Allowed

Earc v. M/S Nishi Land Park Limited

DRT27 Aug 2024TA/1297/2022

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal allowed the Transferred Application for recovery of dues. The Court held that it could not reopen the principal amount decided by the DRAT and awarded the contractual interest rate of 20.06% per annum as Section 34 of CPC does not apply.

What did the court decide?

Direction to respondents to pay interest @ 20.06% p.a. on the principal amount of Rs. 7,96,49,202/-.

Earc versus M/S Nishi Land Park Limited — Banking and Recovery | DRT (2024)

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Before SUSHIL KUMAR RASTOGI, Presiding^Officer Debts Recovery Tribunal-Il, Delhi

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TA no. 1297 of 2022

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EDETWEISS ASSET RECONSTRUCTION^{COMPANY LTD. VS} M/S NISHI LAND PARK LTD. & ORS.

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Reservedon :05.08.2024

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Pronounced on : 27.08.2024

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Edelweiss Asset Reconstruction Company Ltd.-^{Applicant bank} Vs.

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1.M/s Nishi Land Park Ltd.

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2.Shri Paresh S.Shah

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3.M/s Computility Computer Systems^{(P) Ltd. - Defendants}

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Present: Shri Sudhir Kumar Makkar, Sr. Advocate along with Ms. Manisha Aggarwal, Counsel appears for applicant bank. Shri Sanjeev Bhandari, counsel along with Sh. A.K.Sharma, counsel for defendants.

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FINAL ORDER

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This T.A. has been filed by the applicant FI on 16.07.1999 through Shri S.S.Gaur, Dy. General Manager of the applicant bank, under Section 19 of the Recovery of Debts Due to Banks and^Financial Institution Act, 1993 against the defendant no.¹ to³ for recovery of a sum of Rs.7,96,49,2021- together with cost, charges and^{pendentellite} and future interest at the contractual rate of interest from^date of filing of this T.A. till the realization^{in full.}

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The brief facts of the case are^that at^the request of the defendant no.1, the^applicantFI sanctioned a term loan to the defendant^{no.l for an} amount of not exceeding^{Rs.500 lakhs for settingup} of a water-cum- amusement^{park at village Venegoan,} Raigarh District, on the^{Bompqy-PqpeHighway as per}

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terms and conditions mentioned in the^{letter of} intent No.TF|PN678|96'4LL7 datd^{24.09.96. The} defendant no.1 entered into a^{loan agreementon} 08.11.1996 at New Delhi. The defendant^{no.1 secured} the aforesaid loan together with^{interest and other} monies payable under the loan agreement by^{a deed} of hypothecation dated 08.11.1996^{creating a first} charge in favour of the applicant on all^{its moveable} properties more pafticularly described in the schedule attached to the deed of^{hypothecation dated} 08.11.1996 ( save and except^{book debts) including its} moveable^plant and machinery,^{machinery spares,} tools and accessories and^{other moveable both} present and future. The defendant no.2 has secured the aforesaid loan together^{with interest,additional} interes! commitment charges front-end^fees liquidated damages and^all other^{monies by executing} a deed of^guarantee on^{08.11.1996, guaranteeing the} repayment of the aforesaid^{loan. To furthersecure the} repayment of the loan the^{defendant no.2 & 3 pledged} their 25,00,000 and^{2,4O,OOOequityshares} respectively held in defendant^{no.1 with the applicant} and also executed agreement^{for pledgeof shares on} 08.11.1996. The defendant^{no.2 & 3 under the said} agreement for^pledge further^{agreed that if the loan} amount under the loan agreement^{dt. 08.11.1996} remain unpaid, in that case^{the applicant without} giving any notice to the defendant no.2 & 3 can^sell the said shares or any ofthem^{and apply the proceeds} thereof firstly towards the^{paymentof any costs} incurred by the applicant in connection^{with the} pledge by the defendant no. 2 & 3 and thereafter^the balance can be adjusted towards^{the repayment of} interest of the aforesaid loan,^{commitmentcharges}

