Debt Recovery Appellate Tribunal - Allahabad
Maharaj Ji Education Trust And Ors. vs Punjab And Sind Bank And Ors. on 11 May, 2007
Equivalent citations: I(2008)BC6
JUDGMENT
R.S. Tripathi, J. (Chairperson) This appeal arises out of the judgment dated 25th August, 2005 passed by the D.R.T., Lucknow in T.A. No. 333/02 for issuance of recovery certificate for a sum of Rs. 26,75,98,861/- along with pendente lite and future interest @ 16% per annum with quarterly rest from the date of application after adjusting the amount, if any, already deposited + cost.
Briefly stated the facts of the present appeal are as under:
1. Appellant claims to be a public charitable trust registered on 6th January, 1993 at Chennai with its branch at Ghaziabad (U.P.) through Mrs. Kuyilambal wife of late Paramasiyam and Dr. P. Mahalingam with a view to impart medical education by establishing Nursing College, etc. to provide medical help and to plan such activities of the nature of general public utility. Dr. P. Mahalingam was shown as Chairman/Managing Trustee whereas Mrs. Kuyilambal was shown as a trustee. It is said that the purpose of above Trust was to impart medical education and it was running medical colleges in the name and style of Santosh Medical College, Santosh Dental College, Santosh College of Occupational Therapy, Santosh College of Physiotherapy, Santosh College of Radiology and Imaging Technology, Santosh College of Lab Technology, Santosh College of Medical Microbiology at Ghaziabad with necessary approval from Central Government, Government of U.P., Medical and Dental Council of India affiliated with Choudhary Charan Singh University, Meerut (U.P.).
2. Defendant No. 1 Trust through appellant Nos. 2 and 3 in September 1997 approached the respondent No. 1 Bank for the grant of a term loan of Rs. 9.60 crores for the purchase of medical equipments, machinery and other assets for the purpose of their installation in Medical Colleges/Hospitals. The loan was secured by the hypothecation of equipment, machinery and other assets as well as equitable mortgage of land situated at Thandalam village, Sriperumpudhur Taluk, Chennai, Tamilnadu. The appellant after availing the term loan of Rs. 9.36 crores for the aforesaid purchases, paid a sum of Rs. 2,47,22,225/- towards this term loan No. 1. The details of break-up of these payments are as under:
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Date Amounts (Rs.) ----------------------------------------------------- 19th February, 1998 8,20,840/- 30th April, 1998 22,92,472/- 30th September, 1998 23,77,527/- 31st December, 1998 10,48,055/- 31st December, 1998 1,49,720/- 31st December, 1998 19,06,331/- 20th April, 1999 32,77,782/- 2nd November, 1999 36,14,498/- 2nd February, 2000 12,00,000/- 3rd February, 2000 22,00,000/- 20th February, 2000 15,00,000/- 20th February, 2000 2,00,000/- 1st April, 2000 41,35,000/- -----------------------------------------------------
3. The appellant No. 1 further approached the respondent No. 1 Bank for sanction of2nd term loan of Rs. 15.00 crores on 18th October, 1999 to liquidate the liability of loan for working capital availed from HUDCO and to complete the infrastructure i.e. construction of building by Larsen & Toubro Ltd. Respondent No. 1 Bank sanctioned another term loan No. 2 for a sum of Rs. 10.00 crores on 26th November, 1999 for its payment to HUDCO in order to liquidate the liability of appellant No. 1 and for this appellant No. 1 created an equitable mortgage of various flats owned by appellant No. 1 situated at Ghaziabad as well as vacant land owned by petitioner situated at Chennai, which had also been mortgaged for payment of first loan of Rs. 9.36 crores. Appellant No. 1 availed the 2nd term loan amount of Rs. 10.00 crores to liquidate the liability of working capital availed from HUDCO and for the payment to Larsen & Toubro Ltd. For construction of medical college building, the appellant No. 1 paid a sum of Rs. 19,40,000/- on 3rd May, 2000 and a sum of Rs. 6,50,000/- on 5th June, 2000, thus a sum of Rs. 25,90,000/- was paid towards term loan No. 2. The respondent No. 1 Bank did not receive the instalments in connection with above two term loans. Then notice was issued to the appellants and thereafter a suit for recovery of Rs. 26,75,98,861/- was filed claiming interest pendente lite and future @ 16% with quarterly rests covering both the loans. The Bank pleaded in the original application filed before the D.R.T. that the appellant No. 1 was a public charitable trust with object of advancement of education for establishment of nursing college, medical reliefs, advancement of other objects for general public utility. The required documents for above two loans were executed by the appellants and the properties were mortgaged as per the requirements. The Syndicate Bank was also impleaded as party in the original application and it claimed its first charge over the flats situated at Ghaziabad on the basis of equitable mortgage in its favour.
