Sawhney Brothers vs Union Of India (Uoi) And Ors. ...
2007 Latest Caselaw 1673 Del

JUDGMENT

Mukundakam Sharma, C.J.

1. These appeals have arisen out of the common judgment and order passed by the learned Single Judge on 6th August, 2004 whereby three writ petitions filed by the appellants herein were dismissed. Issue under consideration in the writ petitions was eligibility of the petitioners for the benefit of Central Interest Subsidy Scheme (Revised) for November 1984 Riot Affected Borrowers (for short 'the Scheme').

2. The appellants herein, who are sister concerns, have been carrying on business of export of garments since 1969. For the purpose of their business they had borrowed funds from two different banks namely, Bank of Rajasthan and Indian Bank. The appellants claim that they had suffered during the anti-Sikh riots which took place in the year 1984. It is stated that on the evening of 30th October, 1984 miscreants entered the factories of appellants and looted and burnt the same. With financial support from the said banks by way of special over draft limits against export documents, the appellants were able to reconstruct their factories and re-establish their export business.

3. It is relevant to mention at this stage that the Central Government propounded a scheme called 'Central Interest Subsidy Scheme (Revised)' for November, 1984 Riot Affected Borrowers (hereinafter called 'the Scheme'). The Scheme came into force from 1st September, 1993 and effective date for the same was stipulated as 31st March, 1992. The appellants state that they came to know about the aforesaid Scheme only sometime in November, 1994 and upon such knowledge they wrote a letter dated 7th November, 1994 to the Bank of Rajasthan Limited asking for refund of excess interest charged on advances allowed under post-shipment as well as pre-shipment in terms of the said Scheme. The stand taken by the appellants in the said letter was that the Reserve Bank of India had issued directions to all the banks that all the borrowers who were affected by the November, 1984 riots would be eligible for relief if any loan was outstanding during the period of November, 1984 till March, 1992 in terms of the said Scheme. The Scheme provides that interest @ of only 1% per annum 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 RBI. The appellants state that they are also 1984 riot affected companies and, therefore, they are entitled to the benefit of the aforesaid Scheme. Consequently, a request was made in the above-mentioned letter that the excess interest charged by the bank from the appellants against all advances allowed against export documents be refunded. A similar letter was also addressed on 30th November, 1994 to the Indian Bank. However, neither of the banks accepted the request of the appellants stating that the appellants' are not deserving cases as they were profit making concerns and therefore did not come within the ambit of the aforesaid Scheme.

4. Consequently, the aforesaid three writ petitions were filed by the appellants contending inter alia that they are entitled to and are eligible for getting such benefits as provided for in the Scheme, since they come within the ambit of the expression 'deserving cases' as defined in Clause 2(f) of the said Scheme. The aforesaid contentions raised by the appellants were considered by the learned Single Judge. On going through the records and on consideration of the facts and circumstances of the case, it was held that the appellants did not fall within the ambit of the expression 'deserving cases' inasmuch as the appellants had the capacity to pay interest on the export credit at the prescribed rates on the effective date i.e. 31st March, 1992. All the three writ petitions were dismissed by a common judgment and order dated 6th July, 2004

5. Being aggrieved by the said order, the appellants have filed the present appeals on which we have heard the learned Counsel appearing for the parties.

6. In the present appeals, the principal issue which arises for our consideration is whether the cases of the appellants would come within the ambit of the expression 'deserving cases'. The aforesaid expression has been defined in Clause 2(f) of the Scheme, which reads as follows:

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 RBI in this regard.

7. As rightly held by the learned Single Judge so far as the appellants are concerned they satisfy the first requirement as eligible loans were granted to the appellants but the main dispute is with regard to the fact that the sanctioning authorities did not consider the cases of the appellants as deserving cases within the terms of the said Scheme as they were of the opinion that the appellants had the capacity to pay interest at the prescribed rate on the effective date. We are, therefore, required to ascertain as to whether or not the aforesaid satisfaction of the bank is in any manner vitiated. In this regard the attention of the Court is drawn to the fact that the effective date admittedly means 31st March, 1992 and the term 'fresh loan/credit limits' refers to principal amount on 1st November, 1984 or borrowed thereafter.

