High Court of Judicature at Allahabad
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Ram Sanehi v. The Collector And Others - WRIT - C No. - 3463 of 2007  RD-AH 14954 (3 September 2007)
HIGH COURT OF JUDICATURE AT ALLAHABAD
1. Civil Misc. Writ petition No. 4177 of 2007
State of U.P. and others.................................Respondents.
2. . Civil Misc. Writ petition No. 4052 of 2007
State of U.P. and others......................................Respondents.
3. . Civil Misc. Writ petition No4758 of 2007
Collector Basti and others...................................Respondents.
4. Civil Misc. Writ petition No. 4584 of 2007
State of U.P. and others....................................Respondents.
5. . Civil Misc. Writ petition No 3463 of 2007
Collector and others..........................................Respondents
Hon. S.N.Srivastava, J.
The common question mooted in the above batch of writ petitions relates to agricultural loan advanced by different Banks and therefore, all the petitions have been heard and are disposed of by a composite judgment.
1. Civil Misc. Writ Petition No. 4177 of 2007: A brief resume of necessary facts in this writ petition is that the State Bank of India Meja Branch District Allahabad sanctioned a sum of Rs. 2,98000/- to the petitioner against purchase of Tractor on 30.7.2004 and in connection with the aforesaid loan, agricultural land admeasuring 1.232 hectares situated in village Banwari Khas Post Shukulpur P.S.Manda Tahsil Koraon District Allahabad and also land admeasuring .560 sitauted in village Unchdah was pledged to the Bank. The total land pledged to the Bank admeasures 1.792 hectares. It would appear from the record that the petitioner repaid certain amount details of which are enumerated in the writ petition. It would further appear that Bhola Singh Patel and Dharmendra Singh arrayed as Opp. parties 3 and 4 who claimed themselves to be Recovery Agent appointed by the Bank , forcibly took away the Tractor on 26.10.2005. Thereafter, a notice was served to the petitioner cautioning that in case, petitioner failed to repay the loan, the tractor seized by the Bank will be put to auction on 24.12.2006 followed by publication of auction sale notice appearing in news paper on 15.12.2006 and 16.12.2006.
2. Civil Misc. Writ Petition No. 4052 of 2007: In this case, the petitioner was sanctioned loan to the tune of Rs. 3 lac against purchase of tractor on 13.3.2004. He paid certain amount and thereafter, there occurred default in payment on account of natural calamities. It would further appear that one R.B.S. Associates arrayed as Opp. party no.4 claiming himself to be recovery Agent appointed by the Bank forcibly took away tractor on 4.1.2007.
3. Civil Misc. Writ Petition No. 4758 of 2007: In this case, loan granted to the petitioner was to the tune of Rs. 3,25000/- against purchase a tractor payable in 7 years. It would appear that the petitioner deposited the Ist installment, and thereafter, unforeseen calamity befell him and his entire house and crops were engulfed in the raging fire. In this case, M/S Gorakhpur Financial services Gorakhpur which was appointed as recovery agent by the Bank took forcible possession of the Tractor to force recovery of the loaned amount.
4. Civil Misc. Writ Petition No. 4584 of 2007: In this case, the petitioner was granted loan to the extent of Rs. 1,65000/- to purchase tractor by U.P.Sahkari Gram Vikas Bank Ltd Etawah in the month of Jan 1996 and as a security, the land admeasuring 1.109 hectare was mortgaged. It is urged that petitioner repaid a sum to the tune of Rs. 2,70,536/- and still notice was issued for recovery of Rs. 1,58,225/-.
5. Civil Misc. Writ Petition No. 3463 of 2007: In this Case it would appear that the petitioner was sanctioned loan of Rs. 2,50,000/- on 31.12.2000 for purchase of a tractor and to secure the loaned amount, agricultural land belonging to the petitioner was pledged to the Bank. It would further appear that the amount was agreed to be payable in nine year and the first installment of Rs. 80000/- was deposited in August 2003 while second installment of Rs. 13, 490/- was paid on 18.12.2000. Again, it would appear, a third installment of Rs. 95000/- was paid in June 2004. A total sum of Rs. 1,88000/- is indicated to have been paid and yet the Bank issued citation demanding Rs. 2,50,000/- failing which it was postulated , the amount would be recovered as arrears of land revenue.