4. Before D.R.T. the appellants and defendant Nos. 4 and 5 contested the case, whereas defendant No. 6 filed a separate written statement. The contention from the side of the defendant Nos. 1, 2 and 5 in their written statement was that the respondent No. 1 Bank had failed to observe legal requirements, therefore, application filed under Section 19 of the RDDBFI Act, 1993 was not maintainable. They also challenged the territorial jurisdiction of the Tribunal to decide the case on the ground that the mortgaged properties were situated in Tamil Nadu, also they claimed that two loans granted by the respondent No. 1-Bank were separate from each other and their terms and conditions were separate from each other. Therefore, there was no justification to club the amount of above two loans in one suit. The plea that defendant No. 5-Santosh Medical Hospital was not a legal entity, therefore, its impleadment was bad in law particularly when defendant No. 5 had nothing to do with the amount of the transaction in question. Several legal infirmities in the suit were pointed out in the written statements advancing the pleas that the petition of the Bank was not maintainable.
5. Defendant No. 6-Syndicate Bank filed reply but did not dispute the facts of the petition filed by the respondent No. 1-Bank and it advanced the plea that the defendant Nos. 1, 2 and 5 had approached it offering the security of remaining 136-MIG flats along with certificate issued by the respondent No. 1-Bank, therefore, the defendant No. 6 claimed its charge over the above properties for Rs. 1.00 crore and overdraft limit of Rs. 1.00 crore sanctioned by it on the basis of security furnished by defendant Nos. 1, 2, 3 and 5 in respect of 136-MIG flats of Ghaziabad and the creation of equitable mortgage by defendant Nos. 1, 2, 3 and 5 about this property was in the knowledge of respondent No. 1 Bank. Therefore, it has its first charge over the above 136-MIG flats. The Syndicate Bank challenged the right of respondent No. 1-Bank to recover the dues from the above property, which were securities in connection with the amount advanced by it to the defendants.
6. Replication to the written statements were filed by the Punjab & Sind Bank respondent No. 1. The details of the properties mortgaged documents executed by the defendant Nos. 1, 2, 3 and 5 were given in the application moved on behalf of Punjab & Sind Bank for recovery of the amount.
7. Before the Tribunal an affidavit of Chairman/Managing Trustee of the appellant No. 1 was filed asserting that no mortgage/charge or encumbrances, were created over above 285 flats as pleaded by the Punjab and Sind Bank. The affidavits and documents in the form of evidence were brought before the Tribunal.
8. The learned Counsel framed the following issues for the purposes of decision of the case:
(a) Is the transfer application maintainable in its present form in law?
(b) Is the transfer application barred by law of limitation?
(c) Whether the Tribunal does not have territorial jurisdiction to entertain the above application in view of the fact that the mortgaged property includes some property situated in State of Tamil Nadu?
(d) Whether the applicant-Bank has prayed for a mortgaged decree for the sale of mortgaged property and thereby it does not come under the purview of Section 19 of RDDBFI Act, 1993?
(e) Whether the proforma defendant No. 6 Syndicate Bank has its first charge over 136-MIG flats bearing Nos. K-133 to K-168, K-133-A to 168-A, L-388 to L-419, L-388-A to L-419-A situated in Pratap Bihar, Ghaziabad?
(f) Whether the applicant-Bank is entitled forissuanceof recovery certificate together with interest, cost and other usual reliefs?
(g) To what reliefs/relief the applicant-Bank is entitled to?
9. After considering the evidence available before it, the learned Tribunal concluded recording findings on issue Nos. I to IV in favour of the respondent-Bank. Issue No. V was decided against defendant Syndicate Bank. Issue Nos. VI, VII and VIII were decided in favour of respondent No. 1-Bank and on the basis of these findings, the learned Tribunal passed an order for issuance of recovery certificate against defendant Nos. 1 to 5 for a sum of Rs. 26,75,98.861/- and costs along with pendente lite future interest @ 16% per annum with quarterly rest excluding penal interest @ 2% per annum with quarterly rests from the date of filing of the original application till full realization of the amount subject to adjustment of amount already deposited by the defendant Nos. 1, 2 and 5 with the respondent-Bank.
