National Small Industries Corp Ltd v. M/S Maharana Electronics & Anr

judgment is enclosed. Our riot Victim Relief Committee have been pressing the Central Govt that the interest should be charged @ One Per Cent per annum from all the Nov. Riot affected Borrowers. We are also very happy to inform you that Govt; of India have agreed that One per Cent interest will be charged from all Nov. 84 Riot affected Borrowers. We are also enclosing herewith photo copy of Circular No. HO/RD/29/93-94 Dt. 21.09.93. So we would request you to please charge one per cent interest from Nov 84 to 31st March 1993. In all riot affected cases on actual cost of machine After calculation while charging one per cent interest please write us how much money stands balance in our account or you have to pay us. We are sure you will reply us immediately on receipt of this letter and you will close the above mentioned file.

Thanking you,

Yours faithfully"

¶24The representations of the Defendants went unheeded. NSIC continued to insist that the Defendants had to pay as per the NSIC scheme and not as per the Central Government revised scheme as notified by the RBI.

¶25A perusal of all the pleadings and the evidence on record reveals that the Defendants who were riot affected persons repeatedly approached the Plaintiff for payment of interest @ 1% per annum. Their conduct clearly shows that they have paid all the instalments and were only seeking remission of the interest amount. The Plaintiff ought to have considered their case sympathetically owing to the various circulars of the RBI as also the judgment of the Supreme Court in Harjit Singh (supra) read with the Revised Scheme of 1993. The 1984 riots where the Defendants lost their entire factory was sufficient reason for a Government Organisation to have lent a helping hand to the borrowers rather than involving them in this protracted litigation. The riots took place in November 1984 and the hire-purchase agreement was made in 1985. Almost 33 years have passed since the event and the letters on record show that there has been no mala fides on behalf of the Defendants. On the other hand the Plaintiff has failed to reply to the repeated representations of the Defendants and even the witness who has appeared claims complete ignorance of these representations.

¶26Ld. Counsel for the Plaintiff has submitted that the scheme does not apply to the Defendants. She submits that the Plaintiff is neither a bank nor a financial institution. By a mere reading of this scheme, it is clear that the Defendants ought to be extended the benefit which was granted to other riot

affected borrowers who availed of loans and other facilities from banks and financial institutions. Moreover, as per the Circular of the RBI, the Scheme was made applicable to financial institutions. From the nature of activity undertaken by the Plaintiff i.e., `hire purchase' being specifically covered as per the reply given by the RBI, there is no reason why the Defendants should not be extended the said benefit.

¶27Going by the judgment of the Supreme Court as also the clear and categorical response by the RBI in Ex.D-1/11 that the NSIC which is involved in the letting and delivery of machines and comes under the definition of a financial institution, there can be no doubt that the case of the Defendant is a "deserving case' as per the Revised Scheme and the Plaintiff was bound to extend the benefit of the circulars and the said Scheme of the Central Government to the Defendant. The manner, in which the Plaintiff has conducted itself with the Defendants, shows lack of intention of a Government body, to follow the settled judicial precedents and the Government's own policies. The Plaintiff is a Government undertaking which has been set up to support small industries in the country and the Defendants' case definitely falls in the category of an industry which required support in light of the 1984 riots. The Plaintiff, for the purpose of this case, ought to be considered as a Government undertaking or a Financial Institution, involved in support of 1984 riot victims and accordingly, the benefit has been rightly extended by the Trial Court.

¶28The Defendants who availed of the Hire-Purchase as far back as in 1985, in the wake of the riots have been dragged into a long-drawn litigation for a period of 30 years. The Defendants fully participated in the trial of the suit and adduced evidence in support of their case till 2016. The Defendants

have also, in a bona fide manner, paid all the instalments and sought a remission on interest as per the prevalent policy. The circular of the RBI proved by Defendant No.2 clearly shows that RBI's intention was to extend benefits to riot affected victims. A specific question to the witness of the Plaintiff in respect of IDBI and other similar banks and financial institution has been simply denied. The circular and the Revised Scheme is categorical and clear that only 1% simple interest is liable to be charged even on loans which have been granted after the riots. The stand of the Plaintiff that since the Hire-Purchase Agreement was entered into after the riots, and hence the benefits cannot be extended to the Defendants, is completely illogical, inasmuch as the riots having taken place on November, 1984, the Hire-Purchase could have been taken only in 1985 and not before that. The human element of riot affected victims has been given a complete go-by by the Plaintiff which ought to have lent a helping hand to a small scale industries and entrepreneurs. There is no dishonesty on behalf of the Defendants who, after paying most of the instalments, made repeated representations seeking reduction in the interest on the basis of the policy. The Plaintiff turned a deaf ear to the said requests and did not even bother to reply to the same. The filing of the suit was totally misconceived, especially when the Defendant was willing to pay interest at 1%.

