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of <h1>Court Upholds Interest Rate Increase, Emphasizes Contractual Obligations</h1> <h3>Gunjan Cement Pvt. Ltd. Versus Rajasthan State Industrial Development & Investment Corpn. Ltd.</h3> Gunjan Cement Pvt. Ltd. Versus Rajasthan State Industrial Development & Investment Corpn. Ltd. - AIR 1996 Raj 88 Issues:1. Whether the demand for an enhanced rate of interest by the respondent is justified in law.Analysis:The judgment involves several writ petitions challenging the respondent's demand for an increased rate of interest. The key issue revolves around the validity of the enhanced interest rates of 18% and 18.75% imposed by the respondent, which were higher than the initially agreed rates of 12.5% and 13.5%. The court consolidated the cases due to the common legal question. The petitioners argued that they were not obligated to pay the additional interest and that the 'deeds of modification' were signed under duress. However, the court rejected this argument, emphasizing that the petitioners were aware of the terms and conditions when signing the agreements.In the leading case of M/s. Gunjan Cement Pvt. Ltd. v. Rajasthan State Industrial Development & Investment Corporation Ltd., the petitioner, a private limited company, sought a term loan of Rs. 90,00 lacs for setting up a cement plant. The loan agreement specified the interest rates based on the refinance rates from financial institutions. The petitioner voluntarily agreed to a modification increasing the interest rates, which the court upheld as a valid contractual amendment. The court highlighted that the loan agreement did not fix a constant interest rate but linked it to the refinance rates, subject to minimum thresholds during different loan periods.Regarding the discrimination claim, the court noted that other borrowers not subjected to increased interest rates had not signed similar modification agreements. Therefore, the argument of discrimination was dismissed. The court emphasized that parties are bound by the terms of their agreements, and the respondent had the right to unilaterally adjust the interest rates based on the contractual provisions. The court also highlighted that the interest rate revision was in response to economic conditions and aligned with RBI announcements.Ultimately, the court held that unless the 'deed of modification' was invalidated by a competent court due to duress or coercion, it remained binding. As the petitioners failed to demonstrate any legal grounds for interference, their petitions were dismissed. The judgment reinforced the principle of upholding contractual obligations and rejected claims of coercion or discrimination in the modification of interest rates.
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