M/s. Piara Singh Cold Storage vs Canara Bank and Another

Alok Singh, J.—Petitioner has approached this Court under Article 226 of the Constitution of India seeking writ of mandamus directing the

respondent-bank to settle the case of the petitioner as per the OTS guidelines framed by Reserve Bank of India. Brief facts of the present case,

inter alia, are that petitioner firm has applied and was granted an Agricultural Term Loan for the purpose of modernization of the cold storage, of

Rs. 25,00,000/- on 30.3.2000 for a term of seven years; the Agricultural Term Loan was secured by the equitable mortgage of property

measuring 18 kanals, comprised in khata No. 3/6, 7 khasra No. 377 min South (28 kanals 18 marlas), 377 min North (41 kanals - 0 marla), out

of total land measuring 69 kanals 18 marlas, in the name of Sh. Ramandeep Singh and Sh. Charandeep Singh, situated at village Rehana Jattan,

Tehsil Phagwara, District Kapurthala (Punjab); petitioner has repaid an amount of Rs. 6,00,000/- in different installments and last installment was

paid on 7.4.2001; thereafter no installment was paid to clear the outstanding amount; petitioner-firm was classified as ''Non-Performing Asset'' on

14.7.2001 and thereafter Original Application No. 158/2002 was moved by the respondent-bank for the recovery of its-dues before the Debts

Recovery Tribunal; mean while bank has also initiated proceedings u/s 138 of the Negotiable Instruments Act, 1881, as a few cheques issued by

the petitioner towards outstanding amount were dishonoured; petitioner applied for One Time Settlement, however, it was not accepted, therefore,

petitioner has approached this Court.

Written statement to the writ petition was filed by the respondent-bank, inter alia, stating that petitioner had applied and was granted Agricultural

Term Loan of Rs. 25,00,000/- for specific purpose i.e. for utilizing the same towards the modernization of existing cold storage by incorporating

additional refrigerator equipments; as per the terms and conditions of the agreement, petitioner was duty bound to submit detailed project

completion report after utilization of the Agricultural Term Loan amount released in favour of the petitioner; as per condition Nos. 5 and 6 of the

agreement, petitioner-borrower undertook that loan amount would be used only for the purpose for which it was sanctioned and any part thereof

would not be used for any purpose whatsoever; it was further stipulated in the agreement that if borrower itself breaches any of the terms and

conditions stipulated by the bank while sanctioning the loan, bank shall have right to recover the loan amount in one go and shall have right to

initiate other legal proceedings. It has further been contended by the bank that petitioner had diverted the loan amount and has mis-utilized it for the

purpose of construction of marriage palace and has constructed the marriage palace on the spot. It has further been averred that since the

petitioner is guilty of breach of the terms and conditions of the Agricultural Term Loan and has diverted the loan amount for construction of the

marriage palace, therefore, petitioner borrower was not entitled for any One Time Settlement and writ petition deserves to be dismissed.

We have heard Mr. Vibhav Jain, learned counsel for the petitioner, and Mr. Aalok Jagga, learned counsel for the respondents.

This is not in dispute that petitioner was granted and released Agricultural Term Loan and was never granted any loan for commercial purposes

i.e. for the construction of marriage palace. It is also not disputed that as per the then policy of the bank, rate of interest for agricultural loan was

less and rate of interest for commercial loan was on the higher side. On being asked repeatedly as to why petitioner has diverted the Agricultural

Term Loan towards the construction of marriage palace i.e. commercial activity, learned counsel for the petitioner has stated that since there was

down fall in the market and cold storage was not running in profit, therefore, marriage palace was constructed on the spot. No replication has been

filed to the effect that Agricultural Term Loan was not diverted for raising the marriage palace.

Since petitioner is guilty of breach of terms and conditions of the Agricultural Term Loan, therefore, he cannot ask for One Time Settlement and

should not be permitted to approach this Court for equitable relief. Petition is devoid of any merit and is frivolous. Same deserves to be dismissed

outrightly with exemplary cost. Accordingly, the petition is dismissed with a cost of Rs. 5,000/-, which shall be paid by the petitioner to the High

Court Legal Services Committee within 15 days from today.