TMI Blog2004 (4) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellants and other concerned banks, which may be managed by the Comptroller and Auditor General of India. We would request the Comptroller and Auditor General of India to effect recoveries of all the excess amount realised by the Union of India by way of interest tax and interest by the banks and other financial institutions and create the corpus of such fund therefrom. The appellant and other concerned banks are also hereby directed to contribute to the extent of ₹ 50 lakhs each in the said fund. - C.A. 4655 OF 2000 - - - Dated:- 16-4-2004 - Judge(s) : V. N. KHARE., S. B. SINHA JUDGMENT The judgment of the court was delivered by S.B. SINHA J. - The authority of the bankers to round up the existing interest rates to 0.25 per cent. is in question in these appeals which arise out of a judgment and order dated December 18,1998 passed by the High Court in Karnataka in Writ Petition No.3927 of 1994, Civil Appeal No.5218 of 2000 has been filed by the Association of Borrowers of Karnataka upon getting itself impleaded as a party in the connected appeal. Appellant No.1 herein is an Association of Bankers. Appellants Nos.2 to 28 are banks which were created under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible. Such a matter, the appellants, contended, being contractual in nature, the writ petition was not maintainable. The High Court of Karnataka, by reason of its impugned judgment dated December 18,1998, rejected the said contention and found the action on the part of the appellants herein illegal and consequently issued the following directions: " . . . The writ petition is allowed. Rule issued is made absolute. The action of the respondents-banks in rounding off interest rates to the next higher 0.25 per cent. is held illegal, arbitrary and untenable. A command is issued to all the banks to submit an account of the excess interest collected by them from the borrowers and deposit the same with the Reserve Bank of India to be debited in the account of the Union of India. The Reserve Bank of India-respondent No.2 is directed to take immediate effective steps for implementation of our directions by calculating the excess interest collected by the banks and ensuring the same to be deposited in the funds of the Union of India." The appellants herein are before us questioning the said judgment. Submissions: Mr. Dushyant A. Dave, senior counsel appearing on behalf of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t only exactly by 3 per cent, they necessarily had to increase the rate of interest by 0.30927835026 so as continue to earn pre-tax interest at 10 per cent., the impugned decision had been taken; (d) Since the calculation would come to an impossible fraction, the revised rate had to be rounded off for easy calculation in collection; (e) The appellants, therefore, had not realised any tax de hors the provisions of the Act but had realised interest in terms of section 26C which was authorised by the Reserve Bank of India; (f) In any event, increase in the rate of interest being of not much significance, the doctrine of de minimis should be applied; (g) As the appellants have merely collected a higher rate of interest to which they were entitled in terms of the loan agreements, as the Reserve Bank of India only fixes the minimum rate, the same had no nexus with collection of tax within the meaning of article 265 of the Constitution of India and, thus, the finding of the High Court to the effect that the appellants have collected excess amount of tax must be held to be bad in law; (h) In any view of the matter, as pursuant to or in furtherance of the circular letter issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the borrowers under the Act and nothing more. Statutory provisions: The relevant provisions of the Interest-tax Act, 1974 read as under: "2(5) 'chargeable interest' means the total amount of interest referred to in section 5, computed in the manner laid down in section 6; 2(7) 'interest' means interest on loans and advances made in India and includes (a) commitment charges on unutilised portion of any credit sanctioned for being availed of in India; and (b) discount on promissory notes and bills of exchange drawn or made in India, but does not include- (i) interest referred to in sub-section (1B) of section 42 of the Reserve Bank of India Act, 1934 (2 of 1934); (ii) discount on treasury bills; 4. Charge of tax.-(1) Subject to the provisions of this Act, there shall be charged on every scheduled bank for every assessment year commencing on or after the 1st day of April 1975, a tax (in this Act referred to as interest-tax) in respect of its chargeable interest of the previous year at the rate of seven per cent. of such chargeable interest: Provided that the rate at which interest-tax shall be charged in respect of any chargeable interest accruing or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o deduction other than the deduction specified in this sub-section shall be allowed from the total amount of interest accruing or arising to the assessee. (2) In computing the chargeable interest of a previous year, the amount of interest which accrues or arises to the assessee before the 1st day of August, 1974, or during the period commencing on the 1st day of March, 1978, and ending with the 30th day of June, 1980, or during the period commencing on the 1st day of April, 1985, and ending with the 30th day of September, 1991, shall not be taken into account. 26c. Power of credit institutions to vary certain agreements.