Civil Writ Petition No.5771 of 2010 -: 1 :- IN THE HIGH COURT FOR THE STATES OF PUNJAB AND HARYANA AT CHANDIGARH Civil Writ Petition No.5771 of 2010 Date of decision: September 15, 2010. Sanjeev Kumar ...Petitioner(s) v. Registrar, Cooperative Societies, Punjab & Ors. ...Respondent(s) CORAM: HON'BLE MR. JUSTICE KANWALJIT SINGH AHLUWALIA Present: Shri Anupam Bhardwaj, Advocate, for the petitioner(s). Ms. Ambika Luthra, Assistant Advocate General, Punjab, for respondents No.1 to 3. Shri I.S. Saggu, Advocate, for respondents No.4 to 6. Kanwaljit Singh Ahluwalia , J. (Oral): In the present writ petition, a prayer has been made that a writ in the nature of certiorari be issued and the auction notice issued on 23.2.2010 (Annexure P-9), whereby residence of the petitioner has been ordered to be put to auction in execution of the arbitration proceedings dated 6.9.2005, be quashed, as petitioner is ready and willing to pay the outstanding loan amount. Briefly, the facts of the case are that the Well Man Handloom- cum-Powerloom Production Production Cooperative Industrial Society Limited, Amritsar (respondent No.2) obtained a loan from the Amritsar Central Cooperative Bank Limited, Amritsar to the tune of Rs.7.00 lacs. Civil Writ Petition No.5771 of 2010 -: 2 :- The petitioner, being a President of the Society, in order to secure the interest of the Bank for loan amount advanced to the Society, mortgaged his property with the respondent-Bank. The Society failed to re-pay the loan. Thereafter, Deputy Registrar, Cooperative Societies, Amritsar gave his award dated 6.9.2005 (Annexure P-1). The award stated that the petitioner shall pay to the respondent-Bank the loan amount along with 11.5% interest within a period of 90 days and if the petitioner failed to pay the loan amount to the Bank within the stipulated time, the Bank shall be at liberty to charge compound interest @ 11.5%. The interest shall be levied till final payment. The charging of compound interest, is being seriously contested by the petitioner in this petition. It is pleaded that the Bank vide its letter dated 24.11.2005 calculated the outstanding amount @ 16% compound interest and worked out Rs.6,98,725/- as principal amount and Rs.2,94,994/- towards interest as on 13.11.2005 and, thus, made a demand of Rs.9,93,719/- as outstanding amount. A Coordinate Bench of this Court, on March 30, 2010, noticed the contention of the petitioner that he was ready to pay a sum of Rs.2 lacs, in the first instance, within a week thereof. Today also, counsel for the petitioner, on instructions from the petitioner, who is present in Court, states that he is ready and willing to pay the entire loan amount but the calculations made by the Bank run contrary to the mandate of law laid down in a Constitutional Bench in Central Bank of India v. Ravinder, 2002(1) ISJ (Banking) 1. In Central Bank of India v. Ravinder, (supra), it was stated that Reserve Bank of India directions have got a statutory flavour and any Civil Writ Petition No.5771 of 2010 -: 3 :- contravention thereof is punishable under Section 4 of Section 46 of the Banking Regulations Act, 1949. In para 57 thereof, it was concluded by their Lordships as under:- “57. Subject to the above we answer the reference in following terms: (1) Subject to a binding stipulation contained in a voluntary contract between the parties and/or an established practice or usage interest on loans and advances may be charged on periodical rests and also capitalised on remaining unpaid. The principal sum actually advanced coupled with the interest on periodical rests so capitalised is capable of being adjudged as principal sum on the date of the suit. (2) The principal sum so adjudged is 'such principal sum' within the meaning of Section 34 of the Code of Civil Procedure, 1908 on which interest pendente lite and future interest i.e. post- decree interest, at such rate and for such period which the Court may deem fit, may be awarded by the Court. (3) Corporation Bank Vs. H.S. Gowda and Anr. (1994)5 SCC 213 and Bank of Baroda Vs. Jagannath Pigment & chem 1995 ISJ (Banking) 573 have been correctly decided. Consequently, the respondent-Bank is directed to act in consonance with the directions by the Hon'ble Apex Court in Central Bank of India v. Ravinder, (supra). As per the award Annexure P-1, 11.5% simple interest was to be charged on the loan amount. The interest will be capitalized as per mandate of the judgment in Central Bank of India v. Ravinder, (supra). However, from the date when the award was given, the Civil Writ Petition No.5771 of 2010 -: 4 :- Bank shall charge 11.5% simple interest and not the compound interest. Having corrected the apparent error in the award, petitioner is directed to deposit the entire amount within three months. The Bank shall, after following the mode and method prescribed, serve statement of accounts upon the petitioner within 15 days, depicting the outstanding amount and the same shall be paid by the petitioner within three months thereafter. On failure of the petitioner to pay the amount, the Bank shall proceed against the petitioner in accordance with the provisions of law. With these observations, the writ petition is disposed of. However, there will be no order as to costs. [Kanwaljit Singh Ahluwalia] September 15, 2010. Judge kadyan