HARYANA CHLOROCHEM Vs. UCO BANK

JUDGEMENT

(1.) The petitioner M/s. Haryana Chlorochem, a partnership concern, highlights the rough treatment meted out to it by the respondent nationalised bank which has resulted in choking it before it could even take off. The prayer in ultimate analysis is to issue a writ of mandamus directing the respondent Bank to perform it statutory duties and honour all other commitments made vide letter dated 27/04/1991 and accordingly disburse the loan which was promised to it. The relief as indicated above stems from the following facts :- The petitioner concern was set up in order to instal a manufacturing plant for the manufacture of Chlorinated Parafine Wax and Hydrochloric Acid at village Kakkar Majra, Tehsil Naraingarh, District Ambala. A detailed project report for the installation of the factory was prepared but inasmuch as the petitioner fell short of funds and was unable to carry out the manufacturing exclusively with its own funds, it approached the financial Institution for raising loan. The branch of respondent-Bank at Naya Gaon - being closest to the Head Office of the petitioner, it became more convenient for the petitioner to approach the same for the desired loan. The necessary formalities were gone into and the respondent-Bank had sanctioned loan vide letter dated 27-4-1991. It has been mentioned in the letter sanctioning loan (Annexure P1) "that under-mentioned New proposal for advance has been sanctioned, subject to the conditions mentioned thereunder". Under the heading "Special Stipulations", there is condition No. 16 which requires a special mention. The same reads thus :- "Deposits of Rs. 10.00 lacs to be obtained by the branch from the partners and/or their sources within April, 1991" The case of the petitioner is that having considered all the aspects of the case and various securities and mortgages offered by the petitioner vide Annexure P1, a loan to the tune of Rs. 12 lacs was sanctioned against the bills purchase covering supply of finished products and further a term loan of Rs. 10 lacs was sanctioned against hypothecation of the plant and the machinery purchased and installed, further an amount of Rs. 10 lacs was sanctioned against Inland L/C on D.P. basis which was against the supply of raw material. In as much as all the conditions that were imposed by the Bank had been fulfilled by the petitioner, in anticipation of sanctioning of the loan, an amount of Rs. 5.68 lacs was released on 3-4-1991 The petitioner had offered three equitable mortgages, one of house No. 661 Sector 20-A Chandigarh valued at Rs. 8.56 lacs. The second equitable mortgage was against 1 and measuring a Kanals 12 Marlas in village Kakkar Majra which was assessed at Rs. 5.59 lacs as also the cost of factory existing thereon. The third equitable mortgage was by way of deposit of title deeds of land measuring 322 square yards together with shops constructed which was valued at Rs. 13.21 lacs. The Bank had even got verified the title of the properties referred to above by M/s. S. B. Singla and associates, valuers. To be doubly sure the Bank had also got titles verified by Raj Kumar Goyal an Advocate of the Bank. Even though everything was done by the petitioner to the entire satisfaction of the Bank yet with an intent not to perform its statutory duty, the respondent-Bank addressed a letter to the petitioner on 2-8-1991 wherein it was said that one of the conditions had not since been fulfilled. It may be mentioned here that the condition said not to have been complied with by the petitioner was one which has been reproduced above. It is pleaded that the aforesaid letter was issued by completely ignoring the fact that the petitioner had in fact detained through its sources a deposit of Rs. 25 lacs from the Punjab Housing Development Board, Chandigarh. Besides, the petitioner had helped the Bank by opening yet another account which was fixed deposit of Rs. 2 lacs. The petitioner, thus, clarified the position and informed the Bank vide letter dated 9-8-1991 Annexure P2/A. Meanwhile the petitioner having been assured the disbursement of the remaining amount had committed itself to various other agencies by entering into a number of agreements. It had placed orders for the purchase of machinery at Delhi and Jaipur electrical goods from various agencies at Chandigarh and commitments were made with the constructions agencies, as well. In the very nature of things, the commitments involved heavy recurring expenses. After the petitioner had written letter Annexure P2/A on 9-8-1991, one of its partners Shri Suresh Kumar Jain kept on approaching the Branch Office and the Zonal Office for the release of the remaining amount in accordance with the sanction letter but the cause of the petitioner was cold-shouldered up to August 1991. The production, as per planning of the petitioner concern, was to start on 1-9-1991 but on account of non-release of the amount of loan, it was not done. Meanwhile another letter was received by the petitioner on 10-10-1991 whereby the respondent-Bank again insisted upon the condition reflected in clause 16 giving further period of 14 days after which, it was threatened that the sanction would lapse. The petitioner had already mortgaged all the property at, its disposal and was left in a precarious condition being unable to approach any other financial Institution. The Bank started demanding from the petitioner more stringent commitment. Therefore, it contacted the office of the Bank and begged for the release of the amount already sanctioned. An advice was given that it should forego the remaining term loan to the tune of 4.14 lacs and give additional security. The prevailing circumstances made the petitioner succumb to the pressure exerted upon it and finding no alternative in the matter, accepted the demand of the respondents. Vide letter dated 24-10-1991, in accordance with the demand of the Bank, the petitioner agreed to forego the term loan of Rs. 4.14 lacs and offered additional security by way of mortgage of Shop-cum-Office No. 16, Sector 11-D, Chandigarh which is of the value of Rs. 15 lacs. Even this foregoing of the loan did not stir the respondent-Bank, thus, forcing the petitioner to borrow money from the market at exhorbitant interest rate lest the unit may not become sick before its installation. The petitioner, however, received letter on 30-101991 (Annexure P6) that the Bank promised to release the working capital limits. The partner of petitioner firm Shri Suresh Kumar Jain, however, kept on approaching the officers of the Branch and Zonal levels but the commitment made was not honoured. Yet another letter was addressed to the Bank bringing to light to enormous losses that the petitioner was suffering and apprising the Bank regarding the urgency in the matter. The letter was kept in cold storage for sometimes and ultimately on 15-2-1992 the loan already released was recalled along with interest.

