Madhya Pradesh High Court
M/S Balaji Dal Mill Through Partner ... vs State Bank Of India on 21 January, 2025
Author: Anand Pathak
Bench: Anand Pathak, Hirdesh
1 W.A.No.1632/2024 & W.A. No.1640/2024
HIGH COURT OF MADHYA PRADESH BENCH AT
GWALIOR
BEFORE
HON'BLE SHRI JUSTICE ANAND PATHAK
&
HON'BLE SHRI JUSTICE HIRDESH
WRIT APPEAL NO.1632/2024
M/S Balaji Dal Mill
Vs.
State Bank of India and Others
&
WRIT APPEAL NO.1640/2024
M/S Balaji Food Products
Vs.
State Bank of India and Others
Shri Vashistha Narayan Dubey and Shri Maroof Ullah Siddiqui -
Advocates for the appellant.
Shri Sameer Kumar Shrivastava - Advocate for the respondents.
Judgment
(Delivered on 21st day of January, 2025)
1. Heard on I.A. No.6966/2024 and I.A. No.6970/2024, applications
under Section 5 of the Limitation Act.
2. As per office note, Writ Appeal No.1632/2024 is barred by 280
days and writ appeal No.1640/2024 is barred by 285 days.
3. On due consideration, looking the reasons assigned therein and in
the interest of justice, both the I.As. are allowed. Delay in filing the
appeals is hereby condoned.
4. I.As. stand closed.
5. Regard being had to similitude of the dispute, both the appeals are
heard analogously and decided by a common judgment. For factual
clarity, facts of Writ Appeal No.1640/2024 are taken into consideration.
6. The instant writ appeal under Section 2(1) of the Madhya Pradesh
Uccha Nyaylaya (Khand Nyay Peeth Ko Appeal) Adhiniyam, 2005 is
filed challenging the order dated 12th July, 2023 passed by the learned
Single Judge in Writ Petition No.3592/2022 whereby writ petition
preferred by the appellant as petitioner was dismissed.
7. Brief facts of the case are that the appellant/petitioner i.e. M/s
Balaji Food Products (hereinafter referred as appellant) is a partnership
firm registered under the Indian Partnership Act, 1932 as well as
registered as a Micro Small and Medium Enterprise under the MSME Act,
2006.
8. The appellant has availed Cash Credit Limit in terms of Working
Capital limits of Rs.4,75,00,000/- (Rupees Four Crores and 75 Lacs only)
from the Respondent/Bank, which was sanctioned through a letter of
arrangement dated 17.05.2017. Due to outbreak of pandemic of Covid-19,
various businesses were affected and looking to the financial hardships,
the respondent/Bank (in pursuance to Emergency Credit Line extended to
MSME borrowers, by Government of India) had announced a Covid-19
related scheme, which was termed as CCECL (Common Covid
Emergency Credit Line) to help certain businesses and MSMEs to
continue uninterrupted and effortless functioning of their business, for
which unconditional and irrevocable guarantee was provided by the
Government of India in respect of such facilities.
9. The appellant being an MSME approached to the Respondent/Bank
vide letter dated 21.04.2020 for availing of additional 10% CC Limit
under the scheme from its existing limit of Rs.4.75 Crores to Rs.5.30
Cores and availed such additional credit facilities from the
Respondent/Bank.
10. Thereafter, as submitted the appellant further approached for
sanctioning of additional 20% of the limit under Common Covid-19
Emergency Credit Line (as per the scheme as extended by the
Government of India) vide its letter dated 30.05.2020 and accordingly the
Respondent/Bank had extended the limit of the borrower with additional
limit of Rs.89 Lakhs under the GCL scheme on 02.06.2020 and for the
same the appellant was asked to extend the security in respect of
mortgage of immovable properties created in favour of the
Respondent/Bank and the registration in respect of the extension of such
mortgage was done with the Sub-Registrar office, Morena under E-
Registration bearing No.MP25792020A1409509 dated 20.07.2020.
