Delhi High Court
T.T. Limited vs The Industrial Finance Copn. Of ... on 25 January, 2000
Equivalent citations: 2000 VIIAD Delhi 146
Author: K Ramamoorthy
Bench: K Ramamoorthy
ORDER
K. Ramamoorthy, J.
1. The writ petitioner had taken financial assistance from the respondent on various heads. Feeling that the rates of interest charged by the respondent being on the high side, the petitioner wanted to have assistance from the Oriental Bank of Commerce. With that aim in view, the petitioner applied to pre-pay the money due on various heads to the respondent.
2. The respondent accepted the proposal for pre-payment to claim pre-payment premium and took the stand unless the premium, as demanded by the respondent, was paid, it cannot comply with the request of the petitioner to have transactions with the Oriental Bank of Commerce. The respondent demanded Rs.53,03,252/- being the total premium with reference to the financial assistance on four heads.
3. The writ petition was presented on the 19th of May, 1998 in this Court. On the 21st of May, 1998, this court, issuing the rule, passed the following order:-
"CW. 2797/98
Rule.
C.M. 6060/98
Notice for 18th of August, 1998.
The applicant has prayed for issuance of "No Dues Certificate" to enable the petitioner to transfer the charge in favour of its bankers Oriental Bank of Commerce on the fixed assets at the Gajroula Unit of the petitioner.
The learned counsel for the petitioner, Mr. A.S. Chandhiok, represents that the petitioner that the petitioner is willing to give bank guarantee for Rs.52 lakhs without prejudice and rights and contentions of the petitioner subject to the final outcome of the writ petition.
The petitioner shall furnish bank guarantee to the tune of Rs.52 lakhs to the satisfaction of the Registrar of this Court on or before the 28th of May, 1998. On the petitioner's furnishing the bank guarantee, the respondent shall issue "No Dues Certificate" within a week and shall forward all the documents, submitted by the petitioner, to the Oriental Bank of Commerce, New Delhi."
4. The petitioner had furnished bank guarantee as directed by this Court.
5. The facts culminating in the filing of the writ petition have to be noticed and they are as under.
6. The details of loans extended by the respondent to the petitioner under four different heads are as follows:-
Loan Agreement Amount Rate Loan
Scheme Date Sanctioned interest Disbursed
p.a.
1) P.F.S 30.10.92 Rs. 269.00 19.12% Rs. 242.00 lakhs
lakhs
2) E.F.S. 10.09.92 Rs. 350.00 19.61% Rs. 266.34 lakhs
lakhs
3) P.F.S 14.01.93 Rs. 500.00 22.00% Rs. 469.00 lakhs
lakhs
4) F.C.L 10.09.92 DM.1,303,500 9.50% DM. 1,234,115.45
(in DM (Eqv.Rs. 231 lakh
P.F.S. = Project Finance Scheme
E.F.S. = Equipment Finance Scheme
E.C.S. = Equipment Credit Scheme
F.C.L. (in DM) = Foreign Currency Loan under PFS
7. The terms of the agreements have to be noticed. In respect of Project Finance Scheme, Clause 2.2.A of Agreement and Terms of Loan states:
"The Borrower shall not repay the loan or any part thereof before the due date except with the prior written approval of the Lenders on such terms and condition as may be stipulated by the Lenders."
8. There are General Conditions in the contract and one of the conditions, which is relevant, is as under:-
"The Borrower shall not repay the Loans of any part, thereof before the due dates except with the prior written approval of the Lend Institution, on such terms and conditions as may be stipulated by the Lend Institution."
9. In respect of the agreement for assistance in Equipment Financial Scheme, clause 2.7 states:
Interest
(i) The Borrower shall pay to Lenders interest on the principal amount of the Loan outstanding from time to time, quarterly in each year, on January 15, April 15, July 15, and October 15 at the rate of 20% per annum.
(ii) Disbursements made pending creation of final security as stipulated in Article III hereof shall carry further interest at the rate of 1% per annum till creation of such security.
PROVIDED that in the event of any upward revision of the minimum lending rate(s) of the commercial banks for cash credits, the Borrower shall pay to the Lenders interest at such higher rate(s) as shall from time to time be fixed by the lenders and intimated to the Borrower but so that such revised rate(s) shall not at any point of time exceed the highest of the interest rates charged by the commercial banks for case credits.
