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Hooghly Alloy and Steels Company Pvt. Ltd. Vs. Axis Bank Ltd. and Ors. - Court Judgment

LegalCrystal Citation
CourtKolkata High Court
Decided On
Judge
AppellantHooghly Alloy and Steels Company Pvt. Ltd.
RespondentAxis Bank Ltd. and Ors.
Excerpt:
.....for an amount of rs. 2950.50 lakh with the following break up :- (i) rs. 2450 lakh as cash credit facility, (ii) rs. 330.50 lakh as term loan facility and (iii) rs. 170 lakh as letter of credit facilities. the plaintiff had to mortgage the property situated at mouza- dakshin rajyadharpur in the district of hooghly with the defendant no.1 to secure the said credit facility. the defendant no.1 also received a sum of rs. 7.86 lakh plus tax from the plaintiff as processing fee for the said credit facility. the validity of the said credit facility expired after one year from the date of sanction and the defendant no.1 offered for renewal of the said credit facility for an enhanced amount of rs. 35.46 crore.2. the sanction of the said credit facility offered by the defendant no.1 on.....
Judgment:

Form No.(J2) IN THE HIGH COURT AT CALCUTTA Ordinary Original Civil Jurisdiction ORIGINAL SIDE Present: The Hon’ble Justice Ranjit Kumar Bag CS350of 2014 HOOGHLY ALLOY & STEELS COMPANY PVT. LTD. Versus AXIS BANK LTD. & ORS. For the Plaintiff : Mr. Abhrajit Mitra, Sr. Mr. Arik Banerjee, Mr. Shaunak Ghosh, Mr. Rajib Mullick, Adv. Adv. Adv. Adv. Hearing concluded on : November 18, 2016. Judgement delivered on : November 18, 2016. R.K. Bag, J.

: The plaintiff is a company engaged in the business of manufacturing of alloy steel. In the month of January, 2011 the plaintiff approached the defendant no.1 for financial assistance for augmentation of business. The defendant no.1 sanctioned credit facility in favour of the plaintiff for an amount of Rs. 2950.50 lakh with the following break up :- (i) Rs. 2450 lakh as cash credit facility, (ii) Rs. 330.50 lakh as term loan facility and (iii) Rs. 170 lakh as letter of credit facilities. The plaintiff had to mortgage the property situated at Mouza- Dakshin Rajyadharpur in the district of Hooghly with the defendant no.1 to secure the said credit facility. The defendant no.1 also received a sum of Rs. 7.86 lakh plus tax from the plaintiff as processing fee for the said credit facility. The validity of the said credit facility expired after one year from the date of sanction and the defendant no.1 offered for renewal of the said credit facility for an enhanced amount of Rs. 35.46 crore.

2. The sanction of the said credit facility offered by the defendant no.1 on March 9, 2012 was not accepted by the plaintiff and as such the defendant no.1 modified the sanction of credit facility by a letter dated March 31, 2012. The modified sanction of the credit facility was accepted by the plaintiff and revised processing fee to the tune of Rs. 9,18,000/- along with service tax was paid. In the month of December 2012, the plaintiff was in need of further fund for running the business and as such the plaintiff approached the defendant no.2 for credit facility to the tune of Rs. 11.20 crore. The defendant no.2 sanctioned the credit facility as per request of the plaintiff and conveyed the same by a letter dated December 24, 2012. The term of sanction of the said credit facility was valid for a period of one year. The plaintiff paid the nonrefundable processing charge of Rs.5 lakh to the defendant no.2. One of the pre-conditions for disbursement of the loan by the defendant no.2 was pari passu mortgage of the title deed of the land of the plaintiff situated at MouzaDakshin Rajyadharpur in the district of Hooghly. In the meantime, the defendant no.1 extended the offer of credit facility to the plaintiff on the basis of the terms and conditions contained in the letter dated February 13, 2013, which was merely an offer subject to acceptance of the same by the plaintiff. The plaintiff never accepted the terms and conditions offered by the defendant no.1 for renewal of credit facility for the next year. By one e-mail dated March 28, 2013 the defendant no.1 threatened the plaintiff to recover a sum of Rs.7.11 lakh towards processing fees for renewal of the credit facility. Being threatened by the defendant no.1 the plaintiff approached the defendant no.3 for credit facility to run the business. On March 22, 2013 the defendant no.3 sanctioned credit facility to the plaintiff for a sum of Rs.3300 lakh on condition to take over the existing credit facility from the defendant no.1. The plaintiff accepted the sanction granted by the defendant no.3 by e-mail dated March 22, 2013 and declined the offer of the defendant no.1 for renewal of modified terms and conditions of the credit facility offered by the defendant no.1. The plaintiff never accepted the modified terms and conditions of the defendant no.1 for renewal of credit facility of the plaintiff.