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front-end fees liquidated damages and^other monies payable under the agreement and^further balance if so remains can be appropriated^and adjusted towards 1 the instalment of^{principalamount.} Further, the defendant no.1 created in favour of^the applicant a moftgage by deposit of title^{deeds with the} applicant on 20.12.1996 in^respect of^{its immoveable} propefties comprising of all that pieces and^parcel of land comprised in R.S.No.t9l3, t9ls,^1816, t9,^2UL, 2212, 2413, 2414A and 24148 together admeasuring about 3-65-05 hectares equivalent to 9^acres of^land of village Vinegoan being lying and situated^near village Vinegoan of Taluka Khalapur, Distt. Raigarh, Maharashtra to^give all buildings, structures, errection etc. constructed and or to be constructed thereon present and future and the plant and machinery attached to the earth or^permanently fastened to anything attached to the earth, fixtures and fittings errected/ installed or to be errected or installed therein and every part thereof. Further, the defendant^no.2 created in favour of the applicant mortgage by deposit of title deeds with the applicant on 20.12.1996 in respect of his personal immoveable^properties comprising of all that pieces and^parcels of land, comprised in (a) R.S. No. 22 & 23 together admeasuring about 5-29-05 Hectares equivalent to 10.5 acres or thereabout and (b) R.S.No.11, L5,t6,20,2412, 2415, 2416, 28P, 28l4l30ltA and 30llB, together admeasuring about 8.50 acres, and both (a) and (b) altogether admeasuring about¹⁹ acres or thereabout of village Vinegoan together with buildings, structures and constructions thereon both present and future lying and situated near village Vinegoan of Taluka Khalapur, Diglt. RaiOarh within the 4A

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jurisdiction of Maharashtra together with all buildings, structures, errection etc. constructed and / or^{to be} constructed thereon^present and future^and the^plant and machinery attached to the eafth or^permanently fastened to anything attached to the earth,^fixtures and fiftings errected/ installed or to be^{errected or} installed therein and every^part thereof.^The defendant no.1 filed the^particular of^{chargeswith the} concerned Registrar of Companies.

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It is further submitted that the defendant^no.1 enjoyed and utilized the Loan facility, but failed to maintain the financial discipline and failed to repay the due amounts as^per terms and conditions of the^loan agreement. The applicant bank requested the defendants to regularize the loan account^{by visits and} letters, but there was no response from the defendants. Therefore, the applicant bank served^a recall notice dated 23.06.1998 to the defendant^no.1, demanding the amount due as on that date , but failed to recover the same. Fufther, the applicant issued a letter 04.08.1998 to the defendant^{no.2 the} guarantor of the loans invoking the guarantee by demanding^payment of the amount. Similarly applicant FI issued the notice dt. 02.09.1998 to the^pledgers namely defendant no.2 & 3 invoking the security of pledge. However, the defendant no.2 & 3 also failed to pay the monies demanded in the above notice/s. As on 15.07.1999 an amount of Rs.7,96,49,2021-^{is due} and^payable by the defendants^jointly and severally to the applicant towards loan of term Rs.500^{lakhs along} with interest, and other monies^payable as^per the loan agreement. Thus, the^present T.A. is^preferred by the applicant FI to recover its dues. The Ld. Counsel of

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applicant has relied^{upon the judgements Syndicate} Bank v. Mrs. K. Chandrakala^{Bhakta & ors. 2002,SCC} online Kar 227, Union^{Bank of India V. Narender} Plastics 1990, SCC online^{Guj 65, CentralBank of India} V. P.R.^garments India tut.^{Ltd. 1985,SCC onlineGuj} 43, Kamlesh Bhargava^{Hospitaland Research Centre} (h/t.) Ltd. and Ors. Vs. Debts Recovery^Appellate Tribunal and ors. reported^{in MANU/PH} 1266512072, State Bank of India V.^{Yasangi VenkateshwaraRao} (1999) 2 SCC 375, Canara Bank^{Vs. Marshall Cycle &} Ors 72(1998) DLT 295, Indian^{Bank Vs. Blue Jaggers} Estate Ltd. & Ors.⁽²⁰¹⁰⁾ 8^{SCC 129, Syndicate Bank} Vs. West Bengal Cements^{Ltd' (AIR 1989Delhi 107} Delhi High Court), Dr.^{E. Prabakaran and AnotherVs.} Lakshmi Vilas Bank^{Ltd. 2011 (2) DRTC 695), IARC Vs.} M/s UP State Textiles^{Corporation Limited and ors by} Hontle DRAT, Allahabad^{in Appeal no. 135/2018.}

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On notice by this Tribunal, defendants Put counsel and filed written appearance through statement.

