1982 (3) TMI 270 - HC - Indian Laws

Summary

Issues Involved:
1. Breach of contract by the U.P. Financial Corporation.
2. Entitlement to release of further loan amount.
3. Validity of the recall notice for the entire loan.
4. Recovery of loan as arrears of land revenue.
5. Claim for collection charges.
6. Right to compensation for damages due to breach of contract.
7. Release of title deeds and hypothecation deed.

Issue-wise Detailed Analysis:

1. Breach of Contract by the U.P. Financial Corporation:
The Petitioner contended that the Corporation committed a breach of contract by not disbursing the balance loan amount of Rs. 2,31,500/-. The Corporation argued that the Petitioner had not created sufficient assets to meet the stipulated margin of 15% as per Clause 23 of the agreement, which was a condition precedent for further disbursement. The Court noted that both parties alleged breach of contract against each other, leading to the termination of the contract.

2. Entitlement to Release of Further Loan Amount:
The Petitioner claimed he had fulfilled all requirements under the agreement and invested his share of the project cost, thus was entitled to further loan disbursement. The Corporation, however, maintained that the Petitioner had not met the condition of creating sufficient assets and thus was not eligible for further disbursement. The Court found that the Corporation had a right to demand the creation of further assets before releasing additional funds.

3. Validity of the Recall Notice for the Entire Loan:
The Corporation issued a recall notice for the entire loan amount due to the Petitioner's alleged breach of agreement terms, including non-payment of overdue interest. The Court held that the Corporation was within its rights under Section 30 of the State Financial Corporations Act and the terms of the agreement to recall the loan.

4. Recovery of Loan as Arrears of Land Revenue:
The Corporation sought to recover the loan as arrears of land revenue under Section 3 of the U.P. Public Moneys (Recovery of Dues) Act, 1972. The Court upheld the Corporation's right to recover the loan amount as arrears of land revenue, provided the recovery process adhered to legal provisions.

5. Claim for Collection Charges:
The Petitioner challenged the inclusion of Rs. 40,167.06 as collection charges in the recovery notice, arguing that no costs had been incurred in collection proceedings. The Court found merit in this contention, noting that collection charges could only be levied when actual costs were incurred. Consequently, the Court quashed the impugned notice (Annexure 14) to the extent it claimed collection charges.

6. Right to Compensation for Damages Due to Breach of Contract:
The Petitioner claimed damages of Rs. 1,89,710/- due to the Corporation's breach of contract. The Court reiterated that a claim for unliquidated damages does not constitute a debt until adjudicated by a court. The Petitioner's right to sue for damages was acknowledged, but it did not absolve him of the liability to repay the loan with interest.

7. Release of Title Deeds and Hypothecation Deed:
The Petitioner sought the release of his title deeds and hypothecation deed, arguing that he owed nothing to the Corporation after adjusting the claimed damages. The Court held that the title deeds could not be released until the mortgage was redeemed, and the Petitioner's liability to repay the loan with interest was settled. The Court directed the Corporation to permit the Petitioner to sell the mortgaged property to repay the loan.

Conclusion:
The Court allowed the petition in part, quashing the notice dated 3-9-1980 (Annexure 14) to the extent it claimed collection charges, and restrained the respondents from realizing any amount towards collection charges. The Court directed the U.P. Financial Corporation to afford reasonable opportunity and grant permission to the Petitioner to sell the mortgaged properties for the purpose of redeeming the mortgage and repaying the loan. Each party was ordered to bear its own costs.