(Prayer: Writ Petition is filed under Article 226 of the Constitution of India to issue a Writ of Mandamus, directing the 1st and 2nd respondents herein to regulate the rate of interest being charged by the 3rd / 4th respondent Company for the loan bearing the Loan Account No.42700067 sanctioned to the petitioner in the light of the judgment of the Division Bench of this Court in A.R.Jeyarhuthran vs., Union of India and others reported in 2014(2) CWC 899 by considering the representation of the petitioner dated 06.06.2017 within a stipulated time.)Senthilkumar Ramamoorthy, J.In this writ petition, the Petitioner prays for a Writ of Mandamus to direct the first and second Respondents to regulate the rate of interest being charged by the third and fourth Respondents in respect of Loan account No.42700067, which was sanctioned to the Petitioner.2. The Petitioner availed a loan, in 2011, from Sundaram BNP Paribas Home Finance Limited (the third and fourth Respondents herein), which is a non-banking financial company (NBFC), for establishing a steel factory in Palladam, Tirupur District, in the name of AKMG Alloys Private Limited (the Company). In this connection, a loan agreement was executed in the year 2011 and as security for the said loan, an equitable mortgage of two items of residential property was created on 29.07.2011. Pursuant thereto, the loan amount was disbursed to the Petitioner on 30.07.2011.3. The tenure of the loan was 120 months and the equated monthly installment (EMI) was fixed at Rs.1,64,411/- Admittedly, the rate of interest was variable and not fixed. The Petitioner claims that the loan was serviced by paying EMI's regularly until March 2016. On account of the admitted default in servicing the loan thereafter, the loan account was classified as a non-performing asset (NPA) on 30.04.2016. Subsequently, a demand notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the SARFAESI Act') was issued on 01.09.2016. In response thereto, the Petitioner submitted objections dated 17.10.2016. In the said objections, the Petitioner stated that an aggregate sum of about Rs.18,81,00,000/- (Rupees Eighteen Crores and Eighty One Lakhs only) was availed as a loan for purchasing the steel plant of Santhi Steels Private Limited and that the said loan was serviced regularly until the Company had to suspend operations on account of the fall in prices of steel. Therefore, the Petitioner requested the third and fourth Respondents to restructure the loan and reduce the penal interest. In addition, the said Respondents were informed and assured that the Petitioner is making efforts to sell a property and would pay the outstanding dues within a period of three months from the sale proceeds. This reply was found to be unsatisfactory by the third and fourth Respondents, who proceeded to issue a possession notice on 17.05.2017. In response thereto, by communication dated 06.06.2017 to the first and second respondents herein, the Petitioner complained, for the first time, about the usurious interest rates charged by the third and fourth Respondents. The present writ petition is filed in these facts and circumstances.4. We heard Mr.T.Lajapathi Roy, the learned counsel appearing for the Petitioner; Mr.P.Paul Pandi, the learned counsel for the first Respondent; Mr.K.R.Laxman, the learned counsel for the second Respondent and Mr.M.Senthilkumar, the learned counsel for the fourth Respondent.5. After availing the loan, the learned counsel for the Petitioner submitted that the Petitioner repaid an aggregate sum of Rs.92,07,016/- between the financial years 2011-12 and 2015-16. However, out of the said sum, a sum of Rs.66,36,750/- was adjusted towards interest and only a sum of Rs. 25,70,266/- was adjusted towards principal. He also submitted that the third and fourth Respondents did not specify the rate of interest when the loan was availed and that the Petitioner was under the bona fide impression that a reasonable rate of interest would be imposed. On the contrary, as stated above, a substantial part of the amount paid by the Petitioner was adjusted towards interest by imposing an usurious rate of interest. In effect, the contention of the learned counsel for the Petitioner is that the third and fourth Respondents have acted like Shylock in demanding their pound of flesh.6.In support of his submissions, the learned counsel for the Petitioner relied upon the judgment of the Hon'ble Supreme Court in ICICI Bank Limited v. Official Liquidator of APS Star Industries Ltd., AIR 2011 SC 1521 and contended that the management of NPA's is within the purview of the Banking Regulation Act, 1949. He also referred to the judgment of the Division Bench of this Court in AR. Jeyarhuthran v. Union of India and others, 2014 (2) CWC 899 (AR.Jeyarhuthran). In this judgment, the Division Bench referred to the circulars issued by the RBI in respect of non-banking financial companies and concluded that the RBI cannot wash its hands off the matter of charging excessive rate of interest by non-banking financial companies. On the basis of this judgment, the learned counsel for the Petitioner contended that the present writ petition is sustainable and that the Petitioner is entitled to a direction to call upon the RBI to regulate the rate of interest with reference to the loan availed by the Petitioner.7. On the contrary, the Respondents submit that the present petition is an abuse of process and has been filed by a defaulting borrower in order to avoid payment of dues as per the terms of the loan agreement.8. We considered the submissions of the learned counsel for the respective parties and examined the materials on record.9. Upon perusal of the affidavit in support of the writ petition, we note that a loan of about Rs.18,81,00,000/- was sanctioned to the Petitioner in connection with the establishment of a steel factory in Palladam, Tirupur District, in the name of AKMG Alloys Private Limited. An equitable mortgage of two items of residential property of the Petitioner was created as security for the aforesaid loan on 29.07.2011. The undisputed position is that this was not a fixed rate loan and the rate of interest was variable. With regard to interest rates, the RBI fixes the Repurchase (REPO) rate and the Reverse Repurchase (Reverse REPO) rate by bearing in mind various factors, including inflationary trends. Once these rates are fixed by the