10. After the impugned judgment was passed by the D.R.T., the appellant feeling aggrieved with this judgment filed this present appeal.
11. I have heard learned Counsel for the appellant and learned Counsel for the respondent-Bank at length and have also gone through the record and the impugned judgment. The broad points, which have been raised before this Tribunal in this appeal are as under:
(a) A settlement was arrived at between the appellants and the respondent No. 1 Punjab and Sind Bank. Therefore, on the basis of above settlement the contract between the parties stood novated.
(b) The terms of contract so far as the rate of interest is concerned, is illegal, void and violative of the guidelines of the R.B.I.
(c) The interest, granted by way of pendente lite and future from the date of decree till the date of realisation at the rate granted by the D.R.T. is excessive and illegal, as Interest Act is applicable to the present loan.
(d) The amount of decree of Rs. 26,75,98,861/- calculated by the Tribunal is unjust and wrongful.
12. So far as the first point is concerned, the submission from the side of the appellants before this Tribunal is that the two contracts for two loans resulted in settlement between the parties and in pursuant to that the appellants deposited a sum of Rs. 1 crore in the form of demand draft, which was encashed by the contesting respondent-Bank. According to the learned Counsel for the appellant, the demand draft of Rs. 1 crore was enclosed with a letter dated 23rd July, 2005 which is Annexure IX on the file at page 138 of the paper book of the memo of appeal addressed to the contesting respondent-Bank with a clear mention therein that "the encashment of the draft is subjectto the acceptance of settlement proposal submitted by the appellants vide letter dated 7th July, 2005". In this connection, it is pointed out that the memo of appeal Annexure II at page No. 140 is the copy of letter dated 7th July, 2005 has been enclosed giving the manner in which the repayment was to be made and the contesting respondent-Bank having encashed the cheque, which was sent along with letter dated 23rd July, 2005, a condition set forth therein that "the encashment of the draft is subject to acceptance of settlement proposal submitted by us vide our letter dated 7th July, 2005" makes it clear that the proposal of the appellant was accepted by the contesting respondent-Bank. Argument from the side of the appellant is that this settlement between the parties made entire claim of the respondent-Bank substituted by the amount arrived at for repayment by the appellant to the respondent as per the terms of above settlement. It is vehemently argued from the side of the appellant before this Tribunal that the encashment of above draft was not disclosed to them and even on the date of judgment i.e. on 25th August, 2005 the appellants had no knowledge about the encashment of draft of Rs. 1 crore sent by them to the contesting respondent-Bank along with their letter dated 23rd July, 2005. The appellants have contended that they came to know about the encashment of drafts of Rs. 1 crore on 26th July, 2005, when the contesting respondent-Bank with a view to conceal its mala fides cleverly sent a fax message dated 22nd August, 2005 mentioning therein that the amount of Rs. 1 crore offered by you as token money is kept under no lien account with the Bank.
13. Before we take up this point for discussion it would be proper to mention here that the judgment was delivered by the D.R.T. only on 25th August, 2005 after the receipt of aforesaid fax message. The appellant's case is that a suit was also filed before the Hon'ble Delhi High Court. The contents of letter dated 23rd July, 2005 along with the orders of Hon'ble High Court were placed before the Hon'ble Tribunal for its notice and consideration, but the learned Tribunal did not consider anything, although the matter of settlement was communicated to Tribunal to be at the final stage. Argument in this connection from the side of the appellant is that in view of above encashment of draft of Rs. 1 crore, the settlement has to be taken to be finally accepted and now the contesting respondent-Bank is estopped from resiling from the above settlement, as the principle of estoppel is applicable in the facts and circumstances of this case. Learned Counsel for the appellants has cited the rulings Motilal Padampat Sugar Co. Ltd. v. State of Uttar Pradesh ; Bhagwati Prasad Pawan Kumar v. Union of India ; Punjab & Sind Bank v. Mohindra Pal Singh , Ram Dev Food Products (P.) Ltd. v. Arvind Bhai Ram Bhai Patel ; The Union of India v. Kishori Lal Gupta 1960 SCC 493; Indu Shekhar Singh v. State of U.P. ; B.S.N.L. v. Subash Chandra Kanchan , Jai Narayan Parasrampuria (Dead) v. Pushpa Devi Saraf III (2006) CLT 297 (SC) : (2006) SCC 756; Central Inland Water Transport Corporation Ltd. v. Brojo Nath Ganguly . On the point of applicability of principle of estoppel, it is argued that now the contesting respondent-Bank cannot claim anything against the aforesaid settlement. Learned Counsel for the appellants has taken this Tribunal through the record and has argued