11. Thereafter, as per allegations, Respondent/Bank started charging the
interest more than the earlier sanctioned rate (i.e. interest rate @ 1.40%
above bank MCLR as agreed, as per sanction letter dated 17.05.2017) and
as the appellant was perplexed with the action of the Respondent/Bank of
charging hefty rates of interest in lieu of the CCECL Scheme, forced the
appellant to approach the Respondent/Bank for repayment of outstanding
loan amount vide its letter dated 14.01.2021 after making the arrangement
from another bank (ICICI Bank). The appellant deposited the Banker's
Cheque bearing No.011916 dated 22.01.2021 for Rs.4,79,11,549/- and
another Banker's Cheque bearing No.011915 dated 22.01.2021 for
Rs.38,80,341/- in respect of outstanding amount lying in Cash Credit
Account and its first CCECL Account and further deposited another
Banker's Cheque bearing No.011921 dated 27.01.2021 for Rs.89,00,000/-
in respect of liquidation of dues of its second CCECL Account, but
Respondent/Bank did not encash the bankers cheque till 28th January,
2021, aggrieved by such arbitrary approach of the Bank, the appellant
vide its communication dated 28th January, 2021 showed its concern and
requested for deposit of bankers cheques on 28th itself and release the
property documents/security, apart from reversal of the interest charged
by the bank in respect of such period. Upon request so made by the
appellant, the respondent/Bank deposited the Bankers' Cheques for
clearing only on 29th January, 2021 and charged interest on outstanding
loan amount, which resulted into double jeopardy to the appellant in view
of charging of interest on the loan amount by two banks.
12. The appellant vide its letter dated 04.02.2021 requested for reversal of
interest for the said 7 days' period charged by the respondent/bank and
when visited the Respondent/Bank on 08.02.2021 it was told by the
concerned officials that the sanction letter dated 19.05.2020 issued by the
Respondent/Bank while extending the CCECL finance of Rs.45 Lakhs,
contained the Clause of Pre-Payment charges of 2% of the Loan amount,
which is required to be paid by the appellant over and above the interest
of the loan amount.
13. The appellant vide its letter dated 10.02.2021 submitted that the loan
under question is availed in pursuant to sanction letter of the
Respondent/Bank dated 17.05.2017 and CCECL during the year 2020 was
released by the bank in the line of the policy announced by the
Government of India to support the MSME in view of the ongoing Covid-
19 situation and since the sanction terms of the CC Limit as availed prior
to availing of aforesaid CCECL, does not contain any such condition of
pre-payment charges, hence the same cannot be imposed upon the
appellant while releasing the CCECL. Further even otherwise levy of pre-
payment charges on Cash Credit Account of the MSME, even on CCECL
Account is not appropriate.
14. The Respondent/Bank allegedly vide its reply dated 10.02.2021
arbitrarily continued to justify its stand in respect of the pre-payment
charges relying upon the clause of pre-payment charges appearing in their
sanction letter dated 19.05.2020 issued by them while releasing the
CCECL account. Thus, it was a case of arbitrary action on the part of the
Respondent/Bank as initially they were charging rate of interest over and
above the agreed sanction rate as per the sanction letter dated 17.05.2017,
even after realization of proceeds on 30.01.2021, arbitrarily transferred
the fund into TDR without any authorization from the appellant and
thereafter again on 01.02.2021 got the TDR cancelled and credited it in
the loan account of the appellant and arbitrarily debited a sum of
Rs.11,44,600/- on 25.02.2021 as pre-payment/foreclosure charges in
addition to the arbitrary interest collected by the bank for the period of 7
days due to the reason of withholding of the bankers' cheque at their end.
15. Under such circumstances, appellant as petitioner has preferred the
writ petition against alleged (as above) arbitrary action of the respondent/
Bank.
16. The learned Writ Court dismissed the writ petition filed by the
petitioner/ appellant. Hence, appellant has preferred the writ appeal.
