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Judgment
S.N.H. Zaidi, J
This appeal impugns the judgment and following order dated 22.7.2011 passed by the learned P.O. of the DRT-I, Chandigarh in O.A. No. 86/2007:
The application for recovery of Rs. 1,77,67,655.00 is disposed of. The parties are directed to perform their respective obligations as under-
(i) The defendants are directed to pay the balance of suit amount i.e. Rs. 47,655.00 along with pendente lite and future interest @ 10% p.a. from the date of filing of the O.A. i.e. 3.9.2007, till 21.10.2011 and if the defendants fail to pay this amount by the stipulated date, the applicant corporation shall be entitled to recover the said amount along with pendente lite and future interest @ 12% p.a. from 22.10.2011 till realization.
(ii) The defendants are also directed to pay amount of pendente lite and future interest calculated @ 10% p.a. on a sum of Rs. 1,77,67,655.00 from the date of filing of the O.A. i.e. 3.9.2007 up to 25.5.2009 and thereafter adjusting amount of Rs. 25,00,000/-, the amount of interest @ 10% p.a. shall be calculated on the balance amount from 26.5.2009 upto the date(s) of payment of sum of Rs. 1,52,20,000.00.
(iii) If the defendants fail to pay their liability as aforesaid order [(i) & (ii)] within 90 days from the date of decree latest by 21.10.2011, the applicant Corporation shall be entitled to recover the decretal amount alongwith pendente lite and future interest @ 12% p.a. from 22.10.2011 till realization.
(iv) The applicant Corporation is directed to supply statement of calculation within 15 days from the date of decree and the defendants are directed to pay the decretal amount within 90 days from the date of decree.
(v) The liability of the defendants will be joint and several.
(vi) No costs.
The facts of the case, in brief, are that on execution of an agreement between the appellant Corporation and the 1st respondent company, the appellant had invested Rs. 57 lacs in equity capital of the respondent company by way of direct subscription for financing its project for setting up a 50-bedded Multi-Specialty Hospital at Mohali. Respondent Nos. 2 and 3 deposited their shares in the company with the appellant as security vide letter dated 19.1.2000 and respondent Nos. 4 and 5 filed undertaking to buy back the shares to meet the short fall of capital for the completion of the project. As per agreement, the respondents were to re-purchase 1/3rd shares of the appellant in the 5th, 6th and 7th year from the commencement of the commercial activities of the company and in case of failure of commencement of production activity, its entire shares were to be repurchased in the 5th year along with interest at the rate of 16.5% p.a. to be compounded annually less dividend, if any. In accordance with the terms of the loan agreement, entire amount of Rs. 57 lacs was disbursed with effect from 21.1.2000 till 28.2.2000. Although the respondent company commenced its commercial activities in the year 2000, yet the respondents failed to buy back the equity subscribed by the appellant. Since despite sending various notices and legal notice dated 23.1.2000 the respondents failed to regularize the account, the appellant filed O.A. No. 86/2007 for the recovery of Rs. 1,77,67,655/- calculated up to 30.6.2007 with pendente lite and future interest @ 16.5% p.a. with annual rest. The respondents filed a Writ Petition (CWP No. 5425/2009) before the Punjab and Haryana High Court for directing the appellant to extend the facility of one time settlement (OTS) as they were specifically excluded from the said facility because the respondent company had shown profit in its last two years' balance sheet ending 31.3.2007 and 31.3.2008. The Hon'ble High Court issued notice and directed the writ petitioners to deposit Rs. 25 lacs, which was deposited with the appellant on 25.5.2009. The writ petition was, however, withdrawn by the respondents. During the pendency of O.A., the respondent deposited Rs. 1,52,20,000/- after admitting their liability as on the date of filing of O.A., i.e., 3.9.2007 and as such out of the claimed amount of Rs. 1,77,67,655/-, the respondents have paid Rs. 1,77,20,000/- to the appellant. The learned Tribunal below disposed of the O.A. with the order, as mentioned above. Feeling aggrieved with the order of reducing the pendente lite and future interest from 16.5% p.a. with annual rest to 10% p.a. simple and directing to adjust the deposited amount of Rs. 25 lacs towards the principal amount at the first instance and declining to award the cost of the case, the Corporation has filed the instant appeal.
I have heard Mr. S.L. Gupta, appearing for the appellant, and Mr. Anand Chhibber, Sr. Advocate, along with Mr. Ranjit Chawla for the respondents and perused the record.
Mr. Gupta restricted this appeal only to the question of pendente lite and future interest. He pointed out that the O.A. was filed for the recovery of Rs. 1,77,67,655/- as on 30.6.2007, along with pendente lite and future interest @ 16.5% per annum with yearly rests. He further pointed out that though the respondent company was making profits as per balance-sheets for the financial years 2007 and 2008, yet the respondents did not pay a single penny and did not repurchase the shares as per agreement, until the filing of the O.A. on 30.9.2007. He also pointed out that all the payments have been made during the pendency of the O.A. only either on the direction of the High Court or of the Tribunal below. Mr. Gupta contended that as the intention of the respondents had never been bona fide in repayment of the outstanding amount as per agreement, they are not entitled for exercise of any discretion in their favour qua the determination of the pendente lite and future rate of interest. Mr. Gupta has relied upon the observations of the Hon'ble Courts made in Punjab Financial Corporation v. Surya Auto Industries, IV : (2009) CLT 375 (SC) : IX (2009) SLT 181 : (2010) 1 SCC 297, Mathunni Mathai v. Hindustan Organic Chemicals Ltd., : 1995 (2) CCC 2 (SC), Syndicate Bank v. M/s. West Bengal Cements Ltd. and Others, : AIR 1989 Delhi 107 and Food Corporation of India v. Richh Pal Swami, PLR Vol. CLXI 192 in support of his contention.
