It is the settled proposition of law that reduction of interest from contractual rate to a lower rate, would be permissible only in exceptional and special circumstances
Civil Writ Petition No. 19518 of 2012 (O&M) 1
IN THE HIGH COURT OF PUNJAB AND HARYANA
AT CHANDIGARH
Civil Writ Petition No. 19518 of 2012 (O&M)
Date of Decision: 06.10.2012
Kamesh Bhargava Hospital and Research Centre (Pvt.) Ltd. and
others
.....Petitioners
Vs.
Debts Recovery Appellate Tribunal and another
.....Respondents
CORAM : HON'BLE MR. JUSTICE JASBIR SINGH
HON'BLE MR. JUSTICE RAMESHWAR SINGH MALIK
Present : Mr.Anand Chhibbar, Senior Advocate with
Mr. Vaibhav Saini, Advocate for the petitioners.
****
1. To be referred to the Reporters or not?
2. Whether the judgment should be reported in the Digest? RAMESHWAR SINGH MALIK J.
The petitioners, by way of instant petition, seek to invoke the writ jurisdiction of this Court, under Articles 226/227 of the Constitution of India, for issuance of a writ in the nature of Certiorari for quashing the order dated 17.7.2012-Annexure P-18, passed by the learned Debts Recovery Appellate Tribunal, Delhi, ('DRAT Delhi' for short), thereby allowing the appeal of the respondent corporation, enhancing the pendente lite and future interest from 10 % per annum to 14 % per annum and also for quashing the consequent demand notice dated 9.8.2012-Annexure P-19.
Facts first. This case has a long and chequered history. Relevant facts for disposing of the issue involved in the present case, may be noted.
The petitioner company, who is running a hospital known as 'Silver Oaks Hospital' at Mohali, decided to take financial assistance from respondent corporation, i.e. Punjab State Industrial Development Corporation Limited ('PSIDC' for short). Accepting the offer made by the petitioners, PSIDC agreed to advance the financial assistance, by investing a sum of ` 57 lacs in equity share capital of petitioner company, by way of direct subscription. The Direct Subscription Agreement dated 17.12.1999 was executed, vide Annexure P-1, on certain terms and conditions. Consequently, PSIDC invested ` 57 lacs in equity share of the petitioner company by way of direct subscription, with a view to finance its project for setting up a 50 bedded multi specialty hospital at Mohali.
Petitioners No. 2 and 3, being the Managing Director and Director, respectively, of petitioner company, deposited their shares in the petitioner company, with PSIDC as security, vide letter dated 19.1.2000. Undertaking, as per agreement, was given that the equity share capital of PSIDC was to be repurchased, by the petitioner company, before the expiry of the 7th year from the date of commencement of commercial production, along with interest @ 16.5% per annum to be compounded annually, less dividend, if any. Undertaking to buy back the shares, subscribed by PSIDC, and to meet the shortfall of capital for the completion of project was also submitted. As per agreement, if petitioner company would fail to start commercial production up to last day of 5th year from the date of investment by PSIDC, the petitioners were to repurchase minimum 1/3rd shares of PSIDC in each year, in the 5th, 6th and 7th year from the commencement of the commercial activities of the company.
In terms of the agreement, the total amount of ` 57 lacs was disbursed by PSIDC to the petitioner company w.e.f. 21.1.2000 till 28.2.2000. It is further undisputed fact that although the petitioner company commenced its commercial activities in the year 2000, yet the petitioners failed to buy back the equity share capital subscribed by the PSIDC. Faced with this unwarranted situation created by the petitioners, the respondent corporation-PSIDC sent various notices dated 14.2.2006, 1.3.2006, 23.2.2006 and 29.6.2006, including the legal notice dated 23.1.2007, raising its demand against the petitioners, calling upon them to clear the dues of PSIDC. When the petitioners failed to pay the dues, PSIDC was left with no other option, except to file Original Application bearing No. 86 of 2007 (Annexure P-2), before the Debts Recovery Tribunal-I, Chandigarh ('DRT-I, Chandigarh' for short), for recovery of ` 1,77,67,655/- calculated up to 30.6.2007, along with pendente lite and future interest @ 16.5% per annum with annual rest.
