Calcutta High Court
Sppl Hotels Private Limited & Anr vs Allahabad Bank & Ors on 23 July, 2019
Author: Arindam Mukherjee
Bench: Biswanath Somadder, Arindam Mukherjee
IN THE HIGH COURT AT CALCUTTA
CIVIL APPELLATE JURISDICTION
ORIGINAL SIDE
Present :
THE HON'BLE JUSTICE BISWANATH SOMADDER
&
THE HON'BLE JUSTICE ARINDAM MUKHERJEE
GA No.1649 of 2018
With
APO 187 of 2018
WP No.1040 of 2016
SPPL HOTELS PRIVATE LIMITED & ANR.
Vs.
ALLAHABAD BANK & ORS.
For the Appellants : Mr. Anindya Mitra,
Mr. Abhrajit Mitra,
Mr. Prithwiraj Sinha,
Mr. Sourav Ghosh,
Mr. Soumen Ghosh,
Mr. S. Sen,
Mr. F. Nazim, ........Advocate
For the Respondents : Mr.Utpal Bose,
Mr.Om Narayan Rai, Mr. Saikat Roy Chowdhury, Mr. Aritra Ghosh, ..........Advocate Heard on : 03.01.2019, 07.01.2019, 08.01.2019, 15.01.2019, 16.01.2019, 17.01.2019, 21.01.2019, 22.01.2019, 05.02.2019, 12.02.2019, 13.02.2019, 14.02.2019, 20.02.2019, 26.02.2019, 27.02.2019, 28.02.2019, 05.03.2019, 07.03.2019, 19.03.2019, 26.03.2019, 02.04.2019, 11.04.2019, 22.04.2019, 10.06.2019, and 12.06.2019.
Judgment on : 23.07.2019
Arindam Mukherjee, J:
1) The appeal is at the instance of the writ petitioners. The appellant No.1/writ
petitioner No.1 is a company and the appellant No.2/writ petitioner No.2 is its Vice- President - Legal. The appellants/writ petitioners have assailed the judgment and order dated May 1, 2018 by which the learned Single Judge was pleased to dismiss the writ petition being WP No.1040 of 2016 (M/s. SPPL Hotels Private Limited & Anr. Vs. Allahabad Bank & Ors.). The respondent No.1 is a nationalised bank, the respondent No.2 and 3 are respectively the Assistant General Manager and the Chairman-cum-Managing Director of the respondent No.1 (Bank).
2) The case of the appellants/writ petitioners is briefly as follows:-
i) By a sanction letter dated 11th January, 2013 (hereinafter referred to as first sanction letter), the respondent No.1, bank sanctioned a term loan in favour of the appellant/writ petitioner No.1 for a sum of Rs.175 crores repayable as per the schedule incorporated therein. The interest rate agreed to be charged was base rate (BR) + 2% per annum. The said loan was sanctioned for a hotel project at Rajarhat, Kolkata by the NOVOTEL.
ii) The said first sanction letter provide for "details terms and conditions"
under serial no.7 thereof. It also contains Special terms and conditions, 23 Pre-disbursement conditions and 17 Post disbursement conditions.
iii) For the purpose of the issues raised by the appellants/writ petitioners, the relevant clauses are set out hereunder:-
Details terms and conditions
4. "Rate of Interest - BR+2% p.a. with 1st reset on COD and annually thereafter.
5. Period - 9 years 7 months (Door-to-Door Tenor).
6. Repayment - To be paid in 32 progressive quarterly instalments as under
after moratorium of 18 months from the date of 1st disbursement".
"COD" is the abbreviation for Commercial Operation Date.
Post disbursement conditions
11. "The Bank shall have right to recover in part or in full or withdraw/stop financial assistance, at any stage, without any notice or giving any reason at the discretion of the bank, if the company fails to comply with the terms & conditions or guidelines/policy of the Bank.
12. The account shall be reviewed within one year or earlier at the discretion of the Bank.
16. Non-compliance of any of the terms & conditions shall attract penal interest. The Borrower shall pay penal interest at the rate of 1.00% p.a. on the total outstanding in the event of any defaults in payment of interest, principal, upfront fee or any other monies due on their respective due dates during the currency of the facility for the relevant period.
17. Prepayment charges shall be applicable as per circular. The Company shall have the option at the time of reset on 90 days advance notice to prepay the lenders in part or in full, the loan together with all interests and other charges and monies due and payable to the Lenders upto the date of such prepayment, on nil prepayment penalty".
iv) The said first sanction letter also provided for Event of Default wherein the next due date was fixed on 27th December, 2013.
v) On review of the accounts, the term loan was renewed by a letter dated 3rd March, 2015. This is referred to by the appellants/writ petitioners as the second sanction letter. The said second sanction letter contains a clause termed as "interest rate reset clause". The clauses relevant for our purpose in the second sanction letter are set out hereunder:-
The Detailed Terms and Conditions "Interest rate reset clause: Interest Reset, if any: On annual review". Terms and conditions
5. "Review of account will be done after one year from the date of present review or earlier at the discretion of the bank.
6. All usual terms and conditions and other existing terms and conditions will be followed".
vi) Records also reveal that prior to issuance of the second sanction letter, the bank issued a letter dated 17th February, 2015 with the caption "review & term loan" being similar to the caption of second sanction letter. On a comparative study of the two, it, however, appears that terms and conditions on both the letters are identical.
vii) Prior to issuance of the two letters respectively dated 17th February, 2015 and 3rd March, 2015, the hotel "NOVOTEL, Kolkata" commenced its commercial operation on 1st September, 2014. The said date is the "COD" as described under the sanction letters.
viii) The appellants'/writ petitioners' case is that, on a conjoint reading of the two sanction letters, the COD should be the first reset date and the subsequent reset dates will be annually thereafter unless the same is changed by the bank at its discretion as provided in the sanction letters. Thus, according to the appellants/writ petitioners, 1st September, 2014 will be the first reset date and thereafter annually i.e. on expiry of 30th August of each year. According to the appellants/writ petitioners the interest rate as per the "interest rate reset clause"
provided in the second sanction letter is on annual review, however, the Bank had the discretion to review the account earlier.
ix) It is the case of the appellants/writ petitioners that after availing the term loan, they regularly discharged their obligations in terms of the agreement between the parties arrived at on the issuance and acceptance of the sanction letters. However, in finding that the interest rate to be uncomfortable, the appellants/writ petitioners made a request to the Bank for revision of the rate of interest on the term loan by a letter dated 5th June, 2015. In the said letters, the appellants/writ petitioners stated that 0.7% over the base rate was comfortable to them and further cited the example of the State Bank of India charging interest in the range of 10.50% to 10.75%. This letter was followed by another letter dated 27th July, 2015 wherein the appellants/writ petitioners for the first time informed the Bank that they have decided to close the credit facilities with their own funds without, however, indicating the exact date of closure. The reason was, being unable to afford the high rate of interest.
x) By a letter dated 14th August, 2015 issued as a reminder to the two earlier letters respectively dated 5th June, 2015 and 27th July, 2015, the appellants/writ petitioners for the first time requested the Bank to provide them with the amount approximately due as on date with break up of details of the amounts, the appellant No.1/writ petitioner No.1, was required to pay for the closure of the term loan account. This letter also does not specify any particular date of closure.
xi) The Bank in response to the letter of the appellants/writ petitioners dated 14th August, 2015, by a letter dated 21st August, 2015 clearly stated that to foreclose the account, pre-payment charges at the rate of 2.05% of the outstanding loan amount shall be realised.
xii) The appellants/writ petitioners alleging to have not received the Bank's letter dated 21st August, 2015 issued a further letter to the Bank on 2nd September, 2015 referring to their earlier letters dated 5th June, 2015, 27th July, 2015 and 14th August, 2015. In the said letter, the appellants/writ petitioners have contended that they have an option to close the account at the time of the reset or annually thereafter without any pre-payment penalty as per the sanction letters and they wanted to exercise the said option to close the account. The appellants/writ petitioners, therefore, sought for the details of the amount payable with detailed break up of interest so that they could make necessary arrangements to close the account. This letter, however, is clearly beyond the second reset date i.e. 1st September, 2015.
