Bombay High Court
Canara Bank And Ors. vs Vijay Shamrao Ghatole And Ors. on 9 November, 1992
Equivalent citations: 1996(5)BOMCR338
JUDGMENT H.W. Dhabe, J.
1. The plaintiff Bank has preferred the instant appeal against the judgment and decree of the learned trial Court mainly on the ground of interest granted by it.
2. The facts are that on 7.1.1982 the plaintiff Bank agreed to advance the loan of Rs. 1,64,000/- to the defendant No. 1 on execution of the pronote Exh. 44 by him. However, it is not in dispute that the actual loan granted to him was in the amount of Rs. 1,62,283/-. It is the case of the plaintiff that the said loan was advanced to the defendant No. 1 at the agreed rate of interest of 2.5% P.A. above the Reserve Bank of India rate with a minimum of 12.5% P.A. The said loan was guaranteed by the defendant nos. 2, 3 and 4 out of whom the defendant No. 2 is the father of the defendant No. 1. There was also a deed of hypothecation executed by the defendant No. 1. The defendant No. 1 made some repayments towards the loan and the interest. It is the case of the plaintiff Bank that on 2.8.1984 the defendant No. 2 who was the guarantor executed an acknowledgment Exh. 39 acknowledging the liability in the amount of Rs. 2,17,532/-, inclusive of interest upto 30.6.1984, and further binding him for repayment of the said amount in accordance with the relevant agreement executed by him and obligations undertaken thereunder. It is further the case of the plaintiff Bank that on 4.12.1985, the defendant No. 1 himself had acknowledged the liability in the amount of Rs. 2,27,969/- inclusive of interest upto 13.10.1985 by executing the document to that effect which is Exh. 40 by which he had also undertaken to repay that amount with future interest and other charges etc. in accordance with agreement/obligations etc. undertaken by him.
3. According to the plaintiff Bank the LPD. A/c-59/85 of the defendant No. 1 showed that as on 7.1.1987 an amount of Rs.. 2,34,726.13 ps. was due in the account of the defendant No. 1 whereas upto that day he has made payment of Rs.3,953/-. It is its case that no interest was charged in this LPD. A/c 59/85 from 14.10.1985. Therefore, when no payment was made in this account by the defendant No. 1 the suit was filed by the plaintiff bank on 29.4.1987 for the recovery of Rs. 2,30,773.13 ps. upon which the interest was calculated as Rs. 50,801.02 ps. from 14.10.1995 till the date of the suit. Thus, the total amount claimed in the suit was Rs. 2,81,574.38 ps.
4. The defendant No. 1 resisted the suit on various grounds by this written statement. Defendant No. 2 did not file his written statement. Guarantors i.e the defendants 3 and 4 also resisted the suit by filing their written statement.
5. Parties led evidence in this suit. The plaintiff Bank examined two witnesses. The defendant No. 1 examined himself and also the defendant No. 2 who is his father and guarantor also. The principal issues arising in this suit were whether the suit was barred by time and whether in view of the acknowledgment Exh. 39 and 40, the suit was within time. The issues regarding the guarantors were whether they were bound to pay the time barred claim.
6. The learned trial Court held that the acknowledgment executed by the defendant No. 1 at Exh. 40 created promise to pay the debt under section 25(3) of the Contract Act and, therefore, the suit was not liable to be dismissed on the ground of limitation. It also held that there was continuing guarantee and therefore, the guarantors were bound to repay the loan. As regards the claim of interest, the learned trial Court held that in the acknowledgment Exh. 40 there was no provision by which the defendant No. 1 had agreed to pay interest upon the loan amount acknowledged by him. As regards the actual loan taken there was no dispute as such between the parties. The learned trial Court thus decreed the claim of the plaintiff Bank in the amount of Rs. 2,17,532/- which is the sum shown in the acknowledgement (Exh. 39) made on 2.8.1984 by the defendant No. 2 i.e. the guarantor and which acknowledgment is within time. Upon that amount the trial Court granted interest @ 6% P.A. from the date of the suit till realisation. He also granted the installments to the defendant No.1.
7. Feeling aggrieved by the above judgment and decree of the learned trial Court which did not decree the part of the claim of the plaintiff Bank, the plaintiff Bank has preferred the instant appeal in this Court.
