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NON-REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL  NO.  1467 OF 2018 [@ SPECIAL LEAVE PETITION (C) NO. 10579 OF 2012]

PRADESHIYA INDUSTRIAL DEVELOPMENT  CORPORATION LTD. U.P. Appellant(s)

                               VERSUS HINDUSTAN AERONAUTICS LTD.  (LUCKNOW DIVISION) & ORS. Respondent(s)

WITH CIVIL APPEAL NO. 1471 OF 2018

[@ SPECIAL LEAVE PETITION (C) NO. 8265 OF 2015] CIVIL APPEAL NO. 1468 OF 2018

[@ SPECIAL LEAVE PETITION (C) NO. 10856 OF 2012] CIVIL APPEAL NO.  1472 OF 2018

[@ SPECIAL LEAVE PETITION (C) NO. 11740 OF 2015] CIVIL APPEAL NO. 1470 OF 2018

[@ SPECIAL LEAVE PETITION (C) NO. 40164 OF 2012]  CIVIL APPEAL NO. 1469 OF 2018

[@ SPECIAL LEAVE PETITION (C) NO. 40163 OF 2012] CIVIL APPEAL NO. 1473 OF 2018

[@ SPECIAL LEAVE PETITION (C) NO. 27295 OF 2016] CIVIL APPEAL NO. 1474 OF 2018

[@ SPECIAL LEAVE PETITION (C) NO. 492 OF 2018] J U D G M E N T

KURIAN, J. 1. Leave granted. 2. Out of the eight appeals before us, in five appeals  the  State  who  is  a  guarantor  to  the bonds, by which the borrower namely, Pradeshiya

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Industrial Development Corporation Ltd., UP (in short, “PICUP”) collected money, is before this Court, aggrieved by the Judgment dated 24.01.2012 passed by the High Court of Allahabad, Lucknow Bench,  in  W.P.(C)  No.  2838  (M/B)  of  2005  and connected matter.  In other three appeals, PICUP is  before  this  Court,  aggrieved  by  the  same impugned Judgment.

3. Since the borrower failed to comply with the terms  of  the  bonds,  the  respondents  approached the High Court for a direction to the State, the Guarantor, to comply with the terms of guarantee. As per the impugned Judgment, the High Court held that the State had guaranteed the payment as per the terms of the bonds, but failed to honour the same.  Accordingly, a direction was issued to the State  to  disburse  the  remaining  amounts  at contractual rates.  It is pointed out that all the  respondents  have  been  paid  the  principal amounts.  Thus aggrieved, the State and the PICUP are before this Court in respective appeals.   

4. Sh.  Pramod  Swarup,  learned  senior  counsel appearing for the State and Mr. M. C. Dingra,

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learned counsel appearing for PICUP, submit that the writ petition filed by the respondents for enforcing  the  terms  of  the  contract  was  not maintainable.  It is also submitted that 99% of the  purchasers  of  the  bonds  had  settled  their disputes with a reduced rate of interest.  It is also submitted that, in any case, the respondents should  have  sought  for  a  remedy  of inter-ministerial  meeting  and  settled  the disputes in the meeting.

5. Mr.  Sunil  Gupta,  learned  senior  counsel appearing for the respondents, submits that the respondents have, in fact, suffered heavily, on many counts and in some cases, on account of the pre-mature termination of the bonds.  He has also brought to our notice the order dated 15.10.2008 passed by this Court in Civil Appeal No. 6126 of 2008  titled  as  “State  of  U.P.  Vs.  Hindustan

Unilevers Ltd. & Ors.” along with Civil Appeal

No. 6127 of 2008, in almost similar circumstances against the State.  Repelling all the contentions taken  by  the  appellants,  some  of  which  are referred  to  above,  this  Court  passed  the following order in the above referred cases :-

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“Leave  granted.  Heard  the  learned counsel. 2. The U.P. Cooperative Spinning Mills Federation  Ltd.  (hereinafter 'Federation',  for  short)  invited applications for private placement of debenture  bonds  in  the  year  1998 representing  that  the  repayment thereof  was  unconditionally  and irrevocably  guaranteed  by  the  U.P. Government.  The  State  Government issued  Government  Order  dated 12.8.1998  guaranteeing  the  repayment of  the  principal  and  interest  in respect of debenture bonds issued by the  U.P.  Cooperative  Spinning  Mills Federation Ltd. 3.  Acting  on  the  invitation  for private placement of applications, and in view of the guarantee by the State Government,  the  first  respondent invested  Rs.15,00,000/-  (Rupees fifteen lakhs only) from the provident fund deposits of its employees, in the said bonds. The Federation issued an allotment  letter  dated  25.12.1998 confirming  that  the  amount  invested will carry interest @ 14.9% p.a. and the bonds will be redeemed at the end of 48 months, 54 months and 60 months at  the  rate  of  33%,  33%  and  34% respectively.

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4. The Federation sustained losses and went  under  liquidation.  It  did  not redeem  the  bonds  as  agreed  and undertaken, in spite of demands. The amounts due were not paid except part payment  of  Rs.1,73,980/-  and Rs.1,15,118/-  in  all  Rs.2,89,098/- towards interest. As the amounts due under the bonds and interest were not paid by the State Government in terms of  guarantee,  inspite  of  demand  for payment, the respondent approached the Delhi High Court for relief. The High Court,  by  order  dated  21.11.2005, directed  the  State  Government,  as guarantor,  to  pay  the  sum  of Rs.15,00,000/- (Rupees fifteen lakhs) with  interest  at  the  rate  of  14.9% (the rate agreed under the bonds) less amounts already paid. The said order is challenged in these two appeals by the  State  Government  and  the Federation. 5.  Though  several  contentions  were urged by the State Government and the Federation,  when  the  matter  came  up today,  the  learned  counsel  for  the State  Government  handed  over  a  Pay Order  for  Rs.15,00,000/-  (Rupees fifteen lakhs) to the learned counsel for respondent towards the refund of the principal amount. In regard to

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interest, the learned counsel for the Federation  and  the  State  Government submitted  that  as  the  Federation  is under  liquidation  and  as  the  State Government  has  paid  the  principal amount,  the  respondent  should  be relegated to other remedies in law for recovery of interest. 6. Such a contention is not tenable. The  amount  invested  by  first respondent belongs to the workmen of first  respondent.  The  amount  was invested  in  the  bonds  of  the Federation  in  view  of  the  express guarantee by the State Government that the same will be repaid with interest upto  15.5% p.a.  The very  purpose of the State Government guarantee is to ensure payment in case the Federation was not able to make payment. In the circumstances,  the  fact  that  the Federation  is  in  financial difficulties  cannot  be  a  ground  for the  State Government  to say  that it will  not  make  payment  of  interest, even  though  it  had  guaranteed  the repayment  with  interest.  If  such  a contention  is  accepted,  the  very purpose  of  the  guarantee  will  be defeated. We are indeed surprised that such a plea is put forward on behalf of the State of Uttar Pradesh.

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7. In the circumstances, we are of the view that the State Government should pay the interest also. However, on the facts and circumstances, we are of the view that interest should be paid at the rate of 14.9% p.a. for a period of five  years from  the date  of deposit and thereafter at the rate of 9.5% per annum (which is equal to the minimum rate  of interest  that is  payable by the first respondent to its workers on the  provident  fund  dues).  The  above concession  regarding  interest  is granted on the peculiar facts of these appeals. Three months' time is granted to the Government of Uttar Pradesh to pay the balance of interest. 8.  Appeals  are  disposed  of accordingly.  Parties  to  bear  their respective costs.”