17. It is the submission of learned counsel for the appellant that
appellant deposited Banker's Cheque on 22.01.2021 but respondent/ Bank
did not put the said cheque for clearance till 28.01.2021 therefore, it was
fault on the part of the respondent/ Bank and that too respondent/ Bank
collected the interest for those seven days from the appellant, which is
arbitrary and illegal. It is further submitted that without the instruction of
the appellant transferred the fund into FDR and thereafter again cancelled
the FDR and credited in the loan account of the appellant without any
authority and knowledge of the appellant.
18. It is further argued that loan was availed to the appellant in
pursuant to the sanction letter dated 17.05.2017 and CCECL was released
by the respondent/ Bank during the year 2020 in the line of the policy
announced by the Government of India in view of the ongoing Covid-19
situation and as the sanctioned CC limit was availed prior to CCECL,
does not contain any such condition of pre-payment charges, hence same
cannot be imposed upon the appellant. Clause 3 of letter of arrangement
dated 19.05.2020 in the table it is clearly specified under point (v) of the
table of Enhanced Interest that Term Loan is not applicable upon the
appellant. Clause 2 of the letter of arrangement dated 17.05.2017 itself
reflects that the loan was repayable on demand on which respondent/
Bank cannot charge pre-payment charges. So far as subsequent letter of
arrangement dated 19.05.2020 is concerned, clause of pre-payment of
charges does not apply to the appellant.
19. Learned counsel for the respondent/ Bank opposed the prayer and
submits that while dismissing the writ petition, the learned Writ Court
considered all the factual aspects in detail and thereafter passed the
impugned order, hence no interference can be made out in the said order.
20. Heard the learned counsel for the parties and perused the record.
21. This is a case where petitioner as appellant has preferred this writ
appeal against dismissal writ petition whereby he sought following
reliefs:
"(i) Issue writ, order or direction in nature of mandamus or
any other suitable writ declaring the actions of the
Respondents as void and arbitrary.
(ii) The Respondents may kindly be directed to refund the
amount unlawfully charged/usurped from the Petitioner.
(iii) Any other relief/direction which this Hon'ble Court may
deem fit and proper may kindly be granted to the Petitioner.
a. Letter of Arrangement dated 17.05.2017 issued by the
Respondent No.1 i.e.. State Bank of India, S.M.E Branch
Through its Branch Manager.
b. Letter dated 23.03.2020 issued by the respondent bank.
c. Letter dated 21.04.2020 for Common Covid-19 Emergency
Credit Line of 10% in CC Limit of the petitioner.
d. Letter dated 30.05.2020 for Common Covid -19
Emergency Credit Line of 20% in CC Limit of the petitioner.
e. Registration certificate dated 20.07.2020 in respect of
creation/extension of equitable mortgage for the financial
facilities availed by the petitioner created in favour of the
respondent bank.
f. Letter dated 14.01 2021 of the petitioner addressed to the
respondent bank in respect of proposal for repayment of
outstanding loan/financial assistance.
g. Letter/mail dated 28.01.2021 in respect of deposit of
demand drafts dated 22.01.2021 and 27.01.2021 for closure
of the CC Limit and CCECL.
h. Letter dated 04.02.2021 of the petitioner apprising about
delay in presentation/clearing of DD by the respondent bank
and requested for reversal of interest charged by the bank
after that date.
i. Letter dated 10.02.2021 of the petitioner bringing the
notice of the sanction letter dated 17.05.2017 having no such
clause of prepayment charges and requested for appropriate
consideration.
j. Letter dated 10.02.2021 issued by Respondent Bank.
k. Letter dated 22.02.2021 issued by Respondent Bank along
with providing the copy of Letter of Arrangement dated
19.05.2020 issued by the Respondent Bank.
l. Letter dated 22.02.2021 of the petitioner bringing the
notice to the respondent about the letter dated 19.05.2020
alleged to be issued by the respondent bank in pursuant to
request dated 21.04.2020 for consideration of Common
Covid -19 Emergency Credit Line of 10% in CC Limit being
availed by the petitioner in pursuant to sanction letter dated
17.05.2017, having no such clause of prepayment charges
and requested for appropriate consideration.
