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2007 DIGILAW 1762 (PAT)

Ram Babu Singh v. Union Bank Of India

2007-11-12

NAVANITI PRASAD SINGH

body2007
Judgment 1. Heard 2. The petitioner had approached the respondent-bank, which bank is a nationalized bank for grant of agricultural loan to purchase a tractor. The petitioner was granted loan of Rs. 3 lakh under an agreement duly executed. The tractor, as per the said agreement was hypothecated to the bank. The agreement has been annexed as Annexure A to the counter affidavit by the respondent-Bank. The agreement was executed on 19.8.2004. The petitioner admittedly defaulted in liquidating the loan. The liability increased substantially. When the liability increased to Rs. 3,95,000/- and the petitioner made no efforts to liquidate the same, the bank took possession of the hypothecated tractor. Possession having been taken, still the petitioner was unable to liquidate the dues. Bank then advertised for sale of the tractor. Tractor has since been sold and transferred to the purchaser. This allegedly highhanded action of the respondent-bank is questioned by way of this writ application. 3. It is submitted that the petitioner is an agriculturist and due to various reasons he was unable to pay and/or liquidate the dues. It is submitted that even though admittedly he was in substantial debts, the respondent-bank acted arbitrarily in repossessing the vehicle and auction selling it. This, it is submitted, is arbitrary on the face of it and should be not only deprecated by the Court but possession be restored to the petitioner. 4. The bank has appeared and alongwith its counter affidavit, has filed the agreement. 5. The petitioner neither denied the agreement nor denied the contents thereof but submits that he is an illiterate agriculturist and is not aware of the terms of the agreement. He needed money to buy the tractor. He got the money from the bank and bought the tractor. He was unable to liquidate the loan. He should have been given time and opportunity to do so and not having been done he is entitled to restore the possession. 6. It is not in dispute that the tractor was purchased out of money advanced by the respondent-bank and was hypothecated by the petitioner in favour of the bank, as per agreement aforesaid. He should have been given time and opportunity to do so and not having been done he is entitled to restore the possession. 6. It is not in dispute that the tractor was purchased out of money advanced by the respondent-bank and was hypothecated by the petitioner in favour of the bank, as per agreement aforesaid. The agreement stipulates event of default one of which is that if any distress or execution is levied or issued upon or against any part of the property of the borrower and the same is not discharged or vacated within 14 days, that would be taken to be a default. 7. Here it is admitted that there was existing default in repayment inasmuch as the loan remained unliquidated. Even the accrued interest was not liquidated but permitted to accumulation. It is not in dispute that the bank had lien over the property in question. The terms and conditions no. (10) are quoted hereunder: "(10) Right of possession: In the event of default the bank will have a right to take over possession of the securities charged and sell then and recover its dues. The borrower hereby authorises the bank to act as their attorney/agents for all intents and purposes for effectual implementation of the aforesaid action." 8. This deals with right of possession. 9. I may point out that this is a case of hyopthecation. In hypothecation the borrower is the owner but the property is a security and is charged as such. 10. A reference to condition (10) aforesaid would show that in event of default the parties have agreed to confer the bank a right to take over possession and to sell them for recovery of its dues. In the same condition the borrower i.e.. the petitioner has appointed the bank as its agent for the said purposes. From the reading of this condition (10) as a whole it is apparent that though property in question does not vest in the bank as it is a case of hypothecation, the bank has been appointed as an agent by the borrower with a right to take possession and sell the property, as an agent of the borrower. In my view, as the agreement stands, the action of the bank in taking possession of the property and selling it on the borrower not liquidating the dues cannot be questioned. In my view, as the agreement stands, the action of the bank in taking possession of the property and selling it on the borrower not liquidating the dues cannot be questioned. It is then submitted that the bank was bound to act fairly, meaning thereby that the bank has acted unfairly in taking possession. I am afraid there is no law governing correctness who are in debts. This was a commercial loan granted for agricultural purposes. The parties had entered into an agreement and knew their duties and obligations. Having accepted the benefits in the agreement, the party cannot repudiate that part of the agreement which goes against him. It is well established principle of law that no party can approbate and reprobate an agreement i.e. accepted beneficial part and rejected the other. The agreement must be accepted as a whole or rejected as a whole. This has been held by the Apex Court as far back as in 1956 SC 593. What was unfair in the action of the bank is not stated, If I am to understand what is submitted is that the petitioner being a poor illiterate agriculturist ought not to have accepted the deal with the consequences of forefeiting of the tractor. This to my mind is not the correct legal position and it cannot be thus held that the bank acted in any arbitrary or unfair manner in repossessing the vehicle. Had the petitioner any intention to liquidate the dues at least he could have liquidated the accrued interest. Petitioner paid only an amount of Rs. 8,000/- as against the liability of Rs. 3,95,000/-. Thus the action of the bank cannot be questioned. 11. On behalf of the petitioner it was then submitted that the bank has not submitted intelligible account and correct account. It is submitted that bank cannot charge interest and compound the same nor can bank capitalize penal interest, specially when the accommodation is in the nature of agricultural loan. The petitioner is correct in that regard. Petitioner must, therefore, make a representation to the bank concerned in this regard. The bank would then furnish detailed accounts showing that neither interest has been compounded nor penal interest has been charged and capitalized. Once such a representation is filed the bank would examine the matter in accordance with law and give figures accordingly. Petitioner must, therefore, make a representation to the bank concerned in this regard. The bank would then furnish detailed accounts showing that neither interest has been compounded nor penal interest has been charged and capitalized. Once such a representation is filed the bank would examine the matter in accordance with law and give figures accordingly. The bank may also consider the waiver of interest or other charges to the extent permissible under the RBI guidelines or its own scheme because the petitioner is faced with the predicament whereby he has been deprived of his tractor and still left with substantial amount as outstanding. The bank would be obliged to extend all incentives, which are available to the petitioner in this regard. 12. With these observations and directions, this writ petition stands disposed of.