Himachal Pradesh State Financial V. Vs  INSC 526 (31
Thomas & R.P. Sethi. SETHI,J.
The only point in controversy in the present appeal is as to whether the
respondent-loanee is also entitled to interest at the rate of 13% on the amount
to be refunded which was admittedly realised by the sale of his industrial
unit, in excess of his liability in a loan transaction.
the impugned judgment in this appeal, the High Court has directed the refund of
the excess amount, if any, after calculations along with interest at the rate
of 13%, the rate on which the Corporation is stated to have charged the
respondents on the amount of loan advanced to him.
facts giving rise to the present appeal are that on his request the
appellant-Corporation sanctioned on 18.12.1983 a term loan of Rs.15 lacs
against the total cost of the Project of the respondent for construction of a
hotel unit. The appellant-Corporation had also sanctioned an additional loan of
Rs.5.50 lacs on 6.8.1986. The total sanctioned loan of Rs.20.50 lacs was
dispersed to the respondents during the period from 6.7.1984 to 1.5.1987.
respondents committed defaults in the payment of the loan amount with the
result that the appellant-corporation took over the possession of the hotel
under Section 29 of the State Financial Corporations Act, 1951 (hereinafter
called "the Act"). Notices for sale of the hotel were advertised in
the Newspapers. Four parties negotiated the sale of the assets of the hotel
with the appellant-corporation. The offer of M/s.Pradeep Kapur & Associates
was accepted whereafter agreement of purchase was made between the Corporation
and the purchaser on 13th
March, 1993. The
respondents challenged the sale through Writ Petition No.515 of 1993. During
the pendency of the writ petition it was submitted that one Rana Iqbal Singh
was prepared to purchase the property for Rs.60 lacs in case the vacant
possession was delivered to him. Such a statement made in the court was
recorded in the proceedings of the court dated 23rd December, 1993. In view of the offer of 60 lacs as price of the
unit, the Corporation presumably could not disperse the excess amount out of
the amount received from M/s.Pradeep Kapur & Associates to the respondents.
The excess amount was put in the Current Account of the corporation so that it
could be dispersed immediately to the respondents as per situation arising in
the case. The Corporation did not earn any interest on that amount. As per the
orders of the High Court dated 23rd December, 1993, the appellant-corporation claims to have arranged a negotiation and
called the said Rana Iqbal Singh in its office on 16.2.1994. The counsel of
earlier purchaser M/s.Pradeep Kapur & Associates submitted a letter along
with an application which was presented before the High Court praying therein
for recalling the order dated 23rd December, 1993 and for stay of consideration of the offer of third party, namely, Rana
Iqbal Singh. The said application of the earlier purchaser was not decided by
the High Court.
the writ petition No.515 of 1993 was disposed of on 3rd January, 1997 vide the order impugned in this appeal.
submitted on behalf of the corporation that the High Court was not justified in
granting the interest on the excess amount which was to be payable, upon
calculation, to the respondents. The appellant- corporation claims to have not
faulted in refunding the excess amount. The delay was occasioned on account of
the pendency of the writ petition filed by the respondents. As the
appellant-corporation did not earn any profit on the excess amount, it was not
obliged to pay any interest. The corporation, subject to the provisions of the
Act, can carry on and transact any of the business specified in Section 25 of
the Act. The said section authorises the corporation to grant loans or advances
to the industrial concerns on such terms and conditions as may be agreed to.
The corporation deals with public money for public benefit. Default in payments
of the loans and advances thus, ultimately affects the public at large. An
obligation is cast upon the loanee to pay back the amount of the loan or
advance received under the Act.
case of failure to make the payment, the corporation is expected to adopt an
approach which has to be public oriented rendering a helping hand to the loanee
to come out of the financial losses and constrains if any but without causing
any loss to the corporation. To protect the public interest, the Act provides a
mechanism for recovery of loan.
29 of the Act authorises the corporation to take over the management or
possession or both of the industrial unit and transfer the same by way of lease
or sale where it finds that any industrial concern, who had taken loan, had
made default in repayment of any loan advanced or any instalment thereof or in
meeting of its obligation in relation to any guarantee given by the corporation
or otherwise fails to comply with the terms of its agreement with the
conferred under Section 29 of the Act are intended to achieve the object of the
Act. The amount realised in consequence of the sale or lease of the property of
the defaulter can be adjusted in the liability of the defaulter and the excess
amount thus realised, if any, to be paid to the person whose unit was proceeded
against under Section 29 of the Act. The activities of the corporation are visualised
not as profit earning concern but an extended arm of the State to harness the
business potential of the country to benefit the common man. There is no
statutory obligation on the part of the corporation to pay the interest on the
excess amount realised. However, in appropriate cases interest may be awarded
in lieu of compensation or damages for allegedly wrongfully retaining the
amount payable to a party. Interest can be awarded on equitable grounds as was
held by this Court in Satinder Singh v. Umrao Singh [1961 (3) SCR 676], Laxmichand
Indore Improvement Trust [1975 (1) SCC
565] and Sovintorg (India) Ltd. v. State Bank of India, New Delhi [1999(6) SCC 406].
perusal of the impugned order shows that the High Court has not referred to any
ground justifying the payment of interest to the respondents. The respondents
have also not referred to any circumstance warranting the exercise of powers of
equity in their favour. The reliance of the learned counsel for the respondents
on Sovintorg (India) Ltd.'s case (supra) is misplaced.
In that case this Court has held: "There was no contract between the
parties regarding payment of interest on delayed deposit or on account of delay
on the part of the opposite party to render the services. Interest cannot be
claimed under Section 34 of the Civil Procedure Code as its provisions have not
been specifically made applicable to the proceedings under the Act. We,
however, find that the general provision of Section 34 being based upon
justice, equity and good conscience would authorise the Redressal Forums and
Commission to also grant interest appropriately under the circumstances of each
case. Interest may also be awarded in lieu of compensation or damages in
appropriate cases. The interest can also be awarded on equitable grounds as was
held by this Court in Satinder Singh v. Umrao Singh (1961) 1 SCR 676."
From the record it appears that after getting a loan in the year 1983 and 1986
the respondents committed persistent defaults in repayment which necessitated
the action against them under Section 29 of the Act in the year 1991. As no
amount was paid till 13th
April, 1993, the corporation
sold the industrial unit, a hotel, for an amount of Rs.39.75 lacs. Before the
excess outstanding amount could be paid to the respondents, they filed a writ
petition in the High Court challenging the action of the corporation and thus
preventing it from making the payment. The counsel of the respondents even made
an offer that there was a buyer to purchase the hotel for a sum of Rs.60 lacs.
The negotiations with the prospective buyer could not mature on account of
application filed by the earlier purchaser. The High Court instead of deciding
the application of the earlier purchaser disposed of the writ petition vide the
order impugned. As noticed earlier, the High Court has not assigned any reason
much less a cogent one for the payment of interest. In the absence of an
agreement and the statutory provision, interest could not be claimed by the
respondents as a right. The court did not refer to any circumstance on the
basis of which the interest could have been granted as an equitable relief.
the circumstances the appeal is allowed and the impugned order of the High
Court, in so far as it directs the payment of the interest
at the rate of 13% along with excess amount is set
aside. No costs.
No.2 of 2000 In view of the judgment in Civil Appeal, the application has
become infructuous. The same is dismissed having become infructuous.