Feeling aggrieved against the demand notice, petitioners filed CWP No. 5425 of 2009, seeking the benefit of One Time Settlement Scheme ('OTS Scheme' for short) (Annexure P-3) and notice of motion was issued by this Court, vide order dated 2.4.2009, which reads as under:-
"It is, inter-alia urged that the object of One Time Settlement (OTS) Policy is to promote industrialization and not to encourage the loanee industries to face losses so as to become eligible for the benefit of the OTS Policy. The classification between the industries running into losses or those making profits sought to be made under the OTS, is alleged to be violative of Article 34 of the Constitution. Learned counsel submits that in order to show their bonafide, the petitioners are ready and willing to pay a sum of Rs. 25 lacs and shall also abide by the terms and conditions of the OTS provided that the arrears of loan are redetermined as per the OTS Scheme.
Notice of motion for 9.5.2009.
Dasti also.
The matter be listed before Registrar (Judicial)-II on the date fixed for completion of service and pleadings.
Meanwhile, the petitioners are directed to deposit a sum of Rs. 25 lacs with the respondent Corporation before the adjourned date without prejudice to their legal rights."
The abovesaid writ petition came to be disposed of by this Court, vide order dated 6.11.2009 (Annexure P-5) and the same reads as under:-
"The present writ petition has been filed seeking a writ in the nature of mandamus praying that respondent-Corporation should extend One Time Settlement Scheme (hereinafter to be referred as, `OTS Scheme') for Equity - PSIDC/PAIC- 2009 to the petitioner-Company.
The respondent-Corporation has taken a categoric stand that the policy has been issued by the State Government and there is a provision in the policy that any company which has shown profits in the last financial year, is not eligible to apply under OTS Scheme.
Earlier petitioners have made a prayer and sought an opportunity to amend the writ petition. Later, the statement to amend the writ petition was withdrawn.
Counsel for the petitioners has stated that since he is aggrieved by Clause 1 of notification dated 2.3.2009, Annexure P15, which debar the Collaborators/promoters of profit making companies to apply under the OTS Scheme, it is required that a writ petition challenging this part of the scheme as ultra vires, be filed. Counsel state that in pursuance of orders passed on April 02, 2009 and May 29, 2009, petitioners had made deposit of Rs.25 lacs and it was observed by the Bench that the deposit will be without prejudice to the rights of the petitioners to apply under OTS Scheme and their claim will not be eclipsed on the ground that it is barred by way of limitation. Counsel state that till he approaches this Hon'ble Court afresh, challenging a part of the notification as ultra vires, the observations made in his favour in orders dated April 02, 2009 and May 29, 2009, be ordered to remain in operation.
Counsel for respondent No.1 state that he has no objection to the prayer made by counsel for the petitioners if operation of orders dated April 02, 2009 and May 29, 2009 is extended for a period of three weeks.
In view of the broad agreement arrived between counsel for the parties, the present writ petition is dismissed as withdrawn with liberty to petitioners, to challenge vires of notification Annexure P15, along with all other pleas available to the petitioners. The operation of interim orders dated April 02, 2009 and May 29, 2009 is extended for a period of three weeks or till listing of fresh writ petition proposed to be filed by the petitioners, whichever is earlier."Sd/-
JUDGE Thereafter, the petitioner company challenged the constitutional validity of OTS Scheme before this Court, by way of Civil Writ Petition No. 6501 of 2010 (Annexure P-6). The writ petition was dismissed by this Court, vide order dated 28.4.2010 and the relevant part of the order, reads as under:-
"3. In its fiscal policy, a decision to extend concession to certain classes of deserving persons would always be seen as reasonable. The deserving cases would again be instances of company which is sick or a company which has serious financial stringency. Formulation of a policy that excludes a profit making company is under such circumstances a perfect legitimate policy to arrange its finances. A classification of borrowers as falling within profit making companies and loss making ones has a nexus to an object namely of extending a benefit to deserving companies only. A profit making company is a company that has known to survive on its own efficiency. It is somewhere akin to a rule of reservation, which is made to provide for some benefits to certain underprivileged or socially disadvantaged classes of persons. Such reservation is always consistent with the rule of equity and social justice. An extension of OTS to loss making companies and to exclude profit making companies has a similar philosophy to expound CWP 6501 of 2010 and be seen as compatible to rules of fairplay and justice. The challenge by the petitioner that the exclusion of profit making companies from the OTS Scheme as arbitrary is, in my view, without merit.
