NON-REPORTABLE

IN THE SUPREME COURT OF INDIA

  CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.2160 OF 2007

U.P.FINANCIAL CORPORATION & ORS.     … APPELLANTS

VERSUS

M/S SRI BHARAT PAPER UDYOG P.LTD. & ORS. … RESPONDENTS

J U D G M E N T  

Aftab Alam, J.

1 This appeal, by grant of special leave, at the instance of UP Financial  

Corporation and its officials is directed against the judgment and order dated  

September 7, 2006 passed by a division bench of the Allahabad High Court  

on  a  writ  petition  (C.M.WP.  No.  43800/2006)  filed  by  the  respondent  

company. By the impugned order, the appellants are directed to issue the no-

dues certificate to the writ petitioner-respondent, release to it the title deeds  

of the disputed plot and to hand over to it  the possession of the property  

(mortgaged  in  the  favour  of  the  appellant  Corporation).  The  High Court  

order is based on the premise that it was a term of the one time  settlement  

between the two sides that  on payment of  the first  installment  under the  

settlement by the respondent, the Corporation would release in its favour a  

piece of land, 4000 sq. yds. in area, which the respondent might sell or give  

on lease in order to facilitate payment of the remaining installments under  

the OTS. The High Court  found that contrary to its  obligation under the  

OTS, the appellant Corporation did not release the land in question in favour  

of the respondent. The respondent, therefore, could not be held responsible  

for the delay in payment of the installments under the OTS and the liability  

of interest on delayed payments could not be fastened on it. The High Court  

held that the Corporation’s insistence on realizing from the respondent the  

amount of interest  on delayed payments of the installments (a substantial  

sum!) even after  it  had paid the full  amount under  the  OTS was unjust,  

unreasonable,  bad  and  illegal.  Hence,  the  directions  to  the  appellant  

Corporation as noted above.

2. The respondent company took a loan from the appellant Corporation.  

It defaulted in repayment of the loan and with accumulation of interests the  

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outstanding dues grew to a very large sum. According to the appellant, by  

the time the respondent was allowed the facility of OTS, the accumulated  

interests amounted to almost Rs.3 crores, which the Corporation waived off.  

3.       Be that as it may, the respondent made an application to the appellants  

for  a  one  time  settlement  of  its  outstanding  dues.  The  application  was  

accepted by the appellants and intimation was given to the respondent vide  

letter  dated  August  5,  2002  containing  the  terms  of  the  settlement.  The  

relevant terms of the settlement as stipulated in the aforesaid letter are as  

under –

“1. That the settled amount of Rs. 28,50,000/- under OTS shall  be paid as under: (i) Earnest Money (Already Paid)                      Rs. 2,85,000.00 (ii) Down payment within one month  i.e. upto 04.09.2002                                           Rs. 4,28,000.00 (iii) Balance within 8 equal quarterly        installments of Rs. 2,67,125/- each,        commencing from 15.11.2002                     Rs. 21,37,000.00                                                                           ---------------------

                                                   Total    Rs. 28,50,000/-                                                                 ---------------------

The repayment schedule as mentioned above should be strictly  adhered to and any deviation will be liable for cancellation of  facilities granted under One Time Settlement while you will be  entitled for interest free period upto 20.09.2002 Interest @ 16%  shall be payable on outstanding OTS amount after interest free  period  which  shall  be  payable  quarterly  on  20th March,  20th  June, 20th September and 20th December.

1. That the installments of OTS fixed will not be in  any case linked with the sale of assets of the unit  

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and the OTS installments fixed on schedule dates  will be paid by the party on the due dates.”  

                          (emphasis added)

4. In  the  letter  dated  August  5,  2002  by  which  the  respondent’s  

application  for  one  time  settlement  of  its  dues  was  accepted  by  the  

Corporation, there is absolutely nothing to suggest that on payment of the  

first  installment  within  one  month  i.e.  by  September  4,  2002,  the  

Corporation would release the piece of land in question to the respondent so  

as to facilitate payment of the subsequent installments by it by selling or  

leasing out the land.

