The court upheld that distinct loan accounts cannot compel funds adjustment between them under OTS agreements.

JUDGMENT

The petitioner is the partner of a Cinema Theatre functioning in the name and style 'Chand V Movies' and is also the proprietor of 'Chand V Regency' hotel at Kaipamangalam in Trichur district. The petitioner availed loans from the 2^nd respondent, Kerala Financial Corporation ('the KFC' for short) and defaulted repayment. The KFC therefore initiated recovery measures against the property given as security. Thereupon, the petitioner submitted a request for settling the loan availed for Chand V Movies. Acceding to the request, the 1^st respondent agreed for One Time Settlement (OTS) of the account on payment of Rs.134.81 lakhs under the Special Recovery Drive for Doubtful Loans (SRD) Scheme. As the petitioner failed to pay the amount in accordance within the time stipulated, the KFC demanded further sum of Rs.8,16,217/- towards interest on belated payment.

Thereupon, the petitioner submitted Ext.P1 explaining the reasons for the delay in remitting the installments and seeking waiver of the belated interest portion. The 1^st respondent sent Ext.P2 reply making it clear that waiver cannot be granted and directed the petitioner to pay the amount of Rs.8,16,217/- on or before 28-02-2024. The petitioner had availed another loan from the 2^nd respondent for Chand V Regency Hotel. Meanwhile, he remitted Rs.19,19,800/- for getting the proposal to settle that loan account under OTS, considered. Upon receiving Ext.P2 letter, the petitioner requested the KFC to deduct the Rs.8,16,217/- claimed towards interest on belated payment from the Rs.19,19,800/- deposited as a condition for consideration of the OTS proposal of the Chand V Regency hotel kept under SARB CZ suspense account by the 1^st respondent. The request was not considered. Instead, at the instance of the 1^st respondent, revenue recovery notice demanding a sum of Rs.88,32,533/- was issued. Hence this writ petition.

2. Heard.

3. Learned counsel for the petitioner submitted that the 1^st respondent committed gross illegality by refusing to adjust the belated interest of Rs.8,16,217/- demanded for settling the account of 'Chand V Movies' from the sum of Rs.19,19,800/- deposited for consideration of the OTS proposal for settling the account of 'Chand V Regency'. It is contended that, since the sum of Rs.19,19,800/- is kept in a suspense account, the 1^st respondent is bound to release the amount at the request of the account holder. Referring to the meaning of the word 'suspense account' in Prem & Saharay's Judicial Dictionary of Words and Phrases, it is submitted that a person whose money is held in suspense is entitled to withdraw it any moment he likes, though he neither gets a passbook nor is entitled to draw any cheques or to be paid interest in respect of the amount. Attention is drawn to Ext.R1(b) notice to submit that, the 2^nd respondent had only decided to cancel the OTS facility of 'Chand V Movies', but had not actually cancelled the facility. As such, the demand for additional amount of Rs.8,16,217/- as interest towards belated payment, in spite of the petitioner remitting the entire OTS amount by 30.09.2023 as against the last date fixed as 31.05.2023, is patently illegal. Learned counsel then submitted that the petitioner is ready and willing to pay the amount of Rs.8,16,217/- towards belated interest and the 2^nd respondent may be directed to accept that amount and close the loan account of 'Chand V Movies'.

4. The learned Senior Counsel appearing for the KFC submitted that a term loan of Rs.2 Crore was sanctioned to the partnership firm M/s.Chand V Movies during 2015–2016. As repayment towards the loan was defaulted the KFC initiated recovery measures. Thereupon, the petitioner requested for One Time Settlement facility