JUDGMENT
A.S. Tripathi, J.
1. This revision has been preferred against the orders dated August 9 of 1995 and August 17 of 1992, passed by the trial court in Civil Suit No. 5-B of 1987. By the impugned orders, the claim of the petitioner for settlement and payment of reduced amount on accounting was not accepted. Review of the order dated August 17, 1992, was also dismissed by the impugned order dated August 9, 1995.
2. The facts of the case are that the petitioner had taken certain loan from respondent No. 1, Bank of India, some time in the year 1980. Later on, when certain amount was not paid, a suit was filed by respondent No. 1 bank for recovery of Rs. 92,96,629.35. The petitioner was running a Kaththa factory at Morena. The factory was pledged with the bank against the said loan. Respondent No. 1-bank had moved an application for attachment of the property and for appointment of a receiver. By the impugned order dated August 17, 1992, the trial court on the application made by respondent No. 1 for attachment and recovery, directed that a huge amount was due which was accumulated on account of interest for a long time, and granted instalments to the defendants including the petitioner, to pay the balance in instalments of Rs, 4,00,000 lakhs per month.
3. The petitioner moved an application that the instalment granted was too much as the factory was not running on account of non-supply of khair woods as the Government of Madhya Pradesh was the sole supplier. The instalments could not be paid. The petitioner moved an application under Order 47, Rule 1, Civil Procedure Code, 1908, that the petitioner was running a small industrial unit for manufacturing kaththa at Morena. The material required was not being supplied by the State Government, and the petitioner was not in a position to pay the instalments. The petitioner further claimed that in similar situation and circumstances, the offer given by another unit of Sterling Malt and Food Pvt. Ltd. was accepted by the Punjab and Sind Bank in another Suit No. 1 of 1989, and the matter was settled. The Punjab and Sind Bank under the instructions issued from the Reserve Bank of India from time to time accepted the offer of the other unit and settled the matter. The petitioner had also offered on the similar terms to the bank/respondent No. 1 but the bank had refused to accept the offer, which was accepted in the other case, without assigning any reason. The trial court also did not consider this aspect of the matter and did not put forward the proposal of the petitioner to the respondent-bank and only granted instalments which were too heavy,
4. It was brought to the notice of the trial court and the respondent bank that the offer of the petitioner was bona fide. In another case No. 26-A of 1989, filed by Punjab and Sind Bank v. Sterling Malt and Food Pvt. Ltd., pending before the District Judge of Morena, the same was compromised on October 15, 1991. In the suit, the Punjab and Sind Bank had claimed realisation of Rs. 3,84,29,679. But the suit was compromised and the offer of the small unit accepted by the bank only for payment of Rs. 1,80,00,000, and that too in instalments for seven years. This was done under the instructions of the Reserve Bank of India and the Rules framed for payment of loan by the small units, so that the small units are allowed to run and industrial growth be protected, The same offer was not accepted by the bank and the trial court did not consider this matter at all.
5. The respondent-bank objected to this revision on the ground that proper instalments were granted by the trial court and the petitioner did not pay the same. The offer made by the petitioner was not found reasonable and the bank had not accepted the same. The order passed by the trial court is fully justified and could not be interfered with in this revision petition.
6. I have heard learned counsel for the petitioner/defendant, Shri. N. K. Mody, and learned counsel for the non-petitioner No. 1/plaintiff Bank of India, Shri. P. L. Dubey, senior advocate and perused the entire record.
7.
The plaintiff/respondent No. 1 bank according to its own calculations had filed a suit for recovery of Rs. 92,26,629.35 paise. The petitioner/ defendant disputed the claim of the plaintiff/bank on the ground that an exorbitant amount has been claimed by the plaintiff on wrong calculations, on the balance sum and the interest. The defendant/petitioner had taken a plea for accounting and other concessions which are given to small scale units, like that of the petitioner. The plaintiff had calculated the outstanding amount on the basis of cash-credit adding the rate of interest at the rate of 17.5 per cent. per annum and penal rate has also been charged of 2 per cent. per annum, amounting to Rs. 66,11,551.10 paise. The second item of bills purchased was again added by charging the interest at the same enhanced rate, amounting to Rs. 1,41,021.98 paise. Then term loan on the first item adding interest at the rate of 10.25 per cent. per annum and penal rate 2.5 per cent. per annum, this amount comes to Rs. 24,59,023.39 and the term loan on the second item at the sam’e rate of interest comes to Rs. 15,032.88 paise. Thus, in all, the claim put by the plaintiff/bank was for Rs. 92,26,629.35 paise as mentioned above.
