Back
1987 Supreme(Bom) 181
IN THE HIGH COURT OF BOMBAY
Mrs. Sujata Manohar, J.
State Bank of India .... Appellants.
Versus
Edward Textile Mills Ltd. another .... Respondents.
Misc. Petition No. 40 of 1984, decided on 22-6-1987.
Advocates appeared :
Virag V. Tulzapurkar i/ by Crawford Bayley Co., for appellants.
D.K. Ghaisas, for respondents.
Headnote:SICK TEXTILE UNDERTAKINGS (NATIONALISATION) ACT, 1974
Sections 5, 21 and Schedule II-Sick textile undertaking - Liability of the owner to repay to appellant Bank the amounts advanced under cash credit facility together with interest on loan amount untill such time as the loan is repaid in full,
Section 5 states that every liability of the owner of a sick textile undertaking prior to 1st April, 1974 shall be the liability of such owner. The liability which is incurred by the owner in the present case is the liability to repay to the appellant Bank the amounts advanced under cash credit facility together with interest. This liability had been incurred prior to 1st April, 1974. The liability of the owner therefore, includes liability to pay interest on the loan amount until such time as the loan is repaid in full. Since the liability is incurred by the owner prior to 1st April, 1974 this liability continues to be the liability of the owner and can be discharged from the compensation amount. The Commissioner was, therefore, not right when he said that the liability of the owner to pay interest ceases as from 1st April, 1974. There is nothing in the Act which terminates the liability of the Owner as from 31st March, 1974.
The next question is of priority. Second Schedule, Part A puts in category I, inter alia, "Loans advanced by a bank". This category includes not merely the principal amount lent but also interest on it. The various items in the second Schedule describe the order of priorities for the discharge of liabilities. This is expressly the heading of the second schedule. The liability incurred is of repayment of loan which includes principal amount and interest. The term "loan", therefore, in category I of the second schedule covers both principal amount and interest. In this connection Counsel for the appellants, drew attention of the court to the provisions of Section 58 (a) of the Transfer of Property Act under which "the principal money and interest of which payment is secured for the time being are called the mortgage money". So that mortgage money includes interest also.
2. Prior to 1st April, 1974 the appellants State Bank of India a had entered into a cash credit arrangement with Edward Textile Mills Ltd. and had advanced various amounts to Edward Textile Mills Ltd. which were repayable with interest Under the Sick Textile Undertakings (Nationalisation) Act, 1974 the undertaking, inter alia of Edward Textile Mills Ltd. was taken over and became vested in the National Textile Corporation with effect from 1st April, 1974. Under section 5 of the said Act 'every liability specified in sub-section (2) of the owner of a sick textile undertaking, in respect of any period prior to the appointed day, shall be the liability of such owner and shall be enforceable against him and not against the Central Government or the National Textile Corporation." Sub-section (2) of section 5 of the said Act is not relevant for the purpose of the present appeal. The "appointed day" referred to in section 5 was 1st of April, 1974. As a result of this provision every liability incurred by the owner of a sick textile undertaking prior to 1st April, 1974 remained the liability of such owner and was enforceable against him and not against the Central Government or the National Textile Corporation. Sub-section (3) of section 5 made this position abundantly clear by providing that no liability of this nature shall be enforceable against the Central Government or the National Textile Corporation.
3. Under section 8 of the said Act the owner of every sick textile undertaking shall be given by the Central Government, in cash and in the manner specified in Chapter VI, for the transfer to, and vesting in, it .........of such sick textile undertaking and the right, title and interest of the owner in relation to such sick textile undertaking, an amount equal to the amount specified against it in the corresponding entry in column (4) of the First Schedule. The amount so payable as compensation to Edward Textile Mills Ltd. was Rs. 66,28,000/- (which has now increased to Rs. 72,87,542/- with the accrual of interest on it as provided under section 9 sub-section (2) of the said Act.
4. Under Chapter VI of this Act a Commissioner of Payments was appointed for the purpose of disbursing the amount payable to the owner of each sick textile undertaking. Under the provisions of section 20 every person having a claim against the owner of sick textile undertaking was required to prefer such claim before the Commissioner of Payments within 30 days from the specified date. Section 21 read with second schedule laid down priorities for payment of such claims out of the compensation amount. Claims under category I in second schedule have precedence over all other categories and category II claims have precedence over category III claims and so on. Loans advanced by a Bank form a part of category I claims. The claim of the appellants thus filed under category I and had precedence over all other claims for payment out of the compensation amount.
5. Under section 20 of the said Act a notification was issued specifying that all claims should be lodged with the Commissioner for Payments within 30 days from 1st April, 1977. Accordingly, the appellants lodged their claims with the Commissioner for Payments on 29th April, 1977. The appellants filed a total claim for Rs. 64,14,130.51. Out of this a sum of Rs. 37,29,188/- was in respect of amount outstanding under the cash credit account as on 31st March, 1974. This was inclusive of the principal amount advanced and interest calculated as per the agreement between the appellant Bank and Edward Textile Mills Ltd. upto 31st March, 1974. The appellants claimed a further sum of Rs. 20,73,691/- by way of interest under the said cash credit account from 1-4-1974 to 31-3-1977. There were some other claims also which are not