¶29The Trial Court had granted Relief to the Plaintiff in the following terms: "In view of the findings recorded on issue No.2, 3 and 4 suit of the Plaintiff is hereby dismissed but in the totality of circumstances of the case as the public money is involved, Plaintiff is directed to treat the Defendants as deserving case under the "Central

Interest Subsidy Scheme for November 1984 Riot Affected Borrowers" as revised time to time, process the case in accordance with that Scheme and put the Defendants to notice accordingly. If, upon consideration, any amount is found payable, the Defendants shall pay the same in monthly installments of his choice but not less than Rs.5000/- per month. No interest at any rate shall be charged for the litigation period as the litigation took place mainly due to refusal on the part of the Plaintiff to extend the benefits of the aforesaid scheme to the Defendants resulting into harassment of the Defendants and wastage of precious judicial time; and also for the period Plaintiff takes to inform the Defendants any outstanding upon reconsideration in compliance of the present direction. It is made clear that Plaintiff shall calculate amount charging simple interest @1% per annum upto the date of institution of the present suit and not for period thereafter. If after extending the benefits in accordance with the aforesaid scheme, any outstanding is found due a simple interest @1% per annum shall be charged on reducing balance from the date of intimation in writing to Defendants against receipt, till the clearance of the dues."

¶30The impugned judgement does not warrant any interference. It is further clarified that no interest would be chargeable for the period of pendency of the appeal. Costs of Rs.50,000/- shall be deductible from the interest amount which has been awarded to the Defendants for the long drawn litigation that they have been made to undergo since 1995 till 2016 i.e. for more than two decades. The impugned judgment/decree is modified in the above terms.

PRATHIBA M. SINGH, J. Judge MAY 19, 2018/Rahul

* IN THE HIGH COURT OF DELHI AT NEW DELHI Date of Decision: 23rd April, 2018 + NATIONAL SMALL INDUSTRIES CORP LTD ..... Appellant Through: Ms. Manvi Gola, counsel on behalf of Mr. Sanjay Kr. Sharma, Advocate (M-9810767494). versus M/S MAHARANA ELECTRONICS & ANR ..... Defendants Through: None. CORAM: JUSTICE PRATHIBA M. SINGH Prathiba M. Singh, J. (Oral) 1. The Defendants, Respondent no.1 - is a sole proprietary concern of Respondent no.2, Mr. T.S. Rana (hereinafter referred to as "Defendants") who had a factory manufacturing plastic items located in 27, New Wazirpur Industrial Complex, Delhi. In the aftermath of the 1984 riots, the factory was looted and burnt down. All the machinery in the factory was destroyed. The Defendants then approached the Appellant/Plaintiff (hereinafter, "Plaintiff") for taking the machinery on hire-purchase. The machinery was supplied by the Plaintiff and payments were to be made in instalments. The Defendants paid most of the instalments but sought reduction in the rate of interest charged on the basis of the "Central Interest Subsidy Scheme for November 1984 Riot Affected Borrowers" (hereinafter Scheme) issued by the Central Government for the benefit of riot affected victims. As per the said scheme, the Central Government took a decision that banks and financial institutions would charge only 1% interest from riot victims. This scheme was extended by the Supreme Court to include all financial institutions as per the judgement in Harjit Singh v. Union of India (1994) 2 SCC 553 (hereinafter `Harjit Singh'). Accordingly, the Defendants sought reduction in the rate of interest which was not acceded to by the Plaintiff. Finally, when the interest amount remained unpaid, the Plaintiff filed a suit against Defendants no.1 and 2, seeking recovery of the amounts due, for the machines, as per the Hire-Purchase Agreements dated 25th July, 1985 and 19th February, 1987. In the said suit, the Trial Court granted relief to the Plaintiffs, which is the subject matter of the present appeal. 2. The NSIC is a Government of India enterprise functioning under the Ministry of Micro, Small and Medium Enterprises (MSME). It claims to be working for the promotion and fostering of small and medium enterprises in the country. It supplies machinery on Hire-Purchase basis to entrepreneurs in order to encourage growth of the industry. It supplied machinery on hire purchase to the Defendants, on the basis of Hire-Purchase Agreements dated 25th July, 1985 and 19th February, 1987. It claimed that it is entitled to recover delayed payment at 14% from the Defendants, as per the Agreement. The waiver of interest as sought by the Defendants was denied primarily on the ground that the two machines were supplied much after the riots and an inspection has revealed that the machines were being used in the factory of the Defendants in full swing. It was further argued that the Defendant's case was not covered by the scheme. Hence, according to NSIC, the Defendants were not entitled to a lower rate of interest. It was the stand of NSIC that the Defendants having applied under the Scheme of NSIC for 1984 affected borrowers, was not entitled to resile from the same. The said Scheme was "Liberalised Scheme for supply of machines on hire- purchase basis to rehabilitate small scale units affected by riots during 31st October to 11th November 1984" under which interest was payable at 12% with rebate of 2% p.a. against payment of instalments on or before the due date. In the suit filed by NSIC against the Defendants, the relief prayed for by NSIC were as under: "It is, therefore, respectfully prayed that: a) this Hon"ble Court may grant a decree for Rs.9,43,077/- being the amount due from the defendants as per the Hire Purchase Agreement executed on 25.7.85 & 19.2.87 in favour of the plaintiff and against the defendants; b) decree for possession of both the machines supplied by the plaintiff i.e. Injunction Moulding Machine and Blow Moulding Mac