8. The defendants, on the other hand contested that the rate of interest has been charged which could not be more than 10.25 per cent. per annum. No penal interest could be charged by the plaintiff. According to the defendant’s calculations, the total amount which could be claimed by the plaintiff comes to only about Rs. 42 lakhs. The petitioner had furnished a bank guarantee for the same. The industrial unit of the petitioner was also mortgaged to the bank as the security for the loan. In spite of all these, the plaintiff had claimed a huge amount on wrong calculations adding penal rate, etc, In this way, the defendant’s contention was that proper accounting has to be done after charging the agreed rate of interest or proper interest on such loan which is purposeful under the law. These points have to be considered by the trial court at the time of the hearing of the suit on the merits after evidence.
9. At the first instance, the defendant/petitioner claimed concessions and had offered a reasonable solution to the recovery of loan as it was done in the case of Punjab and Sind Bank with Sterling Malt and Food Pvt. Ltd, That offer has, however, been not accepted by the bank without giving any reason.
10. Learned counsel for the petitioner urged that the petitioner was a small scale industrial unit and the total capital permissible was only Rs. 10 lakhs. The original term loan was taken only for Rs. 19 lakhs, from the bank. Cash-credit was up to Rs. 42 lakhs. Bills purchased were only upto Rs. 10 lakhs, and the petitioner had been paying, and the total amount which could be due could not exceed Rs. 42 lakhs in all, which could be ascertained after proper accounting.
11.
According to the contention of the petitioner the bank had filed the suit without accounting for the transactions, and the same was premature for all the loans. The details of the accounting as alleged by the petitioner have been given in the written statement, which has to be taken note of by the trial court at the time of the disposal of the suit.
12. Charging of the higher rate has also to be examined as to whether it was permissible under law, and as to whether the plaintiff could claim penal rate and higher rate than permissible under law for such loan. It was further urged that the cash-credit has been claimed on higher rate of interest whereas on the same only interest was to be paid. The plaintiff/ respondent No. 1 has also illegally debited some amount. The defendant ultimately made a prayer for reasonable instalments for paying the loan which is found to be due after accounting, and the instalments granted by the trial court was too high.
13. On the other hand, learned counsel for respondent No. 1/bank-plaintiff had urged that the suit is pending since 1987, and the instalments were properly granted by the trial court, the petitioner had not paid any instalment in pursuance of the order dated August 17, 1992, the review petition was rightly rejected by the trial court, and this revision was not maintainable to question the order dated August 17, 1992. Learned counsel for the respondent-bank further urged that the industrial unit of the petitioner was mortgaged to the bank, the petitioner was trying to remove the property of this unit, and, therefore, the suit had to be filed to safeguard the interest of the bank in a hurry in the year 1987.
14. In this revision, three main questions arise for determination :
(i) Whether the accounting of the entire transaction is required as claimed by the petitioner/defendant ?
(ii) Whether the rate of interest claimed by the plaintiff respondent No. 1/bank is excessive and penal ? and
(iii) Whether the offer made by the defendant/petitioner for settlement of loan as was done in the case of Punjab and Sind Bank v. Sterling Malt and Food Pvt. Ltd., in another suit No. 26-A of 1989, in similar circumstances, in the Court of the District Judge of Morena is proper and has to be accepted by the respondent No. 1 under the circumstances and rules permitting such settlement by the bank under the instructions of the Reserve Bank of India, in cases of such sick industrial units ?
So far as the first question is concerned, it is necessarily brought on record that proper accounting is needed as the claim of the respondent No. 1/plaintiff prima facie appears to be inflated on the ground of charging penal rate and making the debit and credit accounts against the interest of the petitioner. Such accounting can be done in the trial court only after evidence, and after accounting whatever amount is found to
be due to the respondent No. 1/bank, the same may be recovered according to law, and in that event, fresh question of mode of payment by instalment has to be considered by the trial court. A direction is needed to be given to the trial court in that respect.