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The defendant no.1^{filed written statement. In} its written statement it is submitted^{by the defendant} no.1 that this Hontle Tribunal^{has no jurisdictionto} entertain the^present application^{as the entire causeof} action has arisen outside^{the territorial jurisdictionof} this Hon'ble Tribunal^i.e. at^{Mumbai and also in District} Raigad, Maharashtra.^{The mortgaged propertysituated} in District Raigad,^{Maharashtra whichis outside the} jurisdiction of this Honble Tribunal. Therefore, the present application is not maintainable. It is^submitted that the applicant FI^{has disbursed only Rs.475 lakhs} and that too not within^{the time,as a result thereof}

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the projected costs of the entire^{project risen upto} Rs.17.25 crores. It is submitted^{that due unfoftunate} death of the^young boy in^{the park on 15.01.1999} resulted into the closure of^{the park for substantial} period. The said facts were brought to the^{notice of} rethe Applicant Applicant with a a^request for

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rethe Applicant Applicant with a a^request for schedulement of the^{payment of the loan. However,} the Applicant acted in highhanded^{fashion and} compelled the Defendant^no.1 to^dischargeits liabilities as^per the Agreements. It^{is submitted that} the as a result of the^{non-availability of the additional} finances and/or re-schedulement of^{the paymentof} the loan, the entire^{project got delayedfor a period of} two years which ultimately^{resulted into severe} financial set back and ultimately this defendant^could not comply with the obligations under^{the loan} Agreement. It is submitted that the^documents annexed to the application^{were also not properly} stamped and the stme were^{got to be signedby this} Defendant when they were under^{economy duress. It} is submitted that in the Memorandums^{of depositing} title deeds there is a discrepancy^namelythe documents relate to the date 20.12.1996,^however, the signature at the bottom is of^{23.12.1996 which} prima facie shows that the documents are fabricated and got up and the Applicant^{is estopped from relying} upon the same. It is submitted that^{even the} particulars of claim annexed to the application does not reveal clear^picture of date of the^{disbursement of} the^principal amount and the rate of^{interest claimed} thereon from which^period to^{which period. Unless the} aforesaid^particulars are^{furnished the Applicantis not} entitled to^proceed with the^{presentapplication' It is} submitted that if the reliefs^{claimedin the application}

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are granted then ultimately would^result into the closure of the^park and the lives of¹⁵⁰ workers/staff working in the said^park will be jeopardized and their family members will greatly suffer. It is submitted that the recalling of the loan by notice dated 23.06.1998 is nothing but a^pressure tactics and the same is also contrary to the norms and object of the Memorandum of Association of the Applicant which empower to grant the loan for development of the tourism. It is fufther submitted that though the loan was sanctioned for an amount of Rs.500 lakhs admittedly only Rs.475 lakhs were disbursed. There is no explanation for withholding sum of Rs.25 lakhs. It is fufther submitted that there was delay in disbursement of the loan though agreed for which the projected costs of the entire project were enhanced and the water park project was delayed. It is further submitted that the interest claimed at the rate of 20.60/o is also exorbitant and the additional interest at the rate of 1.05o/o per annum till the creation of the security is also exorbitant. It is submitted that in the particulars of claim there is no break up and/or details furnished to clariff the rate of interest and the penal interest charged by the Applicant from defendant no.1. Therefore, it is submitted that he present TA of the applicant is liable to be dismissed.

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The defendant no.2 & 3 also filed the written statement submitting therein that this Honble Tribunal has no jurisdiction to try and entertain the present application in as much as the entire cause of action has arisen outside the territorial jurisdiction of this Hon'ble Tribunal i.e. at Mumbai and also in District Raigad, Maharashtra. The mortgaged property situated in District Raigad, Maharashtra which is tA

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outside the^purview of this Honble

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Tribunal.

