Case: Iqbal Naseer Usmani Vs. Central Bank of India &amp; Others

The appellant obtained a loan of Rs. 64,000/- from the first respondent on 30.5.1981 for the purchase of a motor vehicle under the terms of agreement between the appellant and the first respondent. The loan had to be discharged by payment of certain instalments. The appellant defaulted in repayment of this loan. First respondent filed Regular Suit No. 66 of 1991 for recovering the amount of Rs. 2,48,438.64 p. which represented the unpaid amount of loan together with accumulated interest thereon. The Civil Court by a decree dated 28.11.1995, decreed the said amount.

Reasoning:
According to the High Court the money of the Bank and financial institutions is public money, which should be in circulation, otherwise the Bank and depositors will suffer. We are afraid that while this may be very good sentiment, it cannot apply in the face of Section 3 of the Act for the reason that Section 3 does not envisage the provisions of the Act being utilised for recovery of every loan taken. Section 3(1)(b) permits this to be done only in respect of loans taken under a State-sponsored scheme, which expression has been defined in Section 2(g) of the Act. Since it is admitted that the loan by the appellant was not under or in relation to a State-sponsored Scheme within the meaning of Section 2(g), whatever else it may be, it would not be recoverable by recourse to the machinery under Section 3 of the Act