15. In so far as the second question is concerned, it is clear from the agreement between the parties that the rate of interest, was agreed on different items like 10.5 per cent. 12,5 per cent. and on one item 17.5 per cent. Respondent No. 1/bank had charged penal rate besides and beyond the scope of the agreement which could not be done under law. No law permits charging of penal rate of interest, over and above the agreed rate of interest or statutory rate of interest permissible on such loan. Therefore, on this point again, the trial court has to examine the matter after recording evidence and come to the conclusion as to what was the actual rate of interest agreed on different items and as to what was the rate of interest permissible to be recovered under the statutory provisions on such loans, and only then, after accounting and considering this point, a reasonable rate of interest has to be allowed by the trial court on this loan. A direction again has to be given in this regard to the trial court.
16. So far as the third point is concerned, the petitioner has brought out on record a precedent on this point in Civil Suit No. 26-A of 1987, filed by Punjab and Sind Bank v. Sterling Malt and Food Pvt. Ltd., pending before the District Judge of Morena. A compromise was arrived at between the parties on October 15, 1991, in that case, The Punjab and Sind Bank had filed a suit for recovery of Rs. 3,84,29,679 and the same was settled between the parties only for recovery of Rs. 1,80,00,000. It has been urged by counsel for the petitioner that this settlement was done on very less amount by the bank itself, as the original loan was for lesser amount. The amount had increased by multiplying the interest on compound rate, and in such cases, simple interest was to be charged. In that case, the bank had agreed only for recovery of lesser amount of Rs. 1,80,00,000 and the matter was settled in the court and a decree was passed accordingly. In that case as well, the court had permitted payment of such loan in instalments for seven years. This was done only with the object that the unit may not be dissolved, the policy and purpose of industrial growth may not be frustrated and the object of such loan was to promote the industrial growth, particularly in respect of small units, concessions were to be provided according to the Banking Rules. Therefore, the Punjab and Sind Bank had agreed, in this situation, for this solution.
17. In this particular case, the same nature of offer was made by the petitioner to the Bank of India, but the bank had refused to accept the offer without giving any reason. Further, when the parties did not come to settle the matter they could not be Compelled to accept any offer. But
reasonable solution has to be evolved with a purpose that the amount advanced by the bank is paid back to the bank with reasonable rate of interest and the small scale industrial unit be also not compelled to dissolve itself. The purpose of such loan has always been to promote the small scale industry and there could not be any object of dissolution of such industry by claiming enhanced rate of interest at compound rate so that the industry is compelled to dissolve and disintegrate. In such a situation, the offer made by the petitioner was to be considered with the above object in view so that the amount fpund to be due is paid back in reasonable instalments, and the unit also carries on its business and remains intact.
18. In this background, the trial court while passing the impugned orders simply observed that the amount claimed by the plaintiff was a large sum. Although the balance sum was very less, but adding the compound interest, it has become a huge amount, unbearable by the petitioner/ defendant, The trial court considered the implications of the cases of Abdul Salim Qureshi v. Mohd. Habib [1983] MPLJ SN 35, Bal Chyasi v. Ujjala [1973] JLJ 581, Ibrahim v. Abid Ali [1988] I WN 219, Presto Lights of India v. Union Bank of India [1986] BJ 411, Balrampur Sugar Co. v. Chalchitra Bharati, AIR 1981 Cal 23, and Kamala Choube (Smt.) v. Punjab National Bank [1991] 1 WN 125,
19. The trial court was considering the question for appointment of a receiver, which was rightly rejected in view of the fact that the industrial unit was being properly managed by the petitioner and its partners. After rejecting the prayer for appointment of a receiver, the trial court without considering the prayer for accounting and rate of interest, etc., directed that the said amount be paid back to the bank in instalments, which was never called upon by the parties, as the amount was not admitted.
20. Further grant of instalment of heavy amount of Rs. 4 lakhs per month could not be said to be reasonable in the circumstances of the case, as the petitioner’s unit was not having production on account of non-supply of khair woods by the State Government. The trial court lost sight of the fact that the State Government was the sole supplier of such khair woods and a dispute has arisen between the State Government and the khath-tha producing units, and the State Government had stopped supply of khair woods. That litigation went up to the Supreme Court and the Supreme Court had directed for supply of khair woods at certain rates to be fixed by the arbitrator. The arbitration proceedings started for the years 1982-85 were still going on and the matter has not been settled. Regarding the rate fixed for supply of khair woods for the subsequent years, again there is a dispute and separate proceeding is pending for the same. In this situation, when the petitioner’s unit was not having
production, it was very difficult rather impossible for them to pay such heavy instalment of the loan. This fact was not at all considered by the trial court, while granting instalments for such loan as an interim measure. Therefore, a suitable direction has to be given on this point as well.
