U.P. Financial Corp. & Ors vs M/S. Sri Bharat Paper Udyog P.Ltd. &Ors

U.P.FINANCIAL CORPORATION & ORS. ... APPELLANTS

VERSUS

M/S SRI BHARAT PAPER UDYOG P.LTD. & ORS. ... RESPONDENTS

J U D G M E N T

Aftab Alam, J.

1 This appeal, by grant of special leave, at the instance of UP Financial

Corporation and its officials is directed against the judgment and order dated

September 7, 2006 passed by a division bench of the Allahabad High Court

on a writ petition (C.M.WP. No. 43800/2006) filed by the respondent

company. By the impugned order, the appellants are directed to issue the no-

2 dues certificate to the writ petitioner-respondent, release to it the title deeds

of the disputed plot and to hand over to it the possession of the property

(mortgaged in the favour of the appellant Corporation). The High Court

order is based on the premise that it was a term of the one time settlement

between the two sides that on payment of the first installment under the

settlement by the respondent, the Corporation would release in its favour a

piece of land, 4000 sq. yds. in area, which the respondent might sell or give

on lease in order to facilitate payment of the remaining installments under

the OTS. The High Court found that contrary to its obligation under the

OTS, the appellant Corporation did not release the land in question in favour

of the respondent. The respondent, therefore, could not be held responsible

for the delay in payment of the installments under the OTS and the liability

of interest on delayed payments could not be fastened on it. The High Court

held that the Corporation's insistence on realizing from the respondent the

amount of interest on delayed payments of the installments (a substantial

sum!) even after it had paid the full amount under the OTS was unjust,

unreasonable, bad and illegal. Hence, the directions to the appellant

Corporation as noted above.

2. The respondent company took a loan from the appellant Corporation.

It defaulted in repayment of the loan and with accumulation of interests the

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outstanding dues grew to a very large sum. According to the appellant, by

the time the respondent was allowed the facility of OTS, the accumulated

interests amounted to almost Rs.3 crores, which the Corporation waived off.

3. Be that as it may, the respondent made an application to the appellants

for a one time settlement of its outstanding dues. The application was

accepted by the appellants and intimation was given to the respondent vide

letter dated August 5, 2002 containing the terms of the settlement. The

relevant terms of the settlement as stipulated in the aforesaid letter are as

under -

"1. That the settled amount of Rs. 28,50,000/- under OTS shall

be paid as under:

(i) Earnest Money (Already Paid) Rs. 2,85,000.00

(ii) Down payment within one month

i.e. upto 04.09.2002 Rs. 4,28,000.00

(iii) Balance within 8 equal quarterly

installments of Rs. 2,67,125/- each,

commencing from 15.11.2002 Rs. 21,37,000.00

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Total Rs. 28,50,000/-

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The repayment schedule as mentioned above should be strictly

adhered to and any deviation will be liable for cancellation of

facilities granted under One Time Settlement while you will be

entitled for interest free period upto 20.09.2002 Interest @ 16%

shall be payable on outstanding OTS amount after interest free

period which shall be payable quarterly on 20th March, 20th

June, 20th September and 20th December.

1. That the installments of OTS fixed will not be in

any case linked with the sale of assets of the unit

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and the OTS installments fixed on schedule dates

will be paid by the party on the due dates."

(emphasis added)

4. In the letter dated August 5, 2002 by which the respondent's

application for one time settlement of its dues was accepted by the

Corporation, there is absolutely nothing to suggest that on payment of the

first installment within one month i.e. by September 4, 2002, the

Corporation would release the piece of land in question to the respondent so

as to facilitate payment of the subsequent installments by it by selling or

leasing out the land.