Mr. Anand Chhibber, learned Senior Advocate, on the other hand, submitted that as against the investment of Rs. 57 lacs by the appellant Corporation in the equity capital of the respondent company, more than the claimed amount of Rs. 1,77,67,655/- has been deposited with it, which is more than three times of the invested amount. He also submitted that as initially the respondents had no sufficient funds, they could not buy back the shares of the appellant in terms of the agreement. According to him, the respondent company, which has set up a multi-specialty hospital and research centre at Mohali, is not involved in a normal commercial activity but is involved with the noble cause of health care of the public at large and is doing a public duty and as such the Tribunal below had rightly determined the rate of pendente lite and future interest. He also pointed out that this Tribunal, while holding that the determination of the rate of interest under Section 19(20) of the RDDBFI Act cannot be on the basis of rule of thumb, has observed in M/s. Septu (India) Pvt. Ltd. v. Canara Bank & Ors., II (2011) BC 168, decided on 15.2.2011 that the Tribunal may exercise its discretion in awarding pendente lite and future interest fairly and has fixed the interest @ 12% per annum on the basis of reducing balance and the said order has been upheld by the Hon'ble Punjab and Haryana High Court.
The Hon'ble Single Judge of the Delhi High Court in the case of Syndicate Bank v. West Bengal Cements Ltd. and Others (supra) has observed as follows--
The grant of interest at a rate lesser than the contractual rate as a matter of rule, will amount to giving premium to those who trade upon the money of others. The defaulting borrower, in my opinion, cannot be given the benefit of reduced rate of interest as a matter of rule only because the Bank had to resort to legal recourse on account of non-payment by the borrower except of course in exceptional circumstances. The existence of exceptional or special circumstances will depend on facts and circumstances of each case. One such illustration of exceptional or special circumstances can be where borrower made every sincere effort to pay but failed and grant of interest at contractual rate will render closure of his unit resulting in unemployment of large number of persons. Another such illustration can be the conduct of the creditor himself which may justify the grant of reduced rate of interest. I will not venture to lay down any broad proposition by multiplying these illustrations. Ultimately facts of each case will determine special or exceptional circumstances. No rigid or hard and fast rule can be laid down. In my opinion, in commercial transactions, grant of interest at the contractual rate ought to be the rule and grant of interest at reduced rate a rare exception. The same principles should be applied for determining the reasonable rate of pendente lite interest.
Since the other cases cited by Mr. Gupta, as mentioned above, do not lay down any guiding principle for determining the interest pendente lite or future, the observations made in those cases are not relevant for the purposes of determining the question involved in this appeal.
Section 19(20) of the RDDBFI Act empowers the Tribunal to make order qua the payment of interest for the period of pendency of the O.A. until the actual payment/realization thereof. As observed by the Delhi High Court in Syndicate Bank's case (supra), reduction of interest from contractual rate depends upon the exceptional and special circumstances of each case. Considering the circumstances of the present case, it appears that though the respondents made default in buying back the shares of the appellant Corporation, which could be on account of the then financial condition of the respondents, but this circumstance cannot be overlooked that the respondents did not raise any dispute qua their liability for payment of outstanding dues and instead of filing any written statement to the O.A., had filed an application offering for the settlement of the matter and had admitted their liability as on the date of the filing of the O.A., as claimed. They had deposited the entire claimed amount, barring a meagre amount of Rs. 47,655/-, during pendency of the O.A. and had also deposited that amount along with interest at the awarded rate on 19.10.2011 and as such a total amount of about Rs. 1.78 crores has been deposited by the respondents. The respondent company, by establishing a hospital and research centre, is involved in a noble cause of providing healthcare to the general public at large. In view of the facts and circumstances of the case, I am of the view that the payment of pendente lite and future interest calculated @ 14% per annum with yearly rest, instead of 10% per annum simple as awarded by the Tribunal, would meet the ends of justice. The order impugned is accordingly required to be modified to the said extent
It is, therefore, ordered that the pendente lite and future interest, qua the amounts mentioned at Serial Nos. (i) and (ii) of the impugned order as reproduced above, shall be calculated @ 14% p.a. with yearly rest. The appellant is directed to provide the copy of the calculation of the interest at such rate to the respondents within fifteen days from the date of this order. The amount of interest so calculated shall be deposited within sixty days from the date of receipt of copy of calculation, failing which, the appellant shall be entitled to recover such interest @ 16.5% p.a. with yearly rest from the date of default. The appeal stands disposed of accordingly. Copy of this order be furnished to the parties as per law.