m. Letter dated 24.02.2021 of the petitioner requesting for
closure of all the accounts and release of property papers.
n. Letter/Email dated 15.04.2021 of the petitioner reminding
about its grievances in respect of its continuous
representation for reduction in charging of higher rate of
interest and an account of non- consideration of its request,
resulted into deposit of demand drafts for closure of bank
account and continuity of harassment to the petitioner even
after the payment of the dues by levy of arbitrary foreclosure
charges and non-release of property documents apart from
lodging the complaints to the Banking ombudsman/other
concerned authorities.
o. Letter dated 16.04.2021 written to the Banking
Ombudsman regarding the arbitrary acts of the Respondent
Bank and asking for refund of Foreclosure Charges and
Refund of Interest charged due to delay in presentation of
DD for clearing by the Respondent Bank."
22. From the reliefs claimed, it appears that appellant has challenged
certain transactional dispute with the respondent/ State Bank of India.
Those transactional dispute as referred in the pleadings and relief claimed
carry trappings of disputed questions of facts. Respondents opposed those
submissions and reliefs. Those transactional issues could have been
decided in the writ proceedings or some alternative forum like Civil
Proceedings or Arbitration Proceedings would be an appropriate mode of
adjudication, is the Question. However, the Writ Court found the writ
petition maintainable and proceeded on the merits of the case.
23. The learned Writ Court discussed the issues on merits in following
manner:-
"28. The facts which are admitted and not controverted by
the respondent/Bank are that on 28.04.2017 the petitioner has
moved an application for availing Cash Credit facility
requesting the respondent/Bank for sanction working capital
limit as existing/enhance levels. Vide letter dated 17.05.2017
the respondent/Bank sanctioned the credit facility to the
petitioner. Clause 2 of letter of arrangement dated
17.05.2017 mentioned the period of advance and repayment
terms, wherein for working capital it had been mentioned that
it is to be repayed on demand. The relevant extract of clause
2 is reproduced herein under:-
"The facility which has been sanctioned on 17.05.2017 is
available for 12 months from that date, subject to renew after
every 12 months, when it may be cancelled/reduced depending
upon conduct and utilisation of the advance or as per the
Bank's Scheme."
Further more, under the said clause it has been clearly
mentioned that:-
"Pre-payment charges, as applicable, shall be payable in
case of pre-payment of term loan installments."
29. On 21.04.2020, the petitioner had sought 10% extension
under the Scheme known as Common Covid Emergency
Credit Line (CCECL), introduced by the respondent/Bank
and again vide letter dated 30.5.2020 an extension for 20%
of CC limit under the said Scheme was sought and the same
was extended by the respondent/Bank and the limit of the
borrower/petitioner was raised to Rs.5,30,00,000/- with
additional limit of Rs.89,00,000/- w.e.f. 02.06.2020 and for
that the petitioner was even asked to extend the security in
respect of mortgage of immovable properties credited in
favour of respondent/Bank and registration in respect of said
extension of such mortgage was done with the Sub-Registrar
office, Morena under E-registration on 20.07.2020.
30. Thereafter as per the terms of letter of arrangement
dated 19.05.2020, the interest @ 1.5% above EBLR (earlier
it was 1.4% above MCLR as agreed as per sanction letter
dated 17.05.2017) and interest on working capital (CCECL)
@ 7.4 % per annum was agreed to be charged by the
respondent/Bank w.e.f. 19.05.2020.
