T.R.HANDA,J. - - (1.)This appeal has been filed under Section 32 of the State Financial Corporations Act, 1951, hereinafter to be referred as the Act, and is directed against the order dated 9 -9 -1980, passed by the District Judge, Mandi. The impugned order was passed in the proceedings initiated by the respondent against the appellant under Section 31 of the Act and it directs that the property of the appellant mortgaged with the respondent as security for the loan raised by the appellant from the respondent be put to sale for realization of the principal amount of loan along with interest thereon till the date of its realization.
(2.)The facts and circumstances giving rise to this appeal may now be stated in brief: - The respondent is a body corporate established under Section 3 of the Act. One of the functions of this Corporation is to grant loans or advances to industrial concerns. The appellant who runs an industrial concern under the name and style of Himachal Automatic Electric Bakery, Mandi wanted to set up an automatic bakery plant at Mandi. He was short of finance and, therefore, approached the respondent Corporation for a loan of Rs. 80,000/. The respondent Corporation offered him a loan of Rs. 60,000/ - against the mortgage of property of adequate value and on the terms and conditions as found in their reply dated, 23 -5 -1970, which is Ex. D. A. on the record. These terms were acceptable to the appellant. The appellant, therefore, on 12 -12 -1969, executed the mortgage deed Ex.PA in favour of the respondent Corporation for securing the amount of loan which he was to receive from the Corporation. This deed besides functioning as security for the repayment of the loan also mentions in details the terms and conditions on which the loan was to be paid as also the manner in which it was to be repaid. Later the appellant realized that the loan of Rupees 60,000/ - sanctioned in his favour by the respondent Corporation and in respect of which he had executed mortgage deed Ex. PA was not sufficient to meet his requirements. He, therefore, applied to the respondent Corporation for a further loan of Rs. 40,000/ -. This additional loan of Rs. 40,000/ - was sanctioned by the respondent Corporation on the same terms on which the initial loan of Rs. 60,000/ - had been sanctioned. The appellant then executed a fresh mortgage deed in favour of the respondent on 3 -7 -1970. This second mortgage deed describes the manner in which the second loan was to be disbursed by the respondent Corporation to the appellant and also provided for the mode of repayment of the amounts of both the loans of Rs. 60,000/ - and Rs. 40,000/ -. The revised schedule of the instalments in which these loans were to be repaid finds mention in condition No. 1 of this second mortgage deed Ex. P.B., the relevant portion of which reads like this : - "The mortgagors hereby covenant with the Corporation that they shall repay to the Corporation at the Head Office of the Corporation or such other place as the Corporation may appoint in this behalf, the said sum of Rs. 40,000/ - as well as Rs. 60,000/ - according to schedule in the said indenture which is substituted as per schedule given hereunder: (i) Rs. 5,000/ - (Rupees Five Thousand Only) on 12 -6 -1971. (ii) Rs. 5,000/ - (Rupees Five Thousand Only) on 12 -12 -1971. (iii) Rs. 5,000/ - (Rupees Five Thousand Only) on 12 -6 -1972. (iv) Rs. 5,000/ - (Rupees Five Thousand Only) on 12 -12 -1972. (v) Rs. 5,000/ - (Rupees Five Thousand Only) on 12 -6 -1973. (vi) Rs. 5,000/ - (Rupees Five Thousand Only) on 12 -12 -1973. (vii) Rs. 5,000/ - (Rupees Five Thousand Only) on 12 -6 -1974. (viii) Rs. 5,000/ - (Rupees Five Thousand Only) on 12 -12 -1974. (ix) Rs. 6,000/ - (Rupees Six Thousand Only) on 12 -6 -1975. (x) Rs. 6,000/ - (Rupees Six Thousand Only) on 12 -12 -1975. (xi) Rs. 6,000/ - (Rupees Six Thousand Only) on 12 -6 -1976. (xii) Rs. 6,000/ - (Rupees Six Thousand Only) on 12 -12 -1976. (xiii) Rs. 6,000/ - (Rupees Six Thousand Only) on 12 -6 -1977. (xiv) Rs. 6,000/ - (Rupees Six Thousand Only) on 12 -12 -1977. (xv) Rs. 6,000/ - (Rupees Six Thousand Only) on 12 -6 -1978. (xvi) Rs. 6,000/ - (Rupees Six Thousand Only) on 12 -12 -1978. (xvii) Rs. 6,000/ - (Rupees Six Thousand Only) on 12 -6 -1979. (xviii) Rs. 6,000/ - (Rupees Six Thousand Only) on 12 -12 -1979. together with interest on the said principal sum or the balance thereof remaining unpaid for the time being at a rate 3% (three per cent) per annum above the bank rate subject to a minimum of 9% (nine per cent) per annum, calculated on the basis of daily Products. The appellant did not pay even a single instalment towards repayment of the principal amount of loan. Even towards interest he paid only two instalments. In this manner he committed a default in complying with the agreed terms as contained in the mortgage deeds Exs. P.A. and P.B. on account of such persistent defaults on the part of the appellant, the executive committee of the respondent Corporation decided to recall the entire loan amount from him in accordance with the terms of the mortgage deeds. The respondent Corporation then served a legal notice on the appellant calling upon him to repay the entire outstanding amount along with interest. The appellant having failed to comply with the notice, the respondent Corporation approached the Court of the District Judge under Section 31 of the Act with the prayer that an order for the sale of the mortgaged property be passed and from the sale proceeds the dues of the respondent Corporation be recovered.
(3.)The case of the appellant before the District Judge on the other hand was that it was the respondent Corporation and not he who had committed breach of the agreed terms as contained in the mortgage deeds on which the loans were to be advanced. According to the appellant, the respondent Corporation failed to release the agreed amount of loan in his favour on due dates with the result that he had to suffer a huge loss in his business. On account of the delay in releasing the loan to him by the Corporation, the appellant could not start his business and this naturally resulted in his failure to pay the instalments in accordance with the agreed schedule. According to the appellant, as against the agreed loan amount of Rs. 1,00,000/ - the respondent Corporation had advanced him only Rs 92,925 -70 and further as per agreed terms the entire amount of Rs. 1,00,000/ - was to be advanced to him by 31 -8 -1970 whereas actually the last instalment was released in his favour only on 27 -10 -1971. Even after this last instalment the total amount of loan advanced to him fell short of the stipulated amount by Rs. 7,074.30. The appellant further claimed that on account of the non -fulfilment of the terms of the contract by the Corporation, he had suffered a loss of Rs. 27,800/ - for which he was entitled to be reimbursed by the respondent Corporation. He also disputed his liability to pay interest at the agreed rate on the plea that it was excessive and the respondent Corporation was not entitled to charge it.
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