In writ petition no. 3463 of 2007 and also in writ petition no. 4585 of 2007, Reserve Bank of India was impleaded and notices were issued. Sri Yashwant Verma, learned counsel appearing for Reserve Bank of India, assisted the court by placing certain material facts relating to agricultural land. It has been submitted by Sri Yashwant Verma that so far as rate of interest is concerned, the same is covered by the guidelines in the matter of loan upto the extent of Rs. 2 lac in the priority sector issued by the Reserve Bank of India and the same cannot exceed Bench Mark Prime Lending Rate (B.P.L.R.) and for the loaned amount above Rs. 2 lacs, it is stated, the Banks are free to determine rate of interest. In the matter of short term production Credit to farmers upto Rs. 3 lac, it is stated that rate of interest was fixed at 7% with 2% interest subvention to be provided by the Government of India. He has also placed graphs by which it is sought to be indicated that so far as State Bank andother Associates are concerned, the agricultural land is provided at the rate of Rs. 11.7%, Regional Rural Bank at the rate of 50.4%, Foreign Bank at the rate of 0.7%, Nationalised Bank at the rate of 12%, and other Scheduled Commercial Banks at the rate of 4.5% and all scheduled commercial Banks 10.8%. So far as agricultural sector is concerned, it is submitted that so far as agricultural sector is concerned, except the Banks mentioned above, the Banks are free to fix their respective interest rate.
In the matter of recovery, the question involved is whether the Bank could get the recovery made of agricultural could vehicles seized and possession of vehicles taken through persons within the legitimate parameters or by engaging private individuals or agencies not recognized by any provision of law as the agency for recovery and further whether such persons could seize the property at any time and Bank could fixed for auction privately without taking recourse to the law as envisaged under the U.P. Agricultural Credit Act. The second question is whether any recovery of interest could be made beyond the principal amount and whether principle of Damdupat will be applicable to loans in which certain immovable properties are mortgaged. The third question that begs consideration is whether in case mortgage of agricultural property against loaned amount what would be the effect of such mortgage regard being had to prohibition contained in section 155 of the U.P.Z.A. & L.R. Act if any such mortgage is impermissible and if agreement is entered between the Bank and tenure holder after mortgaging land to secure loaned amount.
This Court in the light of the above questions had already issued notices to the Banks for being heard on the questions as to what will be the effect of such agreement mortgaging property in the light of provisions of section 155 of the Act prohibiting mortgage of land and further what will be the effect in case agreement relating to mortgage is not registered and also whether such agreement would be enforceable by virtue of U.P. Agricultural Credit Act as envisaged in section 4 of the Act.
In all cases, which are before the Court, it appears that a printed form is being used by the Banks on which signatures of Agriculturists have been obtained and further that the details in the form have not been filled in by the agriculturist but the same have been filled in English language by some other persons and still further, most of the columns have been left blank. It is wholly undeniable that in majority of cases, the agriculturists are unlettered and illiterate and their thumb impressions have been obtained and virtually speaking, they are often not aware of the contents of the agreement or terms and conditions enumerated in the agreement and in the circumsdtances, a question of pivotal importance arises whether such agreement or terms and conditions embodied therein can be considered to be valid agreement within the definition of Contract Act. This Court while issuing notice has already framed certain questions vide order dated 12.2.2007 passed in writ petition no. 4177 of 2007 which are excepted below.
1. Whether a loanee applying for agricultural loan is supplied copy of the proposed terms and conditions before granting agricultural loan by the Nationalized Banks, private Banks and other financial bodies,
2. Whether in the agreement, loanee has any say in fixing terms and conditions of the agreement,
3. Whether copy of the agreement duly signed by both the parties is supplied to loanee after loan is sanctioned,
4. Whether there is any procedure prescribed under any relevant rules, or circulars to explain the terms and conditions to rustic village person who is illiterate and has approached the Bank for loan whose thumb impressions are any how obtained on the agreement the contents of which are in printed form describing terms and conditions either in English language or any vernacular language,
5. What is the basis of fixing terms and conditions in the agreement.
6. Whether loaned amount if sanctioned is paid to loanee or is directly transferred to Agent or dealer nominated by the Bank and is shown in the account of loanee or loanee has any choice to purchase any agricultural instrument which includes tractor, trolley etc from dealer or shop of his own choice.