31. Though the petitioner who was signatory to the said
letter of arrangement dated 19.05.2020 had now raised a
ground that an interest higher to that which was agreed at
earlier point of time was charged from the petitioner without
its knowledge, and in view of the aforesaid charging of the
higher rate of interest the petitioner was compelled to ask
the ICICI Bank to take over the said loan and after its
approval from the Bank bankers' checque bearing
Nos.011916 and 011915 amounting of Rs.4,79,11,549/- and
Rs.38,80,341/- were issued on 22.01.2021 for closing of the
working capital (CC) Account and another bankes' checque
bearing No.011921 dated 27.01.2021 amounting to
Rs.89,00,000/- for closing the working capital limit
(CCECL) account was submitted, the said argument as
advanced on behalf of the petitioner has no force, as the
petitioner with open eyes have accepted the letter of
arrangement dated 19.05.2020, wherein under clause 3
there was specific mention of the rate of interest which
would be charged on the working capital (CC) and working
capital (CCECL) accounts @ 1.5% above EBLR and 7.5%
per annum respectively. Thus, at this juncture, it cannot be
said that the said charging of the interest was arbitrary on
the part of respondent/Bank, thus, so far as answer to this
contention raised on behalf of petitioner is concerned, is in
negative, accordingly, is rejected.
32. So far as the contention of the petitioner that though the
bankers' checque was served upon the respondent/Bank on
22.01.2021 but the same was encashed only on 29.01.2021
and interest has been charged upon the limits, is concerned,
the respondent/Bank in para 5.13 and 5.14 of their reply had
specifically stated that they have returned back the amount
of interest for the period for which the bankers' cheque were
lying with the respondent/Bank. Thus, the grievance so far
as this aspect is concerned, has come to an end.
33. So far as the levy of pre-payment charges @ 2% of the
pre-paid amount from the petitioner is concerned, in clause
2 of the letter of arrangement dated 19.05.2020 there is a
clear stipulation with regard to pre-payment of penalty,
which is reproduced herein under:-
"Prepayment penalty - 2.00% of the pre-paid amount (loans
prepaid out of higher cash accruals from the project/ refinancing
under 5/25 on the date of refinancing / equity infusion by
promoters / borrowers will not attract prepayment/ pre closure
charges)."
34. As per the said clause, 2% of pre-paid amount was
required to be paid by the petitioner and this was also
agreed by the petitioner while signing the said letter of
arrangement with open eyes. Here it is not a case that the
respondent/Bank has taken the petitioner by surprise, as in
the earlier letter of arrangement dated 17.05.2017 under
Clause 2, there was a mention of pre-payment charges
which is reproduce herein under:-
"Pre-payment charges, as applicable, shall be payable in
case of pre-payment of Term Loan installments"
35. Thus, since the terms and conditions of letter of
arrangement dated 19.05.2020 was very much clear and
the same since was accepted by the petitioner, now at a
belated stage it cannot be agitated that the pre-payment
charges as has been levied by the respondent/Bank was per
se illegal.
36. The petitioner has raised another ground of levy of pre-
payment of charges on the basis that earlier in the sanction
letter dated 17.05.2017, there was no condition with regard
to pre-payment charges and at the time when letter of
arrangement dated 19.05.2020 was executed, the said clause
was not informed by the respondent/Bank cannot be
accepted, as it is not a case where an exparte letter of
arrangement has been issued by the respondent/Bank,
partners of the petitioner/firm has signed the document
which amounts to accepting the terms and conditions thereof
and, therefore, the contention that bank officials had not
informed about the change the terms and conditions of the
CC limit at the time of documentation is baseless.
37. Accordingly, the petition is hereby fails and is dismissed.
So far as the judgment cited by the counsel for the petitioner
in the matter of DLF Limited Vs. Punjab National Bank
(supra), the Court therein was dealing with an issue,
wherein as per the admitted agreement between the parties,
there was no reference whatsoever to the pre-payment
charges and there was only use of words "after a
moratorium of 30 months from the date of disbursement" in
relation to repayment of the loan and in that context the
Court has held that the petitioner therein was only obliged to
re-pay the loan within a period of 30 months and the
respondent/Bank has agreed not to enforce the said
obligation for the said period. The Court therein from the
language of the loan agreement and other documents had
held that it cannot be said that the respondent/Bank had at
the time of granting the loan informed the petitioner that it
could not pre-paid the loan before 30 months or that if it so
prepaid the loan, it will be liable for charges. Thus, facts of
this case are not applicable to the present case.
