IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) THURSDAY, THE TWENTY EIGHTH DAY OF FEBRUARY TWO THOUSAND AND EIGHT PRESENT THE HON'BLE MR JUSTICE C.Y.SOMAYAJULU WRIT PETITION NO : 13078 of 2002 Between: 1. V.Sudhakar Reddy and others ..... PETITIONER AND 1. The A.P. Khadi & Village Industries Board, Hyderabad, rep. by its Chief Executive Officer, Hyderabad and another .....RESPONDENT(S) Petition under Article 226 of the constitution of India praying that in the circumstances stated in the Affidavit filed herein the High Court will be pleased to Counsel for the Petitioner: SMT.S.SWARNA REDDY Counsel for the Respondents: Sri K. Janakirami Reddy The Court made the following: THE HON’BLE SRI JUSTICE C.Y.SOMAYAJULU WRIT PETITION No.13078 of 2002 ORDER: Petitioners, who are 13 in number, filed this petition questioning the action of the first respondent i.e. the A.P. Khadi & Village Industries Board, Hyderabad (the Board), in initiating action against them for recovery of the loan given to them for establishing small scale industries like brick and pottery by taking recourse to the provisions of the A.P. Revenue Recovery Act, 1864 (the Act). 2. The case of the petitioners is that they, in pursuance of the scheme floated by the Board, applied for loans of Rs.5,00,000/- each but each of them were sanctioned a loan of Rs.4,30,000/- only for starting industries by them and the Board without releasing the entire sanctioned amount of loan to them, released only Rs.97,500/- as loan, and Rs.37,500/- towards margin money in 1997, and though they paid some instalments. They could not run the industries set up by them only due to the Board not releasing the funds which it ought to have been released. But the Board, without taking into consideration the said fact, is proceeding to recover the amount advanced to them by taking recourse to the provisions of the Act which is highly arbitrary and illegal. 3. In the counter affidavit filed by the Deputy Chief Executive Officer of the Board he stated that the main object of the Board is to uplift the down trodden people and provide employment to them and help in the development of traditional artisans in the rural area and so it sanctioned and released loans in favour of all the petitioners during 1996-97 and 1997-98. But their contention that they were sanctioned a loan of more than Rs.3 lakhs is not true, because all the petitioners except the 7th petitioner were sanctioned only Rs.1,50,000/- as loan besides margin money of Rs.37,500/- and accordingly all of them executed bonds, hypothecating their property to the amount borrowed by them. As per the terms of the agreement, petitioners have to contribute their share of Rs.15,000/- each to cover the total cost of the projects to be set up by them, except the 7th petitioner, under a condition that they should provide 100% security for the amount of loan sanctioned, and repay the same in 28 quarterly instalments with one year moratorium on the principal amount. 7th petitioner was sanctioned Rs.1,30,000/- as loan besides Rs.50,000/- as margin money and was requested to contribute his share of Rs.20,000/- to cover the total project cost of Rs.2,00,000/- for establishment of carpentry and black smith industry. Though the amounts of loan amounts as agreed to were sanctioned, none of the petitioners paid the instalments due in spite of repeated demands and reminders. So, proceedings dated 22-03-2002 were issued under the provisions of the Act for recovery of the amounts due from the petitioners. Petitioners 1 to 6 and 8 to 13 fell in arrears of more than Rs.2 lakhs, whereas 7th petitioner fell in arrears of more than Rs.3 lakhs and so the petitioners, who committed default, are not entitled to any relief. 4. The contention of Sri Shantharam, Advocate, representing Smt S.Swarna Reddy, counsel for the petitioners, is that inasmuch as the Board which agreed to sanction more than Rs.4 four lakhs as loan failed to release the entire amount petitioners, who established the industries basing on the promise made by the Board relating to release of the loans, suffered huge losses and as the entire fault lay with the Board by its not releasing the amounts as promised, it cannot recover the amounts from the petitioners by taking recourse to coercive steps. It is his contention that had the Board sanctioned the entire amount of loan, petitioners would have set up the industry and would have run the same and so the Board, in fact, it is liable to pay damages to the petitioners for not fulfilling its promise. The contention of Sri V.Suresh representing the standing counsel for the Board is that the contention of the petitioners that they were sanctioned a loan of more than Rs.4 lakhs is not correct, as each of petitioners 1 to 6 and 8 to 13 were sanctioned a loan of Rs.25,000/- towards Machinery & Tools & Implements; Rs.1,25,000/- towards Working Capital and Rs.37,500/- towards Margin Money. As per the agreement the amounts sanctioned towards Capital Expenditure Loan i.e., Term Loan, have to be repaid within a period of 7 years in 28 equal quarterly instalments commencing from the 1st working day of the 13th month, which falls in the second year, and the working capital of Rs.1,25,000/- released has to be repaid in 7 years in 28 equal quarterly instalments with a moratorium period of 12 months, and the margin money of Rs.37,500/- has to be paid with interest from the date of disbursement and if the borrowers fail to establish the unit in the Village, providing employment as per the norms, or fails to utilize the funds for the purpose for which the assistance was given by the Board, it can be recovered from them. 7th petitioner was granted a loan of Rs.60,000/- towards Capital Expenditure for Building/Shed; Rs.50,000/- towards Machinery & Tools & Implements; Rs.90,000/- towards Working Capital besides Margin Money Loan of Rs.50,000/- on the same terms and conditions. As all the petitioners failed to repay the amounts due, in spite of repeated reminders and demands they are not entitled to any relief. It is his contention that though this Court granted stay while admitting the petition, after the Board filed a petition for vacating the interim stay granted, the same was vacated on 22.04.2003 and the Board is proceeding to recover the amounts from the petitioners, petitioners are not entitled to any relief. 5. The material papers produced by the Board show that all the petitioners except the 7th petitioner entered into an agreement for taking a loan of Rs.97,500/- besides Margin Money Loan of Rs.37,500/- and agreed to invest Rs.15,000/- towards their share. 7th petitioner had obtained a loan of Rs.1,30,000/- besides Margin Money Loan of Rs.50,000/- agreeing to invest Rs.20,000/- towards his share. No document is produced by the petitioners to show that the Board agreed to sanction more than Rs.4 lakhs as loan to them. Assuming that the Board agreed to sanction Rs.4 lakhs as loan to them, had failed to release that amount, petitioners have no right to retain the amount of loan taken by them and claim that they need not repay the loans taken by them till the Board releases the entire amount due to them. They are bound by the agreements between them and the Board. As per the terms of the agreement executed by the petitioners, the Board has a right to recover the amounts in case of default in repayment of the amounts advanced to them. In view thereof, the contention of the petitioners that the Board cannot recover the amounts from them till it releases the entire amount of loan allegedly agreed to be sanctioned to them cannot be countenanced. 6. As rightly contended by the learned counsel appearing on behalf of the Board, though interim stay granted on 19.07.2002 in WPMP No.16257 of 2002, while admitting the writ petition, was vacated on 22.04.2003 when the Board filed WVMP No.1156 of 2003 seeking vacation of the stay, no stay is in operation from 2003 onwards. 7. So, I find no merits in the writ petition and so, the writ petition is dismissed with costs. -------------- 27.02.2008 Cvrk ..... REGISTRAR // TRUE COPY // SECTION OFFICER To 1.2CCs to 2.2CD copies