7. What is the rationale of mortgaging agricultural property in so far as agricultural loan is concerned apart from pledging tractor or trolley purchased through loaned amount though in caseof other loans like car loan etc purchased properly alone is pledged without any mortgage of other property."
In writ peittion no. 3463 of 2007, petitioner was sanctioned loan of Rs. 2,50,000/- for purchase of a tractor. A total sum of Rs. 1,88,000/- was deposited by the petitioner and yet the Bank issued citation demanding Rs. 2,50,000/- failing which it was postulated in the citation that amount would be recovered as arrears of land revenue. From a further scrutiny of the record it would appear that the Bank has credited only a sum of Rs,17355/- against principal amount, Rs. 28,882.10 p. was adjusted towards administrative fee, Rs. 2,221 was charged as penal interest, Rs. 47485/- as interest and Rs. 9025/- as Misc. expenses. In view of the above, this Court by a detailed order dated 1.2.2007 issued notice to the Bank to satisfy the recovery proceeding and justification of deducting all such charges from the petitioners to the extent of Rs. 95000/- and further to justify whether it was permissible in law. The detailed order dated 1.2.2007 passed by this Court is quoted below.
"This writ petition has been preferred against the citation/demand notice dated 18.12.2006 (Annexure 1 to the writ petition) issued by Bhumi Vikrey Adhikari, U.P. Sahkari Gram Vikas Bank Ltd. demanding deposit of Rs. 2,50,000/-.
From a perusal of the record, it would appear that the petitioner was sanctioned a loan of Rs. 2,50,000/- on 31.12.2000 for purchase of a tractor. To secure the loaned amount, the petitioner pledged his agricultural land to the Bank. It brooks no dispute that it was agreed at the time of sanction of loan that the entire amount would be payable within a period of nine years. It would further appear from the record that the first instalement of Rs.80000/- was deposited in August 2003 while the second instalement of Rs. 13490/- was deposited on 18.12.2000. Again the third instalement of Rs. 95000/- was deposited in June 2004. Thus a total sum deposited by the petitioner approximates to Rs. 1,88000/- and yet the Bank aforesaid issued citation demanding Rs. 2,50,000/- failing which it was postulated in the said citation/demand notice, the amount would be recovered as arrears of land revenue.
I have heard learned counsel for the parties at a prolix length.
The learned counsel for the petitioner canvassed that the total amount deposited by the petitioner that aggregates to a sum of Rs. 1,88000/- has not been reckoned into consideration while issuing citation dated 18.12.2006 in which a sum of Rs. 2,50,000/- is displayed to be due against the petitioner. It is further submitted that it is postulated in the citation that in case the amount demanded is not deposited by the due date, the land mortgaged against the loaned amount would be put to auction attended with further postulate therein to recover the additional interest at the rate of 22% besides penal interest and recovery charges. The learned counsel also submitted that despite deposit of a sum of Rs. 1,88000/- uptil now, a meagre amount in the amount of Rs. 7000/- has been debited vis-??-vis the principal amount which is not only iniquitous but runs counter to all canons of law and settled position in law. The learned also canvassed that the petitioner is a poor agriculturalist and due to vagaries of time and mercurial weather condition and also that the area has been repeatedly hit by drought, the manner in which interest has been charged, is comparable to a practice employed by money lenders trapping poor fellow in the iron vice of interest payment converting his crisis into an opportunity to exploit him. The learned counsel also canvassed that the entire recovery proceeding including rate of interest being charged vis-??-vis agricultural loan which is more than the rate of interest in other agricultural sector, is highly discriminatory and is unsustainable in law.
On being asked to produce agreement entered into between the Bank and the petitioner, the learned counsel submitted that copy of agreement has not been made available by the Bank though it is mandatory on the part of the Bank to make available copy of the agreement so that calculation in all fairness may be made on the basis of the terms of the said agreement and also to enable its challenge in the court of law in case it militates against the provisions of the relevant law.
Sri Jai Singh learned counsel appearing for the Opp. party no.3 and also learned Standing counsel appearing on behalf of respondents 1 and 2 pray for and are granted one month's time to file counter affidavit. Rejoinder affidavit, if any may be filed within two weeks next thereafter.
In view of the nature of controversy involved in this petition, learned counsel for the petitioner is permitted to implead Reserve Bank of India. Let a copy of this writ petition be also served on Sri Yashwant Verma representing the Reserve Bank of India.
