Sawhney Brothers vs Union Of India (Uoi) And Ors. ...
2004 Latest Caselaw 721 Del

JUDGMENT

Badar Durrez Ahmed, J.

1. These three petitions have been filed by the sister concerns and all of them pertain to the Central Interest Subsidy Scheme (Revised) for November 1984 Riot Affected Borrowers (hereinafter referred to as 'the said Scheme'). The case of the petitioners is that they are eligible for the benefits under the said scheme. They borrowed funds from two different banks, i.e., the Bank of Rajasthan Limited and the Indian Bank. WP(C) 3997/1995 pertains to loans taken from the Rajasthan bank and the Indian Ban . WP(C) 4182/1995 is in connection with the loan taken from the Indian Bank and WP(C) 4183/1995 pertains to the loan taken from Rajasthan Bank.

2. It is not in dispute that the petitioners have been carrying on the business of export of garments since 1969. The petitioners had regularly been attending ''pret-a-porter'' fairs in Paris. For procuring export orders, the petitioners have to go abroad to attend such fairs. In October 1985, they attended the fair at Paris and procured good orders which were to be executed in October, November and December, 1984 for the next fair which was to be held in Paris. They obtained the raw material and kept the same in their two adjoining factories situated at A-18 and A-21, both at Sector-6, NOIDA (U.P.). On 30.10.1984, late Smt Indira Gandhi was assassinated and thereafter anti-Sikh riots ensued which are commonly known as the 1984 Riots. In the evening of 30.10.1984 miscreants entered into the factories of the petitioners and looted and burnt the same. Reports were lodged with the police and the fire brigade.

3. With financial support by way of allowing special over-draft limits against export documents by the said banks, the petitioners were able to reconstruct the factories and re-establish their export businesses. According to the petitioners, it is only on or about November 1994, that they acquired knowledge of the said scheme. By a letter dated 07.11.1994 (Annexure-'C' in WP(C)3997/95), the petitioners wrote to the Bank of Rajasthan Limited for refund of excess interest charged on advances allowed under post-shipment as well pre-shipment in terms of the said scheme. In the said letter, it was indicated that the petitioners had come to know from some reliable sources that the Reserve Bank of India (RBI) had issued directions to all the banks that all t e borrowers who were affected by the 1984 Riots would be eligible for relief if any loan was outstanding during the period November 1984 till March, 1992 in terms of the said scheme. It was further mentioned therein that the scheme was to come into force w.e.f. 01.09.1993 under which interest @ 1% per annum (simple) only was to be charged and the balance interest amount due to the banks would be reimbursed by the Government of India to the banks as interest subsidy through the RBI. It was further state in the letter dated 07.11.1994 that it was obligatory on the part of the banks to prepare the statement of advances allowed to the borrowers from time to time during the period mentioned above, i.e., November 1984 till March 1992 for the continuation of the business against which excess interest was charged by the banks and to claim reimbursement from the RBI in terms of the said directions. It was hoped that the statement of advances had been prepared by the bank and had been submitted to the RBI for reimbursement of the claim. Accordingly, a request was made in the letter that the excess interest charged by the bank from the petitioners against all the advances allowed against export documents be refunded. A similar letter dated 30.11.1994 was addressed on the same date to the Indian Bank also. Letters were also addressed in similar vein and sent to the RBI. .

4. Initially, on 14.12.1994, the Bank of Rajasthan Limited informed the petitioners that their representations had been forwarded to their central office and that they would respond on hearing from them. Finally, a letter dated 24.03.1994 was issued by t he Bank of Rajasthan Limited to the petitioners to the effect that the petitioners were not eligible for the refund in terms of clause 2 (f) of the said scheme as the case was not a deserving one in light of their capacity to pay the interest on export credit. The Indian Bank also by a letter dated 15.05.1995 did not accede to the request of the petitioners on the ground that the petitioners were found to be operating satisfactorily and that the firm was a profit-making concern for the last 5 years. Essentially, the request was rejected on the same ground that, on the effective date, i.e., 31.03.1992, the petitioners had the capacity to pay the interest at the rates prescribed. These facts pertain to WP(C)3997/1995. Similar letters were written by the petitioners in WP(C)4182/1995 to the Indian Bank and the RBI and an identical reply dated 15.05.1995 declining the petitioners' request was issued by the Indian Bank. Similarly in WP(C)4183/1995, the petitioners' request, which was made to the RBI and he Bank of Rajasthan Limited, was rejected vide letter dated 24.03.1995 on the same ground that the petitioner had the capacity to pay the interest on the export credit at the rates applicable on the effective date, i.e., 31.03.1992. .