PROVIDED further that in the event of increase in the rate(s) of interest:
(a) The Borrower shall have an option to prepay to the Lenders forthwith on receipt of such intimation, the entire outstanding of the Loan together with all outstanding interest and other charges thereon with such premium as may be specified by the Lenders.
(b) In the alternative, the Borrower shall have an option to make such prepayment together with interest, as the increased rate(s) as intimated till payment, at any time during a period of two years after receipt of such intimation.
The Borrower shall not repay the loan or any part thereof before the due date except with the prior written approval of the Lenders on such terms and conditions as may stipulated by the Lenders."
10. In the General Conditions, it is stated in Section 4.8:
"PREMATURE REPAYMENT
The Borrower shall not prepay the outstanding principal amounts of the Loan in full or in part, before the due dates except (after the conversion right is exercised in full, or has lapsed and) to be deleted if conversion clause not applicable after obtaining the prior approval of IFCI (which may be granted conditionally)"
11. In respect of the Equipment Credit Scheme, the agreement was executed on the 14th of January, 1993. In paragraph 2.5 of the agreement, it is stated:
"Premature repayment
If, at the request of the Company, IFCI agrees to accept premature repayment of the Cost of the Equipment, the Company shall, immediately upon such acceptance, pay/repay:
(a) the Cost of the Equipment.
(b) interest on the Cost of the Equipment at the rate of 22% per annum calculated from the due date of last instalment paid till the date of payment of the Cost of the Equipment;
(c) Premium at the following percentage of the Cost of the Equipment:
(i) in the event of premature repayment is made by the Company before the expiry of the period of one year from the date of payment of the Cost of the Equipment by IFCI, at 5%;
(ii) in the event the premature repayment is made by the Company after the expiry of the period of one year but before the expiry of two years from the date of payment of the Cost of the Equipment by IFCI, at 3%;
(iii)in the event the premature repayment is made by the Company after the expiry of two years from the date of repayment of the Cost of the equipment by IFCI, at 1%;
(d) All other monies due and payable under or pursuant to this Agreement.
(d.1) Disbursements made pending creation of final security as stipulated in clause 3 hereof shall from the date of first disbursement carry further interest at a rate of 1% p.a. till creation of final security."
12. The agreement with reference to the Foreign Currency Loan was executed on the 10th of September, 1992. In clause 2.5 of the agreement, it is stated:
"Repayment
The Foreign Currency Loan shall be repayable in accordance with the Amortisation Schedule to be advised in due course."
13. In the General Conditions, it is stated in Section 4.4:
(i) The Lenders may, in suitable circumstances, revise, very or postpone the repayment of the principal amounts of the Loans of the balance outstanding for the time being or any instalment(s) of the said principal amounts of the Loans or any part thereof upon such terms and conditions as may be decided by the Lenders.
(ii) In the event of any default in the payment of instalment(s) of principal, any interest, commitment charge and liquidated damages, postponement, if any, allowed by the Lenders shall bed at the rate of interest as may be stipulated by the Lenders at the time of postponement.
(iii) If, for any reason, the amount finally disbursed by the Lenders out of the loans than the amount of the Loans, the instalment(s) of repayment of the Loans shall stand reduced proportionately but shall be payable on the due dates as specified in the Amortization Schedule in the Loan Agreement."
14. In Section 4.8 of the agreement, the right is given to the respondent for appropriation of payment. The same is as under:-
"APPROPRIATION OF PAYMENTS:
(a) Unless otherwise agreed to by the Lenders any payment due and payable under the Loan Agreement and made by the Borrower shall be appropriated towards such dues in the following order viz.-
(i) Premium on prepayment;
(ii) Costs, charges, expenses and other monies;
(iii) interest on costs, charges, expenses and other monies;
(iv) Commitment charges;
(v) Interest on arrears of commitment charges;
(iv) Commitment charges;
(v) Interest on arrears of commitment charges;
(vi) Interest, including additional interest, payable in terms of the Loan Agreement;
(vii) Further interest and liquidated damages on defaulted amounts payable in terms of Section 4.3(i) and 4.5;
(viii) Repayment of instalments of principal due and payable under the Loan Agreement.