6. Having regard to the submissions made by the learned counsel on both sides, we are of the view that  as  in  the  case  of  State  Vs.  Hindustan Unilevers (supra), this is also a fit case where this  Court  should  invoke  its  discretion  under Article 142 of the Constitution of India to do complete justice between the parties and to put an end to the entire litigations.  Accordingly, in  the  peculiar  facts  of  these  cases,  these

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appeals are disposed of as follows :- i) The  respondents  shall  be  entitled  to  the contractual rate of interest as per the bonds, till the principal amounts were repaid. ii) From that date, the respondents shall be paid interest at the rate of 11%. iii) The payment shall be made positively within a period of three months from today. iv) In case the payments are not made within the stipulated  period,  the  respondents  shall  be entitled to interest at the rate of 18% and the officer(s)  responsible  for  the  delay  will  be personally liable for the same.   

No costs.  .......................J.

             [ KURIAN JOSEPH ]  

.......................J.               [ MOHAN M. SHANTANAGOUDAR ]  

New Delhi; February 01, 2018.

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ITEM NO.13               COURT NO.5               SECTION III-A                S U P R E M E  C O U R T  O F  I N D I A                        RECORD OF PROCEEDINGS Petition for Special Leave to appeal (C) NO. 10579 OF 2012 PRADESHIYA INDUSTRIAL DEVELOPMENT  CORPORATION LTD. U.P. Petitioner (s)                                 VERSUS HINDUSTAN AERONAUTICS LTD. (LUCKNOW DIVISION) & ORS. Respondent(s) WITH SPECIAL LEAVE PETITION (C) NO. 8265 OF 2015 SPECIAL LEAVE PETITION (C) NO. 10856 OF 2012 SPECIAL LEAVE PETITION (C) NO. 11740 OF 2015 SPECIAL LEAVE PETITION (C) NO. 40164 OF 2012 (Application for Directions ON IA 39256/2017) SPECIAL LEAVE PETITION (C) NO. 40163 OF 2012 SPECIAL LEAVE PETITION (C) NO. 27295 OF 2016 SPECIAL LEAVE PETITION (C) NO. 492 OF 2018] (IA  No.128330/2017-CONDONATION  OF  DELAY  IN  FILING  and  IA No.128333/2017-EXEMPTION FROM FILING C/C OF THE IMPUGNED JUDGMENT and IA No.128332/2017-CONDONATION OF DELAY IN REFILING) Date : 01-02-2018 These petitions were called on for hearing today. CORAM :  HON'BLE MR. JUSTICE KURIAN JOSEPH          HON'BLE MR. JUSTICE MOHAN M. SHANTANAGOUDAR Counsel for the  parties Mr. Pramod Swarup, Sr. Adv.  

Ms. Alka Sinha, Adv.                      Mr. Anuvrat Sharma, AOR

Mr. Sunil Gupta, Sr. Adv.  Mr. Jatin Zaveri, AOR Mr. Neel Kamal Mishra, Adv.  Mr. Vishnu Sharma, AOR Ms. Anupama Sharma, Adv.  Ms. Goutami Budhapriya, Adv.  Ms. Sonali Negi, Adv.

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Mr. Ajay Sharma, AOR Mr. Jitender Kumar Mohapatra, Adv.  Mr. Rajeev Sharma, Adv.  Ms. Neelam Sharma, Adv.  Mr. Roopansh Purohit, Adv.  Mr. Harsh Panwar, Adv.  Mr. Preet Pal Singh, Adv.  Mr. Ashim Vachher, Adv.  Mr. P. Mehta, Adv.  Mr. M. C. Dhingra, AOR Mr. Gaurav Dhingra, Adv.  

  UPON hearing the counsel the Court made the following                              O R D E R

Leave granted.  The  appeals  are  disposed  of  in  terms  of  the  signed

non-reportable Judgment.   Pending Interlocutory Applications, if any, stand disposed of.

(JAYANT KUMAR ARORA)                              (RENU DIWAN)    COURT MASTER                                ASSISTANT REGISTRAR

(Signed non-reportable Judgment is placed on the file)