that both accounts of the loan were taken as Non Performing Assets (N.P.A.) as per the Guidelines of R.B.I, and for this he has pointed out that an account is taken to be N.P.A. on the date when the last transaction took place in that account. He has persuaded this Tribunal to note that the first term loan of Rs. 9.36 crores became N.P.A. on 1st April, 2005, whereas the second term loan of Rs. 10 crores became N.P.A. on 5th June, 2000. According to him, in view of the ruling, Central Bank of India v. Ravindra , the Guidelines of R.B.I, have statutory force as observed by the Hon'ble Apex Court in above ruling. His contention is that the contesting respondent-Bank itself through its letter dated 18th June, 2005 Annexure III of the paper book of the appeal invited the appellants for settlement, therefore, according to him after several rounds of talks and exchanges of various letters available on the record, it is established that the talk of settlement was not without any basis. Learned Counsel for the contesting respondent-Bank in reply to the above arguments has argued that there is not a single word in the form of pleading from the side of the appellants in connection with the above alleged settlement or for the applicability of principle of estoppel. His argument is that the rulings cited from the side of the appellants deal with the matters of promissory estoppel, which has its field in public law whereas in the field of contracts only the principles of estoppel comes into play. His contention is that in this case the appellants have failed to establish that there was any settlement as not a single piece of document in the form of admission or acceptance of alleged settlement signed by the contesting respondent-Bank, has been brought on the record by the appellants to support the contention of settlement to apply the principle of estoppel. He has also contended that the appellants have failed to establish that they suffered detriment on acting on the so- called representation for settlement. According to the learned Counsel for the contesting respondent-Bank, on one hand the appellants claim One Time Settlement at Bank's initiation, as a result of which appellants claimed the encashment of draft of Rs. 1 crore whereas on the other hand the appellants have advanced a plea that they could not get any knowledge about the encashment of their above draft of Rs. 1 crore till the pronouncement of the final judgment and when they came to know about this encashment, the matter of amount of loan in their view became completely settled. According to the Counsel for the respondent-Bank, the above two versions probably do not fit in with each other because if at all the settlement had become final after all why the appellants would keep mum awaiting for the final judgment after participating in the arguments before the D.R.T. Also it is argued that the circumstances under which the appellants kept mum sending a demand draft of Rs. 1 crore sent as a pre-condition along with a letter dated 23rd July, 2005 without caring to know about the fate of their above proposal and the fate of their above draft which was actually encashed on 26th July, 2005 itself i.e. about one month before the pronouncement of verdict by the Tribunal all these belie the story of settlement. Learned Counsel for the contesting respondent-Bank has placed reliance on the rulings, Kashinka Trading v. Union of India, ; Sri Jee Sales Corporation v. Union of India ; and Pollution Control Boards. Professor M.V. Nayadu (2001) 2 SCC 62. The Hon'ble Apex Court has observed that for the plea of estoppel petitioner must provide precise data in support of his case to satisfy its various ingredients. From the side of the respondent-Bank, it is also argued that in the instant case there is no data or pleading from the side of the appellants to apply the principles of estoppel. At this very stage learned Counsel for the appellants has intervened arguing that the fact of encashment of draft of Rs. 1 crore was a subsequent event which came to the notice of the appellants only after the delivery of judgment that is why no such plea could be taken.
14. As already submitted from the side of the appellants that the two accounts of the loan were taken as Non Performing Assets (N.P.A.) as per the Guidelines of the R.B.I. from the date when last transaction took place in those two accounts. The Guidelines of the R.B.I, have statutory force, therefore, keeping in view the letter dated 18th June, 2005 Annexure III of the paper book of the memo of appeal an invitation was extended from the side of the Bank for settlement. It is pointed out that in above letter Annexure III Bank as usual as showing its interest in settlement came forward for having talks when the question of settlement of the amount involved relying upon the ruling of Motilal Padampat Sugar Mill Co. Ltd. v. State of U.P. (supra), wherein the matter of principle of promissory estoppel has been discussed by the Hon'ble Apex Court. It is argued that the settlement was arrived at the initiation of the respondent No. 1-Bank itself, therefore, it should be taken that the settlement was complete.
