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2012 DIGILAW 43 (KER)

Federal Bank Ltd. v. P. J. Baby @ Joy

2012-01-10

C.N.RAMACHANDRAN NAIR, K.VINOD CHANDRAN

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Judgment C.N. Ramachandran Nair, J. 1. Writ Appeals are filed by the same Bank challenging the judgment of the learned Single Judge declaring eligibility for debt relief to the respondents under the Agricultural Debt Waiver and Debt Relief Scheme 2008. We have heard Standing Counsel appearing for the Bank and counsel appearing for respondents. 2. Since the facts in the connected cases are similar, there is no need for us to narrate the facts in respect of all the cases. So much so, we briefly state the common features of all the connected cases pertaining to which the claim of the respondents have to be decided. 3. The party respondents are 4 in number who availed one loan each ranging from Rs.1 lakh to Rs.1,80,000/- from the appellant-Bank on 26.12.2005. The loan account (produced as Ex.P1 in all the Writ Petitions) show that the loan is repayable after three years i.e. on or before 26.12.2008. So far as interest is concerned, it is specifically provided in the agreement that interest is at 10.4% p.a. Nature of loan is described in the loan agreement as “seasonal agricultural operations on crops”. When the respondents claimed debt waiver applicable to agriculturists under Ext.P2 scheme stated above, the Bank declined the same for the reason that the loans were not overdue as on 31.12.2007 and so much so, respondents were not entitled to the benefit of the scheme. It is against this order of the Bank the respondents approached the learned Single Judge who allowed the claim of the respondents holding that respondents are covered by the Agricultural Debt Relief Scheme, 2008. It is against this judgment of the learned Single Judge the appellant-Bank has filed these Writ Appeals. 4. The respondent’s eligibility is to be considered with reference to the classification of the group to which respondents fall and the nature of loan availed by them. So far as categorization is concerned, there is no dispute that all the respondents are either “marginal farmers” or “small farmers” with holding of less than two hectares (5 acres). So far as the category of loan is concerned, going by the agreement and the period of loan, it is a “short term production loan”. So far as categorization is concerned, there is no dispute that all the respondents are either “marginal farmers” or “small farmers” with holding of less than two hectares (5 acres). So far as the category of loan is concerned, going by the agreement and the period of loan, it is a “short term production loan”. The waiver benefit available under the Scheme applicable to respondents with reference to the nature of loans availed by them are contained in clause 4.1 of the Agricultural Waiver and Debt Relief Scheme, 2008, which is as follows: “4.1 The amount eligible for debt waiver or debt relief, as the case may be (hereinafter referred to as the “eligible amount”), shall comprise of (a) in the case of a short-term production loan, the amount of such-loan (together with applicable interest): (i) disbursed up to March 31, 2007 and overdue as on December 31, 2007 and remaining unpaid until February 29, 2008; (ii) restructured and rescheduled by banks in 2004 and in 2006 through the special packages announced by the Central Government, whether overdue or not; and (iii) restructured and rescheduled in the normal course up to March 31, 2007 as per applicable RBI guidelines on account of natural calamities, whether overdue or not.” What is clear from the above conditions is that in order to grant the benefit, the following conditions should be satisfied as required under sub-clause (1): i) The loan should have been disbursed upto 31st March, 2007. ii) The loan should be overdue as on 31.12.2007. iii) The loan should remain unpaid until 29th February, 2008. In order to claim the benefit, the above conditions should be cumulatively satisfied. In these cases admittedly the loans were availed by all the four respondents covered by four appeals only on 26.12.2005. Loan period is 3 years i.e. upto 26.12.2008. So much so, the loans are not outstanding as on 31st December, 2007 entitling the respondents for coverage under the Debt Relief Scheme above stated. 5. In order to substantiate the contentions raised, counsel for the party respondents submitted that the Bank used to debit their account for annual interest only on 31st March of the year and last interest debit is on 31st March, 2007. 5. In order to substantiate the contentions raised, counsel for the party respondents submitted that the Bank used to debit their account for annual interest only on 31st March of the year and last interest debit is on 31st March, 2007. However, since the loan agreement provides for payment of interest in the end of the year and loan having been taken in 2005, interest was overdue as on 26th December, 2007 and so much so, the respondents are entitled to the benefit. The contention raised by Standing Counsel for the Bank is that the loan agreement provides for collection of interest annually and as a matter of accounting practice, the Bank is debiting interest in the end of the financial year and respondents did not object recovery of interest in March, 2007. 6. After hearing both sides, we are unable to accept the claim of the respondents because the amount to be waived is not only the, interest but the loan amount. Therefore, the amount overdue and referred to in clause 4.1(a) takes in the loan amount and the applicable interest thereon. Therefore, when the loan as such is not overdue, there is no justification to consider interest thereon for independent waiver. Waiver of interest independently is not conceived under clause 4.1(a) of the Scheme above stated. Since the loan amount itself is due only on 31.12.2008, the loan cannot be said to be overdue from the respondents as on 31.12.2007 which is the main condition for granting the benefit. In other words, even if the claim of the respondents is admitted i.e. interest is annually payable and is due on completion of 12 months from the date of availing the loan making liability for payment of interest on 26th December, still respondents, in our view, are not entitled to the benefit because only interest for that year will be outstanding as on 31.12.2007 and not the loan amount along with interest. Therefore, respondents are not entitled to benefit of full waiver under clause 4.1(a)(i) and the finding of the learned Single Judge merely based on interest debit made by the Bank is unsustainable. 7. We notice that although there has been stay against recovery of the arrears due from the respondents. The respondents being small farmers are, therefore, entitled to atleast reduction of interest on equitable considerations. 7. We notice that although there has been stay against recovery of the arrears due from the respondents. The respondents being small farmers are, therefore, entitled to atleast reduction of interest on equitable considerations. We, therefore, grant waiver of 25% of the interest on the whole loan amount including the credits already made provided 75% of the interest at the statutory rate and loan amount is paid before 31st March, 2012. We direct the Bank not to treat any default in the accounts of the respondents and no compounding or penal interest should be charged over and above the rate of interest applicable to the loan granted. The appellant-Bank is directed to give a statement prepared as above granting 25% waiver of the interest credited and the interest overdue till 31st March to each of the borrowers within two weeks from date of receipt of copy of this judgment for them to make payment before the due date stated above. If payment is not made as above, the reduction in interest granted by us will stand vacated after 31st March, 2012 and the bank will be entitled to proceed for recovery of the full amount.