8. The main question which arises for consideration in this case as urged on behalf of the appellant Bank is about the contractual rate of interest to which, according to the plaintiff Bank, it is entitled even upon the acknowledged amount as per Exh. 40 which the learned trial Court has not granted. Further, according to the plaintiff Bank if it is entitled to the contractual rate of interest upon the amount acknowledged by the defendant No. 1 till the date of the suit, then since the transaction is a commercial transaction, it is also entitled to further interest from the date of the suit till its realisation at the same rate of interest instead of a meagre rate of interest of 6% P.A. granted by the learned trial Court.
9. In reply, it is urged on behalf of the defendant No. 1 that although he has not preferred any appeal or cross-objection, we should dismiss the suit of the plaintiff Bank itself by exercising power under Order 41, Rule 33 of C.P.C. since the suit is barred by time and there is an obligation on the Court to dismiss the suit barred by time even though such a plea is not raised. It is urged before us that the plaintiff Bank is not entitled to interest, at any rate since the principle claim itself is barred by time. As regards the finding rendered by the learned trial Court that the plaintiff Bank is entitled to charge interest at the contractual rate of 12.5% p.a. with penal interest of 2% with quarterly rests upon the loan advanced by it to the defendant No. 1 in this suit, the said finding is not challenged before us by the defendant No. 1
10. Very elaborate arguments have been advanced by both the sides before us upon the construction of sections 18 and 19 of the Limitation Act as well as section 25(3) of the Contract Act. Although the learned Counsel for the appellant Bank had initially tried to urge before us that the acknowledgment executed by the defendant No. 2 who was the guarantor i.e. Exh. 39 which was within the limitation was binding upon the defendant No. 1 i.e. the principal debtor, he has subsequently given up the said contention. It may be seen that from the date of pronote (Exh. 44) i.e 7.1.1982, the acknowledgment (Exh. 39) executed by the defendant No. 2 was within time and therefore it satisfied the requirements of section 18 of the Limitation Act, 1963, to extend the period of limitation of the suit which is 3 years from the date of the execution of the above pronote (Exh. 44). However, since it is clear that an acknowledgment executed by the guarantor was not binding upon the principal debtor, the question which has to be considered for the purpose of extension of the limitation is whether the acknowledgement executed by the defendant No. 1 i.e. the principal debtor on 4.12.1985 i.e. Exh. 40 can enure to his benefit for extending the period of limitation under section 18 of the Limitation Act, 1963. As regards this acknowledgment Exh. 40, it is admittedly executed on 4.12.1985 which is beyond the period of 3 years from the date of the execution of the pronote (Exh. 44) i.e. 7.1.1982. Section 18 of the Limitation Act, 1963 extends the period of limitation if the acknowledgment is made or executed in writing within the period of limitation. Hence, section 18 of the Limitation Act as such would not be of any assistance to the plaintiff Bank for extension of period of limitation in the instant case.
11. The learned Counsel for the plaintiff-Bank has, therefore, made two fold submissions before us. According to him, the extract of account of the defendant No. 1 shows that he had made last repayment on 30.8.1984 which was within the period of limitation of the suit as it would have expired on 6.1.1985. His submission, therefore, is that this last repayment in cash on 30.8.1984 would extend the period of limitation in view of section 19 of the Limitation Act. The learned Counsel for the defendant No. 1 has brought to our notice the requirements of the proviso to section 19 of the Limitation Act, 1963. The submission based upon the said proviso is that for claiming extension of the limitation, it is necessary for the debtor to prove that the acknowledgement of the repayment is in the handwriting of, or is in writing signed by, the person claiming the repayment. He has urged before us that mere admission of repayment either in the written statement or in the evidence as in the instant case cannot enure to the benefit of the principal debtor for extension of limitation under section 19 of the Limitation Act.
12. In support of the above proposition, the learned Counsel for the defendant No. 1 has relied upon the judgment of the Supreme Court in the case of Sant Lal Mahton v. Kamla Prasad and others, . Perusal of the facts in the said case would show that the principal debtor therein had acknowledged the repayments in written statement. Even then the Supreme Court had held that unless as per the requirement of the proviso there is an acknowledgment of the payment in the hand writing of, or in writing signed by, the person making the payment which is proved, there cannot be any extension of limitation under section 19 of the Limitation Act, 1963. It is, thus, clear that for claiming extension of limitation under section 19 of the Limitation Act, the plaintiff creditor must prove that the said repayment is acknowledged in his hand writing by the person making the repayment or that it must be acknowledged in writing signed by him.