xiii) The Bank issued another letter on 10th September, 2015 by which it communicated to the appellants/writ petitioners that they have decided to reduce the rate of interest on the term loan from the existing rate being base rate plus 2.00% per annum to base rate plus 0.75% per annum.
xiv) By a subsequent letter dated 21st September, 2015, the appellants/writ petitioners stated as follows:-
"Please refer to our earlier letters dtd. 05.06.2015, 27.07.2015, 14.08.2015 and 02.09.2015 wherein we had stated that we would like to close the above account from our own sources.
We would now like to exercise the option of closure of the account at the time of reset which is September 2015, by remitting the entire outstanding balance in the term loan account with up to date interest and we will also be providing 100% margin for the liability under non- fund based facility.
Once the funds are received by you, we request you to kindly appropriate the same to the outstanding balance in the Term Loan account and close the same".
xv) By a letter dated 22nd September, 2015, the appellants/writ petitioners informed the Bank that they have provided sufficient funds in their current account and requested the Bank to appropriate the same against the outstanding balance in the term loan account along with up to date interest applicable and to close the account.
xvi) On receiving such request, the Bank foreclosed the term loan account of the appellant No.1/writ petitioner No.1 by appropriating its dues from the money standing in the current account of the appellant No.1/writ petitioner No.1 which included the pre-payment charges.
3) The appellants/writ petitioners refer to the account's statement issued by the Bank and submit that on 22nd September, 2015, the Bank had realised a sum of Rs.3,28,20,240/- under the head "DEBIT - PENAL CHG PRE CLS OF TL". It is the case of the appellants/writ petitioners that the Bank illegally, unlawful and in an unauthorised manner has realised the said sum of Rs.3,28,20,240/- when the appellants/writ petitioners were not liable to pay any pre-payment charges having paid the entire term loan with up to date interest on a reset date in terms of the agreement. The appellants/writ petitioners also submit that "pre-payment charges"
and pre-payment penalty provided in clause 17 of the Post disbursement conditions in the first sanction letter has to be construed as the same in the context of the agreement. "Nil pre-payment penalty" should mean no pre-payment charges are leviable on the foreclosure of the term loan on the reset date.
4) The Bank on the other hand to counter the case of the appellants/writ petitioners referred to clause 17 of the Post disbursement conditions contained in the first sanction letter and submits that they were entitled to realise pre-payment charges on a foreclosure of the term loan account in absence of 90 days' prior notice. The letters dated 5th June, 2015, 27th July, 2015 and 14th August, 2015 cannot and could not be construed as a 90 days' prior notice in terms of the clause
17. The subsequent letters dated 2nd September, 2015, 21st September, 2015 and 22nd September, 2015 are admittedly after 1st September, 2015 being the reset date as per the contract. Having failed to give a 90 days' prior notice, the appellants/writ petitioners cannot claim the benefit of "Nil pre-payment penalty" as specified in clause 17 of the first sanction letter equating the same with pre-payment charges.
5) The learned Single Judge has dealt with the respective cases made out by the parties and has clearly formed an opinion that the Bank was entitled to realise pre-
payment charges from the appellants/writ petitioners on the latter having failed to give a 90 days' prior notice before the reset date.
6) Considering the detailed discussion and the reasoning given by the learned Single Judge, we were not inclined to interfere with the order impugned while exercising jurisdiction in an intra-court mandamus appeal. The appellants/writ petitioners, however, attempted to raise certain new points before us which were not argued before the learned Single Judge to invite us to interfere with the order impugned. The appellants/writ petitioners submitted that the new points they wanted to raise are points of law which they are entitled to argue at the appellate stage, even if the same has not been argued before the learned Single Judge. The appellants/writ petitioners cited the judgment reported in AIR 1958 SC 512 and in particular paragraph 10 thereof in support of their contention that vagueness of an agreement as sought to be urged by them is based on interpretation of a document which is essentially a part of law and, therefore, can be argued even at the appellate stage even if not raised specifically before the first Court.
7) There is no quarrel as to the settled proposition as laid down in the judgement reported in AIR 1958 SC 512 which allows a party to urge a point of law even if not raised before the first Court. However, without going into the technicalities we allowed the appellants/writ petitioners to argue all points, in course of their argument. The appellants/writ petitioners apart from arguing the new points have also urged the points which formed the basis of their argument before the learned Single Judge. We also allowed the bank to bring on record the circulars which according to the bank were the relevant ones for the purpose of clause 17 of the Post disbursement conditions in the first sanction letter. We also allowed the appellants/writ petitioners to use an affidavit dealing with bank's affidavit.
8) The appellants/writ petitioners before us referred to clause 17 of the Post disbursement conditions in the first sanction letter and contended that the contract is void for uncertainty in as much as it does not specify the circulars but only provides "pre-payment charges shall be applicable as per circulars". No circular has been referred to, no circulars have been provided by the Bank which enables the Bank to realise pre-payment charges. In this context, the appellants/writ petitioners referred to a judgment reported in AIR 1990 Kerala 198 and in particular paragraphs-6 and 7 thereof.
9) The appellants/writ petitioners then contend that there is no acceptance from the borrower i.e. appellant No.1/writ petitioner No.1 allowing levy of penal charges. The letter of the Bank dated 21st August, 2015 where it says that pre-payment charges at the time of foreclosure will be 2.05% of the outstanding loan amount also does not refer to any circular. The said rate of pre-payment charges was never accepted by the borrower (appellant No.1/writ petitioner No.1). No law of land allows imposition of pre-payment charges. It can only be done by way of a contract. Since the contract is vague and tainted with uncertainty, there is no contract between the parties which allows levy of pre-payment charges. There is also no agreement as to pre-payment charges at the rate of 2.05% between the parties.
10) There was no instruction from the appellant No.1/writ petitioner No.1 to the Bank to debit the current account of the appellant No.1/writ petitioner No.1 for pre-payment charges. In absence of such mandate, the Bank could not have debited any pre-payment charges from the account of the appellant No.1/writ petitioner No.1.
11) Furthermore, according to the appellants/writ petitioners, clause 17 of the Post disbursement conditions in the first sanction letter is a clog on equity of redemption. Redemption cannot be restricted and as such the agreement which creates such restriction is also otherwise void. There are no statutory guidelines as such the agreement ought to hold as a clog on redemption of mortgage. In this context, reliance was placed on the judgment reported in AIR 1989 SC 436 and in particular paragraphs-20 to 34 thereof.
12) The respondent bank on the other hand relied upon the circular dated 27th May, 2015 disclosed in its affidavit filed before us and submitted that the account having been squared off on 22nd September, 2015, the bank is entitled to pre- payment charges at the rate of 2.05% of the outstanding amount in terms of the agreement and the relevant circulars and the Bank has rightfully realised the same.
13) According to the Bank, the notice for pre-payment has to be given only after the reset date is reached. It is within 90 days from the reset date that the notice has to be given and thereafter pre-payment. Since the appellants/writ petitioners did not follow such course, the Bank is entitled to pre-payment charges. The bank says, assuming without admitting, that the notice for foreclosure was required to be given 90 days prior to the reset date then also the appellants/writ petitioners do not qualify for nil pre-payment charges having failed to give such 90 days' prior notice. It is further submitted even on a liberal construction of letters dated 5th June, 2015, 27th July, 2015 and 14 August, 2015, none of them can be said to be 90 days' prior notice. The reset date admittedly was the annual day after 1st September, 2014 being the COD. If one has to give a 90 days' prior notice then the same ought to have given on or before 1st June, 2015. Earliest letter from the appellants/writ petitioners is dated 5th June, 2015 i.e. after 1st June, 2015, this is apart from the fact that it does not qualify as 90 days' notice simply on the ground that it does not contain any request for foreclosure on 1st September, 2015. The same is beyond the 90 days and also does not qualify as a notice in absence of an intention to foreclose on the reset date being specified therein being a pre- conditioned for "nil pre-payment penalty".
