The main legal point established in the judgment is the application of the principles of novation, discharge of liability, and reasonable compensation for delay in payment under the Indian Contract Act, 1872.

ORDER :

PRAYER: Writ Petition filed under Article 226 of the Constitution of India to issue a Writ of Certiorarified Mandamus, calling for the records relating to the order passed by the 1st respondent in their Ref. No. F&R/223/13, dated 20.03.2013, and to quash the same and consequently direct the 1st respondent to treat the loan account No. PF/F&R/223/2013 of the petitioner as closed and return the original title deeds of the mortgaged property deposited in respect of the said loan.

1. The petitioner has borrowed a sum of Rs.53.57 lakhs out of total sanctioned amount of Rs.56 lakhs from the 1st respondent (SIPCOT). The petitioner however fell in arrears and had paid only a part of the amount to the 1st respondent (SIPCOT). Under these circumstances, proceedings under State Financial Corporation Act, 1951 were initiated against the petitioner by the 1st respondent (SIPCOT) before the District Court, Chengalpet in SFCOP No. 11 of 1991.

2. The SFCOP No. 11 of 1991 was decreed by the District Court, Chengalpet in favour of the 1st respondent (SIPCOT). Thus, an amount of Rs.78,22,146/- together with interest at 14% per annum from 29.01.1991 on the Principal amount of Rs.31,87,206/- lent to the petitioner was to be paid. The 1st respondent (SIPCOT) thereafter filed E.P. No. 2 of 1994 in SFCOP No. 11 of 1991 on 22.04.1994 to recover the dues from the petitioner and attempted to auction the property. However, the auction could not be conducted by the 1st respondent (SIPCOT) for various reasons. During the interregnum, the 1st respondent (SIPCOT) offered OTS (One Time Settlement) by its communication dated 21.11.2003.

3. As per the aforesaid OTS proposal, the petitioner was required to remit the principal outstanding amount of Rs.31,87,206/- and other dues of Rs.5,41,958/- excluding interest of Rs.2,63,000/- involved in waiver of interest dues of Rs.1,05,662/- lakhs as on 31.12.2003.

4. The petitioner however failed to make any payment and thus the OTS was cancelled on 15.02.2005. The petitioner was therefore directed to pay the entire dues as decreed. Meanwhile, the petitioner sent representation on 19.05.2005. The petitioner thereafter filed W.P. No. 34378 of 2005 for Mandamus to direct the 1st respondent (SIPCOT) to consider the petitioner's representation and pass appropriate orders on the representation dated 19.05.2005. In the said writ petition, an interim order was passed on 25.10.2005.

5. During the pendency of the above writ petition, the 1st respondent (SIPCOT) vide communication dated 13.11.2009 informed the petitioner that the earlier OTS could not be considered as it was cancelled on 15.02.2005 due to non-compliance. However, in view of the revised OTS Policy announced during 2005, the 1st respondent (SIPCOT) extended concessions such viz. waiver of interest on interest, penal interest, reduction of interest rates based on the merits of the case. Accordingly, the 1st respondent (SIPCOT) directed the petitioner company to furnish the following:

“(1) Copy of the Audited Annual Reports for the last three years (i.e. 31.3.2007, 31.3.2008 & 31.3.2009).

(2) An Affidavit as per format (enclosed) in nonjudicial stamp paper valued at Rs.100/- duly notarized.

(3) Remit Rs.3.19 lakhs being 10% of principal outstanding amount of Rs.31.87 lakhs towards down payment.”

6. The said communication stated that “After receipt of the above particulars we will examine your request and place it before the Sub Committee/Board and inform you the decision of the Sub Committee/Board within a month.”

7. Pursuant to the above, a sum of Rs.3,20,000/- was remitted by the petitioner on 23.07.2010, which was duly acknowledged by the 1st respondent (SIPCOT) by enclosing a stamp receipt in their covering letter dated 28.08.2010. Thereafter, the petitioner paid a further amount of Rs.28,67,206/- (Rs.6,67,206/- + Rs.22,00,000/-) which was duly acknowledged by the