15. Having heard Counsel for the appellants and respondent-Bank when we go through the record we find that the question of application of promissory estoppel in the instant case does not arise at all, firstly, because there is not a single word or document signed by the respondent for the acceptance of the so-called one time settlement, secondly, there is not a single word in the form of plea to this effect in the pleadings of the appellants. Letter dated 23rd July, 2005 Annexure IX of the paper book of this appeal shows that this letter as well as other letters brought on the file from the side of the appellants, are the letters of appellants themselves containing their own version about the talks of so-called settlement, but there is not a single document filed by the appellants to show that the respondent-Bank ever came forward with its willingness to accept any such proposal, the letters of the appellants to the alleged settlement contain the version of the appellants themselves and in absence of any material from the side of the appellants to suggest that there was any active involvement of the Bank in above talks of settlement, the question of acceptance of final settlement does not arise. As argued from the side of the respondent-Bank, the argument for the applicability of principle of estoppel in absence of any such pleading before the D.R.T., cannot be raised in this appeal on the pretext that the matter of settlement came to the knowledge of the appellants at the final stage i.e. even after pronouncement of the judgment when the Bank sent a fax message with regard to encashment of the draft of Rs. 1 crore is not acceptable particularly when the consistent view of the Hon'ble Apex Court had been that such plea cannot be raised in appeal unless it finds place in the pleadings. In this connection, reliance can be placed on the rulings Shriniwas Ram Kumar v. Mahavir Prasad ; Bhagwati Prasad v. Chandra Maur ; DM. Deshpandey v. Janardan Kashi Nath Kadam (1958) 8 SCC 315. Moreover, learned Counsel for the Bank has also argued that when the respondent No. 1-Bank has denied such settlement as held by the Hon'ble Allahabad High Court in the cases reported as MM. Accessories v. U.P. Financial Corporation 2002 (1) A.W.C. 242; Sardar Prem Singh v. Bank of Baroda 2004 (5) A.W.C. 4127, wherein it has been observed that the matter of one time settlement cannot be claimed as a matter of right. Further learned Counsel of the respondent No. 1-Bank has argued that the matter of promissory estoppel is not applicable in the cases like present one particularly when it is unilateral act of the appellants. It also worth noting that on the one hand the appellants claim to have settled the dispute with the Bank on the other hand the appellants have pleaded that they had no idea with regard to this settlement till the date of pronouncement of the judgment by the D.R.T. The argument from the side of the appellants pointing out towards the observation of the D.R.T. at the end of the judgment suggesting the parties to make effort for settlement is nothing but advisory in nature which usually is not binding on any party. The draft has been encashed on 26th July, 2005, the judgment was delivered on 25th August, 2005, but the appellants, who were so curious and confident about the settlement, come to know about this settlement only after the communication by the Bank itself for the encashment of the draft of Rs. 1 crore and not before this. This shows how the appellants were careful with regard to their effort for the settlement. The settlement itself is shrouded with doubts because initially the appellants offered the amount of Rs. 22 crores, thereafter they enhanced this amount to Rs. 24 crores and now their argument is that the amount of Rs. 26 crores decreed by the Tribunal is excessive and there is no document for acceptance by Bank of this settlement.
16. The result of above discussions is that this Tribunal does not find any material for establishing the so-called settlement between the parties, therefore, question of applicability of principle of promissory estoppel does not arise.