5. Thus, the petitioners in each of the three writ petitions claim that they are entitled to the benefits under the said scheme, whereas the respondent banks contend that the petitioners were not eligible because theirs' were not ''deserving cases'' as cont emplated in clause 2 (f) of the said scheme. It is, therefore, necessary to examine the scheme itself. Clause 1 (b) of the said scheme provided that it would come into effect from 01.09.1993. The said scheme, in view of clause 1(d) thereof, was to app y to all the eligible loans granted to borrowers by the banks as defined in the said scheme. The effective date for the scheme was stipulated as 31.03.1992 [See clause 2 (d) of the said scheme]. There is no dispute that the petitioners fell within the definition of ''borrower'' [clause 2 (a) of the said scheme] and that the respondent banks were covered by the expression ''bank'' as defined in clause 2 (b) of the said scheme. There is also no dispute with regard to the factum that the loans/credit limits ere availed of by the petitioners and that the loans/credit limits availed of by the petitioners and the grants by the respondent banks were covered within the meaning of the expression ''eligible loans'' as defined in clause 2 (e) of the said scheme. The entire dispute and controversy in the present writ petitions is with regard to the scope and meaning of the expression ''deserving case'' as defined in clause 2 (f) of the said scheme which reads as under:-

''(f) ''deserving case'' means eligible loans granted to a borrower who, in the opinion of the authority which has sanctioned the loan does not have, on the effective date, capacity to pay interest at the rates prescribed by instructions/Interest Rate Directives on Advances issued by the Reserve Bank of India in this regard.''

6. It is also necessary to refer to clause 3 (e) of the said scheme which reads as under:-

''3. (a) xxx xxx xxx xxx xxx (e) Cases where the amount due under an eligible loan has already been repaid and the accounts adjusted/closed or cases where a compromise has been arrived at between the bank and the borrower or cases in respect of which consent decree have been passed in court of law shall not be reopened. (f) xxx xxx xxx xxx xxx'' Clause 3 (e) of the said scheme sets out the three instances in which cases were not to be re-opened. The instances were -- 1) where the loan amount had been repaid and the accounts adjusted/closed; 2) where a compromise had been arrived at between the ankh and the borrower; or 3) where a consent decree had been passed in a Court of law. In this context, the petitioner has fairly conceded that in WP(C) 3997/1995 as the amount of loan in respect of the Indian Bank had been fully repaid and accounts had been closed, he was not claiming any relief against the Indian Bank in WP(C) 3997/1995. He, however, contended that clause 3 (e) would not come in the way of the petitioners proceeding against the Bank of Rajasthan Limited in WP(C)3997/1995 and WP(C) 418 /1995 and against Indian Bank in WP(C) 4182/1995 as in all the three instances the loan amounts were outstanding on the effective date, i.e., 31.03.1992. There is no serious controversy with regard to this submission of the petitioner-in-person.

7. The main issue revolves around the question as to whether the petitioners fell within the expression ''deserving case''. It is only in a deserving case that the relief under the said scheme is to be provided. To fall within the expression deserving case as defined under clause 2 (f) of the said scheme, certain pre-conditions must be fulfillled. They are:-

1) An eligible loan must be granted to a borrower;

2)Such borrower, in the opinion of the authority which sanctioned the loan, must not have, on the effective date (31.03.1992), the capacity to pay interest at the rates prescribed by the instructions/Interest Rate Directives on Advances issued by the RBI in this regard.