In the facts and circumstances of the case it is directed that till further orders of the Court, recovery proceeding pursuant to citation/demand notice dated 18.12.2006 (Annexure 1 to the writ petition) shall remain stayed. In the meanwhile, it is directed that the petitioner shall move application within two weeks to the Bank concerned and in case any such application is received within the aforesaid period, it would be incumbent upon the Bank to calculate the entire amount afresh charging simple interest and furnish the statement within a month next thereafter. Upon receipt of statement of account, it is directed, the petitioner shall pay 1/4th of the amount displayed in the statement of accounts within a period not exceeding three months.
List this matte for further hearing immediately after expiry of the aforesaid period."
Considering the matter in entirety relating to agricultural loan, and from a perusal of materials on record, it would appear that tractor in all the cases in hand were seized by the persons who were engaged privately by the Bank. All the matters relates to recovery of agricultural loan and recovery in the matter of such loans could only be made according to the provisions contained in U.P. Agricultural Credit Act 1973 which has the flavour of a Special Act so far as recovery of agricultural loan is concerned. A detailed procedure has been envisaged for recovery of loan under the Agricultural Credit Act. This Act, it brooks no dispute, is applicable to all the Banks including the State Bank, the Subsidiary Banks , and all the Banks defined unsdr the Bank Regulations Act and Cooperative Land Development Bank. According to Section 11 of the U.P. Agricultural Credit Act, the State Government by notification in the Gazette made on the application of Bank by an order directed that any amount due to the Bank given to an agriculturalist be recovered by sale of the land or by other immovable property and for this purpose, the Bank will approach the Prescribed Authority and Prescribed Authority will issue notice and pass appropriate orders which shall be subject to appeal under section 12 . By notification dated 7.1.94, the Sub Divisional Officer and Additional Sub Divisional Officer were declared Prescribed Authority. This procedure has been prescribed and enforced by Special Act.
In writ petition No. 4177 of 2007, after seizing the tractor, the recovery agent appointed by Bank R.G.B. Associates published notice for auction of the Tractor to be made on 24.12.2006 without there being any indicia of interference or involvement of Prescribed Authority or any authority competent to proceed with the recovery proceedings.
In writ Petition No. 4584 of 2007, notice was issued on Form no. 74 i.e. Z.A. form for auction fixing 18.12.2006 at Tahsil Etawah. The property in the said case is situated in village Pratapner. There is nothing on record to show that proceedings were initiated in strict compliance of the U.P. Agricultural Credit Act or the Prescribed Authority passed any such order under the U.P.Z.A.& L.R. Act. The Agricultural Credit Act 1973 is a Special Act for recovery and in the circumstances, U.P.Z.A. & L.R. Act will not have any application to the cases in hand and therefore, the provisions of U.P.Z.A. & L.R. Act cannot be called in aid for being applied to the proceedings directly without any order passed by the Prescribed Authority at the instance of the Bank.
So far as U.P.Sahkari Land Development Bank is concerned, it would appear, the Bank itself has issued notice for auction mentioning therein a sum of Rs. 2,50,000/- for recovery together with expenses to the extent of 22%.
In writ petition no. 4758 of 2002, M/S Gorakhpur Financial Services were appointed by State Bank of India as Agent for recovery who seized the tractor of the petitioner.