13. The learned Counsel for the plaintiff Bank has merely relied upon the evidence of the defendant No. 1 in the instant case to show that he has accepted the repayments shown in the extract of accounts Exh. 41 and, therefore, the benefit of the extended period of limitation under section 19 of the Limitation Act should be given. In our view, the plaintiff Bank cannot get the benefit of the admissions of the defendant No. 1 in his evidence about the repayment made by him for extension of the limitation under section 19 of the Limitation Act, in view of the judgment of the Supreme Court cited supra.
14. The next submission on behalf of the plaintiff Bank is that even in regard to the time barred debt if there is a promise to pay such debt express or implied, a suit can be filed to enforce such time barred debt in view of the provisions of section 25(3) of the Contract Act. Clause 3 of section 25 of the Contract Act shows that the agreement made without consideration would not be void if it is a promise made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorised in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits. It is pertinent to see that as provided in section 25 of the Contract Act an agreement without consideration in the cases referred to therein is a contract.
15. It is, thus, clear from the perusal of section 25(3) of the Contract Act that when there is a promise to pay the time barred debt made in writing as envisaged therein, it is treated as a contract and therefore such a promise would furnish a fresh cause of action to the creditor. The dispute between the parties upon the construction of section 25(3) of the Contract Act is that according to the learned Counsel for the plaintiff-Bank, any implied promise is covered by section 25(3) whereas according to the learned Counsel for the respondent No. 1 the promise to pay the time barred debt must be express and in writing. In support of his submission, the learned Counsel appearing for the plaintiff Bank has relied upon the judgment of the learned Single Judge of this Court in the case of M/s R. Sureshchandra & Co. v. M/s Vadnere Chemical Works and others, , and also upon the judgment of another learned Single Judge of this Court in the case of M/s. Manekchand Mohanala v. Shah Bhimji and Co., 1969 Mah.L.J. 698.
16. The learned Counsel appearing for the defendant No. 1 has, however, relied upon the decision of the Division Bench of this Court in the case of Manganlal Harjibhai & others v. Aminchand Gulabji and others, A.I.R. 1928 Bom. 319, and in the case of Balkrishna Mansukhram v. Jayshankar Narayan, A.I.R. 1938 Bom. 460. Besides the judgment of the Division Bench Maganlal v. Amichand, (cited supra), he has also relied upon the judgment of the erstwhile Lahore High Court in the case of Basheshar Nath Goela v. Baji Nath & others, A.I.R. 1938 Lah. 264, and the judgment of the Full Bench of the Kerala High Court in the case of Chacko Varkey v. Thommen Thomas, . The judgments of the Division Bench of this Court cited supra have taken the view that the promise to pay the time barred debt must be express so as to constitute the contract under section 25(3) of the Contract Act. The said view taken by the Division Bench is binding upon us in preference to the view taken by the Single Bench of this Court in the judgments (cited supra) relied upon on behalf of the plaintiff-Bank.
17. As regards the judgment of the learned Single Judge in the case of Manekhand cited supra, it may be seen that in the said case what is construed is Order 37, Rule 2 of the Civil Procedure Code (for short C.P.C.) as applicable in the State of Maharashtra. What is held in the said judgment is that the writing known as Khata Pete receipt has been known and understood to constitute not only an acknowledgment for receipt of money but to contain an implied promise that the money having been received Khata Pete i.e. on account would be repaid by the debtor signing the writing. The judgment of the Division Bench of this Court (cited supra) i.e. the promise should be express is distinguished by the learned Single Judge in the said case. It is difficult to see how the above case is of any assistance to the plaintiff-Bank particularly when it is in respect of the construction of Order 37 Rule 2 of the C.P.C. and particularly when the judgment of the Division Bench of this Court is distinguished by the learned Single Judge deciding the said case. In view of the direct judgments of the Division Benches of this Court (cited supra) it has to be seen whether the acknowledgment executed by the defendant No. 1 (Exh .40) in the instant case shows that there is an express promise to pay the time barred debt by the defendant No. 1
18. Although the said acknowledgment (Exh. 40) executed by the defendant No. 1 is not happily worded, its minute perusal would show that it contains an express to promise to pay by the defendant No. 1. After acknowledging the amount of Rs. 2,27,969/- inclusive of interest upto 13.10.1985, the defendant No. 1 has also acknowledged the subsequent interest due upon the said amount. He has thereafter acknowledged the related documents - agreements, securities and obligations etc. which according to him shall remain in full force until the repayments of the liabilities in the respective account in full are made by him. The clause "until the repayment of the liabilities in the respective account in full are made by him." would clearly indicate that the defendant No. 1 had acknowledged and had promised to pay the acknowledged amount with interest in accordance with the agreements, obligations etc. which were to remain in force till the repayment of the liabilities in his account was made in full.
