Punjab-Haryana High Court
The Punjab State Industrial ... vs Canara Bank on 9 August, 2011
Author: K. Kannan
Bench: K. Kannan
IN THE HIGH COURT OF PUNJAB AND HARYANA AT
CHANDIGARH
Civil Writ Petition No.18635 of 2009 (O&M)
Date of decision:09.08.2011
The Punjab State Industrial Development Corporation Limited, Udyog
Bhawan, Sector 17, U.T., Chandigarh, through its Senior General
Manager, Shri J.S.Mann.
...Petitioner
versus
Canara Bank, Branch Office, Sector 35-B, Chandigarh, through its
Branch Manager, and others.
....Respondents
II. Civil Writ Petition No.18639 of 2009 (O&M)
The Punjab State Industrial Development Corporation Limited, Udyog
Bhawan, Sector 17, U.T., Chandigarh, through its Senior General
Manager, Shri J.S.Mann.
...Petitioner
versus
State Bank of Patiala, Industrial Finance Branch, Sector 8, Chandigarh,
and others.
....Respondents
III. Civil Writ Petition No.18678 of 2009 (O&M)
The Punjab State Industrial Development Corporation Limited, Udyog
Bhawan, Sector 17, U.T., Chandigarh, through its Senior General
Manager, Shri J.S.Mann.
...Petitioner
versus
State Bank of India, Industrial Finance Branch, Sector 17, Chandigarh,
and others.
....Respondents
IV. Civil Writ Petition No.1521 of 2010 (O&M)
State Bank of Patiala, through its Chief Manager (C&I) ...Petitioner
versus
M/s Northland Sugar Complex Limited, and others. ....Respondents
Civil Writ Petition No.18635 of 2009 (O&M) -2-
V. Civil Writ Petition No.1660 of 2010 (O&M)
Canara Bank, through its Manager, Principal Officer & General Attorney
Smt. Minakshi Kalia. ...Petitioner
versus
The Punjab State Industrial Development Corporation Limited, Udyog
Bhawan, Sector 17, U.T., Chandigarh, through its Managing Director,
and others.
....Respondents
VI. Civil Writ Petition No.1917 of 2010 (O&M)
State Bank of India, RAR Branch, Sector 17, Local Head Office
Building, Chandigarh, through Assistant General Manager.
...Petitioner
versus
Debts Recovery Appellate Tribunal, through its Registrar, Apartment
No.318, Third Floor, Hotel Samrat, Kautilya Marg, Chanakyapuri, New
Delhi, and others.
....Respondents
CORAM: HON'BLE MR. JUSTICE K. KANNAN
----
Present: Mr.Arun Walia, Advocate, for the PSIDC.
Mr. C.B. Goel, Advocate, and Mr. Nitin Jain, Advocate, for
the State Bank of Patiala
Mr. Aalok Jagga, Advocate, for the Canara Bank.
Mr. B.B.Bagga, Advocate, for the State Bank of India.
Ms. Puneeta Sethi, Advocate, for M/s Northland Sugar
Complex Limited (NSCL)
Mr. Puneet Kansal, Advocate, for Mr. Sukhdev Prasad
Maini, Smt. Anita Maini, Kumar Maini, Harmesh Maini, and
Madhvi Maini.
----
1. Whether reporters of local papers may be allowed to see the
judgment ? No.
2. To be referred to the reporters or not ? Yes.
3. Whether the judgment should be reported in the digest ? Yes.
----
Civil Writ Petition No.18635 of 2009 (O&M) -3-
K.Kannan, J. (Oral)
1. All the above six writ petitions arise out of the order passed by the Debt Recovery Appellate Tribunal (DRAT). The cases with CWP Nos.18635, 18678, 18639 of 2009 have been at the instance of the Punjab State Industrial Development Corporation Limited (PSIDC) against the order of DRAT, while CWP No.1521 of 2010 is at the instance of the State Bank of Patiala, CWP No.1660 of 2010 is at the instance of the Canara Bank and CWP No.1917 of 2010 is at the instance of State Bank of India.