8. There is no dispute with regard to the first condition. The second condition has two limbs. The first limb indicates that it is the opinion of the authority which sanctioned the loan that matters and the second limb indicates the subject matter of the opinion, i.e., the capacity to pay interest at the prescribed rates. Thus, if the respondent banks, in their opinion, feel that the petitioners on the effective date had the capacity to pay interest at the prescribed rates, then the petitioners would to fall under the expression ''deserving case'' and, therefore, would not be eligible to any relief under the said scheme. On the other hand, if in the opinion of the respondent banks the petitioners did not have such capacity, then clearly they would fall under the expression ''deserving case'' and would be entitled to receive the benefits under the said scheme. It was submitted on behalf of the petitioners that as on 31.03.1992 they did not have the capacity to pay interest and had paid the same by under doing great hardships as otherwise their businesses would have come to a standstill. The petitioners had, in fact, a huge amount of Rs.298 lakhs outstanding on the effective date in respect of the Bank of Rajasthan Limited and had to pay interest at the higher rates. Just because the petitioners had, in point of fact, paid the higher interest rate, it would not follow that they were clearly in a position to pay the same. It was submitted that such a conclusion was purely imaginary and far from the trust. According to the petitioner, the actual position was that the petitioner had no capacity and through great difficulties was able to pay the higher rates of interest. Furthermore, it is submitted on behalf of the petitioners that if the petitioners ha the capacity to rebuild/re-establish their export business, then what was the necessity of taking loans and advances from banks and that too at a higher rate of interest?

9. This argument of the petitioners is not quite tenable in the circumstances of this case. The reason being that the ''capacity'' to be considered is not the capacity to rebuild or re-establish the export business, but the capacity to pay the interest at the rates prescribed and that too on the effective date. The question is not whether the petitioners were not in a position to rebuild and re-establish their businesses with their own finances or whether they needed bank loans for the same. The question is, having taken the bank loans for the purposes of rebuilding and re-establishing their business, whether on the effective date (31.03.1992), in the opinion of the authorities which sanctioned the loans, the petitioners had the capacity to pay the interest at the rates prescribed. If on that date they had such capacity, then they would not fall within the expression ''deserving case''. Therefore, the petitioners' contention that if they had the capacity, then why would they have taken the loans in the first place is misplaced and cannot be agitated in this petition.

10. Mr T.S. Sawhney, the petitioner-in-person, next referred to the judgment in the case of Smt Swarn Kaur and Ors v. Union Bank of India delivered by a Division Bench in RFA No. 712/1999 on 25.02.2003. In particular he referred to the following observations contained in paragraph 16 of the said judgment:- .

''The Central Subsidy Scheme was self-contained and took care of loans advanced to borrowers, who were riot affected, before or after the November, 1984 riots. In such cases benefit of ''complete write off'' or interest thereon, as the case may be, was to e given. There is no scope for the Bank to have mis-understood the import of the Scheme framed by the Reserve Bank of India to rehabilitate the riot victims of 1984. Having treated the appellants' as riot victim borrowers under a Rehabilitation Scheme, there was no justification of not treating the appellants' case as one covered under the Central Interest Subsidy Scheme and demanding of them, interest at a rate greater than permissible under the Central Scheme. The suit filed was an attempt to cover p the plaintiff-Bank's own defaults of not having claimed the subsidy in accordance with the Scheme. In any event of the matter, whether the plaintiff-Bank claims the subsidy or not is its internal matter and has got nothing to do with its claim against the appellants-defendants. This is a case where the effort of the Government to ameliorate the miserable lot of the riot victims of 1984 has been deliberately subverted by the Bank. The profound agony of the appellants magnified and prolonged for nearly 18 years.''

Mr Sawhney also referred to paragraphs 17 and 18 of the said judgment which read as under:-

"'17. In the totality of the circumstances, we direct respondent to treat the appellants' as a deserving case under the Central Interest Subsidy Scheme, process the case in accordance with that Scheme and put the appellants to notice accordingly. If, upon consideration, any amount is payable, the appellants shall pay the same in monthly installments of Rs. 5,000/- (rupees five thousand).

18. The judgment and decree dated 25.08.1999 passed in Suit No. 500/1986 is set aside. Since the appellants have been deprived of benefits of the Central Interest Subsidy Scheme for nearly 18 years, we impost costs quantified at Rs. 25,000/- (Rupees twenty -five thousand) payable to appellants No. 1 and 2 equally. The appeal is allowed.''