19. Although we thus accept the submission on behalf of the learned Counsel for the defendant No. 1 as regards the construction of section 25(3) of the Contract Act, we do not accept his contention that there is no express promise to pay in the acknowledgment of the defendant No. 1 (Exh. 40). Once it is held that there is an express promise to pay the time barred debt within the meaning of section 25(3) of the Contract Act, the said acknowledgment would be an agreement and there would be a fresh period of limitation from the date of the said acknowledgment within which period the suit of the plaintiff Bank is within time. As it is held that the suit of the plaintiff Bank is not barred by time, further submission made on behalf of the defendant No. 1 that, although no appeal or cross-objection is preferred by the defendant No. 1, by exercising the extra-ordinary power conferred upon the Appellate Court under Order 41, Rule 33 of C.P.C. we should dismiss the suit, does not survive for consideration.
20. Similarly, the said ground cannot also be pressed into service to challenge the claim of interest, at any rate the contractual rate of interest. In view of the above interpretation and the application of section 25(3) of the Contract Act, the submission made on behalf of the plaintiff Bank that the acknowledgment (Exh. 40) of the defendant No. 1 clearly shows that the defendant No. 1 has bound himself to pay the interest on the acknowledged amount from 14.10.1985 has also to be upheld. In our view, the learned trial Court has clearly committed an error of construction of the said document (Exh. 40) in this regard. As hereinbefore shown, the said document Exh. 40 clearly states that the defendant No. 1 had acknowledged the liability to pay the subsequent interest also being due and has further acknowledged that the liabilities would be discharged in accordance with the agreements, securities etc. which would remain in full force till the full repayment is made. There is no manner of doubt that the defendant No. 1 was liable to pay the contractual rate of interest upon the amount acknowledged by him in Exh. 40.
21. The learned trial Court has determined the contractual rate as 12.5% P.A. and it is at the said rate that the plaintiff Bank itself has calculated the interest from 14.10.1985 till the date of the suit. However, as regards the acknowledged amount which was Rs. 2,27,969/- as on 13.10.1985, there are further amounts added to the said amount in the LPD-A/c 59/85 of the defendant No. 1 on account of insurance premium etc. as shown therein and, therefore, the said amount had become Rs. 2,34,726.13 ps. as on 7.1.1987. The interest calculated from 14.10.1985 till the date of the suit is Rs. 50,801.25 ps. and thus the total amount due to the plaintiff-Bank from the defendant No. 1 on the date of the suit is calculated at Rs. 2,81,574.38ps. It is not shown to us that the above calculation made by the plaintiff-Bank is erroneous. The plaintiff Bank is, thus, entitled to the decree in the above amount of Rs. 2,81,574.38 ps.
22. At this stage, it, may be seen that although the learned trial Court has held that the acknowledgment executed by the defendant No. 2 (Exh. 39) is not binding upon the principal debtor i.e. the defendant No. 1, while granting the decree without including interest it has taken into consideration the amount of Rs. 2,17,532/- acknowledged by the defendant No. 2, which it could not have done. Once the acknowledgment of the defendant No. 1 is treated as a promise to pay the time barred debt within the meaning of section 25(3) of the Contract Act, it is the amount which is acknowledged by him which would have to be taken into account by the leaned trial Court. Hence, its decree is erroneous and has to be modified by decreeing the claim made by the plaintiff Bank as shown hereinbefore in the previous para.
23. The next question which needs consideration is about the future interest from the date of the suit till realisation. In this regard, it may be seen that section 34 of the C.P.C. permits interest upon the principal sum adjudged by the learned trial Court. The learned Counsel for the defendant No. 1 has urged before us that in view of the judgment of the Full Bench of his Court in the case of Union Bank of India, Bombay v. Dalpat Gaurishankar Upadyay, , the principal sum adjudged by the Court means the sum without taking into consideration any interest whether simple or compound.
