HOTEL SEAKING Vs. KERALA FINANCIAL CORPORATION

JUDGEMENT

(1.) The appellants borrowed a sum of Rs 5,50,000. 00 from the respondent for their industrial concern and they executed a mortgage deed on 30/12/1971. The loan was repayable in 17 half-yearly instalments as per the schedule annexed to the mortgage deed with interest at 10. 5% per annum. The deed also provided for enhancement of interest periodically. The appellant took a further loan of Rs 2,50,000. 00 on 7/3/1975.

(2.) The respondent filed a petition under Section 31 of the State Financial Corporations Act, 1951 (for short "the Act") before the District court, Ernakulam for an order of sale of the properties described in the schedule to the petition for the realisation of Rs 16,35,359.26 said to be due as on 1/2/1981 with interest at the rate of 15 per cent per annum till the date of realisation. The appellants filed a statement of objections in which the main contention raised by the appellant was that the industrial unit could not be completed or the hotel could not be commenced on account of several difficulties faced by the appellant. One of them was said to be a dispute raised by a neighbour with regard to a portion of the property and another was said to be the closure of the entrance to the hotel from M. G. Road, Emakulam which was blocked by the Public Health Engineering Department. The respondent was not responsible for any of the difficulties of the appellants.

(3.) The District court framed six points including the relief to which the respondent was entitled. Point I was whether the appellants committed any default in payment of the loan instalments. Point 2 was with regard to the entitlement of the respondent to compound and penal interest. Point 3 related to the question whether the appellants were entitled to reduction of interest. The District court found against the contentions of the appellants on Points 1 and 2. In the 3rd point, it was found that no material was placed before the court to sustain the contention of the appellants. However, while fixing the rate of interest, the District court reduced the interest to 6 per cent per annum invoking the provisions of Section 34 of the Code of Civil Procedure for the period during which the petition was pending in that court. The relevant paragraph of the District court's judgment reads as under: