Karnataka High Court
Mysore Spun Silks Private Ltd., A ... vs Karnataka State Financial ... on 10 January, 2008
Equivalent citations: 2008 (2) AIR KAR R 455, 2008 AIHC (N0C) 692 (KAR.) = 2008 (2) AIR KAR R 455
Author: Anand Byrareddy
Bench: Anand Byrareddy
ORDER Anand Byrareddy, J.
1. Heard the Counsel for the parties.
2. The facts are as follows:
The petitioner is a Company, incorporated under the Companies Act, 1956, as a small scale industry. The petitioner had availed of a term loan from the respondent, Karnataka State Financial Corporation.
3. The petitioner defaulted in the repayment of the loan and the petitioner therefore, took the benefit of a "One Time Settlement Scheme" (OTS Scheme) in the year 2003-04 and sought for being accepted to settle its due under the said scheme. Accordingly, under a letter dated 13.4.2004, which is at Annexure-B to the petition, the proposal of the petitioner was accepted to close its account under the OTS Scheme. Incidentally, the petitioner was entitled to certain subsidies from the State Government as well as the Central Government.
4. It is the petitioner's contention that any such subsidy received from the respective Governments was being utilised towards repayment of the term loan. Keeping this in view, the Mowing clause was inserted in the letter dated 13.4.2004:
(c) If state/central subsidy, interest subsidy, insurance claim etc., are received by KSFC subsequent to the account closure on OTS basis, the amount sacrificed by KSFC/Short Service Commission dues if any, will be adjusted. The balance amount if any, will be returned to you.
5. It is the petitioner's contention that the petitioner made the entire payment contemplated under the OTS Scheme, as on 28.3.2005. In the meanwhile, the State of Karnataka had made a payment of Rs. 3,87,5007- as on 20.10.2004, which was an amount under a subsidy to which the petitioner was entitled.
6. It is the contention of the petitioner that it was agreed under the OTS Scheme that the respondent would be entitled to any subsidy received by the petitioner only after the closure of the account on the OTS Scheme. Since the amount above referred, paid as subsidy by the State Government, was received before the closure of the account, the respondent could not have appropriated this amount towards the amounts that may have been waived under the OTS Scheme. It is therefore, contended that the said sum having been received during the currency of the OTS Scheme, the same ought to be adjusted towards repayment under the OTS Scheme, or in other works, the amount of Rs. 16,98,000/- which has been paid by the petitioner ought to stand reduced by Rs. 3,87,500/-. This is the primary contention of the petitioner.
7. Per contra, the Counsel for the respondent would argue that on 31.10.2003, the petitioner was due in a total sum of Rs. 89,54,055/-. The OTS Scheme was a boon to the petitioner, in that, it bailed out the petitioner from a deep financial crisis. Under the scheme, the respondent-Corporation has written off an amount of Rs. 13.58 Lakhs and waived a further sum of Rs. 35.80 Lakhs and the petitioner was therefore required to pay Rs. 16.98 Lakhs, within the time prescribed in the letter dated 13.4.2004, The payments made by the petitioner on the other hand, were staggered and delayed. The payments made are indicated in a tabular form as under.
Sl. No. Date of Payment Amount
01 Initial Payment Rs. 4,00,000.00
in ARPA
02 23rd April 2004 Rs. 25,000.00
03 20th Oct. 2004 Rs. 3,87,500.00
04 10th Nov. 2004 Rs. 62,500.00
05 20th Nov. 2004 Rs. 50,000.00
06 02nd Feb. 2005 Rs. 1,00,000.00
07 15th Feb. 2005 Rs. 1,00,000.00
08 16th March 2005 Rs. 1,00,000.00
09 17th Mar. 2005 Rs. 4,00,000.00
10 28th Mar. 2005 Rs. 73,000.00
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Total Rs.16,98,000.00
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8. The petitioner did not make the payment within the time prescribed. The respondent has however, permitted the petitioner to repay the amount agreed over an extended period of time. The petitioner is, therefore, not justified in seeking to claim the benefit of Clause-C mentioned hereinabove, to contend that since the period of OTS Scheme stood extended, the Clause-C of the letter dated 13.4.2004 ought to be read as the respondent not being entitled to any amounts received by way of subsidy, but, that the same should he adjusted towards the sum of Rs. 16.98 lakhs, which was to be repaid under the agreed terms of the scheme. The Counsel would submit that to is wholly a perverse interpretation of the terms of agreement. It amounts to the respondent being penalised for having granted extension of time in repayment of the minimum amount of Rs. 16.98 Lakhs over an extended period of time. In other words, the Counsel would submit that if the petitioner had made payments in terms of the originally agreed period, under the letter dated 13.4.2004. the amount of subsidy would necessarily have accrued to the benefit of the respondent. The fact that the petitioner sought for extension of time to make payments and that the respondent had granted time, cannot be construed to hold that the petitioner was absolved from making any payment, less than Rs. 16.98 lakhs and therefore, the Counsel would submit that the petition be dismissed.
9. In this background, the short question for consideration is whether the amount of Rs. 3,87,500/- received as a subsidy as on 20.10.2004 ought to be adjusted towards the amount repayable at Rs. 16,98 Lakhs by the petitioner under the terms of the letter dated 13.4.2004.
10. It is seen from the terms of settlement, that 25% of the amount, namely, Rs. 16.98 Lakhs was to be paid within 30 days from 13.4.2004 and the balance of 75% was payable within three months from the date of expiry of 30 days. It would presuppose that the petitioner was obliged to pay the entire amount of Rs. 16.98 Lakhs before the 14th September, 2004. Admittedly, the subsidy has been paid after the date agreed upon for closure of the account. By this, it is clear that if the petitioner had made payments accordingly, the subsidy amount which has been received as on 24.10.2004 could not have been appropriated towards the repayment of amounts under the OTS Scheme. The fact that the petitioner had been granted further time for repayment, in variance with the terms agreed upon, cannot be pressed into service to contend that till such time that the petitioner was able to make the last of the payments, any amount of subsidy received would also have to be appropriated towards the amount, which the petitioner was obliged to repay under the terms of that settlement.
11. From the material that is available on record, there is no such intention of the parties disclosed. The argument put forth by the petitioner though attractive, would result in the petitioner deriving undue benefit on account of the benevolence of the respondent in having extended the time for repayment under the OTS Scheme which itself, was a wind-fall for the petitioner.
12. There is no merit in this writ petition and accordingly the same is dismissed.