Calcutta High Court
Manorama Ultrascan (P) Ltd. & Anr vs State Of West Bengal & Ors on 20 August, 2009
IN THE HIGH COURT AT CALCUTTA
CONSTITUTIONAL WRIT JURISDICTION
ORIGINAL SIDE
Present:
The Hon'ble Justice S.P. Talukdar
W.P. No. 2036 of 2006
Manorama Ultrascan (P) Ltd. & Anr.
Vs.
State of West Bengal & Ors.
With
W.P. No. 2037 of 2006
Satish Chandra Memorial Trust & Anr.
Vs.
State of West Bengal & Ors.
For the Petitioners: Mr. Ashok Kumar Banerjee,
Mr. Sushovan Sengupta.
For the Respondents: Mr. A. K. Dhandhania,
Mr. R. S. De.
Judgment on : 20.08.2009.
S.P. Talukdar, J.: By filing the instant application under Article 226 of the Constitution, the petitioners sought for cancellation of the purported decisions of the appropriate authority of the West Bengal Financial Corporation by which the pre-payment charges amounting to Rs. 1,70,746.21 was imposed and subsequently realized on five loan accounts, namely, LKTMA-07, LKTMA-08, LKTMA-09, LKTMA-11 and LKTMA-13 of the petitioners. The petitioners also sought for direction upon the respondent authority for refund of the said amount in favour of the petitioners.
The facts of the present case are as follows:-
On 29th March, 2000, an agreement was executed by and between the petitioner No. 1 and petitioner No. 2 for disbursement of the term loan amounting to Rs.50,00,000/- in favour of the petitioners. The petitioners executed other agreements for disbursement of the term loans under different Account Nos. The petitioners paid an amount of Rs.
69,25,074.19 towards principal and interest till 31st March, 2006 on account of LKTMA-07 and further amount of Rs. 69,19,406.26 on other loan accounts. The respondent No. 4, being the Branch Manager of the West Bengal Financial Corporation, by letter dated 7th June, 2004, intimated that the petitioners were free from default as on 31st March, 2004. The petitioners were, thus, eligible for reduction of rate of interest @ 11% per annum w.e.f. 1.4.2004. On 20th February, 2006, the respondent No. 4 issued a letter intimating that the respondents were compelled to withdraw the benefit of reduced rate of interest.
To the utter shock and surprise of the petitioners, they received a further letter dated 4th May, 2006 whereby they were informed that the benefit of reduced rate of interest in respect of the remaining loan accounts was also withdrawn in terms of Clause -'C' of the letter dated 7th June, 2006. The petitioners were accordingly advised to pay a total amount of Rs. 51,22,082.85 which includes pre-payment charge of Rs.2,71,285.95. The petitioners, thereafter, received an intimation on 21st June, 2006 from respondent No. 4. It was regarding their default in payment of dues in respect of loan account No. LKTMA-07 to the extent of Rs. 74,074.49. The petitioners were informed that in view of such default, the benefit of interest @ 11% per annum was withdrawn.
On 10th October, 2006, the General Manager of West Bengal Financial Corporation wrote to the petitioners informing that as per decision of the Board of Directors of the respondent No. 2 in its meeting held on 21st September, 2006, the regular loan accounts of the petitioner No. 1 as on 31st December, 2005 would not be charged at the document rate of interest and they would enjoy the reduced rate of interest. By letter dated 18th October, 2006, respondent No. 4 advised the petitioners to pay total amount of Rs. 41,00,362.15 in favour of the respondents concerned for liquidation of loan amount by 16.10.2006. On 18th October, 2006, the petitioners were informed by respondent No. 4 through a letter that they defaulted in respect of loan account being No. LKTMA-07 by not paying the sum of Rs. 74,074.49 as principal within the schedule date. But so far other loans accounts were concerned, there was no default on the part of the petitioners. The petitioner No. 2, by letter dated 24th October, 2006, informed that the petitioners made payment a sum of Rs. 41,00,362.15 by way of demand draft in order to foreclose all such five loan accounts in favour of the respondents. On 26th October, 2006, the respondents issued 'No Due Certificate'. The respondent No. 4, however, by letter dated 26th October, 2006, informed that they had refused to encash the NSCs/KVPs of the petitioners on the date of maturity.