11. Lastly, a reference was made to the Supreme Court judgment in the case of Tata Oil Mills Co. Limited v. Collector of Central Excise: 1989 (24) ECR 645 (SC). The purpose behind citing this decision was to advance the contention that the scheme must no t be given a narrow interpretation so as to defeat the very purpose of the scheme. In the decision referred to above, the Supreme Court was considering an exemption notification under the Central Excise Act, 1944 in respect of soaps made from rice brand oil. It held that the object of a notification should be kept in mind while interpreting its words. The court held that the whole purpose and object of the notification was to encourage the utilisation of rice bran oil in the process of manufacture of soaps in preference to various other kinds of oil (mainly edible oils) used in such manufacture and this should not be defeated by an unduly narrow interpretation of the language of the notification. There is no dispute with the proposition that a beneficial scheme or a beneficial notification which is ameliorative in nature must be construed liberally and not pedantically or narrowly. However, that does not mean that the provisions of the said scheme can be given a complete go-by and the Court sitting in its writ jurisdiction can direct the granting of benefit under such notifications or schemes in cases which do not fall within the scheme or the notification. There are cases and cases. What has to be seen is whether the present petitioners are entitled to the benefits under the said scheme when the same is construed liberally. Mr Trivedi, the learned ASG contended that the reasons why the benefit was not extended to the petitioners by the respondent banks was that they did not fall within the meaning of expression ''deserving case'' inasmuch as, in the opinion of the respondent banks, the petitioners had the capacity to pay the interest at the normal prescribed rates on the effective date, i.e., 31.03.1992. It was further contended that the scheme, a though ameliorative and beneficiary, did not apply to all the borrowers who were riot affected. If that had been the case, then clearly the petitioners ought to have been given the relief. But the scheme itself stipulated certain conditions and restricted the zone of relief to eligible loans and that too in cases which were deserving. The petitioners did not fall within this zone and, therefore, were not entitled to receive the benefits under the said scheme. I find myself to be in agreement with the e submissions. With regard to the Division Bench decision relied upon by the petitioners in the case of Smt Swarn Kaur and Ors (supra), Mr Trivedi pointed out that a reading of paragraph 3 of the said judgment would disclose the real issue involved in the said case. Issue No.2 which was framed in the original suit in that case was with regard to the question whether the defendant was entitled to any reduced rate of interest on the alleged ground that the loan was sanctioned as a riot case. Therefore, the entire question in that case was: whether the loan taken by the defendants therein were ''eligible loans'' under the said scheme? In the present case, there is no dispute with regard to the eligibility of the loans taken by the petitioners. The dispute s with regard to the question of whether they had the capacity to pay the interest on the effective date at the normal prescribed rates. This question was not in issue before the Division Bench in the case of Smt Swarn Kaur and others (supra) and, therefore, the said decision would be of no help to the petitioners.

12. In the counter-affidavit filed on behalf of the Bank of Rajasthan Limited in WP(C) 3997/1995, it has been pointed out at pages 13, 14 and 15 with details that the petitioner therein was financially sound. It has further pointed out that the audited fingures for the years 1990-91, 1992-1993 showed that the tangible net worth (equity + reserves) of the petitioner in WP(C) No. 3997/1995 was continually rising from 35.39 lakhs to 161.16 lakhs and the net profit after interest on bank borrowings also showed an upward trend from 33.65 lakhs in 1990 to 90.80 lakhs in 1992 and 73.44 lakhs in 1993.

13. The facts and circumstances of the present case disclose that in the opinion of the respondent banks, the petitioners had the capacity to pay the interest at the normal prescribed rates on the effective date, i.e., 31.03.1992. There is nothing on record to show that this opinion was arbitrary, whimsical or based on no materials. On the contrary, sufficient materials have been placed on record as indicated above to show that the petitioners were financially sound. Their sales and export earnings steadily increased. So did their net worth. In such a situation, it would be difficult to hold that the opinions arrived at by the respondent banks that the petitioners' were not deserving cases were wrong. It must be remembered that in exercise of its jurisdiction under Articles 226 and 227 of the Constitution of India, this Court does not sit as a Court of appeal and normally ought not to substitute its views in place of the views of the respondents. Interference in writ jurisdiction, is called for, i there is arbitrariness or discrimination, no such case has been made out in these three writ petitions.

14. Accordingly, the writ petitions are dismissed. Rule is discharged in each of them. The parties are left to bear their own costs.