IMPORTANT POINT
In case State Financial Corporation sells property of defaulting debtor invoking Section 29 SFCA, interest on excess amount to be refunded cannot be claimed as of right.

JUDGMENT

Sethi, 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.

2. 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.

3. 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 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.

4. 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.

5. 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,