The stand of the respondents, as reflected from the Affidavit-in-Opposition filed on its behalf, was :-
The petitioners had five loan accounts with West Bengal Financial Corporation. The number of the said accounts were LKTMA-07, LKTMA-08, LKTMA-09, LKTMA-11 and LKTMA-13. West Bengal Financial Corporation sent a letter dated 7.6.2004 to petitioner No. 1 which was addressed to Manorama Ultrascan Pvt. Ltd. (LKTMA-07). This by itself indicated that it was not applicable to other four accounts. By that letter, rate of interest in respect of loan account No. LKTMA-07 was reduced to 11 %. There could be no question of any reduction of the rate of interest in respect of other four accounts. By letter dated 20th February, 2006, the benefit of reduced rate of interest was withdrawn because of default in the loan account No. LKTMA-07. In response to the petitioners' approach to W.B.F.C. for payment of the dues in respect of all the five loan accounts, W.B.F.C. asked them to pay Rs. 51,22,082.85. By subsequent letter dated 18.10.2006, W.B.F.C. reduced the amount to be re-paid to Rs.41,00,362.15. By letter dated 10th October, 2006 on the basis of which the petitioners demanded reduction in the rate of interest in respect of all five loan accounts, could only be prospective and in relation to future reduction of rate of interest. The petitioners sent Rs. 41,00,362.15 to W.B.F.C. in full and final settlement of its claims by making pre-mature payment. The charging premium for pre-mature repayment is an established practice of all Banks and Financial Institutions. The agreements as well as deeds of hypothecation executed between the parties clearly that the W.B.F.C. could impose terms and conditions in the event of premature repayment.
This writ application was taken up with W.P. No. 2037 of 2006, since both the said two applications relate to identical issues. The respondents, thus, sought for dismissal of the two writ applications.
In connection with the application, being W.P. No. 2036 of 2006, it was submitted by learned Counsel, Mr. Ashok Kumar Banerjee that the respondents circulated a brochure at the material point of time claiming that no premium would be imposed for premature repayment of the loan amount of the respective borrowers. According to Mr. Banerjee, this gave rise to legitimate expectation. The petitioners in response to such assurance, if not promise, took various loans under five different loan accounts. The said accounts have already been referred to. Petitioners, no doubt, defaulted in making payment of the principal amount of Rs. 74,074.49 in respect of loan account being No. LKTMA-07. But this could not justify the mala fide act on the part of the respondents to curtail the petitioners' right of getting benefit of reduced rate of interest in respect of his other loan accounts i.e., LKTMA-08, LKTMA-09, LKTMA-11, LKTMA-13. In respect of the said accounts, the petitioners made no default either in respect of principal amount or interest thereof.
Mr. Banjerjee, inviting attention of the Court to the letter issued by the respondents dated 10th October, 2006, being Annexure-'P-8', submitted that the petitioners were entitled to enjoy the reduced rate of interest in respect of the loan account in which there had been a default in repayment. The petitioners undoubtedly could not claim such reduced rate of interest in respect of the said account and could very well be charged at the document rate of interest. There is no controversy that there had been no default in respect of four other accounts of the petitioners with the respondent authority. It was further submitted by Mr. Banerjee, as learned Counsel for the writ petitioners that at the time of signing of the respective loan agreement, there was no condition entitling the respondents to impose pre- payment charges at the time of closure of such loan accounts before the scheduled period. Even assuming that there could be any such condition, that could not be taken recourse to since before execution of the loan agreements, the respondents in no uncertain terms promised of not charging any premium in case of premature closure of loan accounts. In view of the assurance given at the time of execution of loan agreements, the respondent, according to learned Counsel for the petitioner, are estopped from charging pre-payment amounts in the said loan accounts of the petitioners. It was further submitted that the respondents by dint of coercion recovered such excess amounts from the petitioners at the time of closure of all such long accounts and the petitioners, in fact, made out such case of coercion in the writ application to the effect that the petitioners were compelled to take an ultimate decision in order to severe the relationship with the respondents since the respondents had acted in an arbitrary and mala fide manner. For such strange conduct on the part of the respondent authority, the petitioners sought to close all such loan accounts by way of making payment of Rs. 41,00,362.15 and such payment was actually made without prejudice to the rights and contentions.
Mr. Banerjee then submitted that the respondents being an instrumentality of the State is a party to the loan agreement and, therefore, it has an obligation in law to act fairly, justly and reasonably which is requirement of the Article 14 of the Constitution. On behalf of the petitioners, it was categorically asserted that the writ petition cannot be equated with the pure money claim and the claim of the petitioner is entirely based upon apart from others in clear violation of terms and conditions made in the loan agreement at the behest of the respondent authority. According to Mr. Banerjee, the promissory estoppel is applicable as the respondents at the material point of time promised by dint of circulating of the brochure that no premium would be charged for pre-mature repayment of the loan amounts by the borrowers. It was then submitted that the plea that the writ applications relate to questions of fact, cannot be raised since there could be no dispute in regard to the factual aspects.
