Madras High Court
Sri Venkataramanan And Co., By Partner ... vs Indian Overseas Bank By Its Power Of ... on 22 June, 1987
Equivalent citations: (1989)2MLJ79
JUDGMENT Sivasubramaniam, J.
1. The unsuccessful defendants in O.S. No. 754 of 1979 on the file of the Subordinate Judge of Salem are the appellants in this appeal.
2. The respondent is a Nationalised Bank Which filed the said suit for recovery of a sum of Rs. 44,352-32 due on a mortgage and for costs.
The case of the respondent/plaintiff, as set out in the plaint, is as follows: - The first appellant is a firm in which the other appellants were partners. The appellants wanted financial help for running their business and, therefore, they approached the respondent for a loan. The respondent agreed to lend under Open Cash Credit Hypothecation limit and the facility was sanctioned on 3-2-1971 to the extent of Rs. 20,000 which was subsequently enhanced to Rs. 35,000 on 24-4-1973 and further raised to Rs. 43,000 on 18-8-1973. The second appellant deposited with the respondent Bank on 11-2-1971 the title deeds of his property and created an equitable mortgage. The said deposit of title deeds was made with a view to ensure for loans and advances made and to be made by the Bank to the firm. On 10-9-1973, the appellants 2 to 5 as partners of the first appellant firm and on behalf of the firm, executed a promissory note for Rs. 43,000 with an undertaking to pay interest at the rate of 4 per cent above the Reserve Bank of India Official rate of interest with a minimum of 11 per cent per annum with quarterly rests. An agreement was also executed on the same day and they have executed a letter of hypothecation also in respect of the textile goods worth Rs. 72,395-06. Contrary to the agreement, they have not deposited the sale proceeds into the Bank. The appellants have confirmed the amount payable by them in their letter dated 12-5-1976 and on the same day, they have acknowledged their liability by executing a stamped revival letter also. The respondent issued a notice on 18-4-1977 calling upon them to pay the dues amounting to Rs. 34,434-69 exclusive of interest from 1-4-1977. The appellants also confirmed their liability at Rs. 44,918-23 as on 30-9-1980. Apart from that, the second appellant has acknowledged the debt by a number of letters. Only in the month of November, 1978, it was learnt that appellants 3 and 5 have ceased to be the partners of the first appellant firm. However, this fact was not intimated to the respondent and it was not aware of such reconstitution till November, 1978. Appellants 3 to 5 continued to be liable for the debts and they have been holding out that they were partners of the firm at all relevant times. It is the case of the respondent that the appellants 2 to 5 are personally liable for the suit claim and the mortgaged properties of the second appellant are liable to be sold for realising the suit claim. They are bound to pay future interest at the. contractual rate of interest and they are not entitled to the benefits of any Debt Relief Acts.
3. The suit was resisted by the defendants/appellants. The second appellant filed a written statement which has been adopted by appellants 1 and 4. They had raised the following contentions. Originally, in the year 1966, the appellants 3 and 5 were also partners of the first appellant firm. But they ceased to be partners from 31-5-1972 and the partnership firm was reconstituted from 1-6-1972 with appellants 2 and 4 as partners. The respondent was informed about the said reconstitution of the firm by the letter dated 7-7-1972. The firm was having dealings with the respondent on Cash Credit Account basis. The second appellant produced the title deeds for the perusal of the Bank's Agent and return. He never intended to create any equitable mortgage by deposit of title deeds. The respondent has materially altered the promissory note, hypothecation deed and Form 16 C.P. and P.H. by adding the word (Partners) to foist liability on appellants 3 and 5. The present suit filed on the basis of the materially altered instruments is not maintainable. The simple interest agreed upon is 11 per cent per annum. On the other hand, the respondent has calculated interest at compound rate of interest at more than 11 per cent per annum on monthly rests and for several years on quarterly rests. The Appellants are entitled to the benefits of the Usurious Loans Act. The respondent is not entitled to claim interest more than 9 per cent per annum as simple interest. The appellants 2 and 4 are agriculturists entitled to the benefits of Act IV of 1938. The liability to the extent of Rs. 2,454.86 alone is admitted.
4. The fifth appellant has filed a separate written statement which has been adopted by the third appellant. According to them, they were not partners of the first appellant firm from 1-6-1972. They have nothing to do with the partnership firm and respondent was informed about the said fact. Appellants 3 and 5 are directed to put their signatures in the printed guarantee letter from dated 28-11-1978. They have also raised the plea of material alteration.
5. The second appelant filed an a additional written statement contending that appellants 3 and 4 are agriculturists. The fifth appellant, as the adopted son of Ramanuja Iyengar, is also an agriculturist. Since appellants 2 to 5 are agriculturists, they are entitled to the benefits of the Usurious Loans Act.
6. In the reply statement filed by the respondent, it denied the fact that the fifth appellant has been adopted by any one and contends that appellants 2 to 5 are not agriculturists.
7. The trial Court framed a number of issues arising out of the said pleadings of the parties and decreed the suit as praved for. The trial Court has held that the mortgage by deposit of title deeds relied or by the respondent is true and that there is no material alteration of any of the documents referred to by the appelants. It was further held that the appellants are not entitled to the benefits of the Usurious Loans Act. Aggrieved against this decision, the appellants have come forward with the present appeal before this Court.
8. The points that arise for consideration in this appeal are:
1. Whether there is any valid mortgage by deposit of title deeds as claimed by the respondent Bank?
2. Whether the promissory note, hypothecation deed and Form 16 C.P. and P.H. have been materially altered?
3. Whether appelants 3 and 5 retired from the first appellant firm on 31-5-1972 and whether they are not necessary parties to the suit?
4. Whether the appellants are entitled to the benefits of the Usurious Loans Act?
9. Point No. 1:- The respondent Bank has come forward with this suit on the basis of a promissory note executed by the appellants and on the basis of mortgage by deposit of title deeds by the second appellant. In so far as the mortgage by deposit of title deeds is concerned, the second appellant has denied the factum of mortgage and according to him, the documents were entrusted to the respondent for purpose of perusal and return. He never intended to