17. The other points raised in this appeal are, firstly, that the terms of contract with regard to rate of interest are illegal, void and violative of Guidelines of the R.B.I., secondly, that the interest granted as pendente lite and future from the date of decree till the date of realization of the amount at the interest granted by the D.R.T. is excessive, illegal and against the provisions of law and Interest Act. Thirdly, the calculation of the principal amount of the decree has also been challenged from the side of the appellant. As these points are interconnected with each other, hence, this Tribunal thinks it proper to dispose of these points together. The learned Counsel for the appellants has argued that the account is taken to be N.P.A. on the date on which last transaction took place. According to the learned Counsel for the appellant the transaction in the term loan-one, lastly took place on 1st April, 2005, whereas the last transaction of the term loan second is dated 5th June, 2000. It is argued from the side of the appellants that considering the amount of above two loans on the dates when they were taken as N.P.A., the total amount due was Rs. 20,68,94,615/- relying upon the ruling, Central Bank of India v. Ravindra, (supra); UCO Bank v. Sambhu Nath Dutta IV (2006) BC 247 (D.R.A.T./D.R.T.) (D.R.T., Kol.); S.B.I. v. Preetam Singh II (2006) BC 54; Punjab National Bank v. Subhadra Trading Co. I (2006) BC 131 (D.R.A.T./D.R.T.); Union Bank of India v. Chhatarpur Siliment Sales Corporation ; Associated Construction and Engineering Co. v. Dhanlaxmiben ; D.S. Gowda v. Corporation Bank AIR 1983 Knt. 143; Soli Pestonji Majoo v. Ganga Dhar Khemka . In the case reported as Central Bank of India v. Ravindra (supra), the Hon'ble Apex Court has set at rest so many such controversies such as capitalisation of interest (interest on interest), penal interest, pendente lite and future interest, etc. observing that:
Nothing prevents the borrower from paying the amount of interest on the date it falls due. If the amount of interest is paid there will be no occasion for capitalising the amount of interest and converting it into principal. If the interest is not paid on the date due, from that the creditor is deprived of such use of the money which it would have made if the debtor had paid the amount of interest on the date due. The creditor needs to be compensated for deprivation.
This Court is, therefore, of the opinion that the expression "the principal sum adjudged" may include the amount of interest charged on periodical rests, and capitalised with the principal sum actually advanced, so as to become an amalgam of principal in such cases where it is permissible or obligatory for the Court to hold so. Where the principal sum (on the date of suit) has been so adjudged, the same shall be treated as "principal sum" cannot be given different meanings at different places in the language of same section, i.e. Section 34 of CPC.
A creditor can charge interest from his debtor on periodical rests and also capitalise the same so as to make it a part of the principal. Such a course can be justified by stipulation in a contract voluntarily entered into between the parties or by a practice or usage well established in the world to which the parties belong. Such practice is to be found already in vogue in the field of Banking business.
In the same ruling penal interest has also been justified by observing that "thus while liability to pay interest is founded on doctrine of compensation penal interest is a penalty founded on the doctrine of penal action". It is argued from the side of the appellants that the above N.P.A. amount only should have been taken into consideration for the purposes of payment by the contesting respondent No. 1 because the Guidelines of R.B.I., have statutory force in view of above ruling of the Hon'ble Apex Court. It is pointed out that the total amount of loan is Rs. 19,36,00,000/- out of which appellants have already paid Rs. 2,73,12,225/-. Thus, the balance amount due against them is Rs. 16,62,87,775/- and for this they offered the amount of Rs. 20 crores for payment as per the following break-up:
(a) Rs. 2 crores 31.8.2005 (b) Rs. 10 crores 16.3.2006 (c) Rs. 4 crores 31.8.2006 (d) Rs. 6 crores 31.12.2006
18. With understanding to arrange the payment timely as per above schedule, the total amount offered for payment was Rs. 22 crores, which as per the advice of the contesting respondent-Bank was enhanced to Rs. 24 crores. In the light of these submissions it is further argued from the side of the appellants that the decree passed by the D.R.T. is for Rs. 26,75,98,861/- along with interest, etc. and considering this amount and the amount said to be due, decree in question is wholly illegal and violative of the Guidelines of the R.B.I. The above amount of decree includes interest which were claimed even after declaration of the two accounts as N.P.A. It is argued vehemently from the side of the appellants that in pursuance to R.B.I. Guidelines, the contesting respondent-Bank is not entitled to claim the interest from the date from which the above two accounts were declared N.P.A. at the rate which the D.R.T. has allowed, therefore, the amount of decree is illegal to the extent of inclusion of a sum of Rs. 3,13,14,931/-. In this connection, reliance has been placed on the ruling, Punjab & Sind Bank v. Mohindra Pal Singh, (supra). Also the attention of this Tribunal has been drawn towards judgment dated 16th December, 2002 passed by the D.R.A.T., Chennai in Miscellaneous Appeal No. 120/2002, Neetu Autos (P.) Ltd. v. UCO. I have considered these submissions. Learned Counsel for the contesting respondent-Bank has vehemently argued in reply that the nationalized Bank as well as banking companies are bound to abide by the banking policy issued by the R.B.I./Central Government. He has also laid stress arguing that the rate of interest on advances by nationalized Banks