8. It is clear from the definitional clause referred to earlier that while defining the term 'deserving cases', limited benefit and waiver of interest was sought to be granted under the Scheme. The intention was not to extent benefits under the Scheme to all borrowers. On the contrary benefits and advantage of the Scheme was to those borrowers who did not have the capacity to pay interest at the rate prescribed on the effective date. Borrowers who had capacity to pay interest at the normal rate were required to pay interest at the contractual rates.

9. Whether or not a party has the capacity to pay interest is actually a matter concerning his financial status as reflected from the books of account maintained by him or the statement of the bank with which he has financial or monetary dealings. In order to substantiate the aforesaid position regarding their financial status, the appellants have stated that they did not have sufficient funds to run their business due to which they had to approach the banks for financial assistance including the facility of overdraft. They had taken up a stand that their factories were burnt down during the November 1984 riots and they had to reconstruct and re-establish their business, which also took its toll on their financial capacity. This is not the basis for determining whether or not a case is a deserving case under the Scheme. Clause 2(f) of the Scheme is clear and categorical. The appellants are entitled to benefits if they fall within four corners of the said clause i.e.whether they had capacity to pay interest at the prescribed rate on the effective date 31st March, 1992. It may be relevant to state that the Scheme was introduced in 1993, long after 1984 riots.

10. We have to examine within the power of judicial review whether the opinion of the concerned banks that the appellants had the capacity to pay interest at the prescribed rates on the effective date i.e. 31st March, 1992 was as per law and, therefore, did not fall within the meaning of the expression 'deserving case'. Reference may be made to the counter affidavit of Bank of Rajasthan wherein details were given to establish that the appellants were financially sound on the effective date i.e. 31st March, 1992. In addition to the said fact, audited figures for the years 1990-91 and 1992-93 were also placed on record showing that the tangible net worth (equity + shares) of the appellant-Sawhney Brothers was increased from 35.39 lacs to 161.16 lacs during this period and the net profit after deducting interest on bank borrowings also showed an upward trend from 33.65 lacs in 1990 to 90.80 lacs in 1992 and 73.44 lacs in 1993. Referring to the aforesaid financial position and status of the appellants, the learned Single Judge upheld the stand of the Banks that the sales and export earning of the appellants was steadily increasing and, therefore, the appellants were financially sound. As per balance sheet of Sawhney Brothers for the year ending 31st March, 1992, net profit of more than Rs.90.80 lacs was transferred to the partners' Capital Account. The appellants have not been able to show from the audited accounts that the decisions of the bank authorities are arbitrary and based on incorrect factual position. Interpretation placed by the banks on the relevant Clauses of the Scheme is correct.

11. According to the provisions of the Scheme, satisfaction of the bank that grants the loan is the deciding factor as to whether or not a party is financially sound as on 31st March, 1992 and capable of paying interest. The appellants had financial dealings with the banks and they have been in interaction with them for the purpose of taking loans and making refunds. The audited figures of the appellants are also placed on record which indicate that the appellants were financially sound. On appreciation of the records concerning financial status of the appellants, the banks were satisfied that the appellants do not come within the ambit of the expression 'deserving case'. The documents also speak for themselves. Loans and export earnings of the appellants were steadily rising through the years and on the effective date the financial position of the appellants was sound and they had substantial reserves and surplus. The books of account of the appellants clearly established that there were substantial profit and even as on 1st September, 1992, the appellants were showing substantial profits even after payment of interest to the banks. There is no case of re-appreciation of the entire evidence on record to give a different finding than what was arrived at by the competent authority and also by the learned Single Judge.

12. Having regard to the records, we are of the considered opinion that no interference is called for in respect of the order passed by the learned Single Judge. We find no merit in these appeals and the same are accordingly dismissed.