CASE NO.: Appeal (civil) 441 of 1999 PETITIONER: HIMACHAL PRADESH STATE FINANCIAL Vs. RESPONDENT: VS. DATE OF JUDGMENT: 31/10/2000 BENCH: K.T. Thomas & R.P. Sethi. JUDGMENT:
SETHI,J.
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The only point in controversy in the present appeal is
as to whether the respondent-loanee is also entitled to
interest at the rate of 13% on the amount to be refunded
which was admittedly realised by the sale of his industrial
unit, in excess of his liability in a loan transaction.
Vide the impugned judgment in this appeal, the High
Court has directed the refund of the excess amount, if any,
after calculations along with interest at the rate of 13%,
the rate on which the Corporation is stated to have charged
the respondents on the amount of loan advanced to him.
The facts giving rise to the present appeal are that on
his request the appellant-Corporation sanctioned on
18.12.1983 a term loan of Rs.15 lacs against the total cost
of the Project of the respondent for construction of a hotel
unit. The appellant-Corporation had also sanctioned an
additional loan of Rs.5.50 lacs on 6.8.1986. The total
sanctioned loan of Rs.20.50 lacs was dispersed to the
respondents during the period from 6.7.1984 to 1.5.1987.
The respondents committed defaults in the payment of the
loan amount with the result that the appellant-corporation
took over the possession of the hotel under Section 29 of
the State Financial Corporations Act, 1951 (hereinafter
called “the Act”). Notices for sale of the hotel were
advertised in the Newspapers. Four parties negotiated the
sale of the assets of the hotel with the
appellant-corporation. The offer of M/s.Pradeep Kapur &
Associates was accepted whereafter agreement of purchase was
made between the Corporation and the purchaser on 13th
March, 1993. The respondents challenged the sale through
Writ Petition No.515 of 1993. During the pendency of the
writ petition it was submitted that one Rana Iqbal Singh was
prepared to purchase the property for Rs.60 lacs in case the
vacant possession was delivered to him. Such a statement
made in the court was recorded in the proceedings of the
court dated 23rd December, 1993. In view of the offer of 60
lacs as price of the unit, the Corporation presumably could
not disperse the excess amount out of the amount received
from M/s.Pradeep Kapur & Associates to the respondents. The
excess amount was put in the Current Account of the
corporation so that it could be dispersed immediately to the
respondents as per situation arising in the case. The
Corporation did not earn any interest on that amount. As
per the orders of the High Court dated 23rd December, 1993,
the appellant-corporation claims to have arranged a
negotiation and called the said Rana Iqbal Singh in its
office on 16.2.1994. The counsel of earlier purchaser
M/s.Pradeep Kapur & Associates submitted a letter along with
an application which was presented before the High Court
praying therein for recalling the order dated 23rd December,
1993 and for stay of consideration of the offer of third
party, namely, Rana Iqbal Singh. The said application of
the earlier purchaser was not decided by the High Court.
However, the writ petition No.515 of 1993 was disposed of on
3rd January, 1997 vide the order impugned in this appeal.
It is submitted on behalf of the corporation that the
High Court was not justified in granting the interest on the
excess amount which was to be payable, upon calculation, to
the respondents. The appellant- corporation claims to have
not faulted in refunding the excess amount. The delay was
occasioned on account of the pendency of the writ petition
filed by the respondents. As the appellant-corporation did
not earn any profit on the excess amount, it was not obliged
to pay any interest. The corporation, subject to the
provisions of the Act, can carry on and transact any of the
business specified in Section 25 of the Act. The said
section authorises the corporation to grant loans or
advances to the industrial concerns on such terms and
conditions as may be agreed to. The corporation deals with
public money for public benefit. Default in payments of the
loans and advances thus, ultimately affects the public at
large. An obligation is cast upon the loanee to pay back
the amount of the loan or advance received under the Act.