4. It is irrelevant that the company is not making enormous profits but it has only shown registered . 01% profit as against the earlier years' revenues. If a line has to be drawn, it cannot be on a plus or minus issue of percentage of profits to determine the eligibility to the benefit of OTS. It is again a matter of policy, which if it is not shown to be unreasonable, cannot be susceptible to challenge in a writ petition. The petitioner may have other remedies to make his persuasive efforts to plead before a financial institution to give some concessions but it is beyond the competence of the Court to give such directives to the respondents to do what in its fiscal interest, it shall do.
5. The petitioner cannot have a remedy before this Court through this writ petition and it is accordingly dismissed."Sd/-
JUDGE Faced with the above said order passed by this Court, the petitioners moved an application dated 10.11.2010 (Annexure P-7), before the DRT-I Chandigarh, offering to pay the suit amount. The application moved by the petitioners was decided by the learned DRT-I Chandigarh, vide order dated 10.11.2010 (Annexure P-8) and the relevant part thereof, reads as under:-
"Learned counsel for defendants No. 2 & 3 stated that defendants No. 2 & 3-applicants in IA are willing to pay the entire suit amount alongwith pendent elite interest as and when ordered by the Tribunal.
Since the issue regarding interest is to be adjudicated, the applicant PSIDC is directed to accept the suit amount after deducting the amount already paid and if the same is deposited by the defendants no further interest will be payable on the principal amount and only interest will be payable till date of payment, which will be adjudicated while disposing OA. The amount so deposited will not be appropriated but shall be kept in suspense account till disposal of OA."
In compliance of the above said order, the petitioners deposited the amount of `1,52,20,000/-, admitting this much liability on their part, up to the date of filing of O.A. No. 86/2007. Thus, out of the total amount of ` 1,77, 67,655/-, the petitioners paid ` 1,77,20,000/- to PSIDC including the above said amount of ` 25 lacs, deposited in compliance of the above said order dated 2.4.2009, passed by this Court. The petitioners then filed another application before DRT-I Chandigarh (Annexure P-11), seeking adjudication of pendente lite and future interest @ 6 % as the petitioners had already deposited the suit amount. The DRT-I Chandigarh, however, passed the following order:-
"The learned counsel for the defendants No. 2 and 3 stated that whole suit amount has been deposited and only thing left is to determine the pendent elite interest and future interest as may be decided by this Tribunal.
On the other side, the learned counsel for the applicant Financial Institution stated that the defendants have not paid the total suit amount as the payment of Rs. 25.00 lakhs earlier made has been appropriated towards interest and only part of suit amount has been paid, therefore, the case is to be adjudicated.
The learned counsel for the defendants proposed to pay the outstanding amount as may be determined within one week and requested for final adjudication today itself. The learned counsel for the applicant Financial Institution argued that final adjudication cannot be done at this stage as the suit amount has not yet been determined.
Since pleadings are not complete and exhibition of documents is also to be completed, no final order can be made at this stage without consent of the applicant FI.
The written statement has not been filed by the defendants in spite of opportunity on 20.1.2010, however, in the interest of justice last opportunity is granted to file the written statement within 2 weeks with advance copy to the learned for the applicant FI who shall file replication within 2 weeks thereafter.
Be listed on 8.7.2011 before Registrar for completion of pleadings and for exhibition of documents."