14) After considering the materials on record and the rival contentions we find that the Bank was entitled to realise pre-payment charges and the appellant No.1/writ petitioner No.1 was liable to pay the same for the following reasons.
i) The clause 17 of the Post disbursement conditions in the first sanction letter comprises of two separate sentences. The first sentence provides "pre-payment charges shall be applicable as per circular". The second sentence provides for an option to the borrower (appellant No.1/writ petitioner No.1) to prepay the loan in part or in full together with interest and other charges and money due and payable to the lender up to the date of such pre-payment on "nil pre-payment penalty" subject to 90 days' advance notice. Going by the plain reading of the said clause, it is clear that pre-payment charges is leviable by the Bank as per applicable circular that is to say in the event of prepayment, prepayment charges are applicable. The appellants/writ petitioners cannot allege uncertainty in that portion of clause 17 in absence of specific mention of the circular which is applicable. Section 29 of the Indian Contract Act, 1872 deals with "agreements void for uncertainty". Under the said provision an agreement to qualify to be void for uncertainty has to be such that the term/terms are not certain and are not capable of being made certain. In the instant case, it is certain that pre-payment charge is leviable. Only the rate is not specified as it is dependent on the applicable circular which is not mentioned. The circulars change from time to time and as such mentioning a particular circular in clause 17 would have created more confusion with the change of the circular mentioned therein. For example if a circular of the year 2013 was mentioned therein and the foreclosure took place in 2015 when another circular had come into effect with a different rate to that mentioned in the clause. A question then would have arisen which circular is to be applied. It is open to a borrower in such a situation to contend that the applicable circular would be the one which specified lesser rate. The bank would have contended otherwise. It is for this reason the parties had consciously kept the clause firm yet without mentioning a particular circular which was open to alteration. The clause is worded in such a manner that the same will become certain when the relevant circular as to pre-payment is referred to and relied upon at the time of foreclosure of the term loan account i.e. at the time of pre-payment the agreement becomes certain as to the applicable rate of pre-payment. The clause is thus to the extent it does not prescribe the rate pre-payment is capable of being made certain and cannot be said to be tainted with uncertainty as required under Section 29 of the Indian Contract Act, 1872. Moreover, as per clause 11 of the first sanction letter under the heading Post-disbursement conditions, the appellant No.1/writ petitioner No.1 is required to comply with the guideline/policy of the bank. The judgement reported in AIR 1990 Ker 198 so far it relates to the uncertainty of a contract is not applicable in the facts and circumstances of the instant case.
ii) That apart the appellants/writ petitioners have enjoyed the benefit of the sanction by using and utilising the term loan being a funded liability of the Bank for its project and had commenced commercial operation thereof with such term loan. After having enjoyed the fruits of the contract it does not lie in the mouth of the appellants/writ petitioners to allege that the agreement was vague and uncertain and as such void.
iii) It is also apparent from the records before us that the appellants/writ petitioners never wrote to the Bank seeking any clarification as to the "applicable circular". If it was the case of the appellants/writ petitioners that they were not aware about the pre-payment charges in the absence of any particular circular being mentioned in clause 17, they ought to have got the position clarified by asking the bank about the applicable circular. That the appellants/writ petitioners were not aware of the pre- payment charges in absence of any circular being mentioned therein is, therefore, unacceptable from the course of conduct of the appellants/writ petitioners.
