KAYNE CONSTRUCTION PVT LTD Vs. SYNDICATE BANK

JUDGEMENT

(1.) 1. The petitioners seek appropriate writ(s), order(s) or direction(s) commanding the respondent bank and its functionaries to forbear from making any unauthorised deductions and/or refund the amount unauthorisedly deducted in purported liquidation of the loan of Rs. 12,00,000/ -advanced by the bank to the petitioners' predecessor in interest for the construction of the premises for being leased back to the bank. According to the petitioners, the action of the bank in making endless deductions from the petitioners account is against the terms of the agreement, contrary to the stand taken by the bank itself from time to time and in violation of the circulars issued by the Reserve Bank of India and the law laid down by the Supreme Court in the light of those circulars. In other words, the action of the bank is highly high handed, unreasonable and arbitrary.

(2.) A partnership firm under the name and style of M/s. Sheohar Construction, the Predecessor in interest of petitioner No. 1 in this writ petition, started construction of a building, named, 'Sheohar Sadan'. It applied to the Syndicate Bank ('the bank', hereinafter) for a loan of rupees twelve lacs. (Rs. 12,00,000/ -) for the construction of a portion of that building. The application for loan was accompanied with the proposal that the portion of the building (first and second floors) for the construction of which the loan was applied for would be leased back to the bank for setting up there the Patna Branch of the bank. The bank accepted the proposal and sanctioned the loan and its Dy. General Manager by his letter dated 25.1.1984 (Annexure -1) informed the Manager, Patna Branch that the proposal for shifting the Patna Branch premises and to establish a 'B' class currency chest attached to the branch was accepted by the Board of the bank on the terms and conditions recommended by the Branch Manager which were enumerated in that letter, The Branch Manager, patna Branch then wrote letter dated 22.5.1984 (Annexure 1/A) informing the firm regarding the acceptance of their proposal and reproducing the terms and conditions as contained in the letter of the Dy General Manager. The term concerning the repayment: of the loan (as mentioned at serial No. 10 in the letter of the Dy. General Manager and at serial No. 9 in the letter written to the firm by the Branch Manager was as follows: Loan - Rs. 12.00 lacs at 15% interest per annum against the security of equitable mortgage of land and building. Repayment at Rs. 18,000/ - per month to be liquidated within the first lease period of 10 years... (emphasis added)

(3.) It is thus evident that according to the term of repayment, the loan of Rs. 12,00,000/ -was to be liquidated (on payment of a total sum of Rs. 21,60,000/ -) in monthly instalments of Rs. 18,000/ - spread over a period of ten years or 120 months. It is also significant to note here that the term of repayment did not mention the charging of interest with quarterly rest, that is. the compounding of interest at intervals of three months.