A.V.S. Raja vs Indian Bank and Others

P. Sathasivam, J.—The petitioner challenges the order dated August 1, 2003, made in R. A. No. 2 of 2003 on the file of the Debt Recovery Appellate Tribunal, Chennai arising out of the order in O. A. No. 27 of 2001 dated June 19, 2002, on the file of the Debt Recovery Tribunal II, Chennai.

Heard learned senior counsel for the petitioner as well as the contesting first respondent.

In view of the limited issue raised, we are of the view that it is unnecessary to go into the factual matrix as stated by the petitioner as well as the first respondent. It was contended before the Debts Recovery Appellate Tribunal that though the loan availed of by the petitioner was an agricultural loan at concessional rate of interest, however, the respondent-bank charged interest at 19.89 per cent., which is not applicable to agricultural loans. Taking note of various aspects including the admitted factual position that the loan availed of by the petitioner was not utilised for agricultural purpose, but it was diverted to commercial business, the Tribunal reduced the interest to 10 per cent. instead of 19.89 per cent. only for pen-dente lite and post-decree periods. Not satisfied with the said order, the petitioner has filed the present writ petition.

Learned senior counsel appearing for the petitioner by drawing our attention to the fact that since the petitioner had repaid substantial amount towards loan amount, viz., Rs. 18 lakhs and in view of the fact that the sanctioned amount could not be used for agricultural purpose due to various reasons, including the legal objection, the appellate tribunal ought to have reduced the interest considerably instead of reducing it to 10 per cent. According to him, even interest at 10 per cent. is a heavy burden on the petitioner. On the other hand, learned senior counsel appearing for the contesting first respondent-bank, by drawing our attention to the admitted factual position as evident from the fax message dated March 14, 2001, contended that having received a huge amount by way of loan for the purpose of agricultural development, inasmuch as the petitioner invested the said money in the capital market, the petitioner is not entitled to any concession in the rate of interest. He further pointed out that even the appellate tribunal, in spite of these aspects, has reduced the interest rate to 10 per cent. and hence, no further reduction is warranted.

We considered the rival contentions.

The appellate tribunal, mainly relied on the fax message dated March 14, 2001, available at para. 3 of its order, which amply shows that on receipt of loan amount from the bank for agricultural purpose, the petitioner diverted the same and invested the entire money in the capital market. No doubt, the petitioner has stated that he had invested the money in the capital market through the port-folio management believing the words of one H. Srinivasan, share broker and that due to the volatility in the market, the entire money was lost just in a period of six months. The above information makes it clear that though the loan was advanced only for agricultural purpose, the same was diverted for commercial purpose. In such event, the petitioner cannot claim that he is only liable to pay the rate of interest specified for agricultural loans.

Learned senior counsel for the petitioner by relying on the decision of the apex court in the case of Central Bank of India v. Ravindra [2001] 107 Comp Cas 416 : [2001] 7 Supreme 764, contended that the Debts Recovery Appellate Tribunal has ample powers to reduce the interest or in certain cases to award no interest. There is no dispute regarding the power of the Appellate Tribunal with regard to waiver of interest, however, it depends upon various factors and the conduct and bona fide efforts of the person, who borrowed the loan from the financial institution. We have already referred to the factual conclusion arrived at by the Appellate Tribunal. Inasmuch as the petitioner had diverted the funds for commercial purpose, the Tribunal cannot be expected to reduce the rate of interest as claimed by the petitioner. For the same reasons, we are unable to accept the contention of learned Counsel for the petitioner. In fact, taking note of various aspects such as, repayment of money, etc., the Appellate Tribunal has reduced the rate of interest to 10 per cent. from 19.89 per cent. and we find no adequate reason to reduce the rate of interest further, as claimed by the learned senior counsel for the petitioner. On the other hand, we are in agreement with the conclusion arrived at by the Appellate Tribunal. Consequently, the writ petition fails and the same is dismissed. No costs.