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Therefore, the^present application^is not^{maintainable'} It is submitted that the^principal Debtor^namelyM/s Nishi Land Park Limited have disputed their^liability'It is submitted that the^guarantee executed by^these defendants cannot be enforced^{unlessthe applicants} exhaust all its remedy against the^principal debtor.^It is submitted that the Applicant has failed to^comply with their part of the obligation and only disbursed Rs.475 lakhs and that too not in time which^ultimately resulted into the increase in the^{projected costs} of the entire park. It is submitted that applicant FI^has claimed exorbitant rate of interest contrary to the various policy set up by the Government of India^as also by the Government of Maharashtra for development of tourism in backward areas and^the same is also contrary to the main object and aims of the Applicants to^promote tourism and allied enterprises. It is submitted that the applicant^has not given details of the particulars of their claim specifying the dates of the disbursement, rate of interest charged and the^penalty interest charged, save and except the mere calculation of payment due which is also contrary to the various^guidelines issued by the Hontle High Court and the Honble Supreme Court of India and Banking and Financial Corporation Act. It^is submitted that the Deed of Guarantee and Agreement for Pledge were obtained from these defendants without explaining the contents thereof and therefore the same is unenforceable in law. It is further submitted that even the said documents were also not properly stamped and as such the same cannot be produced in evidence and as such no reliance can be placed thereon. It is submitted that the guarantee can

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not be enforced unless all the^{remedy againstthe} Defendant No.l is^{exhausted. It is submittedthat the} shares were^pledged only^{as a collateral security with} a clear understanding^{that the same will be kept only} as an escrow and the^{Exhibit P-5 to the Application} was also done under the^{heist and executed underthe} economy duress. However,^{the same was improperly} stamped and therefore^{no reliance can be placed on} the same. It is submitted^{that the deposit of Title} Deed is highly disputed as^{there is a discrepancy of} the date of execution and the^{date of signature and} the same is a fabricated and^{got up document. It is} submitted that the demand^{notice dated 04.12.1998} and further notice dated^{02.09.1998 allegedto have} been delivered was contrary to^{the terms agreedand} the figures and the amount^{claimedtherein is also not} admitted being exorbitant and^{inflated one and these} defendans are not liable to^{pay the same and present} application of the applicant FI^{is liable to be dismissed} against defendant no.2 & 3.

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The Ld. Counsels of defendants^{has relied upon} the^judgements "Calcutta^Port Trust^{Vs. ShalimarTar} Products Ltd. reported as Supp.(2) SCC 513,^Nahar Industrial Enterprises Limited Vs. Hong^{Kong And} Shanghai Banking Corporation^{2009 Supp.(8)SCC} 646, Standard Chaftered Bank V.^{MSTC Limited as} 2020 SCC Online SC 69, Harjinder^{Singh s/o Waryam} Singh vs The Recovery Officer-Il and^{others,Central} Bank of India vs. Ravindra and others^2001SCC Online SC 1266, State Bank of^India vs.^Sarathi Textiles and others, 2009 Supp ( 16)^SCC 328,^CK Sasankan vs. Dhanalakshmi Bank Ltd as^{2009 Supp} (11) SCC 60, Pegasus Assets Reconstruction tut^Ltd vs. Arun Sogani and others WP-(c)^{No.2067of 213}

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Order dated 03.04.2023, Punjab National^{Bank vs.} Satinder Kumar Chopra & Anr. As 2009 SCC^{Online Del} 3136, Amish Jain & Anr. Vs. ICICI Bank Ltd. as^ILR 20t2 6 DELHI377.

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Both^parties have filed their written^submission.

