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Judgment
Ashok Menon, Chairperson
This is in an appeal filed by the Applicant in the Original Application No. 598 of 2001 on the files of The Debts Recovery Tribunal- III at Mumbai (DRT) filed for recovery of ₹23,83,64,414/-together with interest at the rate of 18.5% per annum with quarterly rests from the 1st defendant company, namely Vishnu Vijay Packagers Ltd, Mumbai (‘the company’, for short), presently under liquidation with its assets in the possession of The Official Liquidator Hon’ble Bombay High Court. The Application was originally by ICICI Ltd which was later amalgamated with the ICICI Bank and then, the debt was assigned to the present Appellant and got substituted as the applicant.
Respondents Nos. 2 and 3 are the directors of the aforesaid company and guarantors for the loans availed by the company from the applicant and defendants Nos. 4 to 7 financial institutions, which have created a security interest over the assets of the company. The 1st defendant company had borrowed a sum of ₹ 17 Crores from the Appellant Institution’s predecessor in interest, ICICI Ltd on 18/09/2099 and had executed a Deed of Hypothecation with respect to movable assets of the company and defendants numbers 2 and 3 executed a Deed of Guarantee on 22/09/1999, undertaking the liability to pay the outstanding debt of the company. ICICI Bank had assigned the debt in favour of the Appellant.
That apart, defendants 1 to 3, had also given an undertaking on 22/09/1999, to create a charge by executing a Deed of Mortgage with respect to the movable property belonging to the company, more particularly described in Annexure A.
The borrowers were irregular in repayment of the amount and hence, the Appellant issued a recall notice on 15/11/2000 demanding repayment. There was still no response and hence, the Appellant was constrained to file the suit. It was alleged that the Appellant was entitled to a decree of specific performance with respect to executing a deed of mortgage as undertaken by the company and was also entitled to recover the amount claimed.
The Official Liquidator representing the company filed a written statement stating that the interests of the workers as well as the secured creditors need to be protected while disposing of the suit.
Defendants 2 and 3 also filed a joint written statement alleging that the documents produced by the applicant are all bogus and fabricated by the officers of the Bank. It is also contended that the loan amount was neither sanctioned nor disbursed. It is further contended that The Applicant is not a Bank coming within the purview of the DRT Act. It is further contended that the secured assets, including the hypothecated goods, are situated at Aurangabad and therefore, the DRT at Mumbai lacks territorial jurisdiction to determine the application.
After considering the rival contentions, the Learned Presiding Officer found that the DRT at Mumbai has jurisdiction because part of the cause of action arose at Mumbai where the loan was sanctioned. The averment of a charge over the hypothecated goods belonging to the 1st defendant company was also found in favour of the Applicant. However, the claim for specific performance with regard to the creation of a mortgage in accordance with the alleged undertaking, given by the 1st defendant was declined on the ground that there is no mutual agreement executed by both sides, and therefore, there is no enforceable contract, which requires to be specifically performed. It is further observed that the property has been taken possession of by the Official Liquidator and since the property is required for settling the amounts due to the secured creditors, there cannot be any order for specific performance. Hence, it was concluded that no charge has been created over the immovable properties. It was also held that the applicant is entitled only to simple interest at the rate of 17% per annum. Future interest was also awarded only at that rate.
Aggrieved with the findings of the Learned PO in the impugned judgement, the applicant has come up with this appeal challenging the impugned judgement for not having awarded the interest at the rate claimed, not avoiding the expenses claimed and for not having allowed the prayer for specific performance of the undertaking to create a mortgage with respect to the immovable properties belonging to the company.
The original 4th defendant in the suit was substituted with the assignee of the debt. The 4th of respondent alone has appeared and filed a reply stating that the appeal is not maintainable and requires to be dismissed. None of the other respondents has contested.
Heard Mr Rohit Gupta, the learned counsel appearing for the Appellant, Mr Sujeet Kurup, the learned counsel appearing for Respondent No.1 and Ms Sonal Sanap, the learned counsel for the 4th respondent. Records perused.
The Appellant is aggrieved by the findings in the impugned judgement on three points. The Appellant is aggrieved that interest was awarded only at the rate of 17% per annum without any quarterly rests. On perusal of documents, it is seen that the contractual rate of interest is only 17% and being a money suit, I find nothing wrong with the impugned judgement awarding an interest rate of 17% alone. Future interest is also awarded a similar rate since it is a commercial transaction. The relevant clause 2.2 pertaining to the interest In Article II of the Corporate Rupee Loan Facility Agreement between the company and the original lender ICICI Ltd reads thus:
“2.2 INTEREST.
i) The company shall pay to ICICI interest on the principal amount of the facility outstanding from time to time quarterly rests in each year on March 15, June 15, September 15 and December 15. The rate of interest for each Tranche of the Facility will be stipulated by ICICI on the basis of the repayment schedule As Set out in Schedule I, here to (“The Applicable Rate”), subject to the maximum of 3.5% per annum over the LTPR prevailing on the date of disbursement of such Tranche of the facility, plus applicable interest rate or other statutory levy, if any. Provided over the Applicable Rate shall not be less than the LTPR prevailing on the date of disbursement on such Tranche of the facility, plus applicable interest rate or other statutory levy, if any. The LTPR as on date is 13.50% per annum and the Applicable To rate as on date is 17.0% per annum.
ii) ICICI may, at its sole discretion make disbursements out of the facility pending creation of full and final security a specified in Article III hereof in favour of ICICI. In such event, the disbursements made by ICICI pending creation of such full and final security shall carry further interest rate of 1.05% per annum calculated from the date of disbursement of the First Tranche of the facility, the creation of such security.
iii) ICICI may, at its sole discretion, change the interest of the facility at the weighted average rate of interest on the disbursements made out of the facility. For the purpose of this clause “weighted average rate,” means the weighted mean of the rates of interest applicable to the facility.”
The finding of the learned PO in the impugned judgement is that – the account statement pertaining to the amount due from the borrowers specifies interest only at the rate of 17% and it has not been compounded quarterly. And the amount of ₹ 96,63,423 is shown as the other charges. That amount has not been specifically classified and therefore, the learned PO, declined to grant that amount. Even though there is a clause in the agreement that the Appellant is entitled to claim further interest at the rate of 1.05% per annum till the creation of such security, the said amount has not been calculated and claimed in the account. Under the circumstances, I find that the learned PO was justified in not awarding interest at the rate of 18.5% and also not awarding interest compounded quarterly. I find no reason to interfere with the finding of the learned PO on that count.
The next point that arises for determination is whether the Appellants are entitled to claim a decree for specific performance on the basis of the purported agreement signed by the borrowers. As noted by the learned PO, it is a unilateral and unregistered agreement. Nothing is stated regarding the consequences of not executing a mortgage deed as agreed. Under the circumstances, the prayer for specific performance was also rightly declined by the learned PO. Moreover, a decree for specific performance cannot be enforced by a Debt Recovery Tribunal. What comes within the jurisdiction of a DRT is only the realisation of debts. Seeking for the decree of specific performance of the contracts is a civil remedy which can definitely not be exercised before the DRT. Hence, I find no reason for interfering with the finding of the learned PO on that count too.
In the result, I find no merits in the appeal. The appeal is therefore to be dismissed and I do so.
All Miscellaneous Applications, if any, are dismissed as infructuous.