(Prayer: This RFA is filed under Section 96 read with Order XLI, Rule-1 of the Civil Procedure Code, 1908, against the Judgment and Decree dated:02.12.2013 passed in O.S.No.148/2012 on the file of the XXVII-Additional City Civil Judge, Bengaluru, dismissing the suit for recovery of money.)
1. Though this matter is listed for admission, at the request of learned counsel appearing for the parties, it is taken up for final disposal.
2. The unsuccessful plaintiff in O.S. No.148/2012 on the file of the XXVII Additional City Civil Judge, Bengaluru, has come up in this appeal impugning the judgment and decree dated 02.12.2013, wherein the suit filed by it for recovery of Rs.2,75,000/- together with current and future interest at 18% per annum and costs from the defendant, has been dismissed.
3. The brief facts leading to this appeal are as under:
3.1 The plaintiff - M/s. SRS Alloys Private Limited established an industrial unit at Hirehalli Industrial Area, an industrially backward area situate in Tumakuru. It is stated that the said industry was commenced by the plaintiff with the financial assistance from the defendant – M/s. Karnataka State Industrial Investment and Development Corporation Limited (for short, ‘KSIIDC’). The Government of Karnataka had also sanctioned an investment subsidy to the plaintiff in a sum of Rs.11,00,000/- for the purpose of setting up industry involved in manufacture of alloys and steel castings etc.
3.2 Since the plaintiff – Company had suffered huge financial loss, it had fallen in arrears with regard to payment of money due to the defendant – KSIIDC and hence, it requested for settlement of dues under the One Time Settlement (for short ‘OTS’) Scheme. The defendant vide its letter No.AGM(Z-II)/734/2006-07 dated 08.06.2006, approved the plaintiff’s request for settling the dues under the OTS scheme, which was formulated as per the OTS policy for the year 2004-05, subject to certain conditions stated therein. Under the said OTS scheme, the plaintiff paid Rs.84,00,000/- in full and final settlement of its dues to the defendant. According to the plaintiff, the said amount was inclusive of first two installments of subsidy, which the defendant received directly from the Government of Karnataka. In confirmation of the said settlement, the defendant issued ‘No Due Certificate’ bearing No.DGM(IDD)/4337/2006-07 dated 23.02.2007 to the plaintiff.
3.3 It is stated that after the plaintiff settled its dues under the OTS Scheme, the Government of Karnataka addressed a letter dated 05.02.2008 to the Managing Director, KSIIDC, intimating him about the release of the third installment of subsidy in a sum of Rs.2,75,000/- vide cheque No.796852 dated 29.01.2008 and instructing him to credit the said amount in favour of the plaintiff - Company. The plaintiff made repeated requests to the defendant for release of the said subsidy amount in its favour, however the defendant did not take any action in the matter. Meanwhile, the plaintiff addressed a letter to the Joint Director, District Industries Centre, Tumakuru, for release of the said amount. The Joint Director, in turn, issued a letter dated 04.11.2008 to the defendant – KSIIDC instructing them to release the said subsidy amount in favour of the plaintiff.
3.4 The records would indicate that the Deputy General Manager of the defendant vide his communication dated 01.01.2009, declined to release the subsidy amount of Rs.2,75,000/- in favour of the plaintiff - Company on the premise that the said amount had been appropriated towards sacrifice made by the defendant i.e., waiver of accrued interest to the tune of Rs.92,19,000/-, which was payable by the plaintiff, at the time of OTS approval. Thereafter, the plaintiff – Company got issued legal notice dated 21.12.2011 calling upon the defendant – KSIIDC to pay a sum of Rs.2,75,000/-, the third installment of subsidy released by the Government, along with interest at 18% per annum from the date of receipt of the said amount till the date of payment within seven days from the date of receipt of the said notice. Since the defendant – KSIIDC failed to pay the said amount, the plaintiff filed the suit before the Court below.