21. Learned counsel for respondent No. 1/plaintiff-bank urged that the instalment was not heavy. The petitioner’s unit was not having production is none of the concern of the bank. The bank had not charged any amount extra, which could be settled on accounting. Lastly, learned counsel for respondent No. 1/bank urged that the scope of the revision is very limited and the controversy could not be settled in this case. The original order dated August 17, 1992, has been called in question. The review of that order has been rejected, and against the review order no revision lies,
22. So, far as maintainability of this revision is concerned, the two orders had merged. Since the review was rejected, revision could only lie against the original order, which was maintainable by rejecting the review and as such, this point can be considered in this case. Rejection of review petition upholding the original order is not an interlocutory order and the same can very well be considered by way of revision before the High Court. Learned counsel for respondent No. 1/bank relied on the cases of Sethi (M. L.) v. R. P. Kapur, AIR 1972 SC 2379, Bank of Baroda v. R. M. Patwa [1996] 2 SCC 468 ; [1996] 86 Comp Cas 180 and Anr. case of Khushro S. Gandhi v. N. A. Guzder, AIR 1970 SC 1468.
23. It is true that revision could not be entertained against the interlocutory orders. But the interim order dated August 17, 1992, as it was the original order, by rejection of the review petition, is not merely an interlocutory order, and the order dated August 17, 1992, is called in question which was passed on the merits, and, therefore, it could not be said that the revision as such is not maintainable.
24. Granting of instalments by the trial court without getting the accounting done, presuming the claim of the plaintiff/bank to be true was again a mistake on the part of the trial court. First accounting is required as observed above, and then if ultimately some amount is found to be due against the petitioner, only then reasonable instalments could be granted. On this point again, exercise has to be done by the trial court.
25. Lastly, it was argued by learned counsel for the petitioner that the petitioner is a registered firm. Its partners, who are respondents Nos. 2, 3, 4 and 5 were quarrelling among themselves, and none of them is bearing the sole responsibility. Their responsibility is joint so far as payment of loan is concerned, whatever if ultimately found to be due. In this respect, learned counsel for the petitioner argued that respondent No. 5, Shri Dilip Shrimal, is transferring his properties. A house which was said to have been constructed by him bearing No. 462 in Mohalla Adarsh Nagar has been transferred by him in the name of his wife to save it from the recovery of loan. This point was not the subject matter of this revision, and the trial court will take care of itself, if ultimately the question of recovery of loan is taken up. This court, at this stage, could not record any finding on this point, as it is not raised in this revision petition. But at the same time, the trial court at the time of passing of the decree shall take note of the same.
26. Learned counsel for the petitioner also made a reference to Section 3(1)(o) and other provisions of the Sick Industrial Companies (Special Provisions) Act, 1985, where some concessions and benefits are given to sick units according to the procedure prescribed, The benefits given to the sick industrial units by the aforesaid Act shall also be taken into consideration by the trial court at the time of final accounting and arriving at a conclusion in respect of the amount due to be recovered from the petitioner.
27. Therefore, in view of the discussions made above, the impugned orders of the trial court are set aside and the following directions are given to the trial court :–
(i) The trial court shall call upon the parties for accounting on the basis of the terms and conditions of loan and the law prevailing on the subject.
(ii) The trial court shall also ascertain the reasonable rate of interest to be charged by the plaintiff bank for recovery of loan, and particularly, whether penal rate could be charged from such sick industrial unit, which had stopped production on account of non-supply of the raw material.
(iii) The offer given by the petitioner to respondent No. 1/plaintiff-bank for settlement as was done in the case of Punjab and Sind Bank v. Sterling Malt and Food Pvt. Ltd., in Suit No. 26-A of 1989, which was settled on October 15, 1991, was again to be put to respondent No. 1/plaintiff-bank, and if the parties come to a settlement in accordance with the Banking Rules and Regulations, the trial court shall give credence to such settlement.
(iv) After the settlement or accounting, whatever amount if sound to be due to respondent No. 1/plaintiff-Bank of India, the trial court shall then consider the granting of reasonable instalments for payment of such amount by the petitioner afresh, and, ultimately, a decree has to be passed in that light.
28. This revision petition is disposed of finally with the above directions.