AI Structured Summary
Not yet generated for this judgment
Judgment
Ranjit Singh, J
M/s. Woody's Hotels Pvt. Ltd. (WHPL, for short) had obtained a credit facility of Rs. 3 crore from the appellant Tourism Finance Corporation of India Ltd. (TFCI, for short) in the year 1995 for setting up a 3-Star Hotel at Ernakulam, (Kerala). The borrower repaid the outstanding amount of Rs. 255 lac on 8.3.2000. Appellant TFCI, still, raised a demand of Rs. 30,88,621/- through the letter dated 22.5.2000 as foreclosure, charges. When the respondent WHPL declined to make this payment, the appellant filed an O.A. on 20.8.2010 for the recovery of Rs. 87,12,223/- along with pendente lite and future interest. The Tribunal has dismissed the O.A. so filed by the appellant and has directed the appellant to release the title documents to respondent WHPL. Aggrieved against this order, the appellant has filed the present appeal. As already noticed, respondent No. 1 WHPL had availed term loan not exceeding Rs. 3 crore on 3.4.1995. Respondent No. 1 executed loan documents like credit facility application, deed of hypothecation, irrevocable power of attorney, loan agreement etc. Respondent No. 1 had agreed to create security in favour of the appellant by creating a mortgage and a charge in the form satisfactory to the appellant, of the company's immovable properties, i.e., leasehold rights comprised in survey Nos. 707/3 (pt), 710/01 (pt) and 2575/01 (pt.) etc. Respondents 2 to 6 furnished personal guarantee. The loan was repayable with interest @ 18% p.a.
Respondent No. 1 approached the appellant for foreclosing the term loan account and paid principal outstanding of Rs. 255 lac on 8.3.2000. The appellant made a demand of Rs. 30,88,621/- towards prepayment premium on 25.5.2000. This claim of prepayment premium was made in terms of Clause 4.8 of the loan agreement. In the O.A., the appellant had reproduced Clause 4.8 of the loan agreement which reads as under:-
"The borrower shall not prepay the outstanding principal amount(s) of the Loan(s) in full or in part before the due dates except after the conversion right is exercised in full or has elapsed and after obtaining the prior written approval of the lender/Lead institution (which may be granted conditionally) including inter-alia on payment of premium for early redemption of the account as may be decided by Lender/Lead Institution"
Respondent No. 1 had challenged the notice issued by the appellant by filing a writ petition before the High Court of Kerala. The said writ petition was disposed of as not maintainable. Respondent No. 1 challenged the said order by filing an appeal before the Division Bench. The said appeal was disposed of by observing that it would be open for respondent No. 1 to make representation before the Board of Directors of the appellant offering the amounts they will pay for them to consider for settlement. The Court further observed that the issue of limitation, if any, raised should be considered after excluding the period during which the matter was pending before the said Court. Appellant had, thus, filed the O.A. seeking recovery of the amount as already noticed.
Respondents filed reply in response to the notice and raised various preliminary objections. Respondents also challenged the territorial jurisdiction of the Tribunal to entertain the O.A. The main plea, however, was that respondent No. 1 had prepaid the amount as per agreement and nothing was payable to the appellant. Their plea further was that Clause 4.8 of the loan agreement relied upon by the appellant had been modified/altered by the appellant Corporation without notice to the respondents, with ulterior motives.
The Tribunal accordingly considered the issues on the basis of objection raised by respondent No. 1. The Tribunal below has held that the O.A. filed against respondent Nos. 2 to 6 is time-barred. The Tribunal has not accepted the plea of the appellant that respondent Nos. 2 to 6 had not approached the High Court and hence, the O.A. against them would be within limitation. The Tribunal, however, has held that respondent No. 1 had made prepayment on 6.3.2000 and appellant had raised the demand on 8.3.2000. As per the Tribunal, the period of limitation would commence from 8.3.2000 and not from the date when the appellant had invoked the guarantee of respondent Nos. 2 to 6.
