Punjab-Haryana High Court
Gurnam Singh And Ors. vs Uco Bank And Anr. on 19 August, 1996
Equivalent citations: (1996)114PLR624
Author: Sarojeni Saksena
Bench: Sarojnei Saksena
JUDGMENT Sarojeni Saksena, J.
1. Petitioner-judgment-debtors have filed this revision against the executing Court's order dated November 10, 1993, whereby their objection petition is rejected.
2. The petitioners, learned counsel contends that the judgment-debtors obtained a loan of Rs. 26,850/- for purchasing a tractor with a 9-line tiller. Therefore, it was a loan for agriculture purpose and under section 34 of the Code of Civil Procedure (in short, the Code) the bank was not entitled to charge interest more than 6 per cent per annum. His second contention is that under the agreement of loan the bank agreed to charge interest at the rate of 12 per cent per annum only, but in the suit the decree -holder-respondent claimed interest at the rate of 15 per cent per annum, which was allowed by the Court. The petitioner-judgment-debtors could not resist that claim as they were proceeded ex parte. His third contention is that the decree-holder-respondent was not entitled to compound interest. It was entitled to recover interest on the principal amount of Rs. 26,850/- only and that too at the rate of 12 percent per annum only, but from the statement of account submitted by the bank in the Civil court, it is evident that the bank compounded the interest and clubbing the amount of interest along with the principal amount, it filed a suit for recovery of Rs.26,900.77 paise, which was decreed by the Civil Court.
3. The decree-holder-respondent's learned counsel contended that interest Was agreed at the minimum rate. The bank was entitled to raise this rate of interest as per the current instructions issued by the Reserve Bank of India with regard to realisation of rate of interest. He also submitted that it was not an agricultural loan, as it was secured by executing a deed of mortgage. The judgment-debtors mortgaged their land as a security for the recovery of this loan. Therefore, this argument is untenable that it was a loan for agricultural purpose and, therefore, interest beyond 6 per cent was not chargeable. His last argument is that the bank is entitled to recover interest at quarterly rests as per the agreement and, therefore, it is entitled to recover interest at the compound rate. Since the loan was secured by mortgaging the land, the provisions of Order 34 Rule 11 of the Code are applicable and not the provisions of section 34 of the Code.
4. Both the learned counsel relied on various authorities in support of their respective arguments.
5. In Everest Industrial Corporation and Ors. v. Gujarat State Financial Corpn, AIR 1987 S.C. 1950 the Apex Court has held that even under the Code of Civil Procedure the question of interest payable in mortgage suits filed in Civil courts is governed by Order 34 Rule 11 of the Code and not by section 34, which may be applicable only to cases of personal decrees passed under Order 34 Rule 6 of Code.
6. In the present case, admittedly the judgment-debtors-petitioners mortgaged their land as a security for the due payment of the advanced loan. Thus, it is obvious that it was not a loan for agriculture purpose only and in such cases the provisions of section 34 of the Code are not applicable but interest is chargeable under Order 34 Rule 11 of the Code.
7. Krishan Lal v. State Bank of Patiala and Ors., 1990(1)97 P.L.R. 132 is distinguishable, as in that case loan was advanced to an agriculturist for purchasing a mechanised cart, which was not secured by executing a mortgage deed.
8. The petitioners learned counsel has also relied on Devinder Kumar v. Syndicate Bank and Ors., (1994-1)106 P.L.R.l and Chhaju Ram v. State Bank of India and Ors.' (1994-2)107 P.L.R. 67. Chhaju Ram's case (supra) is based on the judgment given in Devinder Kumar's case (supra). In Devinder Kumar's case a Division Bench of this Court has held that under Order 34 Rule 2 sub-rule (1) clauses (a) and (b) of the Code 'principal' and 'interest' have to be ascertained separately and declared to be due as such. It does not contemplate merger of interest in the Principal and determination of the aggregate amount due on account of both of them. It is held that the court has to adjudge the principal amount and interest separately and thereafter interest can be allowed on the principal sum adjudged.
9. In Central Bank of India v. Ravindra and Ors., JT 1996(5) 589 the Apex Court has referred the case to a Bench of five judges in respect of the interpretation of the liability of the borrower to pay interest on the principal sum to include interest that became merged with the principal sum adjudged or principal sum as lent Therefore, this matter is res integra.
10. In this case the above point is not material. The decree-holder bank was entitled to recover interest at quarterly rests. Since the loan was secured by mortgaging the land , it cannot be said that it was a loan for agriculture purpose. Rather it is a commercial loan and in view of the Apex Court's judgment in Corporation Bank v. D.S. Gowda 1994 ISJ (Banking) 594, it is obvious that bank may charge interest with quarterly or longer rests. On commercial loans, the bank is entitled to claim compound interest.
11. Thus, in my considered view, the decree holder bank was entitled to recover interest as per the terms of agreement of loan. It was entitled to recover compound interest also under order 34 Rule 11 of the Code as. the loan was secured by mortgaging the land. But the last contention of the petitioners' counsel is forceful that from the agreement of loan, it is evident that loan was advanced at the rate of 12 percent per annum interest. Therefore, the decree-holder respondent was not entitled to claim interest at the rate of 15 per cent per annum. To this extent the executing Court fell into an error in not allowing this objection of the petitioner-judgment-debtors.
12. Resultantly, the revision is partly allowed. The impugned order is set aside to this extent only that the decree-holder-respondent is entitled to recover interest at the rate of 12 percent per annum only and not at the rate of 15 percent per annum. The decree-holder should recalculate the interest and then only it will be entitled to recover the remaining amount, if any, due on account of the principal sum of loan and interest.