THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY
Second Appeal No.513 of 2011
M/s Godavari Rubber Industries (P) Limited,Rep. by its Director, Rajahmundry
Counsel for the Appellants: Sri V. Srimannarayana
Counsel for respondent : Sri K. Somakonda Reddy
The respondent is a private limited company, and it established a small scale
industry at Rajahmundry. It appears that it availed loan of about Rs.10 lakhs
from the appellants. However, the industry did not function well, and has
become sick. The unit was taken over by the District Collector. The
circumstances under which, such taken over has occurred, are not immediately
before this Court. The consortium of creditors have entrusted the task of
rehabilitation of the unit to the appellants. At one stage, the unit was
brought to sale and in the auction a sum of Rs.21,50,000/- was fetched. At that
stage, the respondent offered to pay Rs.22 lakhs in full and final settlement of
the loan account. That was accepted by the appellants. The amount was paid in
Complaining that the appellants have not issued ‘No Dues Certificate’, enabling
it to assume possession of the property and other assets, the respondent filed
O.S.No.58 of 1997 in the Court of
I Additional Junior Civil Judge, Rajahmundry, for a declaration to the effect
that the debt due to the appellants was cleared; and for consequential mandatory
injunction, requiring the appellants to issue clearance certificate in favour of
The suit was opposed by the appellants, by filing a written-statement. Their
plea was that though the amount of Rs.22 lakhs was paid in installments, the
interest payable thereon, with effect from 01-05-1995 is due.
The trial Court decreed the suit through judgment dated
14-07-2004. The appellants filed A.S.No.102 of 2004 in the Court of
V Additional District Judge (Fast Track Court), East Godavari, at Rajahmundry.
The appeal was partly allowed, modifying the decree passed by the trial Court to
the effect that the relief prayed for therein be granted on payment of
Rs.62,088/-. Not satisfied with that, the appellants have approached this Court
by filing this Second Appeal.
Sri V. Srimannarayana, learned counsel for the appellants submits that a
specific proposal came from the respondent itself, that interest has to be
levied from 01-10-1995 and still, the lower Appellate Court awarded interest
only from 08-12-1995 onwards.
It is stated that the respondent is estopped from pleading that it is not under
obligation to pay interest, once the proposal has emanated through Ex.B-19.
Sri K. Somakonda Reddy, learned counsel for the respondent, on the other hand,
submits that the appellants made his client to wait for more than one year,
after the entire amount was paid, and no benefit was derived by the respondent
for the past more than one and half decades, even after the full payment was
made. Learned counsel submits that the appellants went on taking unreasonable
stand from time to time, and the result was that
not only the industry was closed, but also the assets were withheld.
On the basis of the pleadings before it, the trial Court framed the following
issues for its consideration:
1. Whether the plaintiff is entitled to the relief of declaration as prayed for?
2. Whether the plaintiff is entitled to the relief of consequential mandatory
injunction as prayed for?
1. Whether the suit is properly valued?
2. Whether the frame of suit is correct?
On behalf of the respondent, PW-1 was examined, and
Exs.A-1 to A-5 were filed. On behalf of the appellants, DW-1 was examined and
Exs.B-1 to B-38 were filed. On the suit being decreed, the appellants filed
A.S.No.102 of 2004, and the lower Appellate Court framed the following points
for its consideration:
1. Whether the frame of the suit and relief sought for are not in accordance
with the procedure and law?
2. Whether the plaintiff discharged the entire debt by paying Rs.22 lakhs as
agreed under O.T.S. Scheme?
3. Whether the contention of the appellants that as the plaintiff failed to
honour the One Time Settlement Scheme by paying prompt payments, the defendants
appropriated the payments towards the loan account and that the plaintiff has to
pay the balance loan amount and has to redeem the property mortgage hold any
merits and is acceptable?
4. Whether the finding of the trial court in declaring that the debt due by the
plaintiff to the defendants corporation is cleared and the consequential
Mandatory Injunction directing the defendants to issue clearance certificate to
the plaintiff can be upheld?
5. Whether the respondent is entitled for damages as urged in the cross
The decree passed by the trial Court was affirmed, subject to payment of
The entire industrial unit owned by the respondent was kept under the custody of
the appellants, for the purpose of rehabilitation. May be, because the efforts
to revive the industry did not fructify, the unit was brought to sale, and it
fetched Rs.21.5 lakhs. The respondent and its promoters came forward to pay a
sum of Rs.22 lakhs, in full and final settlement of their obligation towards the
appellants. That proposal appears to have weighed with the appellants, and
ultimately it was accepted. A sum of
Rs.6 lakhs was paid immediately on 29-09-1995. As regards the balance, efforts
were made by the respondent to borrow the amount from M/s Indian Bank.
Ultimately, the amount of Rs.22 lakhs was paid by 31-03-1996. Unless the
appellants give clearance certificate, the respondent is handicapped, either
from assuming the possession, or from transferring it to intending parties. The
appellants withheld the clearance certificate by insisting that interest ought
to have been paid from 01-05-1995.
The trial Court analyzed the oral and documentary evidence adduced before it and
arrived at a conclusion that there was no justification for the appellants to
insist on payment of interest. The lower Appellate Court, however, took the
view that, since the time for payment of balance of the amount was granted by
the appellants, through letter dated 08-12-1995, the balance of the amount shall
carry interest from that date.
A perusal of Ex.B-30 dated 08-12-1995 discloses that the appellants did not
stipulate, that interest is payable from any date, anterior to 08-12-1995. The
lower Appellate Court has taken this into account and awarded interest from that
date, till the date of payment. Learned counsel for the appellants is not able
to point out any defect in the finding recorded by the lower Appellate Court.
No substantial question of law arises for consideration.
The appellants-Corporation is an organization, constituted under a statute, with
an objective of promoting industrial growth and to render public service. On
account of hyper-technical stand taken by it, not only the respondent-industry
was closed, but also it was subjected to serious hardship. On the appellants
accepting the ‘One Time Settlement’ of payment of Rs.22 lakhs, the respondent
pooled the funds from different sources and paid the entire amount of Rs.22
lakhs. The attitude exhibited by the appellants at various stages was totally
unreasonable. Even after the decree was passed by the trial Court, ‘No Dues
Certificate’ was not issued, and the result was that, it remained in possession
and control of the entire unit. The respondent was denied possession of their
own unit, though payment of Rs.22 lakhs, that was agreed by the appellants
themselves was made. The respondent is exposed to the liability to pay interest
on the amount borrowed by it; to clear the debt towards the appellants.
The Second Appeal is accordingly dismissed with costs. It is directed that, in
case ‘No Dues Certificate’ is not issued within four weeks from today, the
appellants shall be under obligation to pay damages to the respondent, at the
rate of Rs.50,000/-
(fifty thousand) per year from the date of decree, till the date of issuing such
certificate, either on its own accord or through the process of execution of
L. NARASIMHA REDDY, J.