(b) Notwithstanding anything contained in Clause (a) hereinabove, the Lenders may, at their discretion, appropriate such payments towards the dues, if any, payable by the Borrower in respect of earlier loans(s) availed of by the Borrower from the Lenders in the order specified in the relative Loan Agreement(s)."
15. From the terms of the agreements, it is clear that if the petitioner wanted to clear up the loans before the expiry of the terms, it has to pay premium for pre-payment and the terms of such premium/pre-payment have to be decided by the respondent and that would be binding on the petitioner.
16. On the 17th of September,1993, the petitioner wrote to the respondent requesting for reduction in the rates of interest. The letter is as under:-
"RE: REDUCTION IN RATE OF INTEREST
As you are already aware that the company had been sanctioned a term loan of "Rs.13.50 lacs by IFCI on July 1, 1992. The details of the Loan Agreements executed are as follows:-
Scheme Amount Date of Agreement
Equipment Credit Scheme Rs. 500 lacs 14.01.93
(ECS)
Equipment Finance Scheme Rs. 350 lacs 10.09.92
(EFS)
Foreign Currency Loan Rs. 231 lacs 10.09.92
under Project Finance
(PFS)
Rupee Loan under Project Rs. 269 lacs 10.09.92
Finance Scheme (PFS)
-------------
Rs.1,350 lacs
=============
As the rate of interest have been reduced substantially during the past, so we request your goodself to kindly reduce rate of interest in all the above four schemes and instruct your accounts department so that we can get the benefit of reduction in rate of interest."
17. On the 20th of February, 1995, the Operational Circular, which is found at page 344 of the paper book, was issued by the respondent.
18. On the 11th of December, 1996, the petitioner wrote to the respondent mentioning of financial restructuring for payment of money due to the respondent with three options. The letter reads as under:-
"You are aware that we have availed following term loans for our Gajroula Spinning unit from IFCI:-
Loan Facility Amount availed *Outstanding
Rupee Loans (Rs. in lakhs) as on 31.3.97
(Rs.in lakhs)
E.F.S. Scheme 266.34 188.04
P.F.S. Scheme 242.00 172.00
E.C.S. Scheme 469.00 146.18
------ ------
Sub Total 977.34 506.22
Foreign
Currency
Loan 243.71 220.38
(DM881,500)
------ ------
Total 1,221.05 726.60
========= ======
*Assuming all payments due up to 31.03.97 would be paid on or before that date.
All above loans (except FCL) are attracting interest rates between 20-21% per annum, which is very high in the present day context and therefore company's profitability is getting eroded. You would kindly appreciate that with the emerging global competition and economic reforms being carried out in India, we have no choice left but to try and undertake financial restructuring to reduce interest costs enabling us to compete effectively with other yarn manufacturers within and outside India. Keeping this in view, we request you to consider following options available to the company.
OPTION I
Request IFCI to consider converting rupee loans to foreign currency loans of equivalent amount at prevailing rates, subject to necessary approvals and your regulations.
OPTION II
Request IFCI to accept pre-payment of rupee loans. The company can seek and obtain External Commercial Borrowing (ECB) to the extent of US$ 3 million to repay IFCI rupee term loans. ECB funds can be arranged by the company if IFCI could consider guaranteeing the repayment, to the foreign bank extending ECB. Tenure of such funds is proposed to be 5(five) years.
OPTION III
If IFCI is not willing to issue the guarantee to the foreign bank for obtaining ECB, then company propose to try and seek such guarantee from its bankers and pre-pay all above loans including FCL and first charge on Gajroula unit could then be transferred to its bankers as security for issuing such guarantee.
Needless to mention that, option III above is our last preference and option I is our first choice considering the costs and other facts involved.
Sir, we therefore, request you to please consider above said Option I and failing which the Option II and let us have your concurrence enabling us to proceed further in the matter.
We would also request you to waive pre-payment charges, in case of our pre-paying IFCI dues at a future date following any of the above Options or otherwise.
You would kindly appreciate that the proposed financial restructuring would be in mutual interest of IFCI and ourselves as it would increase company's profitability considerably for next five years.
Looking forward for your early favourable response."
19. On the 13th of December, 1996, the Bank, called West Merchant Bank, London, wrote to the petitioner indicating its terms of assistance. The letter reads as under:-
"Re: External Commercial Borrowing - Oriental Bank of Commerce, India.
Further to your recent discussion with Mrs.Veena Mankar of Indoa Aval and Consultancy Services we are pleased to provide you with our indicative terms to finance the following transaction.
Amount USD 3,000,000.00
Tenor 5years, 1 year moratorium
repayment in nine half
yearly instalments
thereafter.
Guarantor Oriental Bank of Commerce
Bank India
Purpose Project related expenditure.
Discount On a floating rate basis
Rate LIBOR + 2.0% p.a.
Flat Fee 1%
Admn.Fee 0.5%
Please note this information is given at this stage purely as an indication and does not constitute a commitment on behalf of West Merchant Bank. If you wish to proceed with this enquiry kindly contact Mrs.Mankar."
20. On the 11th of February, 1997, the petitioner wrote to the respondent offering to pre-pay the loans and requested for issuance of 'No Objection Certificate' for the petitioner to approach other financial institutions. The letter is as under :-
"You are aware that we have availed following term loans for our Gajroula Spinning unit from IFCI:-
Loan Facility Amount availed *Outstanding
RUPEE LOANS : (Rs in lakhs) as on 31.3.97
(Rs.in lakhs)
(I) RUPEE LOANS:
E.F.S. Scheme 266.34 188.04
P.F.S. Scheme 242.00 172.00
E.C.S. Scheme 469.00 146.18
------ ------
Sub Total 977.34 506.22
(II) Foreign
Currency 243.71 193.93
Loan
(DM881,500)
-------- ------
1,221.05 700.15
Total ========= ======
*Assuming all payments due up to 31.03.97 would be paid on or before that date.
Competition and economic reforms being carried out in India, we have no choice left but to try and undertake financial restructuring to reduce interest costs enabling us to compete effectively with out yarn manufacturers within and outside India.
Keeping the above in view, we therefore, intend to avail External Commercial Borrowing (ECB) of US $ 3.00 million and pre-pay IFCI Loans as mentioned above.
The company has already been offered ECB of US $ 3.00 million by West Merchant Bank Ltd. London at LIBOR + 2% interest on floating rate basis on security of bank guarantee. Kindly find enclosed copy of their fax dated 13th December, 1996 for your information and records please. We have contacted our bankers i.e. Oriental Bank of Commerce to provide the required Bank Guarantee and kindly note that they are willing to issue the Bank Guarantee as above on security of first charge on our Gajroula Unit, which is presently under IFCI's first charge.
Sir, you would kindly appreciate that to complete the above exercise, we shall be required to provide pari-passu charge on Gajroula Unit to our banker's enabling them to issue the bank guarantee. The pari-passu charge is likely be required for about 120 days during which time we expect to receive the ECB remittance and pre-pay IFCI and subsequently the charge can be transferred by IFCI to our banker.
We, therefore, request you to kindly consider the above proposal and let have your no objection enabling us to proceed further in the matter."
21. On the 24th of May, 1997 the petitioner wrote to the respondent for confirmation regarding outstanding amounts due and payable in case of pre-payment on the 30th of June, 1997. On the 14th of June, 1997, the petitioner sent a reminder to the letter dated 24.5.197. Again, a reminder was sent by the petitioner. On the 24th of July, 1997, the petitioner wrote to the respondent the following :-
"This has reference to your fax message dated 22nd July, 1997 regarding payment of outstanding Principal and Interest Dues.
In this connection, we would like to draw your attention to our letter dated 24th May, 1997 requesting you inform to us the total amount payable by us in case of prepayment of all IFCI dues.
Please note that we would arrange pre-payment of all your dues (Principal - Interest) immediately after we receive your communication."
22. On the 31st of July, 1997, the petitioner requested the respondent for early action in the matter. On the 8th of August, 1997, the Deputy General Manager(Law) of the respondent wrote to the petitioner mentioning the cut-off date for payment as 14.8.1997. The letter reads as under:-
"Please refer to your fax dated 6th Aug, 197 and further discussion the undersigned had with your representative Shri Mehta on the subject.
2. In this connection, we are agreeable to your proposal of prepayment of our outstanding term loans. Accordingly, you are requested to arrange funds for payment which includes principal, interest, other charges and premium, which has been calculated up to the cut-off dated i.e 14th Aug, 1997 as per our prevailing standard norms, set by the financial institutions. The total amount payable will be advised separately. We further inform that any delay in repayment of outstanding term loans shall lead to revised calculations of premium etc.
3. In this context, we may further advise that our charge on the company's assets shall be released only after the realisation of the entire amount due to IFCI.
4. Please acknowledge and respond."
23. On the 20th of August, 1997, the petitioner requested the respondent to give details about the instalment due. On the 22nd of August, 1997, the respondent wrote to the Oriental Bank of Commerce, Panchkuian Park, New Delhi the following:- "We understand from the company that your bank is receiving the ECB funds on behalf of the company, which would be utilised for the prepayment of IFCI outstanding dues. We hereby agree and confirm that we shall transfer all security documents in our possession directly to you after receiving the full and final payment of our outstanding dues."
24. On the 11th of September, 1997, the petitioner wrote to the respondent sending a sum of Rs.1,77,59,879/- towards amount due under Project Finance Scheme. The petitioner has placed on record its calculations and copy of the pay order. On the same date, the petitioner sent a sum of Rs.1,94,54,896/- in respect of Equipment Finance Scheme. Here also, the petitioner gave its calculations and copy of the pay order. On the same date, towards Equipment Credit Scheme, the petitioner send a sum of Rs.1,22,75,276/-. Here also, the petitioner has placed on record the copy of the pay order and its calculations.
25. Towards Project Finance Scheme(Foreign Currency Loan), the petitioner sent, on 11.11.1997, a sum of Rs.1,93,55,646/-. The petitioner has placed on record the copy of the pay order and its calculations.
26. On the 15th of September, 1997, the petitioner wrote to the respondent requesting it to furnish account-wise complete details of pre-payment charges. On the 17th of September, 1997, the respondent wrote to the petitioner mentioning a sum of Rs.50,60,864/- being the amount due towards pre-payment premium. The abstract of the details is as under:-
Faci- Amt.Payable Inte- Amt.Pay- Total Amt.Paid Balance
lit- 31.8.97 rest able on to be
ies (in %) 12.9.97 paid
RLA 2,09,42,453 23.09 158,979 211,01,432 194,54,896 16,46,536
RLA 1,89,81,864 22.59 140,975 191,22,839 177,59,879 13,62,960
FSA 1,21,12,328 25.14 110,111 122,12,439 122,75,276 (-)62,837
FCL 7,12,78,589 27.34 191,262 214,69,851 193,55,646 21,14,205
7,33,15,234 591,327 739,06,564 688,45,697 50,60,864
========================================================================
27. On the 18th of September, 1997, the petitioner wrote to the respondent the following:-
Sub: Prepayment of IFCI Term Loans: 1. Equipment Credit Scheme(ECS) 2. Equipment Finance Scheme(EFS) 3. Project Finance Scheme(PFS) 4. Foreign Currency Loan(FCL)
"This has reference to your letter No.DRO/PL-IA/97-7327 dated 17.9.97 on the above subject, asking us to pay Rs.53,75,350/-(Rupees Fifty three lacs seventy five thousand three hundred fifty only) towards prepayment premium on pre-payment of above loans.
We have gone through your working sheets showing calculations of prepayment premium on prepayment of above said loans, sent to us along with your above stated letter. In this regards, we would like to mention that all your calculations for prepayment premium are based on assumed cut off date of 31.08.97 whereas we have now paid all principal including interest on above loans on 12.09.97. Therefore, you are requested to revise cut off date to 12.09.97 for calculating the prepayment premiums as well as calculation of interest.
Further, we request your attention to following points relevant for calculation of the prepayment premium:
LOANS UNDER PFS & EFS
i) The lending rate of 19.12% & 19.61% for PFS and EFS loans respectively include your spread of 2.5% over & above PLR prevailing at the time of availing the said loans. Therefore as per logic as well as precedent financial practice, you are required to add the same 2.5% to current PLR of 14.5% as taken in the calculations and then the notional different interest loss, as claimed, has to be calculated.
ii) The discounting rate of 14.5% for calculating 'present value' of notional differential interest loss as taken in your calculations has to be consequently changed to 17% p.a. taking into consideration your spread of 2.5% p.a. over & above current PLR.
iii) We are enclosing herewith our revised working sheets (annexure-I & Annexure-II) for calculation of prepayment premiums on prepayment of loans under PFS & EFS, after taking the effect of the above points. You would kindly observe from revised working sheets that prepayment premium amount to following:
As per your As per revised
calculation calculations enclosed
PFS 13,29,203.00 5,71,170.00
EFS 16,07,758.00 7,69,139.00
------------ -----------
29,36,961.00 13,40,309.00
============ ============
B. PREPAYMENT PREMIUM ON CURRENCY LOANS(FCL)
i) As per your above said letter, prepayment premium demanded on prepayment of FCL amounts to DM 116726 (equivalent to Rs.23.35 Lacs).
We are advised that if we go by your logic and method of calculation of prepayment premium on prepayment of Rupee loans, no prepayment premium ought to be demanded in our case, since lending (document) rate of the loan was 9.50% p.a. and your current lending rate for foreign currency loans (DM) is not less than 9.50% p.a. In fact, we are, in this case entitled to prepayment premium from you, based on your current PLR of 14.5%. We, therefore, are entitled to refund 5% flat from you on principal amount (Rs.158.67 lacs) pre-paid by us which comes to Rs. 7,93,350/-.
ii) Further, there is no provision of charging and/or right to impose any condition whatsoever, on premature payment of the Loan in the Loan Agreement.
C. LOAN UNDER ECS:
The cut off date for calculating the prepayment premium needs to be revised to actual date of payment i.e. 12.09.1997. Please see enclosed revised working sheet (annexure-III).
Based on above, we give below the details of final amount payable/receivable by us on prepayment of all your loans under various schemes.
Kindly note that, in our opinion, interest tax is not chargeable on prepayment premium and therefore, we have not considered the same in our revised calculations.
Loan Prepayment Premium Adjustments Net Amount Scheme Payable Receiv- (Pl.see res-(Amount in able respective Annx. Rupees)
for details)
PFS 5,71,170 - - 5,71,170
EFS 7,69,138 - - 7,69,138
ECS 82,773 - (-)2,25,466 (-) 1,42,693
FCL - 7,93,350 - 7,93,350
------------
Net amount payable: 4,04,265
============
We, therefore, enclose herewith our cheque NO.170191 dated 19.09.97 for Rs.4,04,265/- drawn on Oriental Bank of Commerce and request you to consider our request and issue us No Dues Certificate at an early date."
28. The stand taken by the petitioner is that interest tax is not chargeable on pre-payment premium. According to the petitioner, on revised calculation, the amount payable on this account was Rs.4,04,265/-, and it sent a cheque for that amount.
29. On the 3rd of October, 1997, the petitioner wrote to the respondent for the issuance of a 'Due Certificate'. The petitioner again wrote on the 3rd of October, 1997 making the same request. There was a letter on the 13th of October, 1997 from the respondent to the petitioner and that has not been placed on record.
30. On the 3rd of November, 1997, the respondent wrote to the petitioner demanding a sum of Rs.53,03,252/-. On the 11th of November, 1997, a fax message was sent by the respondent, referring the letter dated 3.11.1997. On the 4th of March, 1998, a circular, called Operational Circular, was issued by the respondent.
31. On the 20th of March, 1998, the respondent wrote to the petitioner making a demand for Rs.51,49,392/-. The letter reads as under:-
"Please refer to your fax dated 4th March 1998 and our fax dated 20th March, 1998 on the subject.
