ORDER
1. The above two applications are filed by the State Bank of India-review petitioner seeking review of the Judgment and decree passed in the above L.P.As basing on the circular No. DBOD. BP. BC. 57/21-01-040/99 dated 27-5-1999.
2. The facts are not in dispute. The respondents herein applied for agricultural term loan of Rs. 55,00/- at the interest rate of 14% p.a. with half yearly rests. Having paid some amounts, the borrowers-defendants became defaulters. In these circumstances, the bank filed suit No. 64 of 1986 claiming Rs. 2 Lakhs and odd against the respondents including principal and interest. The trial Court decreed the suit as prayed for an 13-4-1993. In the first appeal, the learned Single Judge relying on the judgment of the Supreme Court allowed compound interest at yearly rests and decreed the suit for Rs. 1.64,747.48 Ps. with future interest.
3. Aggrieved by the said judgment and decree while the respondents-defendants preferred LPA 330/98 contending that since the loan is for agricultural purposes the rate of interest has to be scaled down under the provisions of Agricultural Debt Relief Act and the Courts below erred in not scaling down the interest. The bank also filed LPA No. 90 of 1999 claiming that the learned Judge erred in granting compound interest at yearly rests instead of half yearly rests. While both the LPAs are pending the Ministry of Finance seems to have reviewed the non-performing assets of the public Sector Institutions which are running into millions rupees and directed the Reserve Bank of India to try for one time settlement by giving incentives to get the lent money realized instead of fighting the litigation in the Courts for decades. On the basis of the guidelines given by the Ministry of Finance. The Reserve Bank of India issued circular on 27-5-1999. Under the circular, constitution of Settlement Advisory Committees we encouraged and an appeal from the order passed thereon was also provided apart from directing the banks to charge simple interest approximately at the rate 10% p.a. from the material dates while negotiating for compromise settlements. It is true that any loanee intending to settle has to file an application before the concerned bank and the has to forward his application to the settlement advisory committee. In this case since the L.P.A.s filed by the respondents-defendants as well as the petitioner herein-Bank are pending adjudication, the respondents brought to the notice of this Court about the issuance of the circular by the Reserve Bank of India. Taking this circular into consideration a Division Bench of this Court directed the bank to charge 10% interest per annum till the date of the suit and at the rate of 6% p.a. till payment. The loanees were also given time to pay the amount in four installments. Now the bank filed this application for review of the judgment on the following grounds:–
(1) By the time the circular was issued the suit was decreed and the bank also filed E.P. Hence the respondent cannot take advantage of the circular.
(2) As per the circular he has to approach the Settlement Advisory Committee but cannot straight away approach the Court claiming the relief under the circular.
(3) This circular is intended only in cases where the bank is not able to realize the amounts because of lesser value of the collateral security. Since it is a suit for mortgage for a sum of Rs. 2,00,000/-and odd as the bank is having security of Ac.34-00 of land there is no difficulty to realize this amount. Hence this circular cannot be made applicable to the respondents.
4. Point No. 1:– It is well settled that appeal preferred is a continuing process till it attains finality and Court is bound to take into account the subsequent events that came into being in deciding the appeal. Hence we do not find any substance in the contention of the counsel appearing for the bank.
5. Point No. 2:– We find sufficient force in the contention of the Counsel appearing for the Bank that the party has to approach the settlement Advisory Committee and in fact an appeal is also provided thereafter to the Board of Director of the Bank. But four years have already elapsed and the respondents also seemed to have paid the amount as per the judgment and decree in the above L.P.As. Secondly when once the circular is clear the Settlement Advisory committee has no option to accept the proposal given by them. As such if we send the matter back to Advisory Committee it is subjecting the parties to fresh litigation which do serve any purpose and it will be only an empty formality. Hence we decide this point against the petitioner in both the review petitions.