5. According  to  the  respondent,  however,  the  terms  contained  in  the  

letter dated August 5, 2002 are not conclusive on the issue. The one time  

settlement was arrived at after a protracted negotiation involving, besides the  

respondent company and the appellant Corporation, the Divisional Udyog  

Bandhu,  Meerut.  Further,  in  course of  the  negotiations  certain terms had  

been  arrived  at  which  were  finally  formalized  in  the  OTS.  The  counsel  

appearing for the respondent invited our attention to a letter dated July 3,  

2002 addressed on behalf of the respondent to the Additional Director of  

Industries (WZ), Meerut. In this letter, after referring to the decisions of the  

Divisional Udyog Bandhu, Meerut, dated November 1, 1999 and March 14,  

2001 and further referring to the discussions held between the parties, it was  

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stated  that  the  OTS with  the  Corporation  would  be  finalised  and  settled  

under certain terms mutually agreed between the parties as enumerated from  

paragraph 1 to 4 of the letter. Paragraph 4 on which the counsel laid great  

stress reads as under –  

“(4) Balance 75% of settled O.T.S. amount is payable within  2 years in 8 equal quarterly installments upto July 2004  with applicable simple interest as per O.T.S. matrix and  guidelines  of  the  Corporation  after  release  of  spare  factory land of 4000 sq. yds. as per settlement.”

(emphasis added)

6.         The counsel also referred to a letter dated August 22, 2006 from the  

General  Manager  of  the  Corporation  to  the  Executive  Director,  Udyog  

Bandhu, Lucknow. In paragraph 4 of the letter there is a reference to the  

release of 4000 sq. yds. of land of the respondent’s unit, subject to certain  

conditions.  

7.        He also referred to the minutes of the regional industrial meeting held  

on June 22,  2006 under the Chairmanship of the Industrial  Development  

Commissioner, UP. In those minutes too there is some reference that even  

after  having  received  25% of  the  OTS amount  the  Corporation  had  not  

released the land in question in favour of the respondent.

8.       The main emphasis of the counsel for the respondent, however, was  

on the letter  dated July 3,  2002 and it  was contended that  the condition  

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contained in paragraph 4 of that letter (as quoted above) must be construed  

as one of the conditions of the OTS, binding upon the Corporation.

9.       Counsel for the appellants, on the other hand, submitted that there was  

no  such  condition  in  the  OTS.  On  the  contrary,  the  OTS  made  a  clear  

stipulation as to levy of interest on delayed payments of the installments.

10.      In view of the divergent stands of the parties we asked the counsel for  

the Corporation to produce the original records, including the original copy  

of  the  letter  dated  July  3,  2002,  that  was  submitted  on  behalf  of  the  

respondent to the Corporation. In pursuance of our direction,  the original  

record was produced before the court.  

11.       In the original copy of the letter dated July 3, 2002 paragraph 4 reads  

as follows –  

“(4) Balance 75% of settled O.T.S. amount is payable within  2 years in 8 equal quarterly installments upto July 2004  with applicable simple interest as per O.T.S. matrix and  guidelines of the Corporation.”

After the above, which is in type, the following (on which the entire case of  

the respondent is based) appears to have been added by hand –

“after  release  of  spare  factory  land  of  4000  sq.  yds.  as  per  settlement.”  

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12.    A bare perusal of the letter dated July 3, 2002 as it was originally  

submitted  to  the  Corporation  and as  it  is  contained  in  the  Corporation’s  

records,  makes  it  clear  that  the  respondent  had  acknowledged  that  after  

payment of the first installment the balance 75% of the OTS amount would  

be  cleared  off  in  eight  quarterly  installments  upto  July  2004  and  the  

condition of release of the land was not there in the letter as it was originally  

submitted  to  the  Corporation.  The  release  of  land  is  a  later  addition,  is  

evident from the fact that the cut off date July 2004, for clearing off the  

entire OTS amount does not match with that condition.  

13.   In any event, in regard to the payment schedule, the respondent was  

bound  by  the  terms  of  the  OTS.  Further,  the  terms  of  the  OTS  were  

independent of any condition that might have come from the respondent in  

course  of  negotiations  preceding  the  OTS  or  any  condition  that  the  

respondent might have put in its application for grant of OTS. The terms of  

the OTS would also not be controlled or altered by any decision taken in any  

regional industrial meeting chaired by the State’s Industrial Commissioner.  

The terms of the OTS would continue to bind the respondent until those are  

duly changed and amended by the Corporation.

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14.    For the reasons, discussed above, we are satisfied that the respondent  

was not entitled to the relief claimed on its behalf and the writ petition filed  

in the High Court was liable to be dismissed. The order of the High Court is,  

accordingly, set aside and the writ petition filed on behalf of the respondent  

is dismissed. The appeal is allowed with costs amounting to Rs. 20,000/-.  

            …………………………J.          (Aftab Alam)

      …………………………J.         (R.M. Lodha)

New Delhi; September 8, 2011.

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