Judgment : M. Y. EQBAL, J. ( 1 ) IN this writ application the petitioner has prayed for quashing the demand raised by the respondents vide letter dated 5-3-99 for a sum of Rs. 18,68,983. 22 paise and further for a direction to the respondents to settle the accounts of the petitioner taking into consideration the interest payable at the rate of 10% p. a with rebate of 1% p. a. for timely payment and also to return the documents submitted by the petitioner. ( 2 ) PETITIONERs case is that the respondents Bihar State Financial Corporation (in short the Corporation) sanctioned a sum of Rs. 5,20,000/- as loan in 1972 and out of the sanctioned amount a sum of Rs. 4. 15 lacs was disbursed and an agreement to that effect was entered into by and between the petitioner and the Corporation whereby it was agreed, inter alia, that the loan amount will be repaid with interest at the rate of 10% p. a. with rebate of 1% p. a. for timely payment. A mortgage deed was also executed for payment of loan amount with interest at the aforesaid rate. Petitioners further case is that it paid the instalments in time and on 19-10-84 the balance dues of Rs. 87,524. 72 paise have also been paid as full and final payment. Petitioners case is that as against the total amount of loan disbursed, that is, rupees 4. 15 lacs the petitioner paid a sum of Rs. 8,86,400. 41 paise. It is stated that in 1985 the Corporation vide letter dated 9-3-85 asked the petitioner to pay a sum of Rs. 21,225. 94 paise. The petitioner immediately replied to the said letter stating that nothing is due and payable to the Corporation. Thereafter, several correspondences have been made between the Branch Manager and the higher officials of the Corporation and finally the impugned demand letter dated 5-3-99 was issued demanding Rs. 18,86,983. 32 paise. ( 3 ) A counter affidavit has been filed by the Corporation stating, inter alia, that the rate of interest charged from the petitionerwas 9% allowing 1% rebate for timely payment as the petitioner was regular in payment of the dues but from 15-1-74 he became defaulter. 18,86,983. 32 paise. ( 3 ) A counter affidavit has been filed by the Corporation stating, inter alia, that the rate of interest charged from the petitionerwas 9% allowing 1% rebate for timely payment as the petitioner was regular in payment of the dues but from 15-1-74 he became defaulter. It is stated that the system of charging interest was revised with effect from 27-2-74 in terms of lending rate i. e. 10% after 2% for timely payment but since the petitioner became defaulter, the respondent-Corporation started charging interest at the rate of 10% p. a. with 2% penal interest as per the prevailing norms of the Corporation. It is further stated that the demand raised by the Corporation showing the outstanding dues as on 28-2-99 is subject to revision as per circular No. 1716 dated 12-9-97 which clearly states of charging current rate of interest after expiry of schedule of re-payment. ( 4 ) MR. Mittal, learned counsel for the petitioner, during the course of argument, has drawn my attention to various correspondences made between the officers of the respondent-Corporation. From perusal of Annexure-3 to the writ application it appears that on 19-10-84 the petitioner paid a sum of Rs. 87,524-72 paise. However, by letter dated 9-3-85 the Corporation asked the petitioner to pay a sum of Rs. 21,225-94 paise being the interest due up to 30-9-84. The petitioner immediately replied to the said demand stating that the entire dues have been paid and no further amount is payable. From perusal of Annexure-10 which is a letter dated 15-1-86 written by the Branch Manager of the Corporation to the Managing Director of the Corporation requesting to send the necessary documents for solving the old dispute, it appears that there was dispute with regard to settlement of accounts. For better appreciation the letter dated 15-1-86 is quoted here in below:-The Managing Director,bihar State Financial Corporation,fraser Road, PATNA -1. Dear Sir,ref: Settlement of dispute of accounts of M/s Automobile Ancillary Industries. With reference to this branch letter No. 823 dt. For better appreciation the letter dated 15-1-86 is quoted here in below:-The Managing Director,bihar State Financial Corporation,fraser Road, PATNA -1. Dear Sir,ref: Settlement of dispute of accounts of M/s Automobile Ancillary Industries. With reference to this branch letter No. 823 dt. 27th July, 1985 addressed to the Manager (Finance) and copy to the then M. D. We solicite that the extract of loan ledger since beginning, copy of sanction letter dated 20-7-72 and certified copy of mortgage deed of the above concern may kindly be sent to us so that attempt to solve the old dispute may be made at an early date. Thanking you,yours faithfully,sd/- (A. Jha) Branch Manager. Memo No. . . . . Date 15-1-86copy forwarded to the Manager (Finance), BSFC, Patna, for information and necessary action. sd/- (A. Jha) Branch Manager. Memo No. 2198 Date/15-1-86copy forwarded to M/s Automobile Ancillary Industries, Industrial Area, Adityapur, Jamshedpur with reference to their letter D/-28-9-85 and 15-11-85 and 1-1-86 for information. You are requested to wait till the reconciliation of the accounts. sd/- (A. Jha) Branch Manager. " ( 