are to be regulated as per above banking policy and there is absolutely no inconsistency between the provisions of banking policy and the provisions of Usurious Loans Act. His contention is that non-application of Usurious Loans Act in connection with recovery of amount advanced by Banks do not amount to infraction of guarantee of quality as the nationalized Banks and other such institutions are under the control of R.B.I, from a distinct and separate clause. It is submitted from the side of the contesting Bank that the directions issued by the R.B.I. from time-to-time can be taken to be out of category of the cases where presumption regarding excessive nature of interest under the provisions of Usurious Loans Act can be raised as it is a matter of pure and simple question of law. In this regard he has also argued that Section 21A of the Banking Regulation Act, 1949 expressly seeks to override not only the Usurious Loans Act, but also any other law relating to indebtedness enforced in any State. His submission is that by virtue of above Section 21A, the Courts are not permitted to re-open and reschedule the transaction between the Bank and its debtor on the ground that the rate of interest is excessive and for this purpose Section 21A puts a restraint on the power of the Courts. His further submission is that Banks are entitled to the interest at the agreed rate and to compound the interest as agreed, but such rate of interest should not exceed the rates prescribed by the R.B.I. In the instant case according to the learned Counsel for the contesting Bank, the appellants had executed various documents in favour of the respondent-Bank, agreeing to pay the interest @ 16% plus 2% per annum from the date of disbursement to the date of payment in full with quarterly rest and nowhere the appellants have been able to prove that the above documents executed by them are not genuine and valid documents. Therefore, the rate of interest given in these documents of this contract has to be allowed and the D.R.T. has committed no error in passing the impugned order. He has placed reliance on the ruling, Vijaya Bank v. Art Tend Export . In this ruling it has been observed that interest is to be paid at the agreed rate of interest. Another ruling cited from the side of the respondent-Bank is Indian Bank, Tirunavnamalai v. V.A. Balasubramania Gurukal , wherein Hon'ble Madras High Court has taken the view that there is no inconsistency between the provisions of Usurious Loans Act and Banking Regulation Act observing that the charging of compound or high rate of interest is not prohibited and the Court is required to see if such transaction is unfair or the rate of interest is usurious. Other rulings such as Indian Overseas Bank v. Vimala and Syndicate Bank v. Sudhir Surgical and Allied Industries AIR 1992 Knt. 146, have also been cited in support of above arguments. In the aforesaid citations there are references of various observations of other rulings for the conclusions drawn. Learned Counsel for the contesting Bank on the basis of above submissions has pointed out that the contention from the side of the appellants that the interest can be awarded only on the original principal amount is wholly misconceived because according to him these submissions are against a normal Banking practice as well as against the very spirit of present RDDBFI Act, 1993. Particularly when in the transactions which are of the nature of commercial, grant of interest for the period after passing of decree at the contractual rate has to be taken to be the rule and grant of interest at reduced rate as an exception, when the defaulting borrower is not entitled for any liberty on account of their own fault. In this connection he has further relied upon the rulings, Gulab Rain, Subash Chandra v. Khairati Lal , and Syndicate Bank v. West Bengal Cement Ltd. AIR 1989 Del. 107. In these rulings it has been observed that the interest as agreed rate for subsequent period could be granted while granting relief and that the Bank has every right to compute interest at quarterly rests and after every quarter adding interest at loan balance treating that as principal sum for next quarter for computing interest. As observed earlier we have latest pronouncement of Hon'ble Apex Court in this regard reported as Central Bank of India v. Ravindra (supra). In this ruling the Hon'ble Apex Court has observed that the liability to pay interest is based on the doctrine of compensation but penal interest is a penalty founded on the doctrine of penal action. The Hon'ble Apex Court has gone to the extent of observing that penal interest can be charged only once for a period of default. In para 36 of above ruling the Hon'ble Apex Court has observed as under:
The English decision and the decision of this Court and almost all the High Courts of the country have noticed and approved long established Banking practice of charging interest at reasonable rates on periodical rests and capitalising the sum on remaining unpaid. Such practice is prevalent and also recognized in non-Banking money lending transactions. The legislation has stepped in from time-to-time to relieve the debtors from hardship whenever it has found this practice to be of charging compound interest and its capitalisation to be operative, oppressive and hence needing to be curbed. The practice is permissible legal and pre-judiciously upheld expecting when superseded by legislation. There is nothing wrong for the parties voluntarily entering into transaction evidenced by deeds incorporating covenant and stipulation of compound interest at reasonable rates and authorising creditors to capitalise the interest on remaining unpaid so as to enable interest being charged at the agreed rate on the interest component of capitalised sum for the succeeding period. Interest once capitalised, sheds its colour of being interest and becomes a part of principal so as to bind the debtor/borrower.
