IN THE HIGH COURT OF JUDICATURE AT PATNA CWJC No.1751 of 2007 MADHAVA JEE PRASAD S/O SRI VISHWANATH PRASAD R/O DURGA SMRITI PS-KADAMKUAN, DISTT-PATNA ----------------------------PETITIONER Versus 1. BIHAR STATE FINANCIAL CORPORATION FRASER ROAD, PATNA THROUGH ITS MANAGING DIRECTOR 2. MANAGING DIRECTOR, BIHAR STATE FINANCIAL CORPORATION, FRASER ROAD, PATNA 3. BRANCH MANAGER, BSFC, RAJENDRA SAROVAR, WEST OF POWER HOUSE CHAPRA, DISTT- SARAN------------- RESPONDENTS ----------- 6 3.5.2010 Heard learned counsel for the parties. Justifying the action of the respondent and rejecting the writ application of the petitioner would amount to giving premium over the inefficiency and incompetence of Bihar State Financial Corporation as demonstrated by the petitioner in the present writ application. If what has emerged from the pleadings of the parties the petitioner is being put on the cross by the respondents for their incompetence. The origin of the present dispute relates to the time when the Small Scale Industrial unit known as M/s Ferro concrete Industries came to be established in the backward district of saran some time in mid 1970. Industry was engaged in the manufacturing of PSC poles. Obviously the resources not being adequate they approached the respondent Bihar State Financial Corporation for sanction of loan of Rs. Five lakhs. The initial sanctioned loan stood repaid along with interest. In the year 1985 additional loan of Rs. 8.25 lakhs for modernization and expansion of the unit was prayed for and a sum of Rs. 6.66 lakhs was disbursed. The industry ran into - 2 - difficulty. The respondent initiated action against the industry under sections 29 and 30 of the said Financial Corporation Act. A sale notice was also issued in the year 1995. Petitioner responded with a request for withdrawal of the sale notice and deposited some money. Money deposits were made over a period of time. It is the stand of the petitioner that the entire outstanding amount in terms of their original demand stood paid. But „No Dues‟ certificate was not issued in favour of the petitioner. This payment was said to have been made some time in the year 2004 itself. This position stands certified by a communication dated 3.7.2004 contained in annexure-8 to the writ application. Subsequently the petitioner was issued yet another demand notice. This was probably the Corporation‟s way of responding to the request of „No dues‟ certificate. The fresh demand is the letter of the Corporation addressed to the company dated 26.9.2005. This communication is annexure-12 to the writ application. Naturally the petitioner was startled by such a claim and responded by a detailed letter dated 8.4.2006. Annexure-13 is the said response. When the issue could not be resolved the present writ application came to be filed. Details of payments and the statement of accounts are reflected by the pleading in the writ application as also certified by the respondents in their counter affidavit. The area of conflict has arisen because the Corporation tries to justify the additional demand on the ground that the calculation of the - 3 - repayments made by the petitioner does not reflect correct accounting. Whatever was done at the level of the Branch Manager was found to be erroneous as vetting of account was done at the headquarters. The arrears according to the respondents arises due to wrong rate of interest on which the dues were calculated, demanded or repaid. Payment was on the lower side and that is why the final accounting and repayments pleaded are not final statement so far as the dues are concerned. The reason offered for such a mistake having been committed by the Branch was the difference in the rate of interest which was to be paid for the original loan and the rate of interest for the second refinancing which was done by the Corporation subsequently. All this has taken the Corporation almost 25 years to discover or realise. Petitioner is naturally an agitated person because of this arbitrary action of the respondents. It is his stand that the entire outstanding loan stood paid in terms of the demand raised by the Corporation many many years ago. There is no inkling in the plea that in calculating the outstanding dues the petitioner had any role to play. Accounts are in the hands of the respondents. The petitioner has least bargaining position in the situation of the kind but they can not go by what is demanded by the Financial Corporation. On the specious plea of accounting a fancy full figure has been worked out and the liability saddled on the petitioner. Even for the sake of argument if what has been stated that there was a mistake in the accounting is accepted then it ought to have - 4 - been pointed out within a reasonable time frame. If that was done the actual liability of the petitioner would be couple of thousand rupees because difference in the rate of interest was about 1.5% to 2%. For example in Account No. II the lower rate of interest charged was for the period 1.4.1985 to 31.1.1986. Obviously this mole had taken a shape of mountain in the last two and half decades. Though counter affidavit has been filed on behalf of the respondents and they have tried to justify their action and demand based on the pure accounting and mistake but the Court takes such a stand of the respondents with a pinch of salt in light of what has been stated in paragraph 10 of the supplementary counter affidavit filed on behalf of the respondents on 3.5.2010. The statement in paragraph-10 speaks for itself and therefore is reproduced herein below:- Paragraph-10: that the main reason for raising additional demand after vetting are given hereunder: 1. Non-keeping of re-validated loan of Rs. 1.10 lacs in separate account. 