-Notwithstanding anything contained in any agreement under which any term loan has been sanctioned by the credit institution before the 1st day of October, 1991, it shall be lawful for the credit institution to vary the agreement so as to increase the rate of interest stipulated therein to the extent to which such institution is liable to pay the interest-tax under this Act in relation to the amount of interest on the term loan which is due to the credit institution. Explanation.-For the purpose of this section, 'term loan' means a loan which is not repayab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 26C would arise only when the chargeable interest is calculated whereupon only the incidence of tax under the said Act is required to be passed on to the borrowers by way of additional interest. The entire approach of the appellants was based on a wrong premise. The said Act, is a taxing statute. The Union of India under the said Act cannot direct or permit the bankers or the financial institutions to raise interest. The Act must, therefore, receive purposive construction so as to give effect to the purport and object it seeks to achieve. In the event, the contention of the appellants is accepted, the same would give rise to incongruous results. Such an interpretation, as is well known, must be avoided, if avoidable. Furthermore, a statutory impost must be definite. Having regard to article 265 read with article 366(28) of the Constitution of India nothing is realisable as a tax or by way of recovery of tax or any action akin thereto which is not permitted by law. It is neither in doubt nor in dispute that section 26C is an enabling provision. It has to be so construed, having regard to the term "lawful" used therein. It merely prevails over an agreement under which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e., the subject of the tax, the person who is liable to pay the tax and the rate at which the tax is to be paid. If there is any ambiguity regarding any of these ingredients in a taxation statute then there is no tax in law. Then it is for the legislature to do the needful in the matter." If a statute was ambiguous the contemporaneous construction placed there by the officers charged with its enforcement and administration might be required to be considered and given due weight but therefor the first respondent or the Reserve Bank of India were not competent. In this case, the stand of the Union of India also runs counter to the contentions of the Appellants. A plain reading of section 26C of the Act leaves no manner of doubt that the same was enacted only for a limited purpose, namely, to pass on the burden of tax to the borrowers. The amount of tax must be calculated having regard to the contractual rate of interest as then obtaining and not upon in addition of the purported interest by way of tax or otherwise. Once section 26C is read in a meaningful way, no difficulty arises in giving effect to subsection (2) of section 4 and sections 5 and 6 of the Act. If the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atute and misapplication and misconstruction thereof by the appellants herein had resulted in an illegal action; as a result whereof the borrowers have been deprived of a huge amount. Consequently the Union of India and the appellants have unjustly enriched themselves. When such an unjust enrichment takes place, the doctrine of de minimis, in our view, should not be applied in equity or otherwise. Locus of the respondent: The writ petitioner before the High Court was a firm of chartered accountants. As an expert in accountancy and auditing, it must have come across several cases where its client had to pay a higher amount of interest to the banks pursuant to or in furtherance of the impugned action of the appellants. By reason of such an action on the part of the appellants as also the Reserve Bank of India, as noticed hereinbefore, the citizens of India had to pay a higher amount of tax as also a higher amount of interest for no fault on their part. The same had been recovered from them without any authority of law. While entertaining a public interest litigation, this court in exercise of its jurisdiction under article 32 of the Constitution of India and the High Courts und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith human rights angle in view. Statutes were interpreted in the light of international treaties, protocols and conventions. Justice was made available having regard to the concept of human rights even in cases where the State was not otherwise apparently liable. The people of India have turned to courts more and more for justice whenever there has been a legitimate grievance against the State's statutory authorities and other public organizations. People come to courts as the final resort, to protect their rights and to secure probity in public life. Pro bono publico constituted a significant state (sic) in the present day judicial system. They, however, provided the dockets with much greater responsibility for rendering the concept of justice available to the disadvantaged sections of the society. Public interest litigation has come to stay and its necessity cannot be overemphasized. The courts evolved a jurisprudence of compassion. Procedural propriety was to move over giving place to substantive concerns of the deprivation of rights. The rule of locus standi was diluted. The court in place of a disinterested and dispassionate adjudicator became an active participant in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of each individual borrower upon the bank concerned. If the matter relating to increase in the rate of the interest was within power of the appellants, we fail to understand as to why the Reserve Bank of India was approached at all. The same being not permissible under the Act, any approval given by the Reserve Bank of India for the satisfaction of the members of the first appellant herein was futile. It