IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Letters Patent Appeal No.671 of 2011 (O&M) Date of decision: 20th April, 2011 Corporation Bank and others … Appellants Versus P.K. Malia … Respondent CORAM: HON’BLE MR. JUSTICE RANJAN GOGOI, CHIEF JUSTICE HON’BLE MR. JUSTICE KANWALJIT SINGH AHLUWALIA Present: Mr. Alok Jagga, Advocate for the appellants. 1. Whether Reporters of Local Newspapers may be allowed to see the judgment? 2. Whether to be referred to the Reporters or not? 3. Whether the judgment should be reported in the Digest? KANWALJIT SINGH AHLUWALIA, J. Corporation Bank has filed present appeal to assail an order dated 25th March, 2011 passed by a learned Single Judge of this Court in a civil writ petition preferred by the respondent (hereinafter referred to as, ‘the loanee’). Learned Single Judge accepted the writ petition and held that the loanee has discharged his entire liability, and ordered the Bank to return the documents executed by the loanee, whereby an equitable mortgage was created. A grievance has been projected by the appellant-Bank that the directions of learned Single Judge are contrary to the agreed terms of the loan agreement and the same are liable to be set aside. Furthermore, maintainability of the writ petition before the learned Single Judge has also been questioned. Before we advert to the issues raised in the appeal, it will be necessary to notice brief facts of the case. Letters Patent Appeal No.671 of 2011 (O&M) In the writ petition filed, the loanee pleaded that he along with his wife had applied for a housing loan and on 14th March, 2006, the appellant-Bank sanctioned a loan of Rs.6,30,000/- towards home loan/construction home loan. The Bank had disbursed Rs.2,40,000/- + Rs.26,000/- at the time of execution of the sale deed and later-on Rs.72,000/-. Thus in all, an amount of Rs.3,38,000/- was received by the loanee. The loanee could not timely pay the equated monthly installments, as a result whereof the appellant-Bank served a notice under Sections 13 (2) and 13(3) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as, ‘the SARFASI Act’) on 17th November, 2008. The loanee approached the appellant-Bank and paid Rs.37,000/- so that the proceedings under the SARFASI Act are brought to halt. He also made an offer to make the entire payment of loan as one-time-settlement. The appellant-Bank issued a debit certificate showing Rs.2,73,659/- as an amount payable by the loanee. The loanee paid Rs.75,000/- and finally settled the loan at Rs.2,73,387/- on 14th March, 2008, even though the statement of account showed the amount due as Rs.1,98,100/-. The loanee issued post-dated-cheque amounting to Rs.2,65,000/- payable on 30th April, 2009. In nutshell, the grievance of the loanee was that the Bank, having received Rs.3,17,324/- and the post-dated-cheque of Rs.2,65,000/- against the actual loan availed of Rs.3,38,000/-, is not entitled to pursue the proceedings under the SARFASI Act for auctioning the mortgaged property. An averment was made by the loanee in the writ petition that an amount of Rs.2,40,000/- was disbursed as payment to the vendor of the plot and Rs.26,000/- as stamp duty for registration of the aforementioned property and the same was mortgaged at the time of execution of the sale deed itself in favour of the Bank and thereafter, Rs.72,000/- were released to the loanee in the month of October, 2006 for construction of the house. The loanee has pleaded that he could not construct the house within the time specified by the Bank due to his accident. In the written statement filed to 2 Letters Patent Appeal No.671 of 2011 (O&M) the writ petition, in preliminary objections, the appellant-Bank has taken the following stand: “1. … … … The petitioner had availed two credit facilities from the Bank i.e. C Home and C MTRU. C Home was availed by the petitioner on 14.03.2006 for an amount of Rs.3.38 Lac for purchase of a plot situated at Pandori Waraich Bye Pass Road, Amritsar. The second loan account was a personal loan by way of a limit which was sanctioned to an extent of Rs.50,000/- on 17.10.2003. It would be pertinent to mention that C Home was availed by the petitioner with a specific undertaking that he would start the construction on the said plot within 3 months from the date of availing of credit facility and would complete the construction within a period of 12 months. This Housing Loan was sanctioned to the petitioner upon this specific undertaking otherwise housing loan is not available for purchase of a plot since it is only when the construction is complete upon the said plot the credit facility is qualified as the housing loan and as a necessary consequence thereto the petitioner would have been entitled to the concessional rate of interest. The undertaking submitted by the petitioner clearly stipulates that failure to comply with the undertaking shall entail interest @ 18.25 % p.a. A copy of the undertaking dated 14.03.2006 is annexed herewith as Annex.R-1.” The learned Single Judge noticed the fact that the Bank has encashed the cheque of Rs.2,65,000/- issued by the loanee on 4th May, 2009. After going through the entire gamut, the learned Single Judge observed as under: “The action of the Bank in working out loan liability of the petitioner is highly unfair, unreasonable and inequitable. Even the floating rate of interest as agreed is not adopted to calculate the liability. The loan is taken on the basis of an agreement. The terms were agreed and so also the rate of interest. Charging rate of interest at 16% pre annum is not only against the terms but is arbitrary and show that the Bank is acting with some vengeance and spite against the 3 Letters Patent Appeal No.671 of 2011 (O&M) petitioner. The Bank has been acting unilaterally in charging the much higher rate of interest, which is more than even the double of the agreed rate but has not fairly given credit to the petitioner for being sincere in discharging the liability. The Banks are having scheme of one time settlement. The aim is to enable the person, who is the borrower to discharge the