Deriving inspiration from the decision of the Apex Court in the case between ABL International Limited & Anr. Vs. Export Credit Guarantee Corporation Limited & Ors., as reported in 2004 (3) SCC 553, and the case between Food Corporation of India Vs. M/s. Seil Ltd., as reported in 2008 (1) CLJ (SC), it was submitted that the writ applications involving contractual matters could also be entertained and the High Court in appropriate cases may grant such relief to which the writ petitioners would be entitled to law as well as in equity.
In response to such submission made on behalf of the petitioners, Mr. Dhandhania, as learned Counsel for the respondent authority, submitted that both the writ applications are devoid of merit and as such, are liable to be dismissed. True, by filing the writ applications, the petitioners sought for refund of interest, which was allegedly paid in excess and refund of premium for premature repayment.
Referring to Section 72 of the Indian Contract Act, it was submitted that a person to whom money has been paid or anything delivered by mistake or under coercion must repay or return it. According to learned Counsel for the respondent authority, the petitioners in the two writ applications did not make out any case or either mistake or coercion. Any amount allegedly paid in excess is not necessarily a case of payment under mistake. The petitioners voluntarily made payment in order to persuade the West Bengal Financial Corporation to return the documents i.e. Title Deeds. The petitioners having received the Title Deeds cannot claim refund especially in the writ proceedings.
It was submitted by Mr. Dhandhania that though the High Court has power to pass appropriate order in exercise of its writ jurisdiction under Article 226 of the Constitution, such an application is not ordinarily maintainable for the reason that a claim for such refund can always be made in a suit against the authority which had illegally collected such money. Referring to the decision in the case between Suganmal Vs. State of Madhya Pradesh, as reported in AIR 1965 SC 1740, it was submitted that having regard to the nature of the prayer made in the two writ applications, which is nothing but an order directing refund, the present applications do not deserve to be entertained.
It was then submitted that a claim for refund can only be made if there is a statutory obligation to do so. In this context, reference was made to the decision in the case between M/s. Burmah Construction Company Vs. State of Orissa, as reported in AIR 1962 SC 1320. The Apex Court in the said case held that the High Court normally does not entertain a petition under Article 226 of the Constitution to enforce a civil liability arising out of a breach of contract or a tort to pay an amount of money due to the claimant and leaves it to the aggrieved party to agitate the question in a civil suit filed for that purpose. But an order for payment of money may sometimes be made in a petition under Article 226 of the Constitution against the State or against an officer of the State to enforce a statutory obligation.
According to Mr. Dhandhania, whether any payment made voluntarily or under mistake or coercion being a disputed question of fact can only be properly agitated in a suit.
Attention of the Court was then invited to the letter dated 7th of June, 2004 sent by WBFC to petitioner No. 1 (at page 36 of the writ petition). It was addressed to Manorama Ultrascan (P) Ltd.' (regarding LKYMA-07). Referring to the same, it was submitted that the said letter was not applicable to other four accounts. By the said letter, rate of interest was reduced to 11% in respect of loan account No. LKTMA-07. In the said letter, the respondent authority also mentioned that the benefit of such reduced rate of interest withdrawn in case of the petitioners committing any default in future in payment of any principal instalment, quarterly interest and other dues as per the prevailing rules of the Corporation.
Mr. Dhandhania submitted that the petitioners could not produce any such communication so as to indicate that WBFC agreed to reduce the rate of interest in respect of four accounts to 11%. By letter dated 20.2.2002, the benefit of reduced rate of interest was withdrawn because of the default in the loan account No. LKTMA-07. The petitioners approached WBFC for payment of the dues in all the five loan accounts. They were asked to pay Rs. 51,22,082.85. By letter dated 18.10.2006, WBFC reduced the amount to be repaid to Rs. 41,00,362.15. Reference was made to the chart wherein the petitioners purportedly admitted that as on 4.6.2006, the petitioners were liable to pay to WBFC the principal amount of Rs. 41,06,423.31.
It appears that the letter dated 10.10.2006 mentioned that all regular loan accounts of the Manorama Ultrascan (P) Ltd. will not be charged the document rate of interest, but will enjoy the reduced rate of interest. According to Mr. Dhandhania, the relief granted in the said letter is prospective and not retrospective. It was then contended that there is no mention that the interest already charged at the document rate would be refunded. By way of paying Rs. 41,00,362.15 to WBFC in full and final settlement of its claims and thereby making premature payment, the petitioners chose not to avail the benefit granted to them by letter dated 10.10.2006.