(2.) The petitioner, in the circumstances, that have been narrated above, finding no solace from the respondent financial Institution which is meant to cater for the needs of the petitioner and the like has approached this Court praying for issuance of a writ in the nature of mandamus as indicated in the beginning of the judgement and also praying that order Annexure P8 vide which loan has been recalled along with interest be quashed.

(3.) The matter has been contested by the respondents and by way of preliminary objections, it has been pleaded that the writ petition raises disputed questions of fact which cannot be gone into by this Court in its writ jurisdiction under Articles 226/227 of the Constitution of India, so the petitioner be shown the door of the Civil Court as also that the petitioner has failed to perform his part of the agreement and, therefore, the entire question is based on contract, breach of which cannot be agitated by way of a writ petition. There are other preliminary objections as well r but in as much as they all deal with the case on merits, no specific mention of the same at this stage is felt necessary. The same as also the case of the Bank on merits of the controversy is that even though it had sanctioned the loan in the manner made out by the petitioner, yet in as much as the petitioner did not fulfil the terms and conditions of the sanctioned loan, it had no choice but for the recall the same. The petitioner is to be blamed for not fulfilling its part of the contract as it did not comply with the conditions stipulated in clause 16 of the agreement. It is also maintained that the Bank had written letters Annexures R1 and R2 to fulfil the conditions but since the petitioner had failed to do so, the Bank vide its order dated 15-2-1992 had rightly cancelled the loan limits and directed the petitioner to deposit the entire outstanding amount of the term loan. It is also stated that the deposit of Rs. 25 lacs from the Punjab Housing Development Board which is a certificate of deposit for a period of 91 days and that too at a commercial rate of interest cannot be termed or equated as deposit fulfilling clause 16 of the sanctioned letter. It is stated at the petitioner had applied for the grant of loan and the respondent-Bank after considering the proposal sanctioned the following loan limits vide their sanction letter dated 22-4-1991 :-