38. So far as the reliance placed in the matter of Devendra
Surana Vs. Bank of Baroda and Ors (supra) is concerned,
therein the eventuality of payment of penalty for foreclosure of
amount was dependent upon of Circular dated 07.05.2014
issued by Reserve Bank of India and as therein the foreclosure
happen subsequent of the Circular dated 07.05.2014, whereby
Reserve Bank of India has directed that no foreclosure or pre-
payment of penalties on all floating term loans sanctioned to
the individual borrowers would be levied. The demand of the
bank thus, was held to be illegal. Since, it is also not a case
herein, the same is not applicable.
39. So far as the reliance placed in the matter of State Bank
of Patiala Vs. Permanent Lok Adalat (PUS) Rewari and ors.
is concerned, the facts of the present case are altogether
different as the pre-payment charge was in the form of taking
over the loan by some other bank and in that context when
the matter went before the permanent Lok Adalat, it was held
that the directions were issued to the Bank to release the
property documents kept as a security after recovery of the
charges, if any, then the pre-payment charges were taken over
the charges by the respondent/Bank. Thus, being based on
different facts of the present case, it is not applicable to the
present case.
40. So far as the reliance placed in the matter of Salubrity
Biotech Ltd. and Ors. Vs. Bank of Baroda, Vadodara & ors is
concerned, it is an order of High Court of Orissa at Cuttack.
The learned single Judge therein while taking note of the
application submitted by the petitioner requesting for the CC
limit, the sanction letter and one Circular dated 12.11.2010
issued by the Reserve Bank of India observed that there was no
mention of pre-payment charges in the sanction letter except
for the mention of pre-payment charges in the Circular and as
the said Circular was not disclosed to the petitioner therein,
the imposition of pre-payment charges was held not to be
sustainable. As the facts of the present matter are altogether
different, the said judgment has no applicability.
41. Lastly, the reliance placed in the matter of Gyuankund
Trust Vs. Punjab National Bank & ors. decided by learned
Single Judge in High Court of Punjab and Haryana the issue
in the matter was that whether the pre-payment charges can be
asked for, if they are not part of sanction letter and when it was
not made a part of sanction letter at the time loan is
sanctioned, the parties can still bind themselves by a
supplementary agreement and therein, in the sanction letter
there was no clause regarding any pre-payment charges, nor
there was any supplementary agreement in this regard between
the parties and in that context it was held that since there was
no agreement between the parties in so far as 2% pre-payment
charges were directed to be recovered in case the borrower
has closed his loan account prematurely, the the same amount
cannot be charged by the bank. Since, the analogy, which has
been culled out from the aforesaid judgments which is also
based on different facts, therefore, the same is not applicable
to the present case."
24. If all these factual details are being discussed at length by the
learned Writ Court then scope of interference in writ appeal constricts.
25. Besides that the Hon'ble Apex Court in the case of M/s
Radhkrishan Agrawal and Others Vs. State of Bihar (1977) 3 SCC
457, Than Singh Vs. Superintendent of Taxes AIR 1964 SC 1419,
State of Orissa Vs. Narain Prasad and Others (1996) 5 SCC 740,
Noida Entrepreneurs Association Vs. U.P. Financial Corporation
1994 Supp.(2) SCC 108 and Bharat Cooking Coal Ltd. Vs. Amar Dev
Prabha (2020) 16 SCC 759 has considered the power of Constitutional
Courts vis a vis contractual rights.
26. Considering over all facts and circumstances of the case, we are of
the view that the learned Writ Court did not commit any error in passing
the impugned order. Writ petition was dismissed after considering all the
factual and legal aspects of the controversy involved.
27. As such, no interference is warranted in the impugned order, the
writ appeals are hereby dismissed.
(ANAND PATHAK) (HIRDESH)
JUDGE JUDGE
vc
VARSHA
CHATURVEDI
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Date: 2025.01.21 19:02:22 +05'30'
