SUPREME COURT OF INDIA

Before:- B.N. Kirpal, S.N. Phukan and Shivaraj V. Patil, JJ.

Civil Appeal No. 4783 of 1992. D/d. 8.8.2001.

Dhenkanal Sub-Divisional Housing Building Co-operative Society - Appellant

Versus

Sibaram Satpathy and Ors. - Respondents

Housing loan - Scaling down of Interest - Merely because action appeared to be harsh could not be ground for scaling down interest - Hence, decision of High Court not based on any legal principle especially when rate of interest payable agreed to between parties.

[Para 7]

ORDER

B.N. Kirpal, S.N. Phukan and Shivaraj V. Patil, JJ. :- The appellant is a house building co-operative society and had given a loan of Rs. 60,000/- to respondent No.1. According to the terms of the agreement, respondent No. 1 was to start re-payment after six months of the disbursement of the first instalment and the entire loan amount was to be repaid in 36 half-yearly instalments within a period of 18 years. The first payment was to start on 1st March, 1984.

2. Respondent No. 1 did not make payment in terms of the agreement and a letter was written by the appellant requiring the said respondent to clear the dues. When the payments were not made, the appellant took the dispute before the arbitrator. The claim of the Society in 1984 before the arbitrator was for the amount then outstanding which was Rs. 65,433/- which included interest and principal.

3. It appears that an ex parte award was made on 29th January, 1985 requiring respondent No. 1 to pay a sum of Rs. 63,732/-. The said amount carried future interest at the rate of 15 per cent on the principal sum of Rs. 60,000/-. When the amounts were not paid, the appellant sought to execute the decree. A notice was sent to respondent No. 1 informing him that his movables would be put to auction. The said respondent No. 1 then chose to file a writ petition challenging the proposed action of the appellant. In response thereto, the contention of the appellant before the High Court was that the award which had been passed had become final and the same had not been challenged by respondent No. 1. It was further the case of the appellant that even during the pendency of the execution proceedings respondent No. 1 had appeared and admitted the amount under the award and had requested the Sale Officer that the amount may be rephased so that he could pay the dues at the rate of Rs. 2,000/- per month.

4. During the pendency of the case, sum of Rs. 60,000/- representing the principal amount received was repaid. The only question which then arose for consideration before the High Court pertained to the demand of Rs. 63,000/- by way of interest.

5. By the impugned judgment, the High Court took note of the aforesaid facts and came to the conclusion that the filing of a dispute case and obtaining an award could not be said to be illegal. Nevertheless, the High Court observed that initiation of a dispute for the entire amount of loan and obtaining an award for the same together with interest within one year after the disbursement of the loan was a very harsh and hasty step on the part of the appellant especially when the repayment had to be made in 36 half-yearly instalments over a period of 18 years. Taking this into account, the High Court directed the scaling down of interest from Rs. 63,000/- to Rs. 30,000/-. It further required the respondent to pay the said amount of Rs. 30,000/- within six months of the date of the judgment which was delivered on 13th February, 1992 and it was observed that failure on the part of the respondent to pay any two consecutive instalments would result in the entire decree being executable.

6. Learned counsel for the appellant informs us that payment as directed even of the sum of Rs. 30,000/- has not been made. Prima facie, it appears to us that the import of the judgment of the High Court was that in the event of failure of respondent No. 1 to pay any two consecutive instalments, the result would be that the decree would become executable. The reference to the decree must be to the decree passed by the arbitrator after the award was made which would imply that the respondent was liable, in terms of the decree, to pay the principal sum plus interest thereon. On the failure to pay two consecutive instalments, the said respondent became liable to pay the interest of Rs. 63,000/- calculated at the rate of 15 per cent.

7. This apart, in our opinion, there was no justification for the High Court, in exercise of its writ jurisdiction, to order the scaling down of interest. The High Court has rightly observed that the award which had directed payment of future interest at the rate of 15 per cent had become final and that award was not challenged in appeal. By circumventing the normal procedure established by law, a writ petition was filed. Merely because the action appeared to be harsh could not be a ground for scaling down the interest. The decision of the High Court is not based on any legal principle especially when the rate of interest payable had been agreed to between the parties.

For the aforesaid reasons, this appeal is allowed and the decision of the High Court is set aside.

Appeal allowed.