The Hon'ble Sri Justice C.V.Nagarjuna Reddy Writ Petition No.4603 of 2010 Date: 25-11-2011 Between: M.Manmohan ..... Petitioner AND The Andhra Pradesh State Financial Corporation, Rep. by its General Manager, Abids, Hyderabad and another. .....Respondents Counsel for the Petitioner: Mr.K.R.Sashidaran Nair for Mr.Palle Nageswara Rao Counsel for the Respondents: Mr.M.S.Ramachandra Rao, SC for APSFC The Court made the following : Order: This Writ Petition is filed for a Mandamus to declare the action of the respondents, in selling the petitioner’s vehicle and further threatening to auction his property, given as collateral security in respect of loan account No.6336411, as illegal and arbitrary. I have heard Sri K.R.Sashidaran Nair, learned Counsel, representing Sri Palle Nageswara Rao, learned Counsel for the petitioner, and Sri M.S.Ramachandra Rao, learned Standing Counsel for the Andhra Pradesh State Financial Corporation (hereinafter referred to as ‘the Corporation’), appearing for the respondents. The petitioner has availed a loan of Rs.2,67,000/-, in the year 1995, from respondent No.1- Corporation, for purchasing a motor vehicle of DCM make. The title deeds of the property, standing in the name of the petitioner’s mother, were deposited with the Corporation as collateral security. The petitioner pleaded that, due to his inability, he could not repay the loan and that therefore, he approached the Corporation for settlement of his loan account under One Time Settlement scheme (for short ‘OTS’), by paying Rs.50,000/-. By letter, dated 07-02-2001, the Corporation directed the petitioner to pay Rs.3,98,557-10 ps in lumpsum including the sum of Rs.50,000/- paid by the petitioner at the time of submitting his application for sanction of OTS. The petitioner pleaded that due to certain financial constraints, he could not repay the amount within the time stipulated by the Corporation, and that therefore, his vehicle was sold away in a public auction for Rs.1,75,000/- and not being satisfied with the same, the Corporation is demanding a further sum of Rs.7 lakhs threatening to sell his property given as collateral security. In the counter-affidavit, filed by the Branch Manager of the Corporation, it is inter alia stated that having availed the loan, the petitioner paid Rs.6,700/- on 20-09-1995 and Rs.20,000/- on 11-07-1997 only, between 1995 and 1999, and did not repay the balance loan amount as per the terms of sanction; that as the petitioner was chronic defaulter, a notice was issued to him and his mother (guarantor) on 15- 03-1999, for payment of entire dues and informing that the respondents would sell the hypothecated vehicle and collateral security, if payment is not made; that, as the petitioner failed to clear the dues, the hypothecated vehicle was seized under Section 29 of the A.P.Financial Corporations Act, 1951 (for short ‘the Act’) and sold for Rs.1.38 lakhs, on 21-03-2000, by the respondents. It is further averred that the petitioner’s mother, who was the guarantor, gave a representation on 25-01-2001, on behalf of herself and the petitioner, to respondent No.2 for closure of the loan account of the petitioner under OTS and paid Rs.50,000/- as down payment; that, after considering the said request, the respondents approved the OTS vide letter, dated 07-02- 2001, for a sum of Rs.3,98,557-10 ps including down payment of Rs.50,000/- and advised the petitioner’s mother to submit consent within ten days; that as on the date of sanction of OTS, the total sum due was Rs.6,90,274/-; that as the Corporation has sanctioned OTS for Rs.3,98,557-10 ps, it has waived Rs.2,91,716-90 ps towards interest upto 31-10-2000 and has also not charged further interest from 01-11-2000 onwards and; that the petitioner failed to adhere to the OTS terms and progressively made payments from 27-03-2001 to 31-03-2007, which together with Rs.50,000/- paid on 19-12-2000, comes to Rs.3,99,000/- The facts culled out from the rival pleadings would show that the Corporation has accepted the OTS proposal coming from the petitioner’s mother and settled the dues for Rs.3,98,557-10 ps. It is further stated that, on 20-08-2009, the respondents wrote a letter to the petitioner, with a copy marked to his mother, asking him to pay interest for the delayed period, amounting to Rs.5,78,113/-, up to 31-07- 2009 together with interest thereon from 01-08-2009 for closure of the loan account before 31-08-2009. It is also stated therein that if the petitioner fails to pay the amount mentioned therein on or before the stipulated date, the OTS is liable to be cancelled and the total outstanding amount payable by him is liable to be recovered. Admittedly, the petitioner failed to adhere to the time schedule for repayment, but however, he has cleared the entire OTS dues by 31-03-2007. The respondents are now seeking to sell the collateral security for non-payment of the interest accrued on the entire outstanding amount, which is calculated at Rs.26,60,879/-. It is not in dispute that the amounts due to the Corporation need to be recovered in public interest. Ordinarily, Courts do not interfere with such right of the Corporation. However, this is an unfortunate case where the petitioner, who has availed the vehicle loan of Rs.2,67,000/-, failed to adhere to the payment schedule, as a result of which, he has not only paid about Rs.4 lakhs but also lost his vehicle, which was sold in auction for non- payment of the interest accrued on the principal amount. The Corporation itself has considered the plight of the petitioner and agreed for OTS at Rs.6,90,274/- by waiving interest of Rs.2,91,716.90 ps. As noted above, the petitioner, without adhering to the payment schedule under OTS, has, however, cleared the OTS amount over a period of time. On these hard facts, this Court is of the opinion that canceling the OTS on the ground of delayed payment is highly iniquitous. If the petitioner has committed delay in payment of the OTS amount, it would have been appropriate for the Corporation to charge interest on the delayed payment at reasonable rate instead of treating the OTS as cancelled and demanding a sum of Rs.26,60,879/- besides the sum of Rs.3,98,557/-, which was already paid by the petitioner under OTS scheme. When this Court has suggested to Sri M.S.Ramchandra Rao, learned Standing Counsel, that the petitioner deserves a lenient view in the matter of charging interest, he has fairly left it to the discretion of this Court. In the facts and circumstances of the present case, this Court is of the considered view that interests of justice would be met, if the Writ Petition is disposed of in the following terms: (1) The respondents are directed to treat the OTS as valid and subsisting; (2) The petitioner shall pay interest at the reduced rate of 50% of the normal rate charged by the Corporation for the period of delay in payment of the OTS amount; (3) The Corporation shall calculate the liability of the petitioner in terms of condition No.2 supra and communicate the same to the petitioner and within two months from the date of such communication, the petitioner shall clear the entire amount; (4) On receipt of the payment from the petitioner, the respondents shall release the title deed of the petitioner/his mother and; (5) In default of payment of the amount by the petitioner, the Corporation shall be free to take action in accordance with law for recovery of the outstanding amount. The Writ Petition is disposed of accordingly. As a sequel, WPMP.No.5923 of 2010, filed by the petitioner for interim relief, is disposed of as infructuous. ______________________ (C.V.Nagarjuna Reddy, J) 25th November, 2011 LUR