5 ) FROM perusal of Annexure--12 it appears that the Manager of the Corporation wrote a letter to Branch Manager on 4-12-89 stating that the petitioner has disputed over charging of interest at the rate of 12% and claims to have liquidated the dues in October, 1984. The Manager admitted that there is dispute in the rate of interest and, accordingly the Branch Manager was directed to look into the matter personally and inform the petitioner under intimation to the undersigned. Annexure-3 is another letter written by the Branch Manager to the Assistant General Manager of the Corporation at Patna informing him that the Branch office is not having any record for the settlement of the claim made by the petitioner. Again by letter dated 5-8-92 the Manager of the Corporation directed the petitioner to contact the Branch Manager for needful action as Sr. Branch Manager was advised to get the loan account reconciled with the loan ledger of the Corporation on priority basis and resolve the matter at their end. From perusal of Annexure-19 which is a letter dated 16-12-93 issued by the Branch Manager raising a demand for payment, it appears that the principal overdues was Rs. 3,25. 695. 40 paise and interest overdues was Rs. 5,02,649. 58 paise. From perusal of Annexure-19 which is a letter dated 16-12-93 issued by the Branch Manager raising a demand for payment, it appears that the principal overdues was Rs. 3,25. 695. 40 paise and interest overdues was Rs. 5,02,649. 58 paise. The petitioner again raised serious objection to the demand and requested the Managing Director of the Corporation toprepare the accounts on the basis of 10% interest. Instead of preparing and recalculating the accounts the impugned demand was raised on 5-3-99 for payment of Rs. 18,68,983. 22 paise. ( 6 ) IT has not been disputed by the respondent-Corporation that against the disbursed loan of Rs. 4. 15 lacs the petitioner has already paid Rs. 8,86,400/ -. From the letters referred to above it is evident that the petitioner paid a sum of Rs. 87,525. 72 paise on 19-10-84 and claimed that the entire dues have been liquidated. When the Corporation issued demand on 19-3-85 of Rs. 21,225. 94 paise towards interest, the petitioner immediately replied to the said letter of demand stating that nothing is due and payable by the petitioner. ( 7 ) AS noticed above, the Corporation itself was not sure as to what amount was still due and payable by the petitioner and that is why correspondences were made by and between the Branch Manager and the higher officials of the Corporation whereby they have decided to resolve the old dispute by re-calculating the interest. I am, therefore, of the opinion that when the petitioner has already paid a sum of Rs. 8,86,400. 41 paise against the loan of Rs. 4. 15 lacs, the demand of interest amounting to Rs. 18,68,983. 22 paise is wholly illegal, arbitrary and unjustified particularly when the officers of the Corporation themselves were not aware as to whether any further amount was recoverable from the petitioner. The Corporation does not appear to have behaved in a proper manner. ( 8 ) IN the case of Mahesh Chandra v. R. M. U. P. Financial Corporation (1993) 1 Pat LJR 90: (AIR 1993 SC 955), the Apex Court while considering a similar question held as under (Para 6) :-"corporations deal with public money for public benefit. The approach has to be public oriented, helpful to the loanee, without loss to the Corporation. The approach has to be public oriented, helpful to the loanee, without loss to the Corporation. S. 24 of the Act itself required the Board "to discharge its function on business principles, due regard being had to the interest of industry, commerce and general public". business is a word of wide import. It has no definite meaning. Its perceptions differ from private to public sector or from institutional to commercial banking. The financial corporations under the Act were visualised not as a profit earning concerns but an extended, arm of a welfare State to harness business potential of the country to benefit the common man. " ( 9 ) IN the case of U. P. Financial Corporation v. M/s. Gem Cap (India) Pvt. Ltd. AIR 1993 SC 1435 the Apex Court again reiterated that the Corporation is not like an ordinary money lender or Bank which lends money. The Corporation has to act fairly and not whimsically. ( 10 ) AS noticed above, since 1984 the petitioner has been insisting that the entire loan amount has been liquidated in 1984 but the Corporation was not in a position to give the correct details and calculations of the amount due, rather, by inter-office- correspondences they were trying to resolve the dispute by regularising the loan ledger and the accounts and all of a sudden the impugned demand of Rs. 18,68,983. 22 paise has been raised. The said demand, in my view, is not justified. ( 11 ) FOR the reasons aforesaid this writ application is allowed and the impugned demand raised by the Corporation is set aside. The Corporation is directed to settle the accounts of the petitioner after taking into consideration the rule of interest at the rate of 10% p. a. with rebate of 1% for timely payment in terms of the sanction letter, loan agreement and the mortgage deed executed by the petitioner. Application allowed. --- *** --- .