Indian Overseas Bank And Ors. vs R.P. Mittal And Ors.

J.M. Malik, J

The instant appeal has been preferred against the order rendered by the learned Trial Court dated 19.11.2010. Notice under Section 13(2) of the SRFAESI Act dated 15.7.2009 goes to reveal that a demand in the sum of Rs. 2,78,86,335.63 w.e.f. 15.7.2009 was raised from the respondents who are husband and wife respectively. The learned Trial Court gave the following directions:

Hence, it is hereby being ordered that the claim case of the Bank has been allowed against the two defendants on admission; and hence, it is being further ordered that the two defendants who are the joint petitioners shall pay rupees two crores fifty-nine lacs twenty-five thousand and sixty-eight along with the simple, reducing balance based interest at the rate of ten per cent instead of the contractual twelve per cent from Sunday, March 1, 2009 till the full payment through the eight equal, quarterly instalments; out of which the first quarterly instalment shall be cleared by such petitioner-defendants during the last week of the month of February, 2011 and the other seven of which shall be cleared like the first instalment.

The argument urged by the learned Counsel for the appellants has four prongs. First of all, the amount demanded in the notice was reduced for which no reasons were given in the impugned order. Secondly, contractual rate of pendente lite and future interest was not granted. Thirdly, pendente lite and future interest was granted w.e.f. 1.3.2009 whereas NPA amount was taken into account w.e.f. 31.12.2008. Lastly, respondents have been given enough time to pay off the said loan. The payment of instalments has been sprawled between the day of impugned order and February 2013. Learned Counsel for the appellants submitted that the very purpose and object of the SRFAESI Act regarding immediate recovery stand defeated.

On the other hand, Counsel for the respondents submitted that the said loan was obtained for agricultural purposes. The respondents are residents of Sainik Farm which is an agricultural land though the respondents have also constructed the house there. It was also pointed out that the respondents were previously one of the directors of M/s. Hotel Queen Pvt. Ltd. The abovesaid loan was obtained in order to regularise the accounts of Hotel Queen Pvt. Ltd. meaning thereby that as a matter of fact M/s. Hotel Queen Pvt. Ltd. was a debtor and the respondents were working as creditors qua him. The learned Counsel for the appellants did not dispute the arguments raised by the Counsel for the respondents that the above said loan was taken against property but argued that the respondents did not regularise the accounts of M/s. Hotel Queen Board Ltd. and utilised the same for some other purposes.

I find force in the arguments urged by the Counsel for the appellants to some extent. It is difficult to fathom as to why the learned Trial Court reduced the notice amount. The respondents are liable to pay a sum of Rs. 2,78,86,335.63 as on 15.7.2009. In case the respondents have deposited some amount subsequently, the said amount shall be adjusted towards the loan.

Now I advert to the pendente lite and future interest. The contractual rate of interest is 12% p.a with monthly rests. However, the abovesaid interest appears to be on the higher side. In the cases reported in State Bank of India v. Sarathi Textiles & Ors., II (2009) BC 696: 2008 (3) SCALE 409, C.K. Sasankan v. Dhanalakshmi Bank Ltd., : 1 (2009) CLT 368 (SC): I (2011) BC. 122 (SC):2009 (2) D.R.T.C. 320 (S.C.), and Sardar Associates and Others v. Punjab & Sind Bank and Others, : 111 (2009) BC 705 (SC): III (2009) CLT 186 (SC): AIR 2010 SC 218 it was held that it is the discretion of the Court to award the pendente lite and future interest which has to be exercised fairly. Section 19(20) of the DRT Act runs as follows:

19(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 up to the date of realization or actual payment, on the application as it thinks fit to meet the ends of justice.

No rate of interest under the circumstances can be made a rule of thumb.

However, the other facts are to be taken into consideration. This cannot be said to be an agricultural loan. The loan was obtained for commercial purposes. Moreover, the money was not utilised for the purpose for which it was taken. It was utilised for some other purposes which were never disclosed. A distinction has to be drawn between the housing loan and the commercial loan. Both cannot be dealt with the same yardstick. Pendente lite and future interest @ 10% p.a. simple for housing loan may be just and reasonable but for the commercial purpose it appears to be on the lower side. Even the prime lending rate (PLR) is more than 10% p.a. simple. The Counsel for the appellants submitted that as a matter of fact the borrowers/respondents are living in a lush-plush area and are the former hoteliers. Keeping in view all the facts and circumstances, I hereby direct that the respondents would pay the abovesaid principal amount as detailed in the notice under Section 13(2) of the SRFAESI Act along with pendente lite and future interest @ 14% p.a. simple till full realisation on the reducing balance basis. All the amount deposited by the respondent should be adjusted.

Now, I come to the period for payment of loan. The respondents had obtained the abovesaid loan in the sum of Rs. 5,75,00,000/- on 24.1.2006. The respondents did not adhere to the repayment discipline and the Bank had to issue letter requesting the respondents to repay the remaining amount of loan due on 22.8.2008. Other letters were sent to the respondents on 27.9.2008, 25.11.2008, 12.2.2009, 28.4.2009, 4.7.2009 and ultimately notice under Section 13(2) of the SRFAESI was issued on 15.7.2009. Notice under Section 13(2) of the SRFAESI Act clearly reveals that the borrowers are required to pay the amount within two months. The said two months expired in September, 2009. From September 2009, the learned Trial Court had granted them instalments till the year 2013. Consequently, the very purpose of fast recovery of amount under the SRFAESI Act stands defeated. The grant of enough time to the borrowers is detrimental to the interest of the Bank as well as the public, since the public money is involved. In case the respondents get too much time for payment of loan, they also get the benefit of paying the simple pendente lite and future interest for a long time. The borrowers are not required to pay contractual rate of interest. Consequently, the borrowers get the benefit of both the worlds. They get enough time and have to pay simple rate of interest for years together. This concept goes against the agreement which was entered into between the parties.

To epitomise an argument it can be said that the respondents waddled out of their commitments and should not be permitted to take its undue advantage.

I, therefore, grant two months more time to the respondents to deposit the entire remaining amount failing which the Bank shall be at liberty to proceed against the respondents as per law under the SRFAESI Act. In case the said amount is paid within the prescribed time, the appellants will issue a no dues certificate in favour of the respondents and return their title deed within a period of a week.

The appeal stands disposed of.

Copies of this order be furnished to the parties as per law and one copy be sent to the learned DRT forthwith.