3. On April 2, 2013 the defendant no.3 liquidated the entire dues of the defendant no.1 by making payment of a sum of Rs.19,51,09,228/- and the defendant no.1 acknowledged payment of the said amount by the defendant no.3 on April 2, 2013. However, on April 2, 2013 the defendant no.1 refused to release the securities in favour of the defendant no.3 without payment of processing fees of Rs.7,11,000/- plus tax and interest accrued thereon. Moreover, the defendant no.1 directed the plaintiff to arrange for a fixed deposit for a sum of Rs.1,70,00,000/- until return of the original letters of credit duly discharged by the beneficiary of such letters of credit. On July 22, 2013 the defendant no.3 furnished bank guarantee on behalf of the plaintiff to the defendant no.1 to the tune of Rs.1,70,00,000/- for honouring monthly bills raised by WBSEDCL and the defendant no.1 duly accepted such guarantee furnished by the defendant no.3 by issuing a letter on August 13, 2013. The plaintiff was compelled to make payment of Rs.7,98,888/- towards illegal demand of processing fees of the defendant no.1 by issuing one cheque bearing no.426548 dated October 24, 2013 in order to release the securities from the defendant no.1. The defendant no.1 failed and neglected to return the securities to the defendant no.3, in spite of payment of the entire dues of the defendant no.1 on April 2, 2013 and thereby the defendant no.3 levied interest for a sum of Rs.5,38,640/- on the plaintiff on account of failure of the defendant no.1 to hand over the documents of securities in respect of the land of the plaintiff within the specified period of time. The plaintiff suffered damage to the tune of Rs.50,00,000/- for failure on the part of the defendant no.1 to create pari passu charge in favour of the defendant no.2 and thereby the plaintiff could not avail of credit facility offered by the defendant no.2. The defendant no.1 also forcibly recovered from the plaintiff a sum of Rs.2,91,187/- towards penal interest for non-renewal of sanction of credit facility within the specified period of time. The plaintiff has, thus, instituted this suit against the defendants praying for a decree for a sum of Rs.24,71,429/- and also a decree for a sum of Rs.50,00,000/- along with interest accrued thereon.

4. The summons was duly served on the defendant nos.1, 2 and 3 as reflected from the certificate issued by the Deputy Sheriff on September 20, 2016. It also appears from the certificate issued by the Deputy Sheriff on February 13, 2015 that the defendant no.1 entered appearance on January 14, 2015, but the defendant nos.2 and 3 did not enter appearance till February 12, 2015. Since the defendant no.1 did not contest the suit by filing written statement, the matter is taken up as ‘Undefended Suit’.

5. The only point for consideration of the Court is whether the plaintiff is entitled to get the decree as prayed for.

6. One Prem Agarwal, the Director of the plaintiff company is examined as witness on behalf of the plaintiff. It transpires from the oral testimony of Prem Agarwal and from the document marked Exhibit-A that the defendant no.1 sanctioned credit facility in favour of the plaintiff for a sum of Rs.2950.50 lakh by a letter dated January 28, 2011. The vendor of the land of the plaintiff situated at Mouza- Dakshin Rajyadharpur in the district of Hooghly executed three separate deeds with the plaintiff for the purpose of security for loan and those deeds are marked Exhibits-B, C and D. It transpires from the evidence of the witness Prem Agarwal that the plaintiff accepted the credit facility from the defendant no.1 for a period of one year by making payment of the processing fees. This witness has stated that the initial credit facility was sanctioned by letter dated January 28, 2011 which was sought to be renewed on March 9, 2012. It is the categorical evidence of the witness Prem Agarwal that the plaintiff did not accept the modified sanction of credit facility issued by the defendant no.1 on March 31, 2012 by reducing the processing fees from Rs.19,00,000/- to Rs.10,00,000/-. Ultimately, the plaintiff approached the defendant no.2 for credit facility of Rs.11.2 crore for running the business. It appears from the document marked Exhibit-E that the defendant no.2 sanctioned credit facility in favour of the plaintiff for a sum of Rs.11.2 crore by issuing letter dated December 24, 2012. It further appears from the document marked Exhibit-F that the defendant no.1 issued letter dated February 13, 2013 in favour of the plaintiff for renewal of the credit facility on modified terms and conditions for Rs.23.70 crore. It appears from the terms and conditions of the said sanction of loan (Exhibit-F) that the plaintiff will have to mortgage the property situated at Mouza- Dakshin Rajyadharpur in the district of Hooghly on which charge will be created by the defendant no.1 for the said loan. The witness Prem Agarwal has caterogically stated in evidence that the plaintiff did not accept the offer of renewal of credit facility of the defendant no.1 on modified terms and conditions, but the defendant no.1 unilaterally renewed the said modified credit facility and illegally claimed Rs.7,98,880/- as processing fee. It appears from the copy of print-out of e-mail dated March 28, 2013 (Exhibit-G) that the defendant no.1 renewed the credit facility into their system and demanded processing fees to the tune of Rs.7,98,880/-. The document marked Exhibit-H indicates that the plaintiff requested the defendant no.1 to delete the renewal of credit facility on the basis of modified terms and conditions from the system and protested for illegal demand of processing fees from the plaintiff.

