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High Court Of Calcutta
Mahemmad Habeeb Shams Ansari
SOUTHEND AUTOTECH INDIA PVT LTD - Appellant
Versus
WEST BENGAL FINANCIAL CORPORATION - Respondent
C. O. 20568 (W) Of 1996
Decided On : 01/14/2002
STATE FINANCIAL CORPORATION ACT, 1951 - SECTION 29 - INTEREST RATE - WBFC'S RIGHT TO CHARGE INTEREST - NON OBSTANTE CLAUSE - APPLICABILITY - DETERMINATION OF APPLICABLE RATE.
Fact of the Case:
Petitioner challenged the notice issued under Section 29(1) read with Section 30 of the State Financial Corporation Act, 1951 (Act) for recovery of the loan. The dispute centered around the rate of interest payable.
Finding of the Court:
1. The non obstante clause in the sanction letter is not attracted as the lender has not charged interest at any other rate than specified in the main clause. 2. The intention of the parties was that the rate of interest would be at the lending rate applicable to industry at the time of disbursement of the loan. 3. WBFC is entitled to charge interest as per the circular issued by IDBI and not by stipulating a higher rate of interest than applicable.
Issues: 1. Whether the impugned notice is in violation of principles of natural justice? 2. Whether the non obstante clause in the sanction letter is applicable? 3. What is the applicable rate of interest?
Ratio Decidendi: 1. The impugned notice is not in violation of principles of natural justice as the dispute is only with regard to the rate of interest and the petitioner was not prejudiced. 2. The non obstante clause is not applicable as the lender has not charged interest at any other rate than specified in the main clause. 3. The applicable rate of interest is as specified in the circular issued by IDBI, which is 19% per annum.
Final Decision: The writ application is allowed in part. WBFC is directed to calculate the interest at the rate of 19% per annum and prepare a statement of the amounts due and payable to it by the petitioner. The petitioner shall be afforded an opportunity to submit its objection to the statement and a decision shall be taken by WBFC as regards the actual amount due and payable by the petitioner. In the meanwhile, the petitioners shall not alienate, transfer and/or encumber the mortgaged and hypothecated assets in any manner.
( 1 ) THE instant writ application is filed by the debtor, inter alia, against its creditor respondent-West Bengal Financial Corporation (WBFC ). Petitioner has questioned annexure D dated 26. 11. 1996 being notice issued under section 29 (1) read with section 30 of State Financial Corporation Act 1951 (for short 'act') for recovery of the loan.
( 2 ) IT is not in dispute that a term loan was sanctioned in favour of the petitioner and was disbursed by the respondent Corporation on 19. 2. 93 and 23. 3. 93. The same was required to be repaid by the petitioner within a period of six and half years by 12 half yearly instalments @ Rs. 0. 64 lac each.
( 3 ) THE dispute in the instant case is mainly with regard to the rate of interest payable.
( 4 ) ANNEXURE 'a' is the letter of WBFC sanctioning the loan and specifying therein terms and conditions upon which the loan is to be granted and manner it is to be repaid. With regard to interest, it has been stipulated in annexure 'i' to the said sanction letter as under:"interest on the loan will be charged at the lending rate of the Corporation applicable to such unit and prevailing at the time of disbursement of the loan, the present rate being 23% per annum, which will be subject to a rebate of 4% for regular payment of instalments of principal as specified and interest payable quarterly on the 31st March, 30th June, 30th September and 31st December each year or at such other rate higher or lower, as may be in force at the time of each disbursement in default of payment either of principal or of interest, compound interest will be chargeable. This will not, however, affect the right of the Corporation to realize the defaulted interest on the entire loan thereof by legal steps or otherwise. A surcharge @ 3% p. a. on the applicable rate of interest will also be levied as interest tax. Notwithstanding the foregoing the borrower shall pay to the lenders interest at such other rate (s) as shall from time to time be fixed by the lenders and intimated to the Borrower but so that such rate (s) shall not at any point of time exceed the rate at which term loans are advanced by Commercial Banks. Provided that in the event of increase in the rate (k) of interest:- (a)the Borrower shall have an option to repay to the lenders forthwith on receipt of such intimation the entire outstanding of the loan together with all outstanding interest thereon without being required to pay any premium for such prepayment in terms of section 211 hereof; and (b)in the alternative, the Borrower shall have an option to make such prepayment together with interest, at the increased rate (s) as intimated, till payment, at any time during a period of two years after receipt of such intimation. " (Emphasis supplied ).
( 5 ) IT must be stated here that an agreement was also executed by the petitioner herein with respect to the said loan (page 81 of the application CAN 3819 of 2001 ). With respect to interest, clause 2 of Article II thereof reads as under;"2. Interest: the Borrower (s) shall pay interest on the Principal amounts of the Term Loan and Working Capital Loan, outstanding from time to time, at the lending rate of the Corporation applicable to such industrial (manufacturing/repairing/servicing) concern at the time of each disbursement of the individual loan (s) i. e. Term Loan and/or (Working Capital Loan) the present rate of interest being 23% (Twenty three percent) per annum on the Term Loan and x% (X percent) per annum on the working capital loan and both are payable by quarterly payments on 31st day of March, 30th day of June, 30th day of September and 31st day of December of each year with rebate of 4% (Four percent) per annum on the Term Loan and x% (x percent) per annum on working capital loan for punctual payment of instalments of principal and interest of both the loan (s) (i. e. the Term Loan and Working Capital Loan) subject to the Borrower/borrower (s) complying with the provision
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