RBI, banks price their loans by using the above as a benchmark to decide their lending and borrowing rates. As regards NBFC, their borrowing costs are higher, as a rule, and, therefore, their lending rates are ordinarily also higher. By way of regulation, the RBI issued a Master Circular [DNBS (PD) CC No.340/340/03.10.042/2013-14], which consolidated earlier circulars on guidelines for a Fair Practices Code for all NBFC. These guidelines do not indicate the interest rates but merely provide that the terms and conditions of the loan, including annual interest rates, should be indicated in the sanction letter or otherwise. In addition, NBFC are required to provide a copy of the loan agreement so that the terms and conditions of the loan are clear to the borrower.10. On the facts of the present case, we find that the Petitioner availed a ten-year loan and serviced the loan without demur as to rate of interest until 2016. We also note that the Petitioner refers to but does not produce either the sanction letter or the loan agreement. Significantly, we find that the Petitioner did not raise any objection with regard to the rate of interest even in response to the notice under section 13(2) of the SARFAESI Act. In fact, by the said reply dated 17.10.2016, the Petitioner stated as under:“FromG.V.Kumar,No.72, West Car Street,Dindigul 624 001ToM/s.Sundaram BNP Paribas Home Finance Ltd.,“Sundaram Towers”46, Whites Road,Chennai 600 014Dear Sirs,Sub: Restructure the loan reg.Ref: loan account no.42700067We acknowledge receipt of your letter dated 01.09.2016. I wish to issue the following reply.2. I have been a regular customer of your company for the last 15 years and I have taken several loans from your company which have been pre closed.3. I wish to submit that this present loan was taken for the purpose of starting a steel factory in Palladam, Tirupur District, in the name of M/s. AKMG Alloys Pvt. Ltd. The said factory was purchased from M/s. Santhi Steels (India) Pvt. Ltd. which had a loan with Indian Overseas Bank, Coimbatore Branch. Since M/s. Santhi Steels (India) Pvt. Ltd. were unable to repay the loan to M/s. Indian Overseas Bank, they approached us to settle the loan amounts given by the Bank. After assessing the value of the company and the prospective future for the company, we decided to take over the management of the company together all its assets and liabilities. The Bank has also advanced a sum of Rs.18,81,00,000/- totally towards this project. We have also been paying the bank regularly. However, due to the falling prices of steel, the company could not be run effectively and efficiently. Hence we had to suspend the operations of the company.4. In order to augment the resources for the company, we had mortgaged the property mentioned in the schedule to raise additional funds for a sum of Rs.1/- Crore which is the subject matter of this notice. The said loan was taken in the year 2011 and we have been paying our dues till April 2016. However, since there are no operations in the factory, we were unable to mobilize the funds and we became a NPA on 30.04.2016. At this juncture, we wish to your kind attention that we had also paid a sum of Rs.90/- Lakhs approximately including the overdue interest towards the above mentioned as per your statement.5. Out of a total sum of Rs.1/- crore, we have paid a sum of Rs.87,65,915/- out of which Rs.73,17,760/- have been adjusted towards interest and Rs.14,48,155/- is adjusted towards principal. Since a substantive amount of interest has been paid, we can only request you to re-structure the loan and deduction of penal interest. We also understand from your statement that a sum of Rs.79,24,292/- is the outstanding due as on 31.08.2016 and we also understand that five installments are due under the above loan amount. We are also trying to sell the property to one of our relations and also to third parties who are interested and promise to pay the outstanding dues within a period of three months. So, we would request you not take any legal action on this property since we intend to settle the outstanding dues. We also request you to give one time offer for settling the entire dues within a period of three months so that this matter can be settled once and for all. We would be happy if you could give a positive reply to settle this matter amicably.Yours faithfully,signed/-(G.V.Kumar)”11. From the above letter, it is abundantly clear that the Petitioner availed a loan at a variable rate of interest and proceeded to discharge the loan until the year 2016. Thereafter, the Petitioner was unable to service the loan on account of the fall in prices of steel which, in turn, resulted in the suspension of operations of M/s.AKMG Alloys Private Limited. Therefore, the loan was declared as a NPA. Upon receipt of the notice under section 13(2) of the SARFAESI Act, the Petitioner requested the third and fourth Respondents to restructure the loan and also requested for time to sell one of the properties and discharge the loan from and out of the sale proceeds thereof.12.
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In these circumstances, we are unable to countenance the contentions of the learned counsel for the Petitioner, including on the basis of the judgment in AR.Jeyarhuthran. The aforesaid judgment was pronounced in a PIL wherein a communication of the RBI stating that it does not fix the rate of interest levied by NBFC was impugned. The observations of the Division Bench should be viewed in that specific context. As stated earlier, in this case, the Petitioner admittedly availed the loan at a variable rate of interest and proceeded to pay the EMI, consisting of both principal and interest, without demur between 2011 and 2016. The present writ petition was filed after the possession notice was issued in respect of the Petitioner's property on 17.05.2017. As stated earlier, even in response to the notice under section 13(2) of the SARFAESI Act, the Petitioner did not allege that the rate of interest is usurious. Therefore, it is clear that the allegations of the Petitioner, at this juncture, are clearly an after-thought and we decline to exercise discretionary jurisdiction in favour of the Petitioner.13. For reasons set out above, this writ petition fails and is dismissed. However, there shall be no order as to costs. Consequently, connected miscellaneous petitions are closed.