Haryana Financial Corpn. vs State Bank Of Bikaner And Jaipur And Ors.

Ranjit Singh, J

Appellant Haryana Financial Corporation (for short, the Corporation) is aggrieved against the order passed by the Tribunal below, whereby its prayer to claim enhanced amount has been declined. Pursuant to the recovery proceedings on the basis of recovery certificate obtained by respondent State Bank of Bikaner and Jaipur, the property belonging to M/s. Shiv Ganga Organics Chemicals (respondent No. 2) was put to public auction on 6.10.2009 and was sold for Rs. 223.10 lacs. Appellant who had first charge over this property lodged a claim before the Recovery Officer (R.O.) of Rs. 67,30,399/- along with security charges as on 10.11.2009 which was the date for confirmation of sale, along with future interest till the disbursement of the claim. During re-audit of the loan account, it was found that penal rate of interest had not been levied due to oversight from 9.10.1997 to 11.4.2001. The appellant Corporation accordingly revised its claim to Rs. 90,54,711/-. This was done on 19.1.2010. The R.O. has held the appellant Corporation entitled to interest @17.5% with half yearly rests on sum of Rs. 22.44 lac and @ 18.5% with half yearly rests on the balance amount of Rs. 19.46 lac along with penal interest on the amount in default in the light of judgment of the Apex Court in the matter of Central Bank of India v. Ravindra & Ors., I (2002) BC 150 (SC) : VII (2001) SLT 400 : IV (2001) CLT 127 (SC), which could not be capitalized. The R.O. had thus held that the appellant Corporation was entitled to a sum of Rs. 50,22,109/-.

Aggrieved against this order, the Corporation impugned the same in appeal before the Tribunal below on the ground that the order was without jurisdiction. It was pleaded that the appellant Corporation was entitled to recover future interest from the date of confirmation of sale till the date of final disbursement of sale proceeds. Plea was that the appellant was entitled to receive contractual rate of interest. The appellant accordingly would plead that the R.O. had exceeded his jurisdiction by deciding the distribution of the recovered fund. Appellant, therefore, prayed for setting aside the order passed by the R.O. and for accepting its claim of Rs. 90,54,711/- along with future interest.

The Bank had opposed the prayer made by the appellant Corporation. Bank would plead that the appellant had arbitrarily increased the claim from Rs. 46,52,828/- as on 3.9.2008 to Rs. 67,30,399/- as on 10.12.2009 and further to 90,54,711/- as on 19.1.2010. As per the Bank, this was without any justification and was with mala fide intention. The Bank would also challenge the right of the Corporation to maintain the appeal as it had never challenged the sale of a secured assets at any stage.

The Tribunal below, after considering the submissions made before it. has partly allowed the appeal. The Tribunal has held that the contract entered into between the appellant Corporation and the borrower was not subject-matter before the R.O. and, therefore, R.O. was not called upon to adjudicate upon on the rate of interest. The Tribunal therefore did not find it proper on the part of the R.O. to reduce the rate of interest relying upon the judgment in the case of Ravindra (supra) and accordingly set aside that part of the order. The Tribunal directed the R.O. to calculate the interest at the rate contracted by the parties and put in by the appellant in their claim application.

At the same time, the Tribunal below did not find the action of the appellant corporation in filing a revised claim justified on the ground that it could not levy proper rate of interest due to over sight for the period from 9.10.1997 to 11.4.2001. The observation by the Tribunal is that the appellant had all the time in the world from 2001 onwards to rectify the defect at any time before lodging the original claim which was done on 10.11.2009. This fact apparently came to the notice of the appellant Corporation due to re-audit done after 10 years. The Tribunal has not found this action to be justified and has rather termed it as mala fide or lacking in bona fides. It is also noticed that the appellant has not made available the revised audit report in support of the lapse on its part which had necessitated submission of enhanced claim.

The Counsel for the appellant, however, has been rather vehement in pointing out that it was not a case of enhancement of a claim but it was a bona fide mistake which though may be due to lapse on the part of the officials but could not be termed as mala fide or lacking in bona fides. In response to a query by the Tribunal, the Counsel for the appellant conceded that interest has rightly been charged at the contractual rate for the period from 9.10.1997 to 11.4.2001 but the penal rate of interest @ 3% with quarterly rests could not be added in the claim. The difference is only on account of penal interest having not been added whereas interest agreed otherwise had been taken into account while submitting the claim. The Counsel would plead that mainly because of lapse on the part of the officials of the appellant Corporation, it should not be made to suffer the loss of this huge amount which is a public money.

I have deeply considered the submissions made before me. It may be to an extent loss of some money to the Corporation, but it certainly not a loss of public money as such, as the amount is with the respondent Bank which is also a public institution dealing with public money. The manner in which the appellant had been increasing the amount to lay a claim on the basis of property being under its first charge shows that there has been some mistake on their part in properly calculating the amount which was due to the appellant. It is not one correction but claim had earlier been corrected. Still the mistake is being pleaded for which the appellant can not blame any one but itself. For fault on its part, the blame would be on it appellant and on this basis it cannot blame anybody else

As I can see there is no loss as such caused to the appellant as this increased claim is on account of penal interest which is over and above the rate of interest at which the appellant has made calculation while making the claim. The justification for claiming penal rate of interest is not forthcoming. Whether the appellant was entitled to claim penal interest has not been a subject-matter of adjudication. The appellant has simply made a claim on that basis before the R.O. In this background, I see no justification in permitting the appellant to claim penal rate of interest once it has claimed an amount by adding interest in terms of the contractual rate. Even otherwise, if entitled to this Tribunal would have power in the matter of grant of interest under Section 19(20) of the RDDBFI Act is as under:

"(20) The Tribunal may, after giving the applicant and the defendant an opportunity of being heard, pass such interim or final order including the order for payment of interest from the date on or before which payment of the amount is found due upto the date of realisation or actual payment, on the application as it thinks fit to meet the ends of justice."

Thus this Tribunal can pass any final order including payment of interest from the date on or before the payment of amount is found due up to the date of realization as it thinks fit to meet the ends of justice. Once the appellant has claimed interest as per the agreed rate and has not justified their claim on the basis of penal rate of interest, the additional claim made by the appellant would appear unjustified The submission by the Counsel for the appellant on the basis of law laid down in the case of Punjab Financial Corporation v. M/s. Surya Auto Industries, IV (2009) CLT 375 (SC) : IX (2009) SLT 181 : AIR 2010 SC 266, cannot be accepted as observation in this case are made in entirely different context. The Hon'ble Supreme Court in this case was dealing with the order passed by the High Court which had allowed simple interest @10% when there was no challenge to the rate of interest by the respondent therein. The Hon'ble Supreme Court observed that the High Court could not have suo motu altered the terms of agreement. The issue in this case was power of the Financial Corporation to take possession and sell of defaulting unit under the Financial Corporation Act. The Supreme Court has not considered the power of the Tribunal constituted under the RDDBFI Act, which is a special Act, and the powers under the said statute. The power of the Tribunal under Section 19(20) which confers a discretion on the Tribunal to award interest has rather been considered by the Constitution Bench in the case of State Bank of India v. M/s. Sarathi Textiles & Ors., II (2009) BC 696 (SC) : 2008 (3) SCALE 409. In view of the above noted discussion, I am not inclined to interfere in the impugned order passed by the Tribunal and would dismiss the appeal.