How far such an approach on the part of the respondent authority was justified is a matter for consideration. Mr. Dhandhania submitted that charging premium for premature repayment is an established practice for all banks and financial institutions. This is an essential mechanism. According to him, how the financial institutions and the banks could operate? It runs on the principal of taking money from X and giving loan to Y. X is to be paid interest for his deposit of money. Y must be charged such interest for its taking loan of money It was submitted that for the purpose of granting loans to individual units, WBFC has to arrange funds either by issuing bonds to public or by taking refinance from SIDBI. If the cost of money to WBFC is 13% per annum, it charges generally 14% from the borrower keeping a margin for 1% for itself. It was sought to be explained by pointing out that if subsequently the rate of interest goes down to 10% and the borrower of WBFC makes prepayment, still then, WBFC will have to go on making payment of interest @ 13% to members of the public and to SIDBI. By giving fresh loans, WBFC will get the current interest thereby incurring the loss of 3% per annum and to compensate the loss the premature repayment premium is charged. It was then submitted that it could not denied by the petitioners that all the five loan agreements contain clauses restricting the power of the borrower to make premature repayment. For the purpose of the terms and conditions of the loan what is relevant is the loan agreements. The deed of hypothecation are security deeds by which the borrower hypothecates his movable assets in favour of the corporation. Such deed of hypothecation invariably refers to the loan agreement.
In this context, it was submitted that deed of hypothecation dated 19.5.2004 executed in the case states, inter alia :
"The borrower as per loan agreement executed 19.5.2004 in favour of the corporation has requested the corporation to lend and advance to the borrower total sum of Rs. 23,70,000/-"
It was categorically pointed out on behalf of the respondent authority that the borrower cannot avoid a specific clause of the loan agreement on the ground that the deed of hypothecation does not contain a similar clause. Mr. Dhandhania further submitted that a copy of the brochure issued by WBFC never mentioned that premium for premature repayment would not be charged. It was, however, submitted that in any event the petitioners cannot avoid a clause of the loan agreement on the basis of a leaflet/brochure purportedly issued by the WBFC.
What emerges from the materials on record is that the petitioners' claim is largely based on the letter dated 7.6.2004. But I find it impossible to accept the proposition that the said letter could have had anything to do with the four accounts, other than the A/c. No. LKTMA-07, which was specifically mentioned in the said letter.
Reference to the purported assurance in the brochure, as made on behalf of the petitioners, does not seem to have much relevance in the backdrop of the fact that the relationship between the parties took a concrete legal shape only after execution of the loan agreement. In fact, there is specific mention of such loan agreement in the deed of hypothecation.
Much was said on behalf of the petitioners in regard to 'legitimate expectation'. The word 'legitimate' is very significant. All kinds of expectations may or may not be 'legitimate', even if the same are 'reasonable' or 'rational'.
'Legitimacy' means 'lawfulness'. (Ref: Black's Law Dictionary, 7th Edn. P-912). It cannot be any sort of 'wishful thinking' or 'desire'.
But the principle of promissory estoppel assumes significance in the factual backdrop of the present cases. Short of actual promise, if one, by his words or conduct, so behaves as to lead another to believe that he will not insist on his strict legal rights - knowing or intending that the other will act on that belief - and he does so act, that again will raise an equity in favour of the other; and it is for a Court of equity to say in what way the equity may be satisfied. This equity does not depend on agreement but on words or conduct. Needless to add, this Court must look at the circumstances in each case to decide in what way the equity can be satisfied.
In this case, there is absence of such act or conduct, which could lead the petitioners to proceed in a particular manner or direction. Here, the 'loan agreements' leave no scope for any further confusion or controversy.
But in the event the petitioners find that there have been any over-payment either by way of interest or premium, the writ petitioners can very well approach the respondent authority for refund of the same. Respondent must respond to such approach within a period of three months from the date it is made. This does not also take away the right of the writ petitioners to seek redress of the grievances before the appropriate forum.
Accordingly, the two writ applications being W.P. No. 2036 of 2006 and W.P. No. 2037 of 2006 be disposed of in terms of the observations made in the body of the judgment.
There is no order as to costs.
Xerox certified copy of the judgment be supplied to the parties, if applied for, as expeditiously as possible.
(S.P. Talukdar, J.)