6. Point No. 3:– We have carefully gone through the circular. In the circular it is mentioned that having regard to the realizable value of collaterals held in an account and the time and cost involved in realization of the collateral, terms of compromise settlement could include waiver of the compound and penal rate of interest and charging of simple interest at rate approximately 10 per cent per annum from the material date. No compromise settlement under these guidelines should be entertained in cases where is evidence of fraud or malfeasance. The learned counsel for the Bank contended that according to the circular where the collaterals are more than the due loan amount the circular need to be applied. The circular is having universal effect and it has to be applied to all the loanees concerned without any differentiation. Though the bank may have sufficient collateral security to realize the amount it is not in a position to realize the amount for more than a decade. Now the matter is at the High Court level and another appeal is provided to the Supreme Court. Thereafter, the bank has to resort to execution proceedings. The real difficulty of the decree holder starts only after obtaining decree when he tries to execute the decree. We do not know what type of objections the bank is likely to face in realizing the monies by bringing immoveable properties of the loanee to sale. On the other hand if the bank realized the amount as per the circular herein filed now itself it can utilize the amount for better purpose and it can save sufficient public monies on the litigation. The Counsel wants us to read a portion of the circular wherein it is mentioned that the circular is no applicable to the cases where sufficient to collateral security is there for realization of loan amount. We do not find any clause to that effect in the circular. Further we have to read the entire circular to know the intention of the circular and to give effect to it.
7. Coming to award of interest, we feel that the Division bench erred in directing the payment of interest at 6% pa. from the date of decree till realization. Perhaps the learned Judges gave the said direction under the impression that granting of interest after decreeing the suit is purely a discretion vested in the Court. Normally the Courts are inclined to grant reasonable interest. But in this case the loanee wants to take advantage of circular. Hence he has to take the benefit under the circular as it stands or proceed to contest the matter as per the legal advice available to him. Admittedly, the circular states that the bank instead of charging higher rate of interest and compound interest suggested that the accounts may be settled by collecting simple interest at 10% from the date of loan till the date of realization by giving incentives to the loanees to that the Court did not modify the judgment and decree of the learned Single Judge where under the bank was given rate of interest at 14% p.a. That issue may not arise in this case since the L.P.As are being disposed of on the basis of the circular but not on the merits of the case. Whatever finding is recorded by the Court below and the Division Bench, the orders passed in the L.P.As is purely based on the circular filed in this case.
8. Further these review applications are filed to review the order of this Court passed on 22-11-99 to the extent of granting interest at 6% p.a. from the date of decree till realization. On the other hand, the learned counsel appearing for the respondents brought to our notice that the bank filed execution proceedings claiming interest at the rate of 10% compounding the interest at yearly rests. Unless the bank placed reliance on this circular it could not have reduced the rate of interest from 14% p.a. to 10% p.a. When once the bank is agreeable to extend the benefit to some extent by reducing the rate of interest it cannot refuse to extend other benefit of collecting simple interest. Hence this part of the Division Bench judgment requires review. Since the appeal was disposed of on the basis of the circular, we hold that the respondents are liable to pay simple interest at 10% p.a. from the date of loan till the date of realization. While the Counsel for the bank-Review petitioners submits that by the material date on which the circular was issued the bank declared the loanee of not repaying the loan and the benefit to be extended from the date of the circular but not from the date of availing the loan. The Counsel for the Respondents submits that the date of loan may be taken into consideration under the circular. We need not go into this aspect. We keep the issue open with a fond hope that the bank will not indulge in hostile discrimination. Whatever benefits were given to the other loanees may be extended to the respondents in these review petitions also.
9. In the result, the review petitions are allowed to the extent of interest given in the L.P.As. and direct the respondents to pay simple interest at the rate of 10% p.a. till the date of realization either from the date of availing the loan or from the date of the circular on par with other loanees who were declared as chronic defaulters prior to the issuance of the circular as per the decision of the Bank.
The review petitions are allowed to the extent indicated above