In case of failure to make the payment, the corporation is
expected to adopt an approach which has to be public
oriented rendering a helping hand to the loanee to come out
of the financial losses and constrains if any but without
causing any loss to the corporation. To protect the public
interest, the Act provides a mechanism for recovery of loan.
Section 29 of the Act authorises the corporation to take
over the management or possession or both of the industrial
unit and transfer the same by way of lease or sale where it
finds that any industrial concern, who had taken loan, had
made default in repayment of any loan advanced or any
instalment thereof or in meeting of its obligation in
relation to any guarantee given by the corporation or
otherwise fails to comply with the terms of its agreement
with the Corporation.
Powers conferred under Section 29 of the Act are
intended to achieve the object of the Act. The amount
realised in consequence of the sale or lease of the property
of the defaulter can be adjusted in the liability of the
defaulter and the excess amount thus realised, if any, to be
paid to the person whose unit was proceeded against under
Section 29 of the Act. The activities of the corporation
are visualised not as profit earning concern but an extended
arm of the State to harness the business potential of the
country to benefit the common man. There is no statutory
obligation on the part of the corporation to pay the
interest on the excess amount realised. However, in
appropriate cases interest may be awarded in lieu of
compensation or damages for allegedly wrongfully retaining
the amount payable to a party. Interest can be awarded on
equitable grounds as was held by this Court in Satinder
Singh v. Umrao Singh [1961 (3) SCR 676], Laxmichand v.
Indore Improvement Trust [1975 (1) SCC 565] and Sovintorg
(India) Ltd. v. State Bank of India, New Delhi [1999(6)
SCC 406].
A perusal of the impugned order shows that the High
Court has not referred to any ground justifying the payment
of interest to the respondents. The respondents have also
not referred to any circumstance warranting the exercise of
powers of equity in their favour. The reliance of the
learned counsel for the respondents on Sovintorg (India)
Ltd.’s case (supra) is misplaced. In that case this Court
has held: “There was no contract between the parties
regarding payment of interest on delayed deposit or on
account of delay on the part of the opposite party to render
the services. Interest cannot be claimed under Section 34
of the Civil Procedure Code as its provisions have not been
specifically made applicable to the proceedings under the
Act. We, however, find that the general provision of
Section 34 being based upon justice, equity and good
conscience would authorise the Redressal Forums and
Commission to also grant interest appropriately under the
circumstances of each case. Interest may also be awarded in
lieu of compensation or damages in appropriate cases. The
interest can also be awarded on equitable grounds as was
held by this Court in Satinder Singh v. Umrao Singh (1961)
1 SCR 676.”
From the record it appears that after getting a loan in
the year 1983 and 1986 the respondents committed persistent
defaults in repayment which necessitated the action against
them under Section 29 of the Act in the year 1991. As no
amount was paid till 13th April, 1993, the corporation sold
the industrial unit, a hotel, for an amount of Rs.39.75
lacs. Before the excess outstanding amount could be paid to
the respondents, they filed a writ petition in the High
Court challenging the action of the corporation and thus
preventing it from making the payment. The counsel of the
respondents even made an offer that there was a buyer to
purchase the hotel for a sum of Rs.60 lacs. The
negotiations with the prospective buyer could not mature on
account of application filed by the earlier purchaser. The
High Court instead of deciding the application of the
earlier purchaser disposed of the writ petition vide the
order impugned. As noticed earlier, the High Court has not
assigned any reason much less a cogent one for the payment
of interest. In the absence of an agreement and the
statutory provision, interest could not be claimed by the
respondents as a right. The court did not refer to any
circumstance on the basis of which the interest could have
been granted as an equitable relief.
Under the circumstances the appeal is allowed and the
impugned order of the High Court, in so far as it directs@@
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the payment of the interest at the rate of 13% along with@@
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excess amount is set aside. No costs.
I.A. No.2 of 2000
In view of the judgment in Civil Appeal, the application
has become infructuous. The same is dismissed having become
infructuous.
