Punjab & Sind Bank vs M/S Allied Beverages Company P.L.& Ors

3) Brief facts:

(a) Vide application dated 28.04.1997, the Company approached the Bank and requested for grant of financial 2 facilities in its name. After verifying the documents submitted by the Company, the Bank acceded to the request and granted the Cash Credit (CC) (Hypothecation) limit to the tune of Rs. 60,00,000/-, Term Loan of Rs.20,00,000/-, FOBLC/FOBP facility to the tune of Rs.10,00,000/- and Import/Inland Letter of Credit facility to the tune of Rs.25,00,000/-. However, the Cash Credit and the Import/Inland Letter of Credit limit was not to exceed Rs.60,00,000/-. The aforesaid credit facilities given by the Bank were duly secured by way of hypothecation over stock of raw materials, finished products, goods in transit and in process, finished goods, generator sets and tanks on which the first charge has been created by the Haryana Financial Corporation (hereinafter referred to as "the Corporation") and the Bank had the second charge over all the above materials. Additionally, the said credit facilities were also secured by way of equitable mortgage by deposit of original Title 3 Deeds in respect of immovable property bearing Plot No. 9, Road No. W-8, DLF Qutab Enclave, Phase-III, village Nathurpur, Teh. and Dist. Gurgaon measuring about 450.78 sq.mts. belonging to Shri Surinder Kumar Sadhu - Director of the Company. On 16.07.1997, the Bank sanctioned and granted the abovementioned loan/credit facilities to the Company. The Company submitted all the required documents with the Bank. Because of certain reasons, the business of the Company suffered a set back and its account with the Bank was declared as Non- performing Assets (NPA) on 31.03.1999. As on that date, an amount of Rs.60,99,482.77/- was due in Cash credit account and Rs.15,05,470/- in respect of the Term loan account. The account of the Company was transferred to NPA Account on 01.04.1999.

(b) On 16.09.2002, the Bank sent a legal notice to the Directors of the Company under the Securitization and Reconstruction of Financial Assets and Enforcement of 4 Security Interest Act, 2002 (in short `the Securitization Act') through its Manager, calling them to regularize the account by paying the outstanding dues payable to the Bank along with interest due thereon and that in failure of the same, the Bank would be constrained to take appropriate legal action under the Securitization Act against them. On receipt of the notice, the Company approached the Bank for settlement of accounts and gave a proposal in writing and also deposited a sum of Rs.2,50,000/- towards token money. However, the settlement could not be materialized as the same was on the lower side and as such the amount of token money was credited to the Company's account.

(c) On 04.07.2003, the Bank filed an application before the DRT being O.A. No. 47 of 2003 for recovery of Rs.1,47,42,616.77 along with pendente lite and future interest. During the pendency of the application, the Company further gave a proposal for settlement but the 5 same could not be materialized. However, on 09.06.2005, the Presiding Officer allowed the application and directed the Company to pay the outstanding amount with pendente lite and future interest. The Presiding Officer further directed that a Recovery Certificate be prepared and the parties therein should appear before the Recovery Officer-I, DRT-III Delhi on 09.08.2005 for execution of the same. Being aggrieved by the order passed by the Presiding Officer, the Company preferred an appeal being Appeal No. 70 of 2006 before the Debts Recovery Appellate Tribunal (hereinafter referred to as `the DRAT'), Delhi and the same was dismissed vide order dated 29.03.2007.

(2) Where such a decree is silent with respect to the payment of further interest on such principal sum from the date of the decree to the date of payment or other earlier date, the Court shall be deemed to have refused such interest, and a separate suit therefor shall not lie." 10

Its circulars shall bind those who fall within the net of such directives. For such transaction which are not squarely governed by such circulars, the RBI directives may be treated as standards for the purpose of deciding 15 whether the interest charged is excessive, usurious or opposed to public policy.

(6) Agricultural borrowings are to be treated on a pedestal different from others. Charging and capitalisation of interest on agricultural loans cannot be permitted in India except on annual or six-monthly rests depending on the rotation of crops in the area to which the agriculturist borrowers belong. (7) Any interest charged and/or capitalised in violation of RBI directives, as to rate of interest, or as to periods at which rests can be arrived at, shall be disallowed and/or excluded from capital sum and be treated only as interest and dealt with accordingly.

(8) Award of interest pendente lite and post-decree is discretionary with the court as it is essentially governed by Section 34 CPC dehors the contract between the parties. In a given case if the court finds that in the principal sum adjudged on the date of the suit the component of interest is disproportionate with the component of the principal sum actually advanced the court may exercise its discretion in awarding interest pendente lite and post-decree interest at a lower rate or may even decline awarding such interest. The discretion shall be exercised fairly, judiciously and for reasons and not in an arbitrary or fanciful manner."

14) The approach and the course adopted by the High Court is acceptable and we are not inclined to either enhance the rate of interest as claimed by the Bank or order further reduction as requested by the Company. Consequently, both the appeals are dismissed with no order as to costs.

OCTOBER 1, 2010.