5. According to the respondent, however, the terms contained in the

letter dated August 5, 2002 are not conclusive on the issue. The one time

settlement was arrived at after a protracted negotiation involving, besides the

respondent company and the appellant Corporation, the Divisional Udyog

Bandhu, Meerut. Further, in course of the negotiations certain terms had

been arrived at which were finally formalized in the OTS. The counsel

appearing for the respondent invited our attention to a letter dated July 3,

2002 addressed on behalf of the respondent to the Additional Director of

Industries (WZ), Meerut. In this letter, after referring to the decisions of the

Divisional Udyog Bandhu, Meerut, dated November 1, 1999 and March 14,

2001 and further referring to the discussions held between the parties, it was

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stated that the OTS with the Corporation would be finalised and settled

under certain terms mutually agreed between the parties as enumerated from

paragraph 1 to 4 of the letter. Paragraph 4 on which the counsel laid great

stress reads as under -

"(4) Balance 75% of settled O.T.S. amount is payable within

2 years in 8 equal quarterly installments upto July 2004

with applicable simple interest as per O.T.S. matrix and

guidelines of the Corporation after release of spare

factory land of 4000 sq. yds. as per settlement."

(emphasis added)

6. The counsel also referred to a letter dated August 22, 2006 from the

General Manager of the Corporation to the Executive Director, Udyog

Bandhu, Lucknow. In paragraph 4 of the letter there is a reference to the

release of 4000 sq. yds. of land of the respondent's unit, subject to certain

conditions.

7. He also referred to the minutes of the regional industrial meeting held

on June 22, 2006 under the Chairmanship of the Industrial Development

Commissioner, UP. In those minutes too there is some reference that even

after having received 25% of the OTS amount the Corporation had not

released the land in question in favour of the respondent.

8. The main emphasis of the counsel for the respondent, however, was

on the letter dated July 3, 2002 and it was contended that the condition

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contained in paragraph 4 of that letter (as quoted above) must be construed

as one of the conditions of the OTS, binding upon the Corporation.

9. Counsel for the appellants, on the other hand, submitted that there was

no such condition in the OTS. On the contrary, the OTS made a clear

stipulation as to levy of interest on delayed payments of the installments.

10. In view of the divergent stands of the parties we asked the counsel for

the Corporation to produce the original records, including the original copy

of the letter dated July 3, 2002, that was submitted on behalf of the

respondent to the Corporation. In pursuance of our direction, the original

record was produced before the court.

11. In the original copy of the letter dated July 3, 2002 paragraph 4 reads

as follows -

"(4) Balance 75% of settled O.T.S. amount is payable within

2 years in 8 equal quarterly installments upto July 2004

with applicable simple interest as per O.T.S. matrix and

guidelines of the Corporation."

After the above, which is in type, the following (on which the entire case of

the respondent is based) appears to have been added by hand -

"after release of spare factory land of 4000 sq. yds. as per

settlement."

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12. A bare perusal of the letter dated July 3, 2002 as it was originally

submitted to the Corporation and as it is contained in the Corporation's

records, makes it clear that the respondent had acknowledged that after

payment of the first installment the balance 75% of the OTS amount would

be cleared off in eight quarterly installments upto July 2004 and the

condition of release of the land was not there in the letter as it was originally

submitted to the Corporation. The release of land is a later addition, is

evident from the fact that the cut off date July 2004, for clearing off the

entire OTS amount does not match with that condition.

13. In any event, in regard to the payment schedule, the respondent was

bound by the terms of the OTS. Further, the terms of the OTS were

independent of any condition that might have come from the respondent in

course of negotiations preceding the OTS or any condition that the

respondent might have put in its application for grant of OTS. The terms of

the OTS would also not be controlled or altered by any decision taken in any

regional industrial meeting chaired by the State's Industrial Commissioner.

The terms of the OTS would continue to bind the respondent until those are

duly changed and amended by the Corporation.

8 14. For the reasons, discussed above, we are satisfied that the respondent

was not entitled to the relief claimed on its behalf and the writ petition filed

in the High Court was liable to be dismissed. The order of the High Court is,

accordingly, set aside and the writ petition filed on behalf of the respondent

is dismissed. The appeal is allowed with costs amounting to Rs. 20,000/-.

..............................J.

(Aftab Alam)

..............................J.

(R.M. Lodha)

New Delhi;

September 8, 2011.