The question whether private agents can be engaged by the Bank, was considered by the Apex court in Crl. Appeal No. 267 of 2007 Manager, ICICI Bank Ltd. V. Prakash Kaur and others vide judgment dated 26.2.2007. Though I.c.I.C.I Bank is not covered by the U.P. Agricultural Credit Act, 1973, but considering the matter in its expanse, the Apex Court in last paragraph observed that " In conclusion, we say that we are governed by a rule of law in the country. The Recovery of loans or seizure of vehicles could be done only through legal means. The Banks cannot employ goondas to take possession by force." Thee is no indicia on the record to show whether these agencies have any legitimate trapping of authority under any legislation to make any recovery of loan. If the law does not permit creation of such agencies for recovering any loan or seizure of vehicles by any Banks or Financial Institutions which are doing business of advancing loan to anybody, such agencies are wholly incompetent to take law in their own hands and seize any vehicles at any time or at any place or initiate recovery proceedings on their own in utter disregard of procedures prescribed for such seizure or auction. Such act of the Bank which have alternative way of approaching the Prescribed Authority under the U.P. Agricultural Credit Act which alone can pass appropriate orders and proceeding in accordance with law is wholly uncalled for and unwarranted being not countenanced by any legislation. The procedure prescribed under the U.P. Z.A.& L.R.Act i.e. procedure for recovery as arrears of land revenue could only be taken recourse to in case any law permits to recovery any amount as arrears of land revenue. In the cases in hand the Banks who have advanced agricultural loan under the U.P. Agricultural Credit Act, 1973, can only proceed and initiate proceedings under the provisions of the said Act i.e. by approaching the Prescribed Authority under the Act who alone are competent to initiate proceedings in accordance with the procedure prescribed under the Agricultural Credit Act. Any other means of recovery i.e. by engagement of private agencies by the Bank is wholly uncalled for , illegal and unwarranted besides being one militating against rule of law which is the soul of the Constitution. In case any specific legislation is there, the Banks or such authority advancing loan are competent to approach and proceeding in accordance with law and but in no way, they are authorized to engage any private Agencies who may proceed like the musclemen of a feudal lord to harass, and bludgeon the gullible village people into their submissions by taking law in their own hands and seize any property as agent of the lending authority and auction at their own sweet will. My view finds reinforcement from a judgment of this Court in Ram Sajeevan Shukla v. The Collector District Faizabad and others (2002 (46) ALR 820).
"A conjoint reading of sections 11 and 12 of U.P. Agricultural Credit Act, 1973, reveals that the respondent-Bank instead of sending recovery certificate to Collector, Faizabad to recover the financial assistance granted to the petitioner and co-loanee for purchase of a Tractor as arrears of land revenue under U.P.Z.A. and L.R. Act read with Rules framed thereunder ought to have moved an application before Prescribed Authority and an order passed by Prescribed Authority after hearing both the parties, subject to the result of appeal under section 12 of the said Act would have become final and binding between them. It is held that expression "notwithstanding anything contained in any law used under section 11 of the U.P. Agricultural Credit Act, 1973 has overriding effect upon any other law including U.P. Z.A. & L.R. Act and Rules framed thereunder. The entire proceedings initiated by respondent Bank by issuing recovery certificate to recover financial assistance granted for purchase of a Tractor to the petitioner and co-loanee, who are indisputably agriculturists, is without jurisdiction being in breach of Sections 11 and 12 of U.P. Agricultural Credit Act, 1973."
The second question which begs consideration is whether mortgage of agricultural land to secure loaned amount is permissible vis a vis section 155 of the U.P.Z.A. & L.R. Act which envisages that no Bhumidhar shall have the right to mortgage any land belonging to him as such where possession of the mortgaged land is transferred or is agreed to be transferred in future to the mortgagee as security for the money advanced or to be advanced. Under the U.P. Agricultural Credit Act, section 3 makes it clear that State Government may by notification in Gazette vest, subject to such restriction as may be specified in notification, all bhumidhars , asamis and Government lessees with rights of alienation in land held under their tenure or any interest in such land including the right to create a charge or mortgage on such land or interest in favour of banks generally or any specified class of banks for the purpose of obtaining financial assistance from such banks and upon issue of such notification,, such bhumidhar, asamis and Government lessees shall, notwithstanding anything contained in any law for the time being in force or in any contract, grant or other instrument to the contrary, or any custom or tradition, have a right or alienation in accordance with the terms of the notification. By notification dated 3rd May 1975, the State Government has vested all Bhumidhars, Sirdar, Asami Government lessee the right of alienation in the land or any interest in such land including to create charge or mortgage of such land in favour of Bank generally purposes of obtaining financial assistance. The right of alienation to a Bhumidhar or a tenure holder is governed by the U.P.Z.A. & L.R. Act and right to mortgage is prohibited under that Government and this right has been issued by a notification dated 3rd May 1975 (supra) issued under section 3 which is in the nature of subordinate legislation as the petitioners wants to take loan against these properties for creating charge or mortgage against that land in future no such mortgage could be entered into. The U.P.Z.A. & L.R. Act is very clear which envisages in section 167 of the Act that any transfer made in contravention of such chapter will be void and property shall vest in the State. But the same was permitted by the Special Act called U.P. Agricultural Credit Act 1973 according to which mortgage/charge could be made to secure the loaned amount.