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From^perusal of the entire^record it^{is clear that} the applicant has filed the^present OA for^recovery of the due amount against the defendants. The^present OA was dismissed in default on 27.02.2015.^The applicant filed restoration application for^seeking restoration and condonation of delay in filing^the restoration application. This Tribunal vide order^dated 25.04.20L9 has dismissed the application^for restoration and condonation of delay in^{filing the} restoration application. Against the said order^the appeal was^preferred before the Honble^{DRATand the} Hontle DRAT in the appeal no.28012019^{vide order} dated 04.08.2020 has set aside the^{order dated} 25.04.2019 and has^passed the final^{order for} recovery of sum of Rs.7,96,49,2021- and directed^for issuance of interim recovery certificate^{for the above} amount. Therefore, it is clear that the^{present original} application has been finally decided by^{the Hon'ble} DRAT by invoking Order IX^Rule 8 of^{the CPC and} therefore, this Tribunal has to decide^{only the} remaining part i.e. the interest which the^applicantis entitled to recover from the defendants.^{Beside this,} the Ld. Counsel of the defendants has^made submission that the amount that is^{recoverable from} the defendants is not Rs.7,96,49,2021-^{but is limited to} the amount of Rs.4,75,00,000/-. It is submitted^that this Tribunal should consider the^{recoverableamount} as Rs.4,75,00,000/- and calculate the^{interest on the} 9)

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above principle amount and direct the^defendants to pay the amount of the interest after^decidingthe rate of interest. On the other hand the^{Ld. counselof} the applicant has submitted that the Hontle^{DRAT has} already decided the amount which^{is recoverablefrom} the defendants and therefore, this Tribunal^{has no} jurisdiction to go into this aspect and pass any order against the amount decided by the Honble^{DRAT. It is} submitted that once the^principle amount that^is to^be recoverable is finally decided by the Hon'ble DRAT, this Tribunal cannot go into this^question and cannot pass any order against the order passed by the Honble DRAT. In this regard I have considered the rival contentions of both the^parties. The main contention of the Ld. counsel of the applicant is that the Honble DRAT has decided the amount to be recoverable as Rs.7,96,49,2021- invoking the provisions of the Order IX Rule 8 of CPC and judgement passed by the Honble Supreme Couft in Calcutta Port Trust Vs. Shalimar Tar Products Ltd. 1991 Suppl.(z) SCC^page 513. It is submitted that as per provisions contained under the Order IX Rule 8 and as per mandate^given by the Hon'ble Supreme Court in the above^judgement the amount that is to be recoverable is only Rs.4,75,00,000/- It is also submitted that during 16.07.1999 to 27.05.2015 a sum of Rs.9,73,75,00,000 stood^paid/ recovered as per details admitted by the applicant. It is submitted this amount includes an amount of Rs.2,38,00,000/plus Rs.3,60,75,0001- total Rs.5,98,75,0001- being the forfeited amount of^proposed sale notice dated 01.L2.2012. It is submitted that as^{per provisions} contained in Rule 9 sub clause (5) the amount which has been forfeited due to non.deposit of the entire

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amount by the auction^purchaser, shall^be adjusted towards the loan of the borrower and^shall not go to the credit of the account of the^Secured Creditor and therefore, the admitted^{principle amount} will come only to Rs.4,75,00,000/-. In this regard^I have^perused the record. From^perusal of^{the order} passed by the Honble DRAT it is clear that the Hontle DRAT has^passed the final order and^{has directed that} the recovery certificate may be^issued for amount^of Rs. Rs.7,96,49,2021-. This Tribunal has^{no jurisdiction} to decide that the Hon'ble DRAT^has not^adjustedthe above amount as claimed by the applicant^{in deciding} the final^principle amount that^is to^{be recoveredfrom} the defendants. It is also clear that the^defendants have filed a Writ Petition before the Hontle^{Delhi High} Court against the order^passed by the^Hon'bleDRAT. It is also clear that the defendants^{have subsequently} withdrawn the Writ Petition with liberty to^file appropriate application before the^{Hon'bleDRAT.From} perusal of the record it is also clear that the applicant has filed a review application of the order^dated 04.08.2020 which is still^pending adjudication^before the Hontle DRAT. Therefore, this^{Tribunal is of} constant view that this Tribunal^{has no jurisdiction to} go into the details as to whether the amount that has been forfeited by the Secured Creditor^{will be adjusted} against the^principle amount due from the^defendants or not. This Tribunal also does not^{have the} jurisdiction to decide as to whether any amount that has been claimed by the applicant to be^{deposited by} them has been actually adjusted while^{calculating the} final principle amount to be^paid by the^defendants. Once the Hontle DRAT has finally decided^the principle amount which is to be recoverable from the EJ