3.5 In the said suit, the defendant – KSIIDC after service of summons, entered appearance. The defence taken by the defendant was that at the time of OTS approval, it had collected only the principal amount of Rs.84,00,000/- from the plaintiff and considering the financial loss suffered by the plaintiff, it had waived off accrued interest to the tune of Rs.92.19 lakhs payable by the plaintiff. In that background, the defendant had appropriated the third installment of subsidy of Rs.2,75,000/- towards the sacrifice made by it at the time of approval of OTS scheme as per the terms of OTS policy for the year 2004-05. The defendant pointed out that though the plaintiff did not stick to the payment schedule under the OTS scheme, delay in payment of the principal amount was condoned with an intention to help the plaintiff to get over the financial crisis. The defendant contended that it was not liable to pay any interest much less 18% per annum as sought by the plaintiff and that the suit suffered from non-joinder of necessary party and mis-joinder of parties. Accordingly, it sought for dismissal of the suit with exemplary costs.
3.6 Based on the aforesaid pleadings of the parties, the Court below framed the following issues:
'1. Whether the plaintiff – Company proves that, the very appropriation of the subsidy by the defendant is illegal and is in violation of the conditions of one time settlement as alleged in the plaint ?
2. Whether plaintiff is entitled for the suit claims from the defendant as claimed?
3. Whether defendant proves that suit of the plaintiff is barred under the provisions of State Financial Corporation Act, 1951?
4. Whether defendant further proves that suit of the plaintiff is bad for non-joinder and mis-joinder of parties?
5. What order or decree?'
3.7 In support of the case of the plaintiff, one of its Directors was examined as PW.1 and he got marked documents as per Exs.P1 to P11. On behalf of the defendant – KSIIDC, its Assistant General Manager was examined as DW.1 and documents as per Exs.D1 to D5 were got marked.
3.8 The Court below after considering the contentions of the learned counsel for the parties and the evidence available on record, in its judgment dated 02.12.2013, has observed that the plaintiff – Company had accepted the terms and conditions of the OTS policy for the year 2004-05 vide Ex.D1, which provided for adjustment of the subsidy amount after closure of the account under the OTS scheme by the defendant towards the amount sacrificed by it at the time of OTS approval. The Court below has referred to the admission of PW.1 – Sri Renukananda to the effect that: the plaintiff was liable to pay more than Rs.2,06,00,000/- to the defendant; the defendant had waived off accrued interest to the tune of Rs.92,19,000/- payable by the plaintiff; the plaintiff had paid only Rs.78,50,000/- to the defendant and the balance amount of Rs.5,50,000/- was adjusted against the first installment of subsidy released by the Government to the defendant. PW.1 further admitted that the third installment of subsidy in a sum of Rs.2,75,000/- sanctioned by the Government to the defendant after closure of OTS was public money. In that view of the matter, the Court below while answering issue Nos.1 and 2 in the negative, held that the defendant – KSIIDC had rightly appropriated the subsidy amount of Rs.2,75,000/- released by the Government towards the loss suffered by it on account of waiver of interest to the tune of Rs.92,19,000/- at the time of approval of OTS.
3.9 With regard to issue No.3, the Court below relying upon the evidence of DW.1 – B. Rajendra and the terms of the OTS policy letter vide Ex.D1, held that the suit of the plaintiff was barred under the provisions of the Karnataka State Financial Corporations Act, 1951 and accordingly, answered the said issue in the affirmative.
3.10 Insofar as issue No.4 is concerned, the Court below has observed that since the State Government was not made as a party to the suit, it suffered from non-joinder and mis-joinder of necessary party and accordingly, answered the said issue in the affirmative. Consequently, the Court below dismissed the suit of the plaintiff by its judgment dated 02.12.2013. Being aggrieved by the same, the plaintiff is before this Court.
4. Heard the learned counsel for the appellant and the learned counsel for the respondent. Perused the material on record.
5. The grounds urged in this appeal are that the respondent had no right to appropriate the third installment of subsidy of Rs.2,75,000/- that it received from the Government of Karnataka, after closure of the account under the OTS scheme. The Court below has ignored the fact that the respondent – KSIIDC had not adhered to the terms and conditions stipulated in the OTS policy for the year 2004-05 vide Ex.D1 as clause 7.7 of the said policy confers right to the respondent to appropriate subsidy, insurance claim etc. received by it subsequent to the closure of the account under the OTS, if the said right had been reserved in the communication of approval of the OTS. According to the appellant, Ex.P2 dated 08.06.2006, which is the communication issued by the Assistant General Manager of the respondent to the appellant intimating about acceptance of the OTS did not include any such reservation of right and consequently, the respondent had no right to appropriate the subsidy amount of Rs.2,75,000/-.