The petitioners approached this Court by way of Civil Writ Petition No. 8406 of 2011, seeking direction against DRT-I Chandigarh, for acceptance of the offer of interest @ 6% per annum made by the petitioner company. However, this petition was dismissed as withdrawn, vide order dated 11.5.2011, on the statement made by learned counsel for the petitioner.
The petitioners then challenged the abovesaid interim order passed by the learned DRT-I Chandigarh, before the DRAT Delhi. The learned DRAT Delhi, vide its order dated 7.6.2011 (Annexure P-14), directed the DRT-I Chandigarh to decide the pending issues before it, within a period of 15 days. Thereafter, OA No. 86/2007 filed by PSIDC was decided by learned DRT-I Chandigarh, vide its judgment dated 22.7.2011 (Annexure P-15).
Since the learned DRT-I Chandigarh reduced the contractual rate of interest from 16.5%, to be compounded annually, to the rate of interest of 10% per annum, the respondent corporation filed an appeal (Annexure P-17), before the learned DRAT Delhi, against the order dated 22.7.2011. The case set up by PSIDC before the learned DRAT Delhi, was that it was entitled for recovery of Rs. 1,77,67,655/-, along with pendente lite and future interest @ 16.5% per annum to be compounded annually, till the actual date of realisation and the learned DRT-I Chandigarh exceeded its jurisdiction, while reducing the rate of interest, as noticed above. The appeal of the respondent corporation-PSIDC was partly accepted, vide order dated 17.7.2012 (Annexure P-18). The relevant part of the judgment reads as under:-
"Section 19 (20) of 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 circumstances 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 meager amount of Rs. 47, 655/- during pendency of the O.A. and had also deposited that amount alongwith 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 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 pendent elite and future 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 pendent elite 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."
In compliance of the abovesaid judgment dated 17.7.2012 passed by the learned DRAT Delhi, PSIDC provided the calculations raising its demand, vide communication dated 9.8.2012, for an amount of ` 52,82,200/-, without prejudice to its right to challenge the above said orders passed by the learned DRAT Delhi.
Dissatisfied with the above said judgment 17.7.2012 passed by the DRAT Delhi, the petitioners have approached this Court, by way of instant writ petition.
Learned senior counsel for the petitioners vehemently contended that in view of the provisions contained in Section 34 of the Code of Civil Procedure ('CPC' for short), the pendente lite and future interest, ought to have been ordered as simple interest @ 6% per annum. To substantiate his arguments, learned senior counsel for the petitioners submits that petitioner No.1-company, was running a hospital which was not a profit making venture.
Learned senior counsel for the petitioners next contended that impugned judgments run counter to the law laid by the Hon'ble Supreme Court in Punjab and Sind Bank versus Allied Beverage Company Private Limited and others (2010) 10 SCC 640, Punjab Financial Corporation versus Surya Auto Industries, (2010) 1 SCC 297 and State Bank of India versus Sarathi Textiles and others II (2009) BC 696 (SC).
We have heard the learned senior counsel for the petitioners and with his able assistance, have gone through the record of the case.
After giving our thoughtful consideration to the contentions raised and in view of the peculiar fact situation of the present case, we are of the considered opinion that present one is not a fit case for interference. It is a well reasoned judgment passed by the learned DRAT Delhi. We say so for more than one reasons, being recorded hereinafter.
Twin questions that fall for consideration of this Court are:-
(i) whether in the given fact situation of the present case, it would be appropriate to reduce the contractual rate of interest; (ii) whether the petitioners were justified in not repaying the amount to PSIDC, for the compelling reasons beyond their control.
Taking the first question first, we feel no hesitation to say that learned senior counsel for the petitioners could not point out any material on record to show that the petitioner No.1 company was not a profit making venture. Further, this Court vide its order dated 28.4.2010, reproduced above, dismissed CWP No. 6501 of 2010 filed by the petitioner company, claiming benefit of OTS Scheme. It needs no emphasis that OTS Scheme was floated only for those companies which were not the profit making companies. Since the petitioner company was neither found to be a company running into losses nor a company making no profit, this Court did not find it entitled for the benefit of the OTS Scheme.