The third question that arises for consideration is whether any recovery could be made more than the principal amount? In this connection, paragraph 16 of the decision in Mhadagonda Ramgonda Patil and others v. Shripal Balwant Rainade and others AIR 1988 SC 1200, being relevant is quoted below.
"We may now consider the second question as to whether the rule of Damdupat is applicable to a mortgage transaction. Admittedly, it is an equitable rule debarring the creditor to recover at any given time the amount of interest, which is in excess of the principal amount due at that time. It is urged by the learned counsel appearing on behalf of the appellants that the rule is applicable only to a simple loan transaction and not to a transaction of mortgage. we are unable to appreciate this contention. In every mortgage there are two aspects, namely, (i) loan, and (ii) transfer of interest in immovable property. As mortgage is principally a loan transaction we do not find any reason why the rule of Damdupat which is an equitable rule should not apply also to mortgage."
The quintessence of what has been held is that Damdupat is an equitable rule debarring the creditor to recover at any given time the amount of interest which is in excess of the principal amount due at that time. What is further held by the Apex Court in the said decision is that by virtue of amendment by Act 20 of 1929 of Transfer of Property Act, the rule of Damdupat was made applicable to Transfer of property Act and to all the transaction relating to loan and mortgage of Hindu Law.
Learned counsel for the petitioner urged that there are cases in which a farmer has paid more than five times of actual amount and still he is trapped in debt. Any transaction by which any right is transferred whether by sale , gift or mortgage or otherwise is governed by Transfer of Property Act and any equitable principal of Transfer of Property Act so far as loan or mortgage are concerned, will also apply in case of loan advanced by Bank. Any contract made by the Bank with the farmer is always governed by the Transfer of Property act or Contract Act. From a perusal of the Contract filed by the Bank in some of the cases in seisine of the court it transpires that the agreement whatsoever is in the printed form which is not duly filled in by the loanee or the Bank but in the hand writing by some other persons and most of the columns are blank. It further appears that this cannot be a valid agreement in view of the fact that farmer who has taken loan has not seen the contents thereof. He has simply signed and therefore he cannot be said to have fully understood the terms and conditions on which contract is settled. In number of cases, there is nothing in the agreement that 22% shall be charged as recovery charges and more than 50% will be adjusted towards administrative charges and various other charges. All such charges are ex facie against the public policy. The financial assistance or loan is sanctioned to help the agriculturist to promote and facilitate agricultural farming.
The main vocation of majority of the people of India is farming. Most of the people engaged in farming are small farmers with small holding and are hardly able to arrange two square meals for their families. Their entire hopes and expectations are pinned on good yield of harvest and in case harvest fails them one year or two years, it brings them to the brink of starvation and one can well visualize their predicament. On one hand, they are unable to arrange a square meal for their family and on the other hand, they suffer persecution at the hands of recovery staff or agents who add to their woes by seizing of whatever remains in their impoverished family. In most of the cases, it has been seen that when once, the poor fellow has borrowed, he is trapped in the iron vice of interest payment and ultimately he is trapped in penury inasmuch as his entire land the only source of livelihood is auctioned at throw away price besides suffering civil prison. The agricultural sector is considered to be the most fragile sector and good or bad yield depends upon good or bad weather. In case there is drought or any natural calamity the agriculturist is affected by the same and in some cases it is very difficult for him to arrange meal for his family members. In case crop is destroyed by the drought or flood or due to any natural calamities. In most of the cases as in the present case also, due to unforeseen reason either due to fire destroying the entire crop or due to drought or other natural calamities, if loanee is unable to pay any one of the instalments, the default clause is often invoked and proceedings are initiated by employing private agents (often anti social elements) or by resorting to procedure of auctioning the property. In a welfare and democratic State ruled by rule of law, we decry money lending because it is immoral to convert crisis of another into an opportunity to exploit him. Such exploitation of poor people by our banking sectors in the welfare state was never visualized by Constitutional framers. The agricultural loan has to be taken to be one for assisting and helping the agricultural sector to improve their lot and not as a stranglehold to push them to penury. The Banking sector has to be liberal and not impatient so as to rigidly apply the rules meant of recovery. In the above conspectus, this court is of the view that in case of default, where the drop is hit by natural calamities like flood or drought or fire, beyond the control of farmer, the bank shall take accommodative attitude of employing coercive tactics and must explore measure like postponing recovery or re-scheduling recovery rather than preying upon farmers in the modernized version of Shylock's pound of flesh for failure to repay one or two installments.