7. By letter dated March 22, 2013 (Exhibit `I’) the defendant no.1 again renewed the demand of payment of processing fees plus service tax by the plaintiff. A copy of print out of the letter dated March 31, 2013 (Exhibit `J’) goes to establish that the defendant no.1 modified the renewal of sanction of credit facility in favour of the plaintiff and called upon the plaintiff to accept the same without further delay. It is relevant to point out that the witness, Prem Agarwal has categorically stated that the offer of renewal of credit facility on the basis of modified terms and conditions was never accepted by the plaintiff.

8. It appears from the document marked Exhibit `K’ that the relationship Manager of the defendant no.3 issued one cheque dated April 2, 2013 for a sum of Rs.19,51,09,228/- in favour of the defendant no.1 and requested the defendant no.1 to close the working capital facility of the plaintiff. By issuing letter dated May 3, 2013 (Exhibit `L’) the defendant no.1 has closed working capital accounts of the plaintiff with observation that there is no debit balance. The defendant no.1 again claimed for a fixed deposit of Rs.1,70,00,000/- as security by issuing letter dated April 2, 2013 (Exhibit `M’). The witness, Prem Agarwal, has stated in evidence that the plaintiff was compelled to make payment of processing fees demanded by the defendant no.1 in spite of not accepting the offer of the defendant no.1 for renewal of credit facility. The document marked Exhibit `N’ indicates that on October 24, 2013 one of the Directors of the plaintiff company issued one cheque bearing No.426548 dated October 24, 2014 in favour of the defendant no.1 for a sum of Rs.7,98,880/towards illegal demand of processing fees for renewal of the credit facility of the plaintiff without its consent. By issuing one letter dated April 2, 2013 (Ext.-O) the defendant no.1 made a request to the plaintiff for accepting the modified terms and conditions for renewal of credit facility to the plaintiff, but the same was not accepted by the plaintiff as reflected from the evidence of the witness, Prem Agarwal.

9. By producing letter dated April 25, 2014 (Exhibit `P’), the witness, Prem Agarwal has stated in evidence that the defendant no.3 charged penalty to the tune of Rs.5,38,640/- from the plaintiff for not submitting the original document of title of the property of the plaintiff situated at Mouza: Dakshin Rajyadharpur in the District of Hooghly, for creation of equitable mortgage within the specified period of time. The consistent evidence of the witness, Prem Agarwal, is that the defendant no.1 refused to hand over the original document of the title of the property of the plaintiff situated at Mouza: Dakshin Rajyadharpur in the District of Hooghly in favour of the defendant no.3 for non-fulfilment of illegal demand of processing fees, penal interest and for not making fixed deposit of Rs.1,70,00,000/- as security. The penal interest demanded by the defendant no.1 from the plaintiff is calculated in one sheet marked Exhibit `U’. It appears from the said document (Exhibit `U’) that the total penal interest levied by the defendant no.1 upon the plaintiff was Rs.2,91,187/- and the plaintiff had to pay the said amount of money to the defendant no.1.