The petitioners made another effort, by filing CWP No. 8406 of 2011, seeking direction for acceptance of its offer of simple interest @ 6% per annum. However, learned senior counsel for the petitioners sought permission of this Court to withdraw the petition and the same was dismissed as withdrawn, vide order dated 11.5.2011. Having said that, the answer to the first question, posed above, has to be in the negative. There is no dispute about the law laid by the Hon'ble Supreme Court in the judgments relied upon by the learned senior counsel for the petitioners, however, the same are of no help to the petitioners being distinguishable on facts It is the settled proposition of law that peculiar facts of each case are to be seen first before applying any codified or judgmade law thereto. In the present case, repeated efforts were made by the petitioners, at every relevant point of time before this Court, before the learned DRT-I Chandigarh as well as before the learned DRAT Delhi. However, when the petitioners failed to get any relief, as no court found them entitled for the relief claimed, only then the application before the learned DRT-I, Chandigarh was moved, during the pendency of OA 86/2007, offering to deposit the suit amount. Because the petitioners were well aware of the fact that their financial liability will keep on increasing, in case they do not pay.
In this context, it is equally important to note that the petitioners did not dispute their liability to pay the outstanding amount. Even if it is to be accepted that the petitioners could not buy back, the shares of the respondent corporation at the relevant point of time, because of their alleged poor financial condition, although it is not established on record, yet once admittedly the financial condition of the petitioners have made substantial improvement and, as a matter of fact, they offered to pay the amount before DRT-I Chandigarh, accepting their financial liability and without complaining about their financial condition in this regard, hardly any scope is left for this Court to interfere, so as to reduce the contractual rate of interest.
That brings this Court to the second question, posed above. Having carefully gone through the record of the case and particularly the orders passed by this Court as well as by the learned Tribunals, this Court is of the considered view that answer to the second question, has to be an emphatic no. We say so because no such compelling circumstances have been pointed out on behalf of the petitioners which might be beyond their control, due to which the petitioners could not repay the amount to PSIDC at the relevant point of time. Repeated writ petitions filed by the petitioners before this Court, as noticed above, also shows that the petitioners had been trying to delay the payment, to gain more time for the reasons best known to them. However, the petitioners could not succeed in any of the earlier writ petitions filed before this Court, as noticed hereinabove.
So far as the provisions of Section 34 CPC are concerned, proviso thereto is more relevant in the present case which clearly mandates that the interest @ 6% will have no application wherever it is the contractual rate of interest. It would be appropriate to reproduce Section 34 C.P.C. and the same reads as under:-
" Interest--(1) Where and insofar as a decree is for the payment of money, the Court may, in the decree, order interest at such rate as the Court deems reasonable to be paid on the principal sum adjudged, from the date of the suit to the date of the decree, in addition to any interest adjudged on such principal sum for any period prior to the institution of the suit, with further interest at such rate not exceeding six per cent, per annum as the Court deems reasonable on such principal sum, from the date of the decree to the date of payment, or to such earlier date as the Court thinks fit: Provided that where the liability in relation to the sum so adjudged had arisen out of a commercial transaction, the rate of such further 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 advanced by nationalised banks in relation to commercial transactions. Explanation I.-In this sub-section, "nationalised bank" means a corresponding new bank as defined in the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970). Explanation II.-For the purposes of this section, a transaction is a commercial transaction, if it is connected with the industry, trade or business of the party incurring the liability.
(2) Where such a decree is silent with respect to the payment of further interest on such principal sum from the date of the decree to the date of payment or other earlier date, the Court shall be deemed to have refused such interest, and a separate suit therefore shall not lie.