2. The proceedings before the Appellate Tribunal arose initially arose out of the Banks resorting to actions before the Debt Recovery Tribunal (DRT) for recovery of sums alleged to be due to them from the Company named M/s Northland Sugar Complex Limited (NSCL), now ordered to be wound up on the basis of loans obtained on the security of hypothecation of plant, machineries and the stocks of the Company. In the array of parties, along with the debtor Company, the Banks had also impleaded PSIDC on account of the fact that the latter had taken action against the Company under Section 29 of the State Finance Corporation (SFC) Act, took possession of its assets and brought the land and machineries as well as the stocks, without reference to the claims of the Banks which held hypothecation of the stocks and plant and machineries. Through the proceedings before this Court, the amount realized by PSIDC had been deposited with the State Bank of Patiala and later partially distributed amongst the creditor-Banks in so far the sale proceeds were predicated towards the value of stocks. When the Civil Writ Petition No.18635 of 2009 (O&M) -4- properties were sold pursuant to the action under Section 29 of the SCF Act, M/s Chadha Papers Limited were the successful purchasers and there had been independent proceedings that had gone to the Hon'ble Supreme Court in the manner of realization of sale consideration finalized at the auction. Although the assets of the Company had been taken over by PSIDC on 17.07.1996, it had been sold only 15 months thereafter i.e. on 09.10.1997. Even the purchaser did not pay the entire amount immediately and they were concluded only by the intervention of the Hon'ble Supreme Court. All the details of the amounts realized by PSIDC may not be necessary, since as a starting point for resolution of dispute between parties, it shall be possible to take the admitted amount of Rs.21,26,15,094.78 plus further interest as lying with PSIDC as surplus after satisfaction of its own dues with interest and costs. The land, plant and machineries have all been sold as one lot and it has not been possible to predicate the exact amount that was realized towards the machineries which had been hypothecated to the Banks. However, in the proceedings before the DRAT, the point for consideration was only the liability of PSIDC for return of the surplus amount and the claims of the Banks.
3. While disposing of the appeals before the DRAT, the Tribunal had calculated the specific sums of money which were recoverable and had also provided for interest at 9% per annum as pendente lite interest and future interest till the recovery of the amount from PSIDC. The learned counsel for the PSIDC in the above three writ petitions would contend that the surplus amount had been deposited Civil Writ Petition No.18635 of 2009 (O&M) -5- through FDR yielding lesser interest than 9% and, therefore, PSIDC cannot be made liable for any sum in excess of what it has realized by way of interest on the surplus amount. It is also contended that the Tribunal was in error in making PSIDC liable to pay to the Banks as per formula given in its order at para 53, wherein it had been observed that the interest would become payable from 09.10.1997 when the property was sold and whatever that remained beyond that period would be treated to be the surplus.
4. All the Banks have challenged the order of the DRAT in so far as it restricted their entitlement only to 9% towards pendente lite and future interest till the actual recovery from PSIDC. Since all the loans were of commercial transaction, the pendente lite interest as well the future interest must have at the contract rate itself and it could not have been reduced at 9%. The contract rate was in the range of 18 to 19.5% with quarterly rests and the same should also be provided.
5. As regard the contention of PSIDC that the interest could not have been directed to be paid at 9%, since their own deposits of the surplus funds having yielded 9% interest, it is not a tenable argument at all. In the manner of reckoning of the surplus, I would go only by what PSIDC itself has declared that such surplus existed after fully discharging its own debts by claiming the contract rate of interest and all their costs. The amounts in excess of Rs.21 crores and odd, which the PSIDC is retaining, shall be recoverable by the creditors with reasonable interest and if there still exists any surplus, it should go back to the Company in liquidation for distribution in accordance with law. The Civil Writ Petition No.18635 of 2009 (O&M) -6- claim of interest by the Bank at any percentage in excess of what interest PSIDC itself was obtaining through its deposits of the surplus amount, is wholly irrelevant. No part of the money beyond what it has fully adjusted for its loans and what is treated as surplus belongs to PSIDC. The entitlement of the creditor-Banks shall be dealt with independently of whatever interest that PSIDC obtains through its deposits of the excess amount. In respect of such surplus, PSIDC is only a trustee and it could have no claims whatever. It cannot, therefore, dictate the percentage of interest that is claimable by the Banks. The plea of the PSIDC with reference to how the interest could be worked out by the Banks is, therefore, rejected. The other argument that the liability would be calculated from the surplus amounts after loading interest upto the date of land sale on 09.10.1997 need not be fully applied in this case, for, I will take the PSIDC's own admission of the existence of surplus in its hands as the basis for distribution.
