Punjab State Tubewell Corporation Ltd. vs Bank of India and Others

Sanjay Kishan Kaul, C.J.—The only aspect, which needs adjudication in the present writ petition assailing the order of DRAT dated 15.04.1998, is as to whether the respondent No. 1-Bank could have charged enhanced interest from the petitioner beyond the prevailing rate of interest at the time of loan agreement. Term loan facilities were sanctioned and availed of by the petitioner and the prevailing bank rate of interest at the relevant time was 10.25%. This rate of interest was increased to 15.5% w.e.f. 01.10.1991 which, according to the petitioner, was impermissible.

The DRAT while recording that the only plea raised before it was that the loan agreement provided for the increase in the rate of interest, has found that it was so. The matter pertains to the Irrigation Scheme and the Agricultural Refinance and Development Corporation (ARDC) subsequently known as NABARD had agreed to grant refinance for any loans granted by participating banks to the borrowers for the purpose of implementation of irrigation projects. The petitioner being a State enterprise, the Government of Punjab stood guarantee for the said transaction.

The relevant Clause 6 in the agreement has been discussed in the impugned order, which is quite clear that there can be a variation of rate of interest but the difference between the rate charged by the bank and that by NABARD shall not exceed at any time 3% per annum or such other margin as may be prescribed from time to time by the NABARD. This clause has not been breached by respondent No. 1 and interest has been charged accordingly. Charging of interest by respondent No. 1 was in turn dependent upon the charging of interest by the NABARD especially reading Clauses 6 and 18 providing for such variance/modification. The DRAT thus, found force in the contention of respondent No. 1 that interest was determined by the instructions of Reserve Bank of India/NABARD and the Bank has charged interest as per the guidelines.

There has been a sudden increase in the rate of interest by the NABARD and consequently the Bank had given corresponding intimation to the petitioner of the liability to pay enhanced rate of interest. The respondent No. 1-Bank thus, imposed interest at the higher rate only corresponding to the increase in rate of interest by the NABARD.

We are thus, of the view that no fault could be found in the impugned judgment of the DRAT, which is in accordance with the terms of the agreement inter-se between the parties.

There is no irregularity or perversity in the impugned order calling for interference by this Court in exercise of the jurisdiction under Article 226 of the Constitution of India. Dismissed.