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2009 Supreme(Mad) 4211
High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE S. TAMILVANAN
Hatsun Agro Products Ltd.
Versus
Industrial Development Bank of India Southern Regional Office
C.S.No.513 of 2001
Decided on : 14-10-2009
For Plaintiff: Mr.T.R.Rajagopalan, Senior Counsel for Mr.T.Venugopalan. For the Defendant:Mr.T.V.Ramanujam, Senior Counsel for Mr.PL.Narayanan, Advocates.
Ratios:
a. Court cannot re-write any contract by way of interpretation, contrary to the terms and conditions that are agreed by the parties to the contract.
b. Unless the objectives, directives or policy involved in the contract are declared illegal and unenforceable, the same cannot be construed as against Public policy.
c. A party to a contract is estopped from raising a plea against the terms and conditions of contract by saying that the same is against Public policy, without establishing the same.
d. Unless the terms and conditions of a contract are illegal or unenforceable, it cannot be challenged by a party to it, on the ground that the terms are against public policy.
Headnote:(A)Indian Contract Act, 1872 (9 of 1872)-Sec.23-Contract-Public policy-Enforceability-Illegality-Loan-Prepayment-Penalty-Plaintiff had obtained term loan from the defendant and opted to repay it before the term-Defendant demanded premium for prepayment-Premium was paid by the plaintiff under protest and later filed a suit to recover it-Plaintiff contended that collection of prepayment charges by a Government organisation was against public policy and payment was made under duress-Defendant contested the claim of the plaintiff-Held, the payment was made as per the terms of the contract-Courts are not to re-write the terms of the contract-There is no violation of public policy involved when the charge was collected as per the contract-For proof of duress, no evidence was let in-Suit was dismissed.
(B)Indian Contract Act, 1872 (9 of 1872)-Sec.23-Contract-Public policy-Enforceability-Illegality-Estoppel-Power of Court- Court cannot re-write any contract by way of interpretation, contrary to the terms and conditions that are agreed by the parties to the contract-Unless the objectives, directives or policy involved in the contract are declared illegal and unenforceable, the same cannot be construed as against Public policy- A party to a contract is estopped from raising a plea against the terms and conditions of contract by saying that the same is against Public policy, without establishing the same.
The Court cannot re-write any contract, by way of interpretation, contrary to the terms and conditions that are agreed by the parties to the contract. Similarly, unless the objectives, directives or policy involved in the contract are declared illegal and unenforceable, the same cannot be construed as against the Public policy. When the terms and conditions of the contract have been mutually agreed by both the parties to the contract, when one of the party is a Government undertaking, it cannot be construed that such a contract or any provision of the contract is against public policy, merely on the plea raised one of the party, who has reaped the benefits under a contract. In fact, a party to a contract, having agreed and signed the terms and conditions of contract, later on cannot challenge the same on the ground of duress, unless there is element of coercion for entering into the said contract. It is a settled proposition of law that a party to a contract is estopped from raising a plea against the terms and conditions of contract by saying that the same is against Public policy, without establishing the same.
Para 32
(C)Indian Contract Act, 1872 (9 of 1872)-Sec.23-Contract-Public policy-Enforceability-Illegality-Challenge-Unless the terms and conditions of a contract are illegal or unenforceable, it cannot be challenged by a party to it, on the ground that the terms are against public policy.
Courts cannot re-write the contract, by way of interpretation, contrary to the terms and conditions mutually agreed by the parties to the contract, unless the contrary is proved by the party, who challenges the mutual agreement. Unless such terms and conditions are illegal or unenforceable, it cannot be challenged by a party to the contract, on the ground that the terms of the contract is against public policy. Para 34
The suit has been filed by the plaintiff against the defendant for declaration and other consequential reliefs.
2. The plaintiff is a public limited company registered under Indian Companies Act, 1956. The plaintiff has stated that it is one of the largest private sector manufacturers of ice cream and dairy products. The plaintiffs company is marketing Arun (Ice Cream) and Arokya (Standardised Milk) and running business so as to maintain a standard. The plaintiff company approached the defendant, Industrial Development Bank of India on about 29.06.1998 to provide financial assistance for running a Modern Dhall Mill, a Bakery, cold storage for their Ice Cream products and for expansion of their Salem dairy, for which their loan request was for Rs.700 lakhs and their total project cost was Rs.1,050 lakhs.
3. The defendant informed the plaintiff that the term loan for the above said purpose was sanctioned vide their letter, dated 14.09.1998. Pursuant to the above, loan agreement dated 210. 1998 was entered into at Chennai by the plaintiff with the defendant, whereby the plaintiff agreed to avail the term loan to the maximum extent of Rs.700 lakhs on the terms and conditions set out in the loan agreement. The plaintiff had also paid an up-front fee of Rs.7.35 lakhs @ 10.5% on the loan amount being sanctioned at Chennai. The loan availed by the plaintiff was repayable in accordance with the amortisation schedule under Schedule III of the said agreement, dated 210. 1998 starting from 010. 2000 and ending on 01.07.2005 besides payment of interest periodically by the plaintiff.
4. For the purpose of availing the above loan, the plaintiff had provided adequate securities both movable and immovable to the satisfaction of the defendant, besides establishing the technical feasibility and financial viability of the company and further, 12,90,500 equity shares for the face value of Rs.10/- each held by the Chairman of plaintiffs company was also pledged in favour of the defendant by executing appropriate legal documents. The plaintiff subsequently took a business decision not to implement their Bakery and Dhall Mill project and requested the defendant to transfer Rs.533 lakhs remaining undrawn amount for their upcoming projects relating to Salem Diary and for setting up a New Diary plant at Belgaum in the State of Karnataka.
5. The plaintiff had been sanctioned a term loan of Rs.700 lakhs, but availed only a sum of Rs.167 lakhs from November 1998 till August 1999 under Term Loan No.I, though they had paid the defendant an up-front fee of Rs.7.35 lakhs towards the loan. The defendant, instead of transferring the unavailed portion of the loan amounting to Rs.533 lakhs as stated above, cancelled the same and sanctioned a fresh loan of Rs.670 lakhs on 011. 1999. The fresh loan agreement, dated 111. 1999 was executed between the plaintiff and the defendant at Chennai for a term loan of Rs.670 lakhs. The plaintiff had also paid an up-front fee of Rs.7.04 lakhs under the Term Loan No.II as directed by the defendant.
6. According to the plaintiff, out of the sanctioned amount of Rs.670 lakhs, they availed and drew only Rs.470 lakhs as on 07.08.2000 and as such, the plaintiff had availed from the defendant bank a total loan of Rs.637 lakhs comprising of Rs.167 lakhs under Term Loan No.I and Rs.470 lakhs under Term Loan No.II, but had paid a total up-front fee of Rs.14.39 lakhs in respect of Term Loan No.I and II.
7. According to the plaintiff, their company approached the defendant bank to sanction a fresh term loan to fund acquisition of a profit making company, Ajith Diary Industries Ltd., through the process of bidding under Court proceedings in the High Court of Judicature, Madras, for a total consideration of Rs.10.50 crores. The plaintiff had brought to the notice of the defendant bank the urgency of processing their loan request, since the Honble High Court had directed them to make payment for the acquisition of Ajith Diary