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defendants, this Tribunal^{cannotreopen the same} and cannot hold an^{adversefinding on the issue. The} review is still^pending before^{the Hon'ble DRAT and} the parties may agitate^{the samebefore the Honble} DRAT and the same can^{be adjudicated by the Honble} DRAT in accordance with^{law. Therefore,this Tribunal} is of the view that this aspect^{cannot be decidedby} this Tribunal and it is concluded^{that the total principle} amount that is to be^{recoverable is Rs.7,96,49,2021-.}

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The next^point that is to^{be decidedby this} Tribunal is the rate of interest^{whichthe applicant FI is} liable to recover from the defendants^{during the} pendency of the OAffA till realization of the^same' The Ld. counsel of the applicant^{has submittedthat} as per agreement entered^{into between the partiesthe} rate of interest is 20.60%^p.a. with^{quarterly rest. It is} submitted that the applicant^is entitled^{to recover the} same from the defendants at the^{same rate of interest} which has been contracted between^{the pafties. It has} been submitted that Section 34^{of the CPCdoes not} apply to the recoveries under the^{RDB Act and} therefore, this Tribunal is not bound^{by the provisions} contained in Section 34 of the CPC. It^{is submitted} that as per^{pronouncements} made by^{the Honble} Supreme Court and the Honble^{High Court in different} judgements the Tribunal should award the contractual rate of interest. It is submitted that the^contractual rate of interest should be the rule and a depafture^is rare exception. On the other hand the^{ld. counsel of} the defendants has submitted that^{the Tribunalshould} decide the rate of interest keeping^{in view of the} entire circumstances of the case and^{in appropriate} cases may fix a rate of interest that^{is much belowthe} contractual rate of interest. It is;ubmitted^{that in the}

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present case the contractual rate of interest is very high and therefore,^{this Tribunal} should^pass an order directing the^{defendantsto pay} at any rate of interest as decided^by the^{Tribunal as it} deems fit in the^present circumstances.^{In this regard} the Ld. counsel of the applicant^has filed^{the above} judgement. On the other side the Ld. counsel of the defendants has filed the above^judgements. I^have perused the judgements passed by the Honble Supreme Court and the Honble High Court^{in the} above mentioned cases. From^perusal of^{the above} judgemenb it is clear that the provisions of Section 34 of the CPC are not applicable in the^recovery certificate issued under Section 19 of the^{RDB Act.} Therefore, the directions contained in Section 34 of CPC will not apply in the^{present case and the Tribunal} has to decide the rate of interest as^{per mandate} given by the Honble Supreme Court and the Hontle High Court in the above mentioned cases.

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From^perusal of the above^judgements it^{is clear} that the Tribunal has discretion to make^departure from the ordinary rule that the contractual^{rate of} interest should be directed to be^paid butⁱⁿ the^cases where it appears to the Court that the contract^is unfair and unconscionable and its^{enforcementwould} be shocking to the conscious of the Court, the^Court can direct for a lesser rate of interest. The^relevant portion of the judgement passed by the Honble Gujrat High Court in Union Bank of India Vs. Narender^Plastic 1990 SCC online Gujrat^page 65 is reproduced^below:-

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"Z The trial court ought to have reah2ed that contractual rate of interest should be the^{rule and} deprture a rare exception. This is so bmuse t- EN

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ordinarily the couft cannot and would uary the terms of contract arived at betwen the^parties. The mutual righb and obligatbns arising out of the contract are requrred to be respxted and enford by the coutts. The court annot and would not uary the terms of contact and impose a new contrad on the^parties. This is the basb under lying principle conbind in the prouisrbns of Section 34 of C.P. Code.

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It is true that the court has discretion to make departure from the aforesaid ordinary rule. But such caes would be only those in which it manif*tly appeao to the court that the contract s unfarr and unconsionable and ib enforcement would be shocking to the consience of the court The parties wking uariation in the rate of interest agred to be patd should show by cogent evidence that the rate of interest agred to be pard s usunbus, excessive or unreasonable. Unless thrs rs shown rt would not be just and proper for the court to uary the terms of contract as regards the payment of interest and impose new contract upon the paftia. fn aes wherein the amount aduanced is to be rrcoverd by public financr?l instifutions, if the courts were to determine the reasonable rate of the interest, it would be extremely hazardous and it may even lead to disastrous consequence."

