Calcutta High Court
Bank Of India vs Laldhar Tiwari & Ors. on 17 November, 2000
Equivalent citations: (2001)1CALLT415(HC)
Author: S.K. Mukherjee
Bench: Tarun Chatterjee, Subhro Kamal Mukherjee
JUDGMENT S.K. Mukherjee, J.
1. This appeal is directed against the Judgment and Decree passed by a learned Judge of this Court on 27th March, 1995 in Commercial Suit No. 748 of 1988, whereby the learned Judge had decreed the suit in part. The prayer for grant of interest during the pendency of the suit and future interest was however refused.
2. On or about September 8. 1988, Bank of India (hereinafter to as "the Bank") instituted the suit, inter alia, claiming for a decree for Rs. 1,62,341.74 against the defendants/respondents and for further interest from 1st September, 1988 Including interim Interest and interest on judgment at the agreed rate of 12.5 per cent per annum with quarterly rest till realisation from the defendants/respondents Jointly and severally and for other Incidental reliefs.
3. At the request of one Bala Kanta Dubey, since deceased, in the month of March, 1983. the Bank granted a Term Loan for Rs. 1,90,000/- to him for acquiring and purchase of a new Tata Truck chasis with all its accessories against securities inter alia of hypothecation and charge of the said vehicle.
4. It was agreed between the said Bala Kanta Dubey and the Bank that the Term Loan of Rs. 1,90,000/- would be repaid by 50 equal monthly instalments of Rs. 4524/- each commencing from one month after registration of vehicle or three months from the date of first disbursement whichever is earlier together with interest at the rate of 2.5 per cent per annum over the Bank rate subject to a minimum of 12.5 per cent per annum or at such other rate or rates as may be certified by the Bank.
5. By a writing dated September 10. 1985, the said Bala Kanta Dubey, since deceased, confirmed, admitted and acknowledged his indebtedness and liabilities as on September 10. 1985 for a sum of Rs. 1,77,954.14 in respect of the said Term Loan Account.
6. The defendant Nos. 1 to 4 respondents, stood guarantors and confirmed such loan and admitted that they were also liable to the Bank in accordance with the terms of Letter of Guarantee.
7. Since the said Bala Kanta Dubey, since decesed, failed and neglected to pay the agreed instalments of principal and interest as per the agreement and terms and conditions stipulated thereunder, a sum of Rs. 2,06,219.69 became due and payable by him in which the interest was calculated upto June 23, 1988 and besides further Interest from June 24, 1988 at the rate of 12.5 per cent per annum were found to be due and payable by the said Bala Kanta Dubey, since deceased and accordingly, the Bank was constrained to file the suit for realisation of its loan and Interest in a manner indicated above as also alleged in the plaint and for other Incidental reliefs.
8. The trial Court by the impugned Judgment and Decree, decreed the suit in part to the extent that the defendants/Respondents shall pay to the Bank a sum of Rs. 1,62,341.74 and also shall pay to the Bank its costs of the suit. However, as noted hereinabove, the learned Judge declined to grant interest to the Bank during the pendency of the suit and also the future interest.
9. Being aggrieved by the refusal to grant Interest during the pendency of the suit and future interest, the Bank has preferred this appeal.
10. In support of this appeal the learned Advocate for the Bank brought to our notice the provisions contained in section 21A of the Banking Regulation Act, 1949 and contended that the Bank was entitled to a decree for interest during the pendency of the suit and also the future interest and, therefore, the learned Judge erred in not granting the said reliefs to the Bank.
11. In this connection reliance was placed by the learned Advocate for the appellant to a decision of the Supreme Court in the case of State Bank of India v. Yasangi Venkateswara Rao and also to a Bench decision of this Court In the case of Vijaya Bank v. Art Trend Exports, reported in 1990(2) CLT 55. Having heard the learned counsel for the appellant and after going through the facts of the present case, we are of the view that the Bank was entitled to decree regarding Interest as mentioned above which was wrongly refused by the trial Court. In State Bank of India v. Yasangt Venkateswara Rao [supra], the apex Court of India clearly observed, inter alia, that entering into mortgage is a matter of contract between the parties and if the parties agree that in respect of the amount advanced against a mortgage, compound interest will be paid, the Court cannot possibly interfere and reduce amount of interest agreed to be paid on the loan so taken. It was further observed by the apex Court of our country that the mortgaging of a property is with a view to secure the loan and has no relation whatsoever with the quantum of interest to be charged.
12. In Vijaya Bank v. Art Trend Exports [supra] it has also been observed that the question of payment of interest assumes special importance where the plaintiff is a Bank. It is a question of realisation of money advanced by a Bank which is a public financial institution. It is a question of public money. It is a question of Bank carrying on the business of accepting deposits and lending money. It is a business of bank to lend money on payment of interest. The rate of interest charged by a banking company depends on the direction by the Reserve Bank of India. That every banking company should be bound to comply with any direction given to it under section 21 of the Banking Regulation Act, 1949 as to inter alia, the rate of interest and other terms and conditions on which advances and other financial accommodation may be made or guarantees may be given. We have already indicated about the provisions of section 21A of the Banking Regulation Act, 1949. However, for our purpose it would be necessary to reproduce section 21A of the Banking Regulation Act, 1949 which runs as follows:--
"21A. Rates of interest charged by banking companies not to be subject to scrutiny by Courts. Notwithstanding anything contained in the Usurious Loans Act, 1918, or any other law relating to indebtedness in force in any State, a transition between a banking company and its debtor shall not be reopened by any Court on the ground that the rate of interest charged by the banking company in respect of such transaction is excessive."
13. A bare perusal of the aforesaid provisions in Banking Regulation Act, 1949 it Is not open to the Court to scrutiny the rate of Interest charged by the banking companies. A transaction between a banking company and its debtor shall not be reopened by any Court on the ground that the rate of interest charged by the banking company in respect of such transaction in excessive.
14. In view of the principles laid down as aforesaid by the Supreme Court as well as by Division Bench of this Court and in view of the mandatory provisions as contained in section 21A of the Banking Regulation Act, 1949 as mentioned hereinabove, we are therefore of the view that the learned Judge had gone wrong in refusing to grant Interim interest and interest on judgment at the rate of 12.5 per cent per annum which was admittedly the agreed rate of the parties.
15. Accordingly, the impugned judgment and decree is modified to the extent that the Bank. In addition to the decree already passed by the trial Court, would also get a decree for interest from September 1, 1998 including interim interest and interest on judgment at the rate of agreed rate of 12.5 per cent per annum till realisation of the entire decretal amount from the defendants/respondents either jointly or severally.
The impugned judgment and decree is set aside to the extent as indicated hereinabove and accordingly the appeal is allowed.
There will be no order as to costs.
ORDER T. Chatterjee. J.
1. I agree
2. Appeal allowed