The Telegraph
Friday , July 25 , 2014
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Court slams bank on claim

- Rs 40 lakh sought in repayment of Rs 1-lakh loan

Guwahati, July 24: Gauhati High Court has strongly criticised a nationalised bank for asking a borrower to pay Rs 40 lakh for a loan of Rs 1 lakh that he had taken way back in 1973, despite settlement of the case in a Lok Adalat in 2006.

The court of Justice K. Sreedhar Rao on Tuesday disposed of the petition filed by the bank, refusing to accept the Lok Adalat’s order that had settled the case. The borrower had already paid Rs 9 lakh.

“This case projects a transaction where the conduct of a nationalised bank appears to be worse than that of a usurious money lender. It may be that the banks are public institutions and dealing with public money. However, there should be some elements of morality and justification on the part of the bank in making a claim for recovery where the claim is almost 40 times that of the loan,” Justice Rao said in his order, which was made available to The Telegraph today.

The borrower, Vidya Prakash Agarwalla of Fancy Bazar, a business hub, had taken a loan for Rs 1 lakh in 1973 from Central Bank of India for business purposes.

He had made some repayments but later failed to repay the total amount.

As the borrower failed to repay the loan, the bank filed a suit in 1990 and it was pending. The bank was however, calculating commercial rate of interest and penal rate of interest.

In 2006, the case was referred to a Lok Adalat for mutual settlement.

The manager of the bank agreed to settle the claim at Rs 9 lakh and signed the compromise memorandum on the condition that it needed to be approved by their higher authorities.

Agarwalla had paid the amount and the Lok Adalat passed an order.

But the bank then filed a suit in the high court as their higher authorities rejected the settlement.

“The court order, however, said, “The interest to be awarded from the date of the suit till the date of decree and till payment is the discretion of the court. Hence the plaintiff cannot insist on contract rates and penal rates after preliminary decree. The manager of the branch had agreed to the Lok Adalat settlement and there was no reason for their higher authorities to have rejected the proposal. Such rejection appears to be arbitrary and based on such rejection, the claim of the bank to revive the suit and to make a claim for Rs 40 lakh would really prick the conscience of the court,” the high court order said.

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