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L2. I have also gone through the judgement passed by the Hon'ble Supreme Couft in Central Bank of India, Kutch Vs. P.R.Garments Industries h/t.Ltd. (1985 SCC online Guj 43) The relevant portion of the^judgement is reproduced below:-

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"8. Prouiso to S. 34, Civil Procdure Code insertd by Amendment in 1976 provides th.at yltere the lbbility in

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relation to the sum, so^{adjudgd had arisen out} of a commercial transactio4^{the rate of such fufther} interest may exceed six^{per cent per annum,but shall} not exceed the contractual^{rate of interest or where} there is no contractual rate,^{the rate at which moneys} are lent or aduanced by Nationalid^{Banl<sin relation} to commercnl tranactions; a^{commerct'al transction} is defined to be connectd^{with industry trade or} business of the^party incuring the^ltability- undoubtedty, this was a^{commercialtransaction and} therefore, ordinarily the rate of^{interest shall be} contractual rate or such rate at^{which moneysshall be} lent by the Nationalisd Banks in^{relation to} commercial transactions; otherwise it^{will amountto} the Court^granting credit facility^{of somebody elseS} money, at a lower rate of interest.^{The Bank would not} have aduancd a commercial loan at a^{lessr rate of} interest Beause the^party has committd defaultⁱⁿ payment and the bank is required to file a suit against such party, such a defaulting^party annot^{have the} benefit of lesser rate of interest^{Thereforq ordinarily} in such transactions, the mntractual rate of^interest should be the rule and departure a^{rare exception."}

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I have also^gone through the^{judgementpassed} by the Hontle Supreme Court in State^{Bank of India} Vs. Yasangi Venkateswara Rao⁽¹⁹⁹⁹⁾ 2 SCC^{375. The} relevant portion of the^judgement is^reproduced below:-

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"8. We also find it difficult to agrre with^the obreruation of the High hurt that normally^{when a} security is offered in the case of mortgage of^property, charging of compound interest would be regordd^as excessive. Entering into a moftgage is a^matter of

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contract betwen the^parties. If the^pafties agre that in resryt of the amount advancd^against a mortgage compound interst^{will be paid, we fail to} understand as to how the coutt^{can possiblyinterfere} and reduce the amount of interest^{agred to be pard} on the lun s taken.^{The mortgagingof a property is} with a view to secure the loan and^{has no relation} whatsoever with the^quantum of^{interest to be} charged."

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I have also^gone through^{the other judgements} and in the other^{judgementsalso Hon'ble Supreme} Court and Honble High^{Court has taken the same} view. Therefore, it is clear^{that the rule is that the} contractual rate of interest^{should be awardedas} pendentelite interest and only in^exceptional circumstances the same^{may be reduced' From} perusal of the above^judgement it is also^{clear that} mere weak financial^{condition of the borrowerwill not} entitle him to claim^{lesserrate of interest'In view of} the above^principle of^law I^{have considered the} contention of the Ld. counsel of^{the defendants.From} perusal of the entire record and the sanction^{letter it} does not appear that the^{agreementwhich has been} contracted between the^{parties isunfair or} unconscionable. Therefore,^{this Tribunalis of the view} that in the^present circumstances^{of the case the} applicant is entitled for the^{contractual rate of interest} and there is no^ground to^{reducethe rate of interest.}

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The next contention of^{the Ld. counselof the} applicant is that the rate of^{interest is 20.60/op.a. at} quarterly rest whereas the Ld. counsel of^the defendant has submitted that^{it is not quarterlyrest'} In this regard I have^gone through^{the record. From}

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perusal of the record it is clear that as^per Annexure 12 of the letter dated 24.09.t996^paperno. 10 of the list of document filed by^{the applicant bank it} is clear that in the interest column it^{has been} mentioned as below :-

¶97

"NPL shall^piy to the^{TFCI interest on principle} amount of the loan(s) ouBbnding^{from time to time} at lending rates^preuailing on^{the date of exrcutionof} toan/bridge loan agreement^{The curentlendingrate} of TFCI is 20.60/o^{per annum, inclusive of interest tax.} NPL shatt also^pay 1.05% additional^{interest till the} time of creation of secunty.^{Such interestshall be} payabte quarterty each^year on 19 lanuary, 19^April 19 Julyand 19 October."