10. By producing three annual reports of the plaintiff company for the year 2011-2012, 2012-2013 and 2013-2014 (Exhibits `Q’, `R’ and `S’), the witness, Prem Agarwal, has stated in evidence that the plaintiff suffered business loss to the tune of Rs.50 lakh. The witness, Manoj Kumar Sharma, the Accountant of the plaintiff company has also been examined on behalf of the plaintiff. This witness has produced one comparative chart of EBIDTA (Earning Before Interest Depreciation Tax Amortization) for a period of 10 years from 20062007 to 2015-2016 and the said document is marked for `T’. This witness, Manoj Kumar Sharma, has stated in evidence that the percentage of EBIDTA was reduced from 3.46% to 3.01% from the year 2011-2012 to the year 20122013 for non availability of credit facility of about Rs. 11 crore from the defendant no.2 due to non cooperation of the defendant no.1.

11. It is established from the evidence on record that the defendant no.1 has unilaterally renewed credit facility in favour of the plaintiff on modified terms and conditions, in spite of not accepting the said terms and conditions by the plaintiff. The defendant no.1 compelled the plaintiff to make payment of processing fees of Rs.7,98,880/- without having any basis for the same. So, the plaintiff is entitled to recover a sum of Rs.7,98,880/- from the defendant no.1 along with interest at the rate of 8% per annum. It has also been established from the evidence on record that the plaintiff had to pay penalty to the defendant no.3 to the tune of Rs.5,38,640/- due to failure on the part of the defendant no.1 to hand over the title deeds of the property of the plaintiff to the defendant no.3 within specified period of time, in spite of payment of all outstanding dues of the defendant no.1 by the defendant no.3. So, the plaintiff is entitled to recover a sum of Rs.5,38,640/- from the defendant no.1 along with interest at the rate of 8% per annum. I have already observed that the defendant no.1 illegally levied penal interest upon the plaintiff to the tune of Rs.2,91,187/- without having any basis for the same. So, the plaintiff is entitled to realise the said amount of Rs.2,91,187/- from the defendant no.1 along with interest at the rate of 8% per annum. I do not find any basis for claiming interest at the rate of 18% per annum by the plaintiff and as such the interest will be at the rate of 8% per annum in stead of 18% per annum as claimed by the plaintiff.

12. The plaintiff has prayed for damage of Rs.50 lakh from the defendant no.1 for loss of profit in the business. On an analysis of the table showing percentage of EBIDTA for a period of 10 years from 2006-2007 to 2015-2016 (Exhibit `T’), it appears that EBIDTA was reduced from 8.82% to 5% from the year 2007-2008 to 2008-2009. The witness, Manoj Kumar Sharma, has tried to explain that this reduction of percentage of EBIDTA from the year 20072008 to the year 2008-2009 can be attributed to increase of administrative cost of the plaintiff company as the company was established in 2006-2007. On my query as to why the percentage of EBIDTA was further reduced from 5% to 3.31% from the year 2008-2009 to the year 2009-2010, the witness, Manoj Kumar Sharma, replied that the said loss was due to global recession. The plaintiff has claimed damage of Rs.50 lakh for loss of business for not getting credit facility from ICICI Bank due to non co-operation of the defendant no.1 for which EBIDTA was reduced from 3.46% to 3.01% from the year 2011-2012 to the year 2012-2013. Since there was more loss of business of the plaintiff in the year 2008-2009 and the year 2009-2010, I am unable to accept the contention of the plaintiff that the loss of business reflected in the reduction of percentage on EBIDTA from the year 2011-2012 to the year 2012-2013 was due to non availability of the credit facility of about Rs.11 crore from the defendant no.2. Nor can I persuade myself to accept that the loss of business of the plaintiff in the year 2008-2009 and in the year 2009-2010 can be attributed only to the cost of increase in the administrative set up of the plaintiff and due to global recession as stated by the witness, Manoj Kumar Sharma. I do not find any rationale in claiming damage to the tune of Rs.50 lakh by the plaintiff from the defendant no.1 on the ground that the defendant no.1 did not return title deeds of the property of the plaintiff to the defendant no.3 from whom fresh credit facility was obtained by the plaintiff for running the business. So, the plaintiff is not entitled to get any damage on account of loss of business. However, the plaintiff is entitled to get lump sum cost of Rs.2 lakh from the defendant no.1 for causing harassment and for compelling the plaintiff to make payment for processing fees, penalty to the defendant no.3 and penal interest.

13. In view of my above findings, the plaintiff do get a decree against the defendant no.1 ex parte for a sum of Rs. 20,71,429/- along with interest at the rate of 8% per annum from the date of institution of the suit on September 11,2014 till the date of realization of the decretal dues from the defendant no.1. The Department is directed to draw up decree expeditiously. (R. K. BAG, J.) GH/sp2/snn


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