iv) Furthermore, on the same logic, the appellants/writ petitioners should have then objected to the realisation of interest as the interest levy clause only says base rate plus 2% and base rate has not been specified. The base rate is always dependent on the Bank's circular based on the circulars issued by the Reserved Bank of India (RBI) from time to time. With the aid of the circulars the base rate is capable of being made certain. It is, therefore, apparent that the point of uncertainty in the agreement as to prepayment charges in absence of circular being mentioned as sought to be raised by the appellants/writ petitioners is by way of an afterthought particularly when the appellants/writ petitioners have derived benefit out of such so called uncertain contract. This argument of the appellants/writ petitioners is as such devoid of merits.
v) It further appears that the Bank on a query from the appellants/writ petitioners by its letter dated 21st August, 2015 had indicated that 2.05% of the total outstanding amount was the pre-payment charges. The appellants/writ petitioners subsequent thereto had sought for detailed break up of the outstanding sum but never insisted for production of the applicable circular on the basis whereof the bank claimed pre-payment charges till 22nd September, 2015 when the appellants/writ petitioners instructed the bank to appropriate the money. The bank has produced the applicable circular by disclosing the same with the affidavit filed before us. It is clear from the circular that those pre-payment charges leviable on and from 27th May 2015 was 2.05% of the outstanding amount. It is also evident from the two letters of the appellants/writ petitioners respectively dated 21st September, 2015 and 22nd September, 2015 which were written subsequent to bank's letter dated 21st August, 2015 that there was a clear mandate from the appellants/writ petitioners to the bank to appropriate money to foreclose the account and the bank has realised pre-payment charges being money due to it as per such mandate. The appellants/writ petitioners, therefore, cannot also complain as to there being no mandate. In fact clause 17 allows the bank to realise all interests and other charges and monies due and payable to the bank which the bank has done.
vi) The appellants/writ petitioners also cannot deny knowledge of such circulars issued by the bank from time to time for realisation of pre- payment charges as they are in normal course displayed on the notice board of the Bank as also on the bank's web site. So there is a presumption as to knowledge of the circulars applicable from time to time.
vii) The appellant No.1/writ petitioner No.1 is a company. The appellant No.2/writ petitioner No.2 is its Vice President- Legal. This pre-supposes that the appellant No.1/writ petitioner No.1 has a legal department and/or has a legal support system. The appellant No.1/writ petitioner No.1 with its eyes open had entered into the agreement by accepting the sanction letter and availing the term loan. It is too late in the day for the appellants/writ petitioners to contend that they did not accept clause 17 of the agreement or any part thereof.
viii) It is also clear from the statement of the account as also the case made out by the parties that apart from pre-payment charges, the Bank has not charged anything on any other head or account for the pre-payment of the loan. The description in the statement of the account as against deduction of Rs.3,28,20,240/- on 22nd September, 2015 is "DEBIT - PENAL CHG PRE CLS OF TL". This has to be construed as pre-payment charges and no other meaning can be given to it. In an accounting system maintained through computers, the description is as per the software or the application used for maintaining the account over which a particular bank like the respondent No.1 has no contract. Even if, the column does not describe the realisation of the said sum as pre- payment charges, it definitely describes the realisation as penal charges for foreclosure of the term loan. The amount, therefore, has been debited and/or realised as a penal consequence for pre-closure of the term loan, which is nothing but pre-payment charges particularly when no other charges for pre-payment has been levied.
ix) So far as the alternate argument is concerned that "nil pre-payment penalty" is the same as pre-payment charges then also the appellants/writ petitioners are not entitled to the benefit of "nil pre- payment penalty" having clearly failed to give 90 days' notice prior to the reset date which is a pre-condition for receiving such benefit. In this regard, we do not agree with the Bank's submission that the 90 days has to be counted after reaching the reset date. On a proper construction of the second part of clause 17, it is clear that 90 days' advance notice means a notice to be issued 90 days before the reset date i.e. 1st September, 2014 (being the 1st reset date) and thereafter 90 days prior to each reset date evincing a clear intention to foreclose the account. None of the notices issued by the appellants/writ petitioners are 90 days ahead of 1st September, 2015 being the reset date with which we are concerned. That apart and in any event, neither of the notices respectively dated 5th June, 2015, 27th July, 2015 and 14 August, 2015 clearly evinces the intention of the appellants/writ petitioners to foreclose the loan on the reset date. The said notices thereby fall short of such 90 days advance notice. The argument of the Bank so far as it relates to the construction of the notices are concerned, therefore, are accepted and as consequence thereto, the appellants/writ petitioners are not entitled to claim refund of the pre- payment charges realised by the bank.