19. It would be proper to pause for a while to take up the argument advanced from the side of the appellants that the agreements for loans were unilateral imposed upon them on the basis of take it or leave it and that the appellant is an educational trust having been established in the State of Tamil Nadu for the purposes of spreading and supplementing the cause of the medical education by establishing medical institutions. It has been argued that the object of trust is a pious one for imparting medical education under the Medical Council of India with approval of Central Government. Therefore, the amount of two loans cannot be taken for the purposes of business. Learned Counsel for the appellant has argued that education has never been taken to be a business, therefore, under the contract for loan the rate of interest envisaged is excessive, illegal and against the provisions of the Constitution infringing the rights of the appellants. In this connection, reliance has been placed on the several rulings cited from the side of the appellants in support of above arguments and the Tribunal does not think it proper to discuss all the above citations in detail particularly when we have the celebrity ruling of T.M.A. Pai Foundation v. State of Karnataka , wherein setting at rest above point raised from the side of the appellants the Hon'ble Apex Court has been very clearly observed giving reply to the questions referred to esteemed 11 Judges Bench of the Hon'ble Apex Court that "reasonable surplus to meet the cost of expansion and augmentation of facilities does not, however, amount to profiteering giving clear verdict that the judgment of the Hon'ble Apex Court reported as Unni Krishnan J.P. v. State of Andhra Pradesh , holding that primary education is a fundamental right is unconstitutional. The Hon'ble Apex Court has discussed all aspects of the education involving profession. Therefore, there is no controversy left that the appellant No. 1 trust was not doing any business by imparting medical education, etc. This Tribunal is of the opinion that in the instant case the appellants have not been able to show either from the contract or from any material that the loan in question was taken for the purposes of carrying out the duties of a trust or activities relating to the trust. The learned Counsel for the respondent-Bank on the other hand has rightly pointed out that they have not been in a position to earn money by running above institutions for imparting medical education and to pay the dues of Bank. Thus, all above arguments advanced from the side of the appellants are of no help to them.
20. Much stress has been laid from the side of the appellants that the interest should have been calculated at the current rate of interest. As already discussed, when there is written contract, the question of giving weight to this argument does not arise. There is nothing to establish that there is any doubt with regard to validity of documents relating to this loan or that the interest charged is in violation of R.B.I. Guidelines or terms of contract.
21. From any angle, the appellants have not been able to establish that the charging of interest a the rate of 16% per annum is against any of Guidelines of the R.B.I. and in absence of any such violation of guidelines, the various citations brought before this Tribunal from the side of the appellants are of no help to them. Learned Counsel for the appellants has cited various rulings on the point of charging of interest and since these rulings relate to several other provisions provided for interest as well as under the CPC, therefore, after the judgment of Hon'ble Apex Court reported in Central Bank of India v. Ravindra (supra), it is not necessary for this Tribunal to discuss elaborately all these rulings. Various judgments and comments on the point of amalgamated investment and Section 34 of CPC, settlement, pari materia and other similar matters of foreign Courts as well as that of Hon'ble Apex Court and High Courts have been placed before this Tribunal from the side of the appellants, but these are also not of much help after the judgment of Central Bank of India v. Ravindra (supra) as discussed above on relevant point of dispute about interest, etc. A line has been tried to be drawn by pointing out towards the general principle of interpretation and pari materia from the side of the appellants, but these rulings are superfluous for the purposes of this case.
22. The result of above discussion is that in opinion of this Tribunal the learned Tribunal has committed no error in issuing the recovery certificate for a sum of Rs. 26,75,98,861/- plus interest and cost of the suit. Particularly when the loan involves a heavy amount and since the date of loan i.e. October/November, 1997 till this date for some or other pretext, the appellants have always tried to avoid the payment. Therefore, the appeal deserves dismissal.
ORDER
23. The appeal is hereby dismissed with costs.
Judgment pronounced in open Court. A copy of this judgment be sent to the parties as well as D.R.T. concerned along with original records, if summoned earlier.