In connection with the argument that in most of the cases, printed form is used and the loanee is often compelled to affix signatures or thumb impressions on every page of the printed form, which is subsequently filled in by person other than the petitioner. It is shocking to conscience that the poor agriculturists who are either illiterate or semi-literate are compelled to sign on dotted line without having any opportunity of understanding the terms of the agreement. In case of agricultural loan most of the agriculturist who get loan for the purpose of development of their agricultural land, copy of agreement was never given to any agriculturist. The copy of agreement filed alongwith counter and some of the writ petitions makes it clear that signatures has been affixed thereon at the bottom of every page. Most of the columns are also left blank and entries have been made by some person other than petitioner who according to learned counsel for the petitioner was made at a subsequent date. It has come on record that in the event of loan for more than 2 lacs, Banks are free to charge rate of interest. In such a situation in order to execute a valid agreement both the parties to the agreement must arrive at an agreement by actual consent out of free will and without any coercion or undue influence. In case of agricultural loan as most of the parties are illiterate and are made to affix their signatures, in order to get a valid agreement, it is necessary that loanee must get copy of the agreement proposed by the Bank at least one week prior to entering into agreement and only after the loanee gets acquainted with the terms of agreement fully, the agreement may take place and every column must be filled and every page must be signed by all the parties to the agreement. It is clear from the U.P. Agricultural Credit Act 1973, that though under the U.P.Z.A. & L.R. Act thee is a bar on any mortgage but under the said Act, charge or mortgage has been permitted subject to registration under section 17 of the Registration Act. In case any agreement is unregistered, the same cannot be enforced in obedience and no recovery will be referred to the Prescribed authority or collector for being given effect to.
It has come from the letter (Annexure 1 to the writ petition No. 3463 ) that the loanee deposited Rs. 95000/- and only Rs. 17355/- was credited in the principal amount and rest of the amount was not credited against the remaining loan. This Court is of the view that any amount deposited by the loanee may be credited towards principal and interest if any due may be recovered subsequently. The Banks are however, wholly incompetent to charge administrative, Misc and other charges. There is nothing on record to show that in cases where Opp. parties are charging 23% as recovery charges such charges as mentioned in the notices are wholly arbitrary and exorbitant. The recovery charges cannot be more than 10% by any reckoning particularly by a statutory body. In case of U.P. Land Development Bank, before the recovery is embarked upon as mentioned in the Act, the matter is required to be placed before the Registrar and only by the order of the Registrar, recovery proceedings can be embarked upon. The Registrar may after giving opportunity of hearing to the loanee and may pass order for recovery of the amount.
As held above, since principles of Damdupat are applicable to agricultural loans as well, the Bank cannot recover the amount of interest in excess of principal amount. It is further held that any agreement militating against the provisions of Transfer of Property Act or Contract Act or in case there is violation of the principles of any legislation, the same shall be unenforceable and cannot give any right to the Banks to initiate such proceedings with the help of recovery agents or any extra constitutional authority. The recovery shall be made strictly in accordance with the provisions of the U.P. Agricultural Credit Act.
In view of the above discussions, the writ petitions are allowed. The recovery proceedings initiated against the petitioners are quashed. The Banks are restrained from making recovery through any recovery agent except under the provisions of the U.P. Agricultural Credit Act in so far as agricultural loans are concerned by adopting procedure prescribed. The petitioners shall approach the Bank by way of representation bringing all facts to the notice of the Bank which result in failure to repay the loans on due dates and in case any such representation is preferred, the Bank shall consider and take appropriate decision on petitioner's representation considering the directions embodied in the judgment and also taking into consideration the difficulties and aptitude of farmers and if it so requires, the Banks may also reschedule the instalments accordingly. In view of the above a general mandamus is also issued that in case any private agency is found to be engaged in making recovery made under the U.P. Agricultural Credit Act, immediately action shall be initiated against him for launching criminal prosecution besides taking action against the Bank concerned which has employed such private agent.
Let a copy of this judgment be circulated to all District Magistrates/S.S.Ps/S.Ps in the State for compliance through Home Secretary. The Home Secretary shall also issue circulars to all concerned for strict implementation of direction contained in this judgment.
Sept 3, 2007
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