liability and not to put him in such a burden in some manner that he is ruined… … …” Learned counsel appearing on behalf of the appellant-Bank has vehemently urged that since construction of the house was not made within the specified time, therefore, it is a case of misutilization of the housing loan and thus, as per the terms of contract entered between the parties, in case of misutilization of the housing loan, the Bank was entitled to charge the highest lending rate, which was 16 per cent per annum. It has been further canvassed before us that misutilization of the loan, i.e. non- construction of the house has been admitted by the loanee, and therefore, according to the loan agreement duly executed between the loanee and the Bank, contractual rate of interest chargeable on the loan amount (C-HOME) has to prevail. Counsel for the Bank very forcefully has raised the following arguments before us: Firstly, that since the amount of loan was not deployed for construction of the house, it will amount to misutilization and the Bank, as per the contract/agreement executed between the parties, is entitled to charge 16 percent commercial rate of interest against 7.75 percent flouting rate of interest. Secondly, it is urged that it was not within the domain of the learned Single Judge to whittle down the terms of the agreement and direct the 4 Letters Patent Appeal No.671 of 2011 (O&M) Bank to charge 7.75 percent rate of interest per annum. Thirdly, it is canvassed that the learned Single Judge overstepped his jurisdiction by issuing a direction that the appellant-Bank should treat the account closed. Lastly, it was contended that the SARFASI Act contains a complete mechanism for rederssal of the grievances of an aggrieved person and the writ Court should have refrained from issuing the directions as issued in the present case. Having given our due consideration to the above submissions, we are of the view that mere delay in raising construction of the house cannot be termed as misutilization of the funds unless it is proved that the funds were diverted for any gainful use or for advancement of some business or commercial interest. True, it is, that the housing loan is provided to give impetus to the overall economic development and to achieve social object of providing roof to the needy, yet at the same time, this Court cannot become oblivious of the fact that out of the total disbursement of the loan amount of Rs.3,38,000/-, Rs.2,40,000/- were handed over to the vendor of the plot and Rs.26,000/- were used for purchase of stamp duty. The total loan sanctioned was Rs.6,30,000/-. Only Rs.72,000/- were advanced for construction of the house. From the entire transaction, it can be safely inferred that the respondent-loanee was a small-time-borrower. We cannot entertain the legal submissions in isolation. They are to be applied on the facts and circumstances of each case. From the tenor of judgment of the learned Single Judge, it is apparent that primarily for three reasons, (a) that at the relevant time amount outstanding was Rs.1,99,765/-, (b) thereafter, the Bank had encached the cheque of Rs.2,65,000/- given towards full and final settlement, (c) qua the total 5 Letters Patent Appeal No.671 of 2011 (O&M) disbursal of Rs.3,38,000/- to the loanee, he has paid Rs.3,17,324/- and a cheque of Rs.2,65,000/-, in all Rs.5,82,324/-; the learned Single Judge made equities to secure triumph over a too legalistic view projected by the Bank. We find it difficult to unsettle the view formulated by the learned Single Judge, which is based on the sound canons of equity. A Division Bench of this Court in Letters Patent Appeal No.872 of 2010 titled as ‘Balwinder Kaur v. Dalwinderjit Singh and others’ decided on 9th August, 2010, relied upon a judgment of the Hon’ble Apex Court reported as ‘Shiv Shankar Dal Mills v. State of Haryana’ (1980) 2 SCC 437, wherein it was held as under: “Article 226 grants an extraordinary remedy which is essentially discretionary, although founded on legal injury. It is perfectly open for the court, exercising this flexible power, to pass such order as public interest dictates and equity projects: Courts of equity may, and frequently do, go much further both to give and withhold relief in furtherance of the public interest than they are accustomed to go where only private interests are involved. Accordingly, the granting or withholding of relief may properly be dependent upon considerations as of public interest.....” We are also conscious that as a Court of appeal, we should be hesitant to cause our interference when the discretion has been validly exercised by the learned Single Judge. In the present case, the learned Single Judge after appreciating the pleadings arrived at a conclusion in the facts and circumstances of the present case and has formulated a view, which serves the ends of equity and justice. We are guided by the following observations of the Hon’ble Supreme Court of India in case of Wander Ltd. And Anr. Vs. Antox India P.Ltd. 1990 Supp. (1) SCC 727:- “14. The appeals before the Division Bench were against the exercise of discretion by the Single Judge. In such 6 Letters Patent Appeal No.671 of 2011 (O&M) appeals, the Appellate Court will not interfere with the exercise of discretion of the Court of first instance and substitute its own discretion except where the discretion has been shown to have been exercised arbitrarily, or capriciously or perversely or where the court had ignored the settled principles of law regulating grant or refusal of interlocutory injunctions. An appeal against exercise of discretion is said to be an appeal on principle. Appellate Court will not reassess the material and seek to reach a conclusion different from the one reached by the court below if the one reached by that court was reasonably possible on the material... … …” Thus, taking the entire conspectus of the case into view, we are of the opinion that the present appeal deserves dismissal. Ordered accordingly. [RANJAN GOGOI] CHIEF JUSTICE [KANWALJIT SINGH AHLUWALIA] JUDGE April 20, 2011 rps 7