2007 (2) TMI 698 - HC - Indian Laws

Summary

Issues Involved:
1. Release of the entire loan amount sanctioned.
2. Release of the soft loan amount as per the National Equity Fund Scheme.
3. Awarding damages, interest, and waiver of interest on the amount already released.

Summary:

1. Release of the Entire Loan Amount Sanctioned:
The entrepreneur-petitioner, M/s Garg Steel, sought directions for the Punjab Financial Corporation (PFC) to release the entire loan amount sanctioned. The petitioner applied for financial assistance of Rs. 30 lacs, which was sanctioned in two parts: a term loan of Rs. 21,25,000/- at 15.5% interest p.a. and a soft loan of Rs. 7,50,000/- at 5% interest p.a. The petitioner availed Rs. 17,00,000/- of the term loan but faced delays in the release of the remaining amount due to non-compliance with certain conditions, including obtaining an NOC from the Pollution Control Board, installing a factory main gate, and securing a power connection letter from PSEB.

2. Release of the Soft Loan Amount as per the National Equity Fund Scheme:
The PFC admitted the sanction of the soft loan but stated that it was contingent on the availability of refinance from the Small Industries Development Bank of India (SIDBI). The SIDBI clarified that both the term loan and the soft loan were sanctioned to the PFC on 7.5.2004, and the PFC should have disbursed these amounts to the petitioner. The PFC's refusal to release the soft loan was due to an inter se controversy with SIDBI regarding the linkage of refinance for the soft loan and term loan.

3. Awarding Damages, Interest, and Waiver of Interest:
The petitioner argued that withholding the soft loan and the remaining term loan caused significant financial strain, leading to a standstill in the unit's operations. The court found merit in the petitioner's claim, invoking the principle of promissory estoppel as laid down by the Supreme Court in the cases of Motilal Padampat Sugar Mills Co. (P) Ltd. v. State of U.P. and Gujarat State Financial Corporation v. M/s Lotus Hotels Pvt. Ltd. The court directed the PFC to release the soft loan of Rs. 7,50,000/- at 5% interest and the balance term loan without charging interest from March 2003. Interest on the remaining term loan would accrue from the date of its release.

Conclusion:
The writ petition was allowed, directing the PFC to release the soft loan and the remaining term loan within one month, subject to compliance with the conditions detailed in the mortgage deed dated 18.11.2002.