It is the settled proposition of law that reduction of interest from contractual rate to a lower rate, would be permissible only in exceptional and special circumstances. So far as the present case is concerned, no such special or exceptional circumstances have been pointed out so as to enable this Court to interfere in the matter, reducing the contractual rate of interest. Even in the judgments relied upon by the learned senior counsel, it has been held that award of interest, pendente lite and post decree, is discretionary with the Court. In a given fact situation of the case, if the Court finds it appropriate to reduce the contractual rate of interest, it can exercise its discretion but the same is to be exercised judiciously. We have carefully scanned the record of the present case but could not find any sufficient reason to persuade ourselves, to agree with the contentions raised on behalf of the petitioners.
Learned senior counsel for the petitioners submitted that since the petitioners were running a hospital, they deserve sympathetic consideration. We afraid, we are unable to accept this contention, as well. In the given fact situation of the present case, we are not inclined to affect our judgment with sympathy or sentiment, for the simple but strong reason that petitioners, as a matter of fact, do not deserve any such sympathy. The hospital run by the petitioners is not a charitable one, rather it is like Apollo or Escort hospitals.
Having said that, it is unhesitatingly held that the financial liability of the petitioners had arisen out of a pure and simple commercial transaction between two profit making companies.
On the issue of sympathy, our view also finds support from the judgment of the Hon'ble Supreme Court in M/s Teri Oat Estates (P) Ltd versus U.T., Chandigarh and others 2004 (2) SCC 130. The relevant observations made by the Hon'ble Supreme Court in paras No. 36 to 39 in Teri Oat's case (supra), which can be gainfully followed in the present case, read as under:-
SYMPATHY :
36. We have no doubt in our mind that sympathy or sentiment by itself cannot be a ground for passing an order in relation whereto the appellants miserably fail to establish a legal right. It is further trite that despite an extra-ordinary constitutional jurisdiction contained in Article 142 of the Constitution of India, this Court ordinarily would not pass an order, which would be in contravention of a statutory provision.
37. As early as in 1911, Farewell L.J. in Latham v. Richard Johson & Nephew Ltd., (1911-13 AER reprint p. 117) observed :
"We must be very careful not to allow our sympathy to affect our judgment with the infant plaintiff. Sentiment is a dangerous will O' the wisp to take as a guide in the search for legal principles." (See also Ashoke Saha v. State of West Bengal & Ors., CLT (1999) 2 H.C. 1).
38. In Sairindhri Ddolui v. State of West Bengal, (2000) 1 SLR 803, a Division Bench of the Calcutta High Court wherein (one of us Sinha, J. was a Member), followed the aforementioned dicta.
39. This Court also in C.B.S.E. and Another v. P. Sunil Kumar and Others, [1998] 5 SCC 377 rejecting a contention that great injustice would perpetrate as the students having been permitted to appear at the examination and having been successful and certificates had been issued in their favour, held :
". . . We are conscious of the fact that our order setting aside the impugned directions of the High Court would cause injustice to these students. But to permit students of an unaffiliated institution to appear at the examination conducted by the Board under orders of the Court and then to compel the Board to issue certificates in favour of those who have undertaken examination would tantamount to subversion of law and this Court will not be justified to sustain the orders issued by the High Court on misplaced sympathy in favour of the students. . ."
Reverting back to the facts of the present case, this Court, while passing the judgment dated 28.4.2010, reproduced above, has not found the petitioner company entitled for the financial benefit under the OTS Scheme. The reason was simple but strong, that the petitioner company was not found running into losses, as per its relevant balance sheets. Even today, it is not the case of the petitioners that they are facing any financial crisis or not in a position to pay the amount to the respondent corporation-PSIDC, as per the contractual rate of interest.
Considering the totality of facts and circumstances of the present case noted above, coupled with the reasons aforementioned, we have no hesitation to conclude that the present petition, being bereft of any merit and without any substance, must fail. No case for interference has been made out.
Resultantly, the instant petition is ordered to be dismissed.
(JASBIR SINGH) (RAMESHWAR SINGH MALIK)
JUDGE JUDGE
06.10.2012
Ak Sharma
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