

Ferro  alloy  in  their  factory  premises  at  C/9,  

Industrial Estate, Khapuria, Cuttack and therefore  

it  was  decided  between  themselves  and  M/s  Swati  

Ferro Alloys Pvt. Ltd. that the appellant-Company  

will take responsibility to clear the term loan paid  

by 2nd respondent-Orissa State Financial Corporation  

along with accrued interest. In the said letter, it  

was intimated that M/s Eastern Fan intended to start  

manufacturing activities under the name and style of  

M/s  Swati  Ferro  Alloys  Pvt.  Ltd.  The  appellant  

company was thereby incorporated by M/s Eastern Fan  

for the said purpose. Letter dated 9.1.1990 issued  

by 2nd respondent-Orissa State Financial Corporation  

to the appellant company shows that the appellant  

company  was  intimated  that  entire  assets  and  

liabilities of M/s Prachi Vanijya was transferred to  

the appellant company and the same was agreed upon  

by  the  appellant  company  on  certain  terms  and  

conditions.   

(ii)    Letter dated 23.12.2003 written by 2nd respondent-

Orissa State Financial Corporation to the Managing  

Director,  IDCO,  indicates  that  M/s  Eastern  Fan  

availed loan from 2nd respondent and mortgaged the

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leasehold  land  in  favour  of  2nd  respondent  as  

security.   

(iii) Letter dated 26.4.1989 written by 1st respondent-IDCO  

shows that the appellant-company -M/s Swati Ferro  

Alloys  Pvt.  Ltd.  was  allowed  only  accommodation  

inside the premises of M/s Eastern Fan for a period  

of 2 years and they have not given permission for  

transfer of the land.  

18. We agree with the observation of the High Court that this  

matter  involves  disputed  question  of  fact.  Despite  the  same,  

prima facie it appears that neither original borrower nor the  

present appellant does any business in the land in question,  

except  for  taking  loan  against  the  land.  In  this  background  

while  we  upheld  the  impugned  judgment  dated  18th April,  2012  

passed by the Division Bench of High Court of Orissa at Cuttack  

in  WP(C)  No.16790  of  2008,  we  are  of  the  opinion  that  the  

respondent-IDCO should inquire into the matter to find out as to  

whether the land is properly used by one or other party for the  

purpose it was open or by opening different firms or companies  

in  different  names  in  same  premises,  they  are  availing  loan  

mortgaging the same very land. For such inquiry the respondent-

IDCO  will  issue  notice  to  the  2nd respondent-Orissa  State  

Financial  Corporation,  appellant-M/s  Swati  Ferro  Alloys  Pvt.  

Ltd., M/s Eastern Fan and any other party who may be interested.

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On such enquiry it will be open for the competent authority to  

pass an appropriate order.  

19. The appeal is dismissed with aforesaid observations.

..........................J.                 (SUDHANSU JYOTI MUKHOPADHAYA)

...........................J.

(V. GOPALA GOWDA)    

NEW DELHI, JANUARY 6, 2015.