2. Loans inspection conveyed as charged in Account No. II. 3. Last interest was charged in Account No. II; and 4. Some wrong credit entries in both accounts and error in allowing rebate. A reading of the above reason for the justification establishes the allegation made by the petitioner that the respondents had charged premium for their inefficiency. Nothing which has been stated in the above quoted paragraph-10 is a - 5 - reflection on the petitioner. The Court has to take into consideration question of equity. Whether such liability can be allowed to be fastened on the citizen in such a stated circumstance begs for an answer. Obviously allowing the respondents now to raise fancy full new demand as per paragraph 11 of counter affidavit would only reward incompetence and patronize lack of concern for the right borrowers. Strange are the ways of working of Financial Corporation. The Court would not like to record its opinion separately as similar matters have travelled to this Court. One such case pointed out by the petitioner is the case of M/s Naresh Metal Industry vrs. The Managing Director and anther reported in 2009 (2) PLJR 453. The issue is summed up in the observation of learned Single Judge in paragraphs 3 and 4 of the said decision. The said paragraphs are also reproduced herein below since it has relevance to the issue. Paragraph: 3. In the counter affidavit, the explanation given by the Corporation is virtually a saying that since 1981 its Account Section failed to charge interest. Accordingly its stand is that the contractual rate of interest, though fixed, had to be varied depending on the availability of re-finance from the Industrial Development Bank of India on receipt of re- finance. It is not dispute that no intimation was given to the petitioner of any rate revision and it is admitted that the Corporation’s Account Section did not correctly incorporate the rate change because of this difference in rate since 1981 various incentives which the petitioner had availed were to be denied or these were returned back. On additional liability since 1981 created interest and penal interest charge though accounts were clear in 1997, huge liability were created by this process. It is not in dispute that - 6 - the petitioner had done nothing to induce the mistake if any committed, petitioner is not to be blamed for these mistakes. It is now in the year 2007 that these mistakes are being realized and for these mistakes committed by the Corporation, the petitioner is being made to pay. Paragraph-4: To this Court, this opinion of the corporation shocks the conscious. The Corporation intends to say that yet its officer committed a mistake starting from 1981 so what you (petitioner) must now suffer the consequences of its mistake 27 years later. To me, there cannot be any say mere arbitrary and unfair. If such mistakes are committed by such responsible statutory Corporation, it is them who must suffer for their mistakes and they cannot make other suffer for their mistakes. All I can do is quote in the words of Hon’ble Chief Justice Chagla, a passage from the case of All India Groundnut Syndicate Ltd. vs. Commissioner of Income Tax, Bombay City since reported in AIR 1954 Bombay 232:- “………….But the most surprising contention is put forward by the Department that because their own officer failed to discharge his statutory duty, the assessee is deprived of his right which the law has given to him under sub- section (2) of Section 24. In other words, the Department wants to benefit from and wants to take advantage of its own default. It is an elementary principle of law that no person- we take it that the Income-tax Department is included in that definition- can put forward his own default in defence to a right asserted by the other party. A person cannot say that the party claiming the right is deprived of that right because “I have committed a default and the right is lost because of that default………..” The treatment meted out to the petitioner is not in isolation. The way the Corporation has been functioning over the years they have acquired an air of invincibility. They think they have right to exercise their power according to their sweet will and - 7 - convenience. In the above said circumstances quashing the additional demand is the least that can be done. It was also a case for compensation but the Court refrains from doing so. There is nothing yet to show that the Corporation is desirous to put its house in order. If a similar kind of story is repeated and citizens are harassed again there may be an occasion for the Court to respond appropriately. In so far as the present writ is concerned the demands with regard to A/c Nos. I and II are quashed. The respondents are directed to issue “No dues” certificate in favour of the petitioner on the basis of the payments made earlier. If the Managing Director of the Corporation is so concerned about the working of the said Corporation let him do an exercise to put his house in order. He has a statutory duty to fix responsibility upon the person/persons who were at the helms of affairs at the relevant time and recover the dues from their pockets. The innocent citizens should not be harassed for the failure and mistake of the officials of the Corporation. This exercise would be beneficial both for the functioning of the Corporation and the health of the Corporation in future. This writ application is allowed of with the above direction. RPS (Ajay Kumar Tripathi,J.)