6. A perusal of the said letter dated 08.06.2006 vide Ex.P2 discloses that the Board in its meeting held on 03.06.2006 had approved the appellant’s request for setting the dues under One Time Settlement Scheme subject to the following terms and conditions:
'1) The company shall pay entire principal amount of Rs.84 lacs under OTS to KSIIDC (including the initial amount paid).
2) OTS amount as above shall be paid as follows:
i) First 25% of the OTS amount within 30 days from the date of communication without interest (including the initial amount paid).
ii) Balance 75% of the OTS amount within next three months without interest.
3) Waiver of interest dues.
4) The company shall pay other debits, if any.
The Corporation has the right to withdraw the OTS package, if it comes to know subsequently that you have furnished false or misleading or incorrect or untrue information or any material information, having bearing on the OTS decision. The Corporation’s decision in this regard shall be final.'
7. It is pertinent to note that the appellant – Company did not stick to the payment schedule stipulated in the aforesaid letter dated 08.06.2006 (Ex.P2) and in that behalf, Director of the appellant – Company, by his letter dated 31.10.2006 vide Ex.D4, requested the Deputy General Manager of the respondent - KSIIDC to extend time till 31.03.2007 to make balance payment of Rs.43,00,000/-. The respondent considering the fact that the appellant had suffered huge financial loss, had extended time to enable it to make balance payment towards the loan account. Thereafter, the respondent after accepting a sum of Rs.84,00,000/- towards clearance of the loan account under the OTS scheme, issued No Due Certificate on 23.02.2007.
8. It is seen that even earlier to filing of the suit in O.S. No.148/2012, when the appellant requested the respondent to release the third installment of subsidy in a sum of Rs.2,75,000/- in its favour, the respondent – KSIIDC had refused to do so for the reason that under the OTS scheme, it had waived off interest accrued to the tune of Rs.92,19,000/-, which was payable by the appellant and thereby, it had suffered loss and as per the terms of the OTS policy of the respondent for the year 2004-05, it was entitled to appropriate the subsidy amount of Rs.2,75,000/- received by it from the Government against the sacrificed amount of Rs.92.19 lakhs. The relevant clause No.7.7 of the said policy reads as under:
'If State/Central Subsidy, interest subsidy, insurance claim etc., received by the Corporation subsequent to the account closure of OTS, the amount sacrificed by the Corporation at the time of OTS approval / other liabilities if any shall be recovered and only the balance amount be refunded to the loanee concerned. While communicating the OTS approval communication, this clause shall be included. However, this conditions does not apply in cases where specific reference is made and relaxation is provided at the time of considering OTS.'
9. The contention of the learned counsel for the appellant is that the said condition was not mentioned in the letter dated 08.06.2006 addressed by the Assistant General Manager of the respondent – KSIIDC to the appellant and concurrence of the appellant in that regard was not taken. There is nothing on record to substantiate the said contention. The OTS scheme has been framed by the respondent under the OTS policy for the year 2004-05. The appellant having availed the benefit of the said OTS Scheme, wherein interest amount of Rs.92,19,000/- was waived off by the respondent by taking into consideration the fina
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ncial loss suffered by the appellant, cannot now contend that it is not bound by clause No.7.7 of the OTS policy merely on the ground that the said clause was not mentioned in the communication dated 08.06.2006 vide Ex.P2. Moreover, PW.1- Renukananda, Director of the appellant – Company, has admitted in his cross-examination that the third installment of subsidy amount of Rs.2,75,000/- released by the Government in favour of the respondent was public money. 10. In that background, the respondent has rightly appropriated the sum of Rs.2,75,000/-, which it had received on behalf of the appellant from the State Government, towards the sacrifice made / loss suffered by it on account of waiver of interest of Rs.92,19,000/- at the time of approval of the OTS scheme. 11. It is needless to say that the respondent – KSIIDC is also a State run organization wholly funded by the State of Karnataka. Therefore, the amount of Rs.2,75,000/- that was given by the State in the form of subsidy was rightly appropriated by the respondent inasmuch as it had absorbed the loss of the plaintiff to the tune of Rs.92,19,000/-. 12. Therefore, in the fact situation, the Court below having rightly considered the pleadings, evidence available on record, has declined to decree the suit of the plaintiff, which appears to be just and proper. This Court find that no grounds are made out to interfere with the impugned judgment and award. 13. Accordingly, this appeal is dismissed.