The Counsel for the appellant would contest this finding returned by the Tribunal to urge that the period of limitation would commence from the date when the guarantee given by respondent Nos. 2 to 6 was invoked. This issue, in my view, would be immaterial. Once the Tribunal has dismissed the O.A. on the ground that no claim is maintainable against the principal borrower, the invoking of guarantee in this case would not arise. Concededly, the guarantee could be invoked if the claim against the principal borrower had been surviving. Once the principal borrower is not held liable to make any payment, the issue of invoking of guarantee would be immaterial. Reference here can be made to the judgment in the case of Union Bank of India v. Chairman, Debts Recovery Appellate Tribunal, II (2011) SLT 790 : 2011 (8) ADJ 88, where it is observed that liability of surety gets automatically terminated when liability of principal debtor is extinguished.
Otherwise, I have heard the Counsel for the parties. The loan agreement dated 8.8.1995 was exhibited before the Tribunal below and was marked as Exhibit AW-1/5. Counsel for the appellant as well as respondents have taken me through Clause 4.8 of this agreement which reads as under:-
"The borrower shall not prepay the outstanding principal amount(s) of the Loan(s) in full or in part before the due dates except after the conversion rights is exercised in full or has elapsed and after obtaining the prior written approval of the lender/Lead institution (which may be granted conditionally)."
This actual Clause 4, 8 of the agreement referred to and relied upon by the appellant has undergone a change. This was the agreement which had been produced before the Tribunal below by the appellant. There is marked difference in the clause actually applicable and the one relied upon by the appellant in the O.A. The actual clause of the agreement provides that the borrower shall not repay the principal outstanding in full or in part before the due dates except after conversion rights is exercised in full or has elapsed. The significant words relied upon and pressed by the Counsel for the appellant in Clause 4.8 relied upon by them read "including inter-alia on payment of premium for earlier redemption of the amount as may be decided by Lender/Lead institution)" are missing in the actual clause of agreement which was produced. The aspect of prepayment premium which has been pressed in the O.A. actually is not there in the clause of the agreement which was produced before the Tribunal. The Tribunal has also considered the conversion which is defined in Clause 2.6 of the agreement. The Tribunal is fully justified in relying upon the Clause 4.8 of the agreement and ignoring the clause which was produced and relied upon by the appellant in the O.A. based on which the entire case was built by the appellant. After noticing this variance, the Tribunal has rightly come to the conclusion that the appellant is not justified in claiming the prepayment charges on the ground that they had not consented for prepayment premium.
To be fair to the Counsel for the appellant, he has invited my attention to the communication initiated where it has been mentioned. But the parties have to be governed by the agreement which they had entered into and are not dependent upon any other correspondence which may have been exchanged between them.
The Tribunal, while forming this view, has also taken support from the decision of the Hon'ble Delhi High Court in the case of DLF Limited v. Punjab National Bank, 180 (2011) DLT 435, rendered while deciding W.P.(C) 8520/2010 on 27.5.2011. The Hon'ble High Court in this case has noticed that the Bank as a State has to be a model litigant and it could not be expected to take technical pleas encouraging litigation. The Court has also relied upon various judgments of the Hon'ble Supreme Court where it has been observed that statutory authorities ought not to raise frivolous and unjust objections, nor act in a callous and high handed manner and could not behave like some private litigants. This was a case where the Bank had sought prepayment charges of Rs. 20 crore on a loan which was the subject-matter of litigation.
I can see no logic in the plea that a person who wants to prepay the loan should be discouraged to do so by imposing prepayment charges. The submission by the Counsel appearing for the appellant that they (appellant) had borrowed this money to lend it to the respondents is also immaterial. In any event, the rights of the parties are to be governed by the terms of the agreement and in terms of the agreement the appellant has no case to claim this prepayment charges on the ground that prepayment could be made only on being approved by the appellant. The plea by the appellant, therefore, is not justified.
No case is made out for interfering in the impugned order. The appeal is accordingly dismissed.