Judgment:
Vinod K. Sharma, J.
1. The Tamilnadu Industrial Investment Corporation Ltd., a company registered under the Companies Act and finance institution as defined under the State Financial Corporation Act, 1951, has invoked the provisions of Section 31(aa) of the Act, for recovery of a sum of Rs.90,89,452/- (Rupees Ninety Lakhs Eighty Nine Thousand Four Hundred and Fifty Two only) with interest @15.5%.
2. The first respondent M/s.Tamilnadu Pipe Industries advanced loan to respondent no.1 for purchase of SIDCO Shed No.67 at Sidco Industrial Estate, Thirumazhisai and purchase of machinery and its erection.
3. The partnership firm was advanced a term loan of Rs.13.50 Lakhs and also loan against subsidy eligibility, amounting to Rs.3.31 Lakhs.
4. The respondent nos.3 & 4 executed a registered mortgage deed and hypothecation deed on 16.03.1994 to secure the loan, whereas the respondent nos.2 & 3 had executed a deed of guarantee on 16.03.1994.
5. Thereafter, the second term loan of Rs.5.30 Lakhs and the loan against subsidy amounting to Rs.1.20 Lakhs was advanced on 15.12.1995 against security of hypothecation and mortgage.
6. The loan was foreclosed on 28.11.2003. A proposal of one time settlement was also considered, but it was not finalized.
7. The respondents took over the assets of the partnership firm, i.e. movable and immovable properties secured by way of hypothecation and mortgage on 28.01.2005. The respondents also gave cheques for Rs.3.51 Lakhs, but these were dishonoured when presented.
8. The property was brought for auction in the year 2005, which fetched Rs.14.85 Lakhs. This hypothecated and mortgaged property was sold to enforce their rights under the mortgage and hypothecation. Legal notice was thereafter issued on 26.06.2006. The cause of action to recover any outstanding amount, therefore arose in the year 2005, when the mortgaged property and hypothecated goods were sold.
9. The reading of petition further shows, that no principal amount is outstanding. Whereas the total amount of Rs.90,89,452/- (Rupees Ninety Lakhs Eighty Nine Thousand Four Hundred and Fifty Two only) is claimed only towards interest. The pleading or evidence also does not show how this figure is arrived at. It was open to petitioner to adjust the amount received first towards cost, then interest and finally towards principal. Once having chosen to adjust the principal amount, no further interest could be claimed on outstanding interest.
10. In Paragraph No.9 of the affidavit, it is pleaded as under:
"9. The cause of action arose within the jurisdiction of this Hon'ble Court on 29.11.1993 when the loan was sanctioned and on 16.3.1994 the Registered Mortgage deed and the Deed of Hypothecation were executed by the 2nd and 3rd respondents and when respondents 2nd and 3rd execute a Deed of Guarantee on 16.03.1994 and when the petitioner cause the Lawyer's notice to the Respondents when the petitioner arrived at the loss suffered by its on account of the above loan granted by it and subsequently."
11. Even if the averments made in the petition are taken on its face value, the petition deserves to be dismissed, firstly in absence of principal, no interest on interest could be claimed. Admittedly, no principal amount is outstanding, and no details are forthcoming as to how an amount of Rs.90,89,452/- (Rupees Ninety Lakhs Eighty Nine Thousand Four Hundred and Fifty Two only) is claimed as interest after receipt of principal amount in the year 2005. The claim is thus on the face of it unconscionable for State agency, as such claim cannot be expected even from private money lenders.
12. No merit. Dismissed. No costs.