2. In this connection, we have to advise that as per revised TMC guidelines, we have recalculated the premium on prepayment of FCL (a copy of revised calculation of FCL premium is enclosed herewith for ready reference). Accordingly, you are required to pay the total amount of premium on RTL, FCL and FSA and instalment/interest due up to 12.9.97 as under:-
RTL outstandingin cl premium - Rs.1,73,14,054
RTL " - Rs.1,90,95,556
FCL " - Rs.1,89,01,246
FSA - ECS " - Rs.1,23,57,096
--------------
Rs.6,76,67,952
Instalments/interest
due up to 12.9.97 (+) Rs. 67,31,402
---------------
Rs.7,43,99,354
Paid by TTL (-) Rs.6,92,49,962
--------------
Balance to be paid by TTL Rs. 51,49,392
==============
3. You are requested to pay the entire amount of Rs.51,49,392/- along with the interest from the cut off date i.e. 12.9.97 till the realisation of cheque. Please further note that the amount of difference between the DM rate at Rs.20.58 as on 12.9.97 and actual rate prevailing on the date of realisation of cheque, shall also be payable by TTL.
4. Please treat the matter as most urgent and clear the dues on or before 27th March, 1998 so that the requisite effect could be given in our books of account in this financial year. In case you fail to pay the said amount by the said date, your offer for premature repayment of various loans would be cancelled and your liability to pay interest,iquidated damages and panel interest etc. on various outstanding loans as on 12.9.97 would be booked in our accounts accordingly."
32. On the 17th of April, 1996, the petitioner wrote to the respondent questioning the demand. On the 21st of April, 1998, the respondent wrote to the petitioner for a meeting with the Chief General Manager. On the 21st of April, 1998, the Oriental Bank of Commerce wrote to the petitioner to obtain 'No Due Certificate' from the respondent. On the 28th of April, 1998, the respondent wrote to the petitioner the following:-
"Please refer to the discussion you had with Shri C.D.Ghose, Chief General Manager, on 28th April, 1998.
2. In this connection, we have to advise that the premium charged by us on premature repayment, is based on the Financial Institutions guide-line and we are not competent authority to change the Financial Institution's policy.
3. Please note that the payment as informed to you on the basis of cut off date i.e. 12.9.97 has not been received in full in spite of our repeated requests. Since the said offer of prepayment has not been concluded, which may be treated as withdrawn and the said contract of prepayment become null and void. Kindly further note that the amount received is lying pending "on account" for adjustment to the respective loan facility."
33. On the 18th of May, 1998, the writ petition was presented in this Court.
34. On the 3rd of September, 1998, after filing of the writ petition, the petitioner wrote to the respondent to sign Form Nos.13 & 17. On the 25th of September, 1998, the respondent wrote to the petitioner, in reply to the letter dated 3.9.1998, stating:
"Please refer to your letter dated the 3rd September, 1998 on the above subject.
2. In this connection, we have to advise that the ex parte order dated May 21, 1998 passed by the High Court of Delhi directs IFCI to issue a 'No Due Certificate' in favour of the for creation of charge pending proceedings in the writ petition. The said order does not in any manner contemplate a direction to IFCI to file satisfaction of charge with ROC, IFCI cannot file satisfaction of charge as the dues still remain unpaid although being the subject matter of the writ petition. Therefore, we cannot sign the Form 17 for satisfaction of charge."
35. The learned senior counsel for the petitioner submitted that as per the terms of the contracts, the respondent is not at all justified in making a demand for the sum of Rs.51,49,392/-. The learned senior counsel submitted that there is a mention about the pre-payment premium only in the agreement relating to Equipment Credit Scheme, and in other agreements, there is no such clause, and, therefore, the respondent was not justified in making the demand. The learned senior counsel submitted the details of the terms of loans availed and payments made. The same is as under:-
S.NO TYPE OF YEAR OF LOAN FINAL PRINCIPAL REPAYMENT INTEREST PAID TOTAL AMT. PAID PREMIUM DEMAND
NO. LOAN AVAIL- AMT. DATE BEF ON BEF ON BEF
ON BEF % OF
MENT AVAILED MATURITY 12.09.97 12.09.97 12.09.97 12.09.97 12.09.97
12.09.97 12.09.97 PRE-PAID
1. EFS(RL) 1992-93 266.34 15.01.02 87.70 178.64 267.58 15.91
266.34 283.34 15.86 8.88
2. PFS(RL) 1992-93 242.00 15.01.02 78.60 163.40 257.38 14.20
242.00 271.58 13.11 8.02
3. ECS(RL) 1992-93 469.00 30.04.98 386.23 82.77 324.87 7.45
469.00 350.32 0.85 1.03
TOTAL 977.34 552.53 424.81 867.83 37.56
977.34 905.39 29.82
===============================================================
4. FCL(DM) 1992-93 243.71 30.12.01 66.00 177.76 129.80 15.85
243.71 145.65 22.19 12.48
G.TOTAL 1221.05 618.53 602.52 997.63 53.41
1221.05 1051.04 52.01
36. The learned senior counsel for the petitioner submitted that the respondent had acted in an arbitrary fashion and the stand of the respondent is totally unreasonable. The learned senior counsel submitted that the respondent, being a public authority, while acting under the terms of a contact, is expected to act in accordance with law and reasonably, and it is amenable to jurisdiction of this Court under Article 226 of the Constitution of India, if a public authority acts beyond its rights under a contract. The petitioner was always ready and willing to pay the amounts due to the respondent and the petitioner had paid off all the dues. According to the learned senior counsel, the demand made by the respondent is usurious and, hence, arbitrary and cannot be sustained.