6. The writ petitions of the Banks would require consideration only as regards the rate of interest awarded by the DRAT at 9% for pendente lite and future interest. The learned counsel for the Banks argued that Section 21-A of the Banking Regulation Act makes possible a claim of interest at the contract rate without being in any way effected by the several State Usurious Loans Acts. It is no body's contention that the contract rate of interest are usurious loans and that they would require to be scaled down on that basis. I, therefore, do not reproduce any of those decision relating constitutional validity of Section 21-A of the Banking Regulation Act, 1949 and the effect of said provision Civil Writ Petition No.18635 of 2009 (O&M) -7- brought through such decisions. A decision of this Court in Gaje Singh Versus Punjab National Bank-2002(1) ISJ (Banking) 622, lays down that pendente lite future interest cannot be regulated only by the provisions of Section 34 CPC. Yet another judgment in Punjab National Bank Versus Shishu-AIR 2001 (Punjab) 137, held that, while awarding interest, the Bank could invoke Section 21-A of the Banking Regulation Act and the charge of compound interest and such interest cannot be said to be excessive. Both these decisions do not address the issue of what could be claimed as pendente lite or future interest and the power of a Court to award interest different from what is contracted to be made. The issue of pendente lite interest and future interest have been dealt with squarely in the judgment of the Hon'ble Supreme Court in C.K. Sasankan Versus Dhanalakshmi Bank Limited-2009(11) Supreme Court Cases 60 and Punjab and Sind Bank Versus Allied Beverage Company Private Limited and others-2010 (10) Supreme Court Cases
640. In C.K. Sasankan's case, the Court held, referring to Section 34 CPC, that the rate of interest awarded pendente lite and future interest at 9% under RDB Act could not be interfered with. The Court was not actually making a reference to Order 34 Rule 11 CPC. The said provision contains similar provisions to Section 34 CPC which empowers the award of future pendente lite interest and future interest at such rate as the Court deems reasonable. In Punjab and Sind Bank's case, referred to above, the Hon'ble Supreme Court was considering the interplay of Section 34 CPC and Section 21-A of the Banking Regulation Act as also the rival contentions of parties before DRT awarding at 12% Civil Writ Petition No.18635 of 2009 (O&M) -8- and the Bank seeking for enforcement of 18% interest with quarterly rests. The Hon'ble Supreme Court held that, there was a discretion vested with a Court in the manner of determination of future interest and awarded 14% interest. The two decisions of the Hon'ble Supreme Court, referred to above, clearly lay down that there exists a discretion for the Court to award future interest at such rate as it deemed appropriate. In this case, the DRAT has referred to the decision of the Hon'ble Supreme Court in C.K. Sasankan's case and has held that, awarding of 9% interest would be appropriate. Though the counsel appearing for the Banks would plead for payment of interest at the contract rate even if not compounded quarterly in the manner provided under the contract, I would not make any interference with reference to the same, since in the writ petition if the challenge is to the award of interest and the Tribunal has found the reasons to determine the rate of interest and cited also the decision of the Hon'ble Supreme Court that had awarded 9% interest, I will not make any modification merely because it is possible for this Court to do so.
7. The only point that has to be seen now is, how the money, which has been determined by the DRAT, shall be recovered. It is contended on behalf of the Official Liquidator (OL) and the legal representatives of the Guarantor that the excess amount, as admitted by the PSIDC, should be brought before the OL before it is paid to the Banks. It is contended by the Banks that it will be a needless exercise and it will brook further delay. The counsel for the Banks relies on a judgment of the Company Court between Canara Bank and the very same Civil Writ Petition No.18635 of 2009 (O&M) -9- debtor Company NSCL in CA774 of 209 in CP No.40 of 1998 where against a claim for transmission of the amount to the OL from the DRT where proceedings were pending under the RDB Act, the Court held that the applicant Bank could realize the amount determined with pendente lite and future interest from the sale proceeds lying in deposits with PSIDC. That direction, in my view, could continue to govern the rights of parties and the creditor-Banks would be entitled to recover the principal sum referred to in the order of DRT with interest at 9% from the date of institution of the proceedings from PSIDC directly. The payments to the Banks shall be made on the same line of undertaking as provided in the order of Company Court dated 30.07.2010, namely, the entitlement is subject to the right of the claim of the workmen under Section 529-A of the Companies Act, 1956 and it shall also give an undertaking to reimburse to the OL to the extent of the workmen's claim, if found due and payable without any demur or objection. However, it is brought to my attention that the Company Court has already passed an order on 22.02.2002 in CP No.45 of 1996, that PSIDC shall not disburse any of the amount of sale consideration in any manner.
8. The three Banks, who are the writ petitioners, shall apprise to the Company Court of this order and take permission for withdrawal of the amounts from PSIDC in the manner referred to above within the time as stipulated by the Company Court.
9. The counsel for the petitioner in CWP No.1660 of 2010 states that it has already recovered the money at the rate specified in the order of the DRAT. Therefore, no further order is necessary in the said Civil Writ Petition No.18635 of 2009 (O&M) - 10 -
writ petition. If there is ever a dispute that there exists a larger surplus in the hands of PSIDC after payment to the Banks, it is not a matter for adjudication in this Court and any affected party such as, a shareholder or any other creditor than the Banks, who figure as petitioners in the writ petition and who is not a party before this Court, may have such an adjudication before the Company Court in independent proceedings.
10. All other writ petitions are disposed of as above.
(K. KANNAN) JUDGE 09.08.2011 sanjeev