¶98

Again in Article II^{at 2.2 interest has been} mentioned as below:-

¶99

"The borrower shalt^pay to the^{lendercintereston the} principte amounB of the loan outstanding^{from time to} trme quarterly in each^{year on January 15 April 15} Juty 15 and October¹⁵ at^{the rate set out in Schdule} IV hereto. The tendeq^{however, resrue the right to} reuise the rate of interest after^{giving notice of the} same to the borrower."

¶100

In the Schedule^IV the^{rate of interesthas been} mentioned as 20o/o^per annum^{exclusiveof interest} tax.

¶101

From^perusal of the^{abovedocuments it is clear} that the interest rate^{payable on the principle amount} was fixed as 20.060lo^per annum^{and it was not at} quarterly rest. Therefore, this Tribunal is of^{the view} that the applicant is entitled^{for the intereston the} /.

S.)

TA 1297/2022

principle amount of Rs.7,96,49,2021- @ 20.060/o^per annum.

¶106

The Ld. counsel of the^{defendant has also} contended that in the O.A.^{the applicanthas not} specified the rate of interest^{which he is entitled. It is} submitted that in the^{prayerclause the applicant has} only mentioned that the^{applicantmay be awarded} contractual rate of^{interest. Therefore,it is submitted} that the applicant^{cannot claim the interest@20'060lo'} But the contention of the defendants^{has no force'} The applicant FI has specifically^{sought the relief that} the applicant may be^{awarded contractual rate of} interest during^pendency of^{the OA therefore,the} applicant can claim^{the contractualrate of interest} which is @ 20.060/o.

¶107

In the light of the above^{discussions,the presentTA} deserves to be allowed.

¶108

ORDER

¶109

I hereby allow this^{T.A. of the ApplicantBank} and direct the defendant^{nos' 1 to 3 to pay jointly and} severally to the applicant^{bank the interestat the} contractual rate of interest @^{20.060/o per annumon} principle amount of Rs.7,96,49,202/-^{within a periodof} 30 days from the date of^{filing of the OA till realization.}

¶110

In case of failure to^{deposit the above} amount within the^{stipulated period, the same shall be} recovered from the^{sale of the mortgaged propefties} comprising of (i) all^{that pieces and parcel of land} d<

¶111

¶112

TA 129712022

¶113

comprised in R.S.No.18/3, t9ls, LBl6,^19, 2lll, 2212, 2413, 2414A and 24148 together^admeasuring about 3-65-05 hectares^{equivalentto 9 acresof land of} village Vinegoan being lying and^{situated near village} Vinegoan of Taluka Khalapur,^{Distt' Raigarh,} Maharashtra including buildings, structures,^errection and the^plant and machinery^{attached to the earth (ii)} all that^pieces and^parcels of^{land, comprisedin (a)} R.S. No. 22&23 together admeasuring^{about 5-29-05} Hectares equivalent to 10.5^{acres or thereaboutand} (b) R.S.No.11, L5,16,20,2412, 2415,^2416,28P, 28l4l3}llA and 30/18, together^{admeasuring about} 8.50 acres, and both^{(a) and (b) altogether} admeasuring about 19^{acres or thereabout of village} Vinegoan together with buildings,^{structuresand} constructions thereon^{both presentand futurelying} and situated near^{village Vinegoan of Taluka Khalapur,} Distt. Raigarh Maharashtra^{together with all buildings,} structures, errection and the^{plant and machinery} attached to the earth^{and from the sale of} hypothecated assets^{and sharespledged by defendant} no.2 & 3. In case of^{short fall, the sameshall be} recovered from the sale of^{personal movableand} immovable assets of^{the defendant no. 1 to 3'}