LAW FOR ALL

Board not liable to pay any amount to the Bank towards subsidy amount as the Borrower committed default =The Borrower had borrowed money from the Bank for its business and as per policy of the State of Karnataka, the Board had assured the Bank that by way of subsidy, the amount of interest would be paid by the Board to the Bank, provided there was no default in repayment of the principal amount by the Borrower.= the Board has been wrongly saddled with the liability of paying Rs.75,213/-.= The question only is with regard to the liability of the Board. The Board is neither a borrower nor a guarantor. = The Commission and the Karnataka State Khadi and Village Industries Board, will have no liability of any kind either in respect of the principal amount of loan or payment of 4% or revised rate of interest to be borne by the borrowers for which interest subsidy eligibility certificate has been issued by the Commission. Its liability shall be restricted only to the extent of payment of interest subsidy as per scheme. The Commission would be liable to pay interest subsidy as per the scheme only for the period of which the loan is sanctioned by the Bank and is not liable to pay such interest subsidy for the defaulted period 87-88.”= In other words, upon default committed by the Borrower, the Board was absolved of its liability of paying interest on behalf of the Borrower to the Bank and its liability was only to the effect that it would surrender its first charge over the moveable and immoveable assets of the borrower in favour of the Bank. 10. In spite of the aforestated facts, the trial court came to the conclusion that the Board was liable to pay interest which was due and payable by the Borrower. In our opinion, the said finding of the trial court is not correct. Even the High Court’s view of confirming the said finding is not correct and therefore, we quash and set aside the judgment of the appellate court as well as the decree passed by the trial court so far as it makes the Board liable to pay the interest on behalf of the Borrower. In view of the contents of the aforestated letter dated 23rd March, 1988, the Board shall surrender its first charge over all the moveable and immoveable assets of the Borrower in favour of the Bank as soon as possible. 11. The appeal stands partially allowed to the above extent with no order as to costs.