MATHEW Vs. KERALA FINANCIAL CORPORATION

JUDGEMENT

(1.) The counter petitioner in S.F.C. Act Petition No. 144 of 1981, District Court, Ernakulam, has filed this appeal against the order of the lower court dated 10-10-1983. The petitioner in the court below is the respondent herein. The petitioner Kerala Financial Corporation - initiated action under S.29, 30 and 31 of the State Financial Corporations Act, 1951 and sought recovery of the principal and interest due from the respondent (Appellant herein) on account of a loan of Rs. 2,53,000/- advanced to the respondent by the Corporation by sale of machineries etc., mentioned in the schedule to the petition, which - were hypothecated to the Corporation by way of security for repayment of the amount due from him. The Corporation sanctioned a loan of Rs. 2,60,000/-. The respondent has actually advanced an amount of Rs. 2,42,697.94. The loan should be repaid in seventeen half yearly instalments with 51/2% interest per annum. The petitioner Corporation stated that the interest was liable to be varied after notice and it was so done from 14-10-1977. The interest was enhanced to 12% per annum. It was again reduced to 11% from 1-1-1980 and again enhanced to 121/2% from 15-10-1980. The respondent (appellant herein) defaulted payment of the instalment due on 10-3-1978 and thereafter. So, the petition was filed by the Corporation seeking recovery of a sum of Rs. 3,89,955.66 as on 1-1-1981 with 12.5% interest per annum. The respondent filed a counter statement disputing the correctness of the amount claimed in the petition. The main contention urged was that he took the loan from the Corporation only on the basis of the representation made by the Corporation that interest will be realised from him only at the rate of 5 1/2% per annum, that the Corporation is estopped from claiming any higher rate of interest as done at present and that the real amount due on proper calculation of interest will be as specified in the statement filed along with the counter.

(2.) The main controversy between the parties, that was agitated in the lower court, was regarding the exact rate of interest that is liable to be paid by the respondent (appellant herein) to the Corporation. The Corporation mainly relied on Clause.7 and 29 of Ext.A1 hypothecation bond, executed by the respondent in favour of the Corporation on 30-3-1976, which permits the Corporation to charge higher rate of interest after notice. The respondent in the petition (appellant herein) relied on the particular scheme under which the loan was sanctioned as specified in Ext.A1 itself, Ext.B3, the agreement between the Corporation and the Government regarding the subsidy receivable by the Corporation from the Government for loss of interest suffered by it by advancing loans at rates of interest lower than the normal rate to certain categories of loans. Exts.B4 and B5 publications of the Corporation and Exts.B7, B8 and B9 and contended that the Corporation is incompetent to levy enhanced rate of interest in this case.

(3.) The court below adverted to Exts. A1, B1, B2 and B3 as also Ext.B7 and held, that in so far as Ext. A1 specifically provides for levying higher rate of interest, the Corporation is not estopped or otherwise incompetent to realise higher rate of interest and upheld the plea made by the Corporation. The respondent in the court below has come up in appeal.