is not in dispute that action on the part of the appellants in grossing up of interest was not at all relevant. The appellants could not have suo motu taken recourse to rounding off of interest for the purpose of obtaining a higher amount of interest or otherwise. The purported practical difficulty sought to have been put forth by the appellants is a self created one. If such practical difficulty existed there was apparently no reason as to why the Reserve Bank of India refused to grant such approval since 1997. In any view of the matter, the purported directions contained in the letter dated September 2,1991, of the Reserve Bank of India are not even in the nature of executive instruction under the said Act. It was not binding on the banks, far less on the borrowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... objection if facts permit the same as in this case." In B.O.I. Finance Ltd. [1997] 89 Comp Cas 74 (SC), the question which arose for consideration was as to whether the transaction arising out of an agreement to do an illegal act could be enforced. In that case certain circulars were issued by the Reserve Bank of India in terms of section 36(1) of the Banking Regulation Act which had not been published. It was held: "It was then submitted that even if it is held that the said circulars were binding they could only bind the banks and not the third parties. The submission was that by contravening the direction contained in the said circulars, the contracts which were entered into between the banks and the third parties could not be invalidated and the only result of such contravention would be the levy of penalty under section 46 of the said Act" The question which arose for consideration therein does not arise in the instant case. In Central Bank of India [2001] 107 Comp Cas 416 (SC), this court, inter alia, held that sections 21 and 35A of the Banking Regulation Act confers a power coupled with duty to act. The question which arose for consideration related to many phr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aulted. However, the matter does not end there. The question which looms large is what effective order can be passed by this court. More than five crores of borrowers are involved. A huge sum of money is to be recovered from the Union of India as also a large number of banks. Directions may be issued for refund of the amount to the borrowers, but implementation thereof would take a long time. The court may not be able to effectively monitor such recovery. The Union of India, as noticed hereinbefore, had proposed that the banks concerned be directed to deposit the excess recovered by it, if no direction is issued by us that the same be returned to the borrowers. Interestingly, the Union of India has not volunteered, which as "a State" it should have done, to suo motu undertake the exercise of identifying the borrowers and refund the excess amount recovered, a part whereof had been deposited by way of interest tax by the concerned banks. Furthermore, directing the Union of India to refund the excess amount collected through the banks and consequently ask the banks to refund the same to the borrowers whether with the amount retained by them by way of rounding off of interest invari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivious that Parliament enacted the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999, providing for constitution of a national trust which would provide for maintenance allowance for persons with disabilities, the object being to enable disabled persons to live independently within the community, to deal with problems of such persons who do not have family support, to facilitate the realisation of equal opportunities; protection of rights, full participation of such persons, to evolve a procedure for appointment of guardians or trustees for such persons requiring protection. We are, furthermore aware that the Ministry of Social Justice and Empowerment had taken the following actions to implement the provisions of the aforementioned Acts: (i) notification of Central Co-ordination Committee as per section 3 of the Act; (ii) notification of Central Executive Committee as per section 9 of the Act; (iii) creation of post of Chief Commissioner, Deputy Chief Commissioner, and staff for office of Chief Commissioner; (iv) five core groups of experts and officials of relevant Ministries have been set up to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in keeping with the objectives of the Disabilities Act and was in consonance with the concession already given by Indian Air lines to visually disabled persons. Kunal Singh v. Union of India [2003] 4 SCC 524 saw the court interpreting the Disabilities Act in a manner so as to further its objective. The court opined that section 47 of the Act mandates that an employee who acquires a disability during service must be protected. If such an employee is not protected, he would not only suffer himself, but all his dependants would also undergo suffering. Therefore, merely granting him pension would not suffice, but there must also be an attempt to secure him alternative employment. Despite the progressive stance of the court and the initiatives taken by the Government, the implementation of the Disabilities Act is far from satisfactory. The disabled are victims of discrimination in spite of the beneficial provisions of the Act. We are, therefore, of the opinion that in the larger interest a fund for the aforementioned purpose should be created with the amount at the hands of the Union of India and the appellants and other concerned banks, which may be managed by the Comptrolle ..... X X X X Extracts X X X X X X X X Extracts X X X X
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