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CASE NO.: Appeal (civil) 441  of  1999

PETITIONER: HIMACHAL PRADESH STATE FINANCIAL

       Vs.

RESPONDENT: VS.

DATE OF JUDGMENT:       31/10/2000

BENCH: K.T. Thomas & R.P. Sethi.

JUDGMENT:

SETHI,J. L...I...T.......T.......T.......T.......T.......T.......T..J

   The  only point in controversy in the present appeal  is as  to  whether  the respondent-loanee is also  entitled  to interest  at  the rate of 13% on the amount to  be  refunded which  was admittedly realised by the sale of his industrial unit, in excess of his liability in a loan transaction.

   Vide  the  impugned  judgment in this appeal,  the  High Court  has directed the refund of the excess amount, if any, after  calculations along with interest at the rate of  13%, the  rate on which the Corporation is stated to have charged the respondents on the amount of loan advanced to him.

   The  facts giving rise to the present appeal are that on his   request   the   appellant-Corporation  sanctioned   on 18.12.1983  a term loan of Rs.15 lacs against the total cost of the Project of the respondent for construction of a hotel unit.   The  appellant-Corporation  had also  sanctioned  an additional  loan  of  Rs.5.50 lacs on 6.8.1986.   The  total sanctioned  loan  of  Rs.20.50  lacs was  dispersed  to  the respondents  during  the period from 6.7.1984  to  1.5.1987. The  respondents  committed defaults in the payment  of  the loan  amount with the result that the  appellant-corporation took  over  the possession of the hotel under Section 29  of the  State  Financial  Corporations Act,  1951  (hereinafter called  "the  Act").   Notices for sale of  the  hotel  were advertised  in the Newspapers.  Four parties negotiated  the sale    of   the   assets   of    the   hotel    with    the appellant-corporation.   The  offer of M/s.Pradeep  Kapur  & Associates was accepted whereafter agreement of purchase was made  between  the  Corporation and the  purchaser  on  13th March,  1993.   The respondents challenged the sale  through Writ  Petition  No.515 of 1993.  During the pendency of  the writ petition it was submitted that one Rana Iqbal Singh was prepared to purchase the property for Rs.60 lacs in case the vacant  possession  was delivered to him.  Such a  statement made  in  the court was recorded in the proceedings  of  the court dated 23rd December, 1993.  In view of the offer of 60 lacs  as price of the unit, the Corporation presumably could

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not  disperse  the excess amount out of the amount  received from M/s.Pradeep Kapur & Associates to the respondents.  The excess  amount  was  put  in  the  Current  Account  of  the corporation so that it could be dispersed immediately to the respondents  as  per  situation arising in  the  case.   The Corporation  did  not earn any interest on that amount.   As per  the orders of the High Court dated 23rd December, 1993, the   appellant-corporation  claims  to   have  arranged   a negotiation  and  called  the said Rana Iqbal Singh  in  its office  on  16.2.1994.   The counsel  of  earlier  purchaser M/s.Pradeep Kapur & Associates submitted a letter along with an  application  which was presented before the  High  Court praying therein for recalling the order dated 23rd December, 1993  and  for stay of consideration of the offer  of  third party,  namely,  Rana Iqbal Singh.  The said application  of the  earlier  purchaser was not decided by the  High  Court. However, the writ petition No.515 of 1993 was disposed of on 3rd January, 1997 vide the order impugned in this appeal.

   It  is  submitted on behalf of the corporation that  the High Court was not justified in granting the interest on the excess  amount which was to be payable, upon calculation, to the  respondents.  The appellant- corporation claims to have not  faulted in refunding the excess amount.  The delay  was occasioned  on account of the pendency of the writ  petition filed  by the respondents.  As the appellant-corporation did not earn any profit on the excess amount, it was not obliged to  pay  any  interest.   The corporation,  subject  to  the provisions  of the Act, can carry on and transact any of the business  specified  in  Section 25 of the  Act.   The  said section  authorises  the  corporation  to  grant  loans   or advances  to  the  industrial  concerns on  such  terms  and conditions  as may be agreed to.  The corporation deals with public money for public benefit.  Default in payments of the loans  and  advances thus, ultimately affects the public  at large.   An  obligation is cast upon the loanee to pay  back the  amount  of the loan or advance received under the  Act. In  case of failure to make the payment, the corporation  is expected  to  adopt  an  approach which  has  to  be  public oriented  rendering a helping hand to the loanee to come out of  the  financial losses and constrains if any but  without causing  any loss to the corporation.  To protect the public interest, the Act provides a mechanism for recovery of loan. Section  29  of the Act authorises the corporation  to  take over  the management or possession or both of the industrial unit  and transfer the same by way of lease or sale where it finds  that any industrial concern, who had taken loan,  had made  default  in  repayment  of any loan  advanced  or  any instalment  thereof  or  in  meeting of  its  obligation  in relation  to  any  guarantee  given by  the  corporation  or otherwise  fails  to comply with the terms of its  agreement with the Corporation.

   Powers  conferred  under  Section  29  of  the  Act  are intended  to  achieve  the object of the  Act.   The  amount realised in consequence of the sale or lease of the property of  the  defaulter can be adjusted in the liability  of  the defaulter and the excess amount thus realised, if any, to be paid  to  the person whose unit was proceeded against  under Section  29  of the Act.  The activities of the  corporation are visualised not as profit earning concern but an extended arm  of  the State to harness the business potential of  the country  to  benefit the common man.  There is no  statutory obligation  on  the  part  of the  corporation  to  pay  the interest  on  the  excess   amount  realised.   However,  in

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appropriate  cases  interest  may  be  awarded  in  lieu  of compensation  or damages for allegedly wrongfully  retaining the  amount payable to a party.  Interest can be awarded  on equitable  grounds  as  was held by this Court  in  Satinder Singh  v.   Umrao  Singh [1961 (3) SCR 676],  Laxmichand  v. Indore  Improvement  Trust [1975 (1) SCC 565] and  Sovintorg (India)  Ltd.   v.  State Bank of India, New Delhi  [1999(6) SCC 406].

   A  perusal  of  the impugned order shows that  the  High Court  has not referred to any ground justifying the payment of  interest to the respondents.  The respondents have  also not  referred to any circumstance warranting the exercise of powers  of  equity  in their favour.  The  reliance  of  the learned  counsel  for the respondents on  Sovintorg  (India) Ltd.’s  case (supra) is misplaced.  In that case this  Court has  held:   "There  was  no contract  between  the  parties regarding  payment  of  interest on delayed  deposit  or  on account of delay on the part of the opposite party to render the  services.  Interest cannot be claimed under Section  34 of  the Civil Procedure Code as its provisions have not been specifically  made  applicable to the proceedings under  the Act.   We,  however,  find  that the  general  provision  of Section  34  being  based  upon  justice,  equity  and  good conscience   would  authorise  the   Redressal  Forums   and Commission  to  also grant interest appropriately under  the circumstances of each case.  Interest may also be awarded in lieu  of compensation or damages in appropriate cases.   The interest  can  also be awarded on equitable grounds  as  was held  by this Court in Satinder Singh v.  Umrao Singh (1961) 1 SCR 676."

   From  the record it appears that after getting a loan in the  year 1983 and 1986 the respondents committed persistent defaults  in repayment which necessitated the action against them  under  Section 29 of the Act in the year 1991.  As  no amount  was paid till 13th April, 1993, the corporation sold the  industrial  unit,  a hotel, for an amount  of  Rs.39.75 lacs.  Before the excess outstanding amount could be paid to the  respondents,  they  filed a writ petition in  the  High Court  challenging  the action of the corporation  and  thus preventing  it from making the payment.  The counsel of  the respondents  even  made an offer that there was a  buyer  to purchase   the  hotel  for  a   sum  of  Rs.60  lacs.    The negotiations  with the prospective buyer could not mature on account  of application filed by the earlier purchaser.  The High  Court  instead  of  deciding the  application  of  the earlier  purchaser  disposed of the writ petition  vide  the order  impugned.  As noticed earlier, the High Court has not assigned  any reason much less a cogent one for the  payment of  interest.   In  the  absence of  an  agreement  and  the statutory  provision,  interest could not be claimed by  the respondents  as  a  right.  The court did not refer  to  any circumstance  on the basis of which the interest could  have been granted as an equitable relief.

   Under  the  circumstances the appeal is allowed and  the impugned  order  of the High Court, in so far as it  directs@@           JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ the  payment  of the interest at the rate of 13% along  with@@ JJJJJJJJJJJJJJJJJJJJ excess amount is set aside.  No costs.

   I.A. No.2 of 2000

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   In view of the judgment in Civil Appeal, the application has become infructuous.  The same is dismissed having become infructuous.