37. The learned senior counsel relied upon the following rulings:-
1. "South Kheri & Others Vs. Ram Sanehi Singh",
2. "The Gujarat State Financial Corporation Vs. M/s.Lotus Hotels Pvt. Ltd.",
3. M/s.Shree Ganesh Trading Co., Saugor Vs. The State of Madhya Pradesh & Others",
4. "Mangat Ram, Delhi Vs. Delhi Development Authority & Another",
5. "Chowgule & Company, Goa & Another Vs. Union of India & Others", AIR 1982 Goa, Daman & Diu 19
6. "Colony Welfare Association & Another Vs. UOI & Another",
38. The learned senior counsel for the respondent, Mr.Mukul Rohtagi, submitted that the respondent had acted in accordance with the terms of the agreements. He submitted that a perusal of the terms of the agreement would show that the petitioner had agreed to act as per the directions of the respondent and when the parties are governed by clear terms of the contract, the petitioner cannot come forward with the grievance that the respondent had acted in an arbitrary fashion. The learned senior counsel submitted that the respondent is a leading financial institution arranging funds for companies which require funds, and for that purpose, it has got its own arrangements with the persons who provide funds to it, and the respondent charges pre-payment premium depending upon commitment to the persons who provide funds to it. He submitted that the respondent had not charged anything more than what was absolutely needed for the purpose.
39. The petitioner having been a party to the contract, cannot be heard to say that it is not bound to pay pre-payment premium, as demanded by the respondent.
40. The learned senior counsel for the respondent, Mr.Mukul Rohtagi, referred to the following rulings:-
1. "Woodcrafts Assam Vs. The Chief Conservator of Forests, Assam, Shillong", AIR 1971 Assam & Nagaland 92
2. "Har Shankar & Others Vs. The Dy.Excise & Taxation Commissioner & Others",
3. "M/s.Radhakrishna Agarwal & Others Vs. State of Bihar & Others",
4. "The Divisional Forest Officer Vs. Bishwanath Tea Co. Ltd.",
5. "Bareilly Development Authority & Another Vs. Ajay Pal Singh & Others",
41. The Supreme Court had considered the jurisdiction of this Court in a matter arising under similar circumstances in "Food Corporation of India Vs. M/s.Kamdhenu Cattle Feed Industries", . The
Madras High Court, in the case "Tamil Nadu Electrical Fittings & Choke Manufacturers' Association Vs. The State of Tamil Nadu & Others", 1999 Writ L.R. 634, referring to the entire case law on the point, held that the jurisdiction of the Court under Article 226 of the
Constitution of India in respect of contractual matters is very much limited and circumscribed and the principles laid down by the Supreme Court are very clear.
42. I have quoted the relevant provisions of the agreements, where the general conditions of contract provide for a right to the respondent to make demands and it is at the discretion of the respondent depending upon the time when the loan was granted and when the party availing the loan wanted pre-payment. Having regard to the circumstances, I am unable to accept the submissions made on behalf of the petitioner. In my view, it cannot be said that the respondent had acted arbitrarily or irrationally in making the demand of Rs.51,49,392/- towards prepayment premium in respect of the four agreements. Accordingly, the writ petition is dismissed.
43. There shall be no order as to costs.
