Case: Solidaire India Ltd Vs. Fairgrowth Financial Services Ltd.

The appellant herein on 3rd March, 1992, 20th March, 1992 and 25th March, 1992 took a loan of Rs. 50 lakhs, Rs. 25 lakhs and Rs. 25 lakhs respectively from respondent No. 1. According to the appellant, the agreement was to repay the loan amount within three years together with interest at 18 per cent per annum.2. Repayment not having been made and respondent No. 1 having been notified under Section 3 of the Special Court (Trial) of the Offences Relating To Transactions And Securities) Act, 1992 (hereinafter referred to as "Special Court Act"), proceedings were initiated by the Custodian before the Special Court for the recovery of the said money.3. There was no dispute before the Special Court with regard to the fact that Rs. 1 crore had been taken on loan by the appellant. The claim against the appellant before the Special Court was for a sum of Rs. 1,57,20,216.24 consisting of principal plus interest. The main contention raised before the Special Court related to the rate of interest. The respondent had claimed interest at the rate of 21.5 per cent on the amount of Rs. 50 lakhs and 23 per cent on the two loans of Rs. 25 lakhs each. The special Court came to the conclusion that the appellant herein had been put to notice by the Custodian as far back as 3rd June, 1993 that if it did not deposit the amount it will become liable to pay interest at a higher rate and the payment had not been made. The special Court came to the conclusion that the claim of interest made by the respondent was justified. The suit of the respondent was, accordingly, decreed as prayed for alongwith costs.4. During the pendency of this appeal, a further development had taken place and that is that the appellant has become sick and proceedings are going on under the provisions of The Sick Industrial Companies (Special Provisions) Act, 1985.

Court's reasoning:
6. As far as the question of interest is concerned, it appears that there was no formal agreement which had been entered into between the parties at the time when the loan was advanced in March, 1992. The correspondence which has been placed on record, however, clearly indicates that the respondent had claimed interest at the rate of 21.5 per cent on the loan of Rs. 50 lakhs first advanced and on the balance amount the claim was of 23 per cent. There is no document on the record to show that the amount of interest claimed was immediately refuted, though it was belatedly refuted by the appellant. We do not find any infirmity in the decision of the Special Court in coming to the conclusion that the appellant was liable to pay the rate of interest as claimed by thecan, therefore, be no stay of any proceedings for recovery against a sick company so far as the Special Court under the 1992 Act is concerned.We are in agreement with the aforesaid decision of the case, more so when we find that whenever the legislature wishes to do so it makes appropriate provisions in the Act in that behalf. Mr. Shiraz Rustomjee has drawn our attention to Section 34 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 wherein after giving an overriding effect to the 1993 Act it is specifically provided that the said Act will be in addition to and not in derogation of a number of other Acts including the 1985 Act. Similarly under Section 32 of the 1985 Act the applicability of the Foreign Exchange Regulation Act and the Urban Land Ceiling Act is not excluded. It is clear that in the instant case there was no intention of the legislature to permit the 1985 Act to apply notwithstanding the fact that proceedings in respect of a company may be going on before the B.I.F.R. The 1992 Act is to have an overriding effect notwithstanding any provision to the contrary in another Act.12. For the aforesaid reasons, we do not find any merit in this appeal.