x) It will appear from the letters dated 5th June, 2015 and 27th July, 2015 that the appellants/writ petitioners understood that they had an option to repay the amount due at the time of reset which was the annual day from the date of COD (i.e. 1st September, 2014). The annual day, therefore, according to the appellants/writ petitioners was 1st September, 2015 being the reset date. Prior notice had to be given 90 days ahead of such reset date. On perusal of the letter dated 21st September, 2015, it is apparent that the appellants/writ petitioners despite being aware of the reset date attempted to show that the entire month of September, 2015 was available for them to foreclose the account by paying the outstanding balance in the term loan account with up to date interest i.e. to say without any pre-payment charges or pre-payment penalty, if they made such payment within September, 2015. The appellants/writ petitioners, however, in their earlier letters have admitted that the reset date was the annual day from the date of COD i.e. 1st September 2015 and as such clearly knew about their option and the time when it has to be exercised i.e. on the reset date. The appellants/writ petitioners had to therefore give a 90 days' notice prior to the reset date which they have admittedly failed.
xi) So far as to the point of clog on redemption is concerned we are not in agreement with the appellants/writ petitioners. The term redemption is normally associated with a mortgage. Section 60 of the Transfer of Property Act, 1882 secures the right of redemption of the mortgagor. The role of the Court in a case of mortgage is to protect the mortgager to the extent that harsh or oppressive conditions are not introduced taking advantage of the situation of the mortgager which would render the mortgagee right to a mirage. The Court in such a situation strikes the bargain to revive and restore the mortgagors' right of redemption. It is, therefore, a settled position that the right of redemption can always be attached with a condition by incorporating the same in the agreement which is not oppressive at harsh that renders redemption right of the borrower otiose. The appellants/writ petitioners have also admitted this legal position. The pre-payment charges is such a condition which needs to be fulfilled for early closure of the term loan. This restrictive covenant is incorporated in the agreement which has been duly accepted by the appellants/writ petitioners and acted upon. We do not find that pre-payment charges is an oppressive or harsh condition introduced in the agreement taking advantage of the position of the appellant No.1/writ petitioner No.1 or that the clause for realisation of pre-payment charges is of such nature which makes redemption impossible. In view of such findings we hold that the judgement reported in AIR 1989 SC 436 has no manner of application to the instant case.
xii) That apart the Bank's grant term loans with a condition to realise the same as per the schedule of payment which is fixed after taking into account several parameters. It was open to the appellants/writ petitioners to go on making payment as per the schedule and square off the account without going for pre-payment. The Bank calculates the term for the loan on the basis of its available funds. The interest rate is also calculated on the basis of amount required to be disbursed and the period for its return. The schedule of re-payment is prepared taking into account all these factors. On an early closure of term loan, the banking business is required to be re-structured as infusement of a huge amount of fund at a time dehors the schedule of payment is liable to upset such banking business. The bank is entitled to impose a condition for such pre-payment. In any event restrictions can be imposed by the contract and there being a valid contract between the parties containing such restriction which has been acted upon, the appellants/writ petitioners' cannot at this belated stage contend that the agreement is void having a clog on redemption. It was open to the appellants/writ petitioners either to make payment in terms of the schedule of payment or otherwise they could have avoided the agreement by not accepting the terms of the sanction. Having not done either of the two, the argument that the pre-payment charges being a restriction on redemption cannot be accepted.
The appeal, therefore, fails and is accordingly dismissed along with all connected applications.
There shall, however, be no order as to cost.
Urgent photostat certified copy of this judgment and order, if applied for, be supplied to the parties on an urgent basis.
(ARINDAM MUKHERJEE, J.) (BISWANATH SOMADDER, J.)