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2009 Supreme(Kar) 290
High Court of Karnataka
S. ABDUL NAZEER
Mrs. Leelavathi & Another
Versus
The Managing Director, S.C.D.C.C. Bank Ltd. & Others
Writ Petition No.9997 of 2007 (CS-DAS) V/w W.P.No.17933 of 2007 (GM-RES)
Decided on : 24-04-2009
For the Petitioners:R. Vijayakumar, Advocate.
For the Respondents:R1, P. Karunakar, R3, K.M. Nataraj, Advocates.
The court established the principle of determining a just and reasonable interest rate for financial assistance, considering the purpose and circumstances of the loan.
Headnote:
Interest Rate - Financial Assistance - Karnataka Cooperative Societies Act, 1959 - Section 70 - AIR 2007 SC 817
Fact of the Case:
The petitioner sought financial assistance from a bank for additions to his house, creating an equitable mortgage of the property. The bank raised a dispute and auctioned the property. The petitioner challenged the award and order of the appellate authority, while the auction purchaser sought possession of the property.
Finding of the Court:
The court considered the petitioner's plea for a reduction in the interest rate and the auction purchaser's request for a refund with interest. It referred to the Apex Court's decision in Krishna Bhagya Jala Nigam Ltd. Vs. G. Harischandra Reddy, and modified the interest rate to 9% per annum, granting the petitioner reasonable time for payment and directing the bank to refund the auction purchaser.
Issues: Dispute over interest rate on financial assistance, auction purchaser's claim for refund with interest, and petitioner's plea for reasonable time for payment.
Ratio Decidendi: The court relied on the precedent to determine a just and reasonable interest rate, considering the purpose of the financial assistance and the circumstances of the case.
Final Decision: The court modified the interest rate to 9% per annum, directed the petitioner to deposit a sum with the bank, and ordered the bank to refund the auction purchaser with interest, granting the petitioner time for payment.
Though the reliefs sought for in these writ petitions are different, the parties to the writ petitions are common and the facts leading to the cases are also common. Therefore, they are clubbed together, heard and disposed of by this common order.
2. The petitioner in W.P.No.9997/2007 was the owner of the properly morefully described in the schedule to the writ petition (hereinafter referred to as ‘the schedule property’). He had sought financial assistance from the South Canara District Central Cooperative Bank Limited, Mangalore (for short ‘Bank’) in order to make additions to his house. The Bank sanctioned a loan of Rs.2 lakhs subject to the petitioner creating equitable mortgage of the schedule property in its favour. It is not in dispute that the petitioner created equitable mortgage of the schedule property in favour of the Bank and availed the financial assistance as above. It is the case of the petitioner that he had repaid a sum of rs.70,000/-to the Bank and failed to pay the balance of the amount. Therefore, the bank raised a dispute in No.JRM/DDS/1301/04.05, which came to be allowed on 24.11.2004 by the Joint Registrar of Cooperative Societies, Puttur Sub-Division, Puttur for a sum of Rs.1,99,234/-with interest at 19% per annum. Feeling aggrieved by the said order, the petitioner filed an appeal before the Karnataka Appellate Tribunal, Bangalore, in appeal No.608/2005. During the pendency of the appeal, the schedule property was auctioned for a sum of Rs.4 lakhs in favour of the third respondent. The third respondent deposited the said sum of Rs.4 lakhs with the Bank and the bank registered a sale certificate in favour of the third respondent. The third respondent has borne the registration fee in a sum of Rs.35,000/-. During the pendency of the writ petition, the Karnataka Appellate Tribunal dismissed the appeal on 20.8.2007. Therefore, petitioner sought amendment of the prayer in the writ petition, which was allowed by this Court. Thus, in this writ petition, the petitioner has called in question the award passed by the Joint Registrar of Cooperative Societies at Annexure ‘D’ dated 24.11.2004, the order of the appellate authority in appeal No.608/2005 (Annexure ‘K’) dated 20.8.2007 and the sale certificate dated 22.5.2007 executed by the Bank in favour of the third respondent at Annexure ‘H’.
3. In W.P.No.17933/2007, the auction purchaser of the schedule property (third respondent in W.P.No.9997/1997) has sought for a mandamus directing the respondents to deliver vacant possession of the schedule property. It is contended that the sale certificate having been executed in his favour as early as on 22.5.2007, possession has not been handed over to him so far.
4. I have heard the learned Counsel for the parties.
5. Learned Counsel for the petitioner in W.P.No.9997/1997 does not dispute the correctness of the award passed by the Joint Registrar of Cooperative Societies dated 24.11.2004 nor does he dispute the order dated 20.8.2007 passed by the Karnataka Appellate Tribunal in appeal No.608/2005. His only submission is that since the financial assistance sought for by the petitioner was for making additions to his house, interest should have been fixed at a reasonable rate. It is argued that since the petitioner had mortgaged his property in favour of the Bank, question of awarding interest at 19% from the date of the claim petition till payment of the amount in question is excessive and arbitrary in nature. In this connection, he has relied on the decision of the Apex Court in Krishna Bhagya Jala Nigam Ltd. Vs. G. Harischandra Reddy & Another – AIR 2007 SC 817. It is further submitted that petitioner may be granted reasonable time for payment of the award amount with interest which may be fixed by this Court.
6. On the other hand, learned Counsel appearing for the respondent-Bank has sought to justify the levy of interest.
7. Learned Counsel appearing for the auction purchaser submits that the auction purch