24. The learned Counsel for the defendant No. 1 has after verification of the account stated before us that the principal amount of Rs. 1,62,283/- is actually advanced to the defendant No. 1 and that he has made repayment towards the said principal amount also. Therefore, according to him, deducting the sum paid towards the said principal amount the original sum upon which the interest has to be given under section 34 of the C.P.C. would be Rs. 1,53,000/-. He has urged before us that although the defendant No. 1 has not filed any cross-objection or counter appeal, in the interest of justice, exercising our discretionary power under Order 41, Rule 33, C.P.C. to do justice when we are modifying the finding of the learned trial Court on the question of future interest payable to the plaintiff-Bank in the light of our above conclusions, we should determine the said interest upon the aforesaid principal amount of Rs. 1,53,000/- only. The above submission made on behalf of the defendant No. 1 is well founded in view of the judgment of the Full Bench of this Court cited supra and no serious exception is taken to the same on behalf of the plaintiff Bank.
25. The next question which arises for consideration about future interest is the rate of interest from the date of the suit till realisation. Upon the view that no interest is agreed between the parties as per Exh. 40, the learned trial Court has granted future interest @ 6% P.A. from the date of suit till realisation. It is well settled that when the parties have agreed that the interest upon the principal sum should be paid at a particular rate, simple or compound, the said rate is not normally departed from by the Court in granting future interest from the date of the suit till the date of decree under section 34 of the C.P.C. unless there are circumstances brought to the notice of the Court to show why the said rate of interest should be departed from. It is, however, true that as held by the Full Bench of this Court the future interest has to be granted at a simple rate of interest. The learned Counsel for the plaintiff-Bank has urged before us that the transaction in the instant case is a commercial transaction and hence the future interest should be granted at the contractual rate of interest from the date of suit till realisation.
26. The learned Counsel for the defendant No. 1 has, however, urged before us that the future interest from the date of the suit till realisation should not be granted at the contractual rate of interest taking into consideration the facts and circumstances in the instant case. According to him, the defendant No. 1 belonged to the category of the educated unemployed whose case for sanction of loan by the plaintiff-Bank was recommended, by Mahatma Fule Magasvargiya Sanstha which had advanced the seed money to him for purchase of truck at the nominal rate of simple interest of 4% P.A. only. It is also urged that the defendant No. 1 has paid the substantial amount of Rs. 52,000/- to the plaintiff-Bank. In fact, according to him the transaction itself is not a commercial transaction within the meaning of the Explanation 2 to section 34 of the C.P.C. As regards the question whether it is commercial transaction or not, we do not propose to allow the defendant No. 1 to raise this question at the time when the judgment was dictated and completed upto the question of future interest because elaborate arguments are necessary on this question from both the parties and also because if the transaction is a commercial transaction, the contractual rate of interest could be claimed as future interest under section 34 of the C.P.C. However, we shall deal with the question whether we should depart from the rule of awarding the future interest at the contractual rate and determine what would be reasonable rate of interest in the facts and circumstances of the instant case.
27. In considering the said question what is first necessary to be seen is that the defendant No. 1 has taken the loan for purchasing the truck to ply it which would show that it is his means of livelihood. He is a person who belongs to the category of the educated unemployed. In fact he had no money of his own to pay the seed money to the Bank which is paid by Mahatma Fule Magasvargiya Sanstha at the nominal rate of simple interest of 4% P.A. Taking these facts and circumstances into consideration in the instant case and also the fact that the document Exh. 40 itself was not very happily worded to determine whether the contractual rate was contained therein, in our view, it would be a reasonable rate of interest within the meaning of section 34 of the C.P.C. if we were to direct the defendant No. 1 to pay to the plaintiff Bank simple interest at the rate of 8% P.A. from the date of the suit till realisation. The said interest would be as stated above upon the principal sum of Rs. 1,53,000/-. The decree of the learned trial Court thus need to be modified.
28. In the result, the instant appeal is partly allowed. A decree in the sum of Rs. 2,81,574.38 ps. is passed against the defendants jointly and severally. As regards the future interest, the claim of future interest is decreed against the defendants jointly and severally @ 8% P.A. (Simple Interest) from the date of the suit still realisation upon the principal sum of Rs. 1,53,000/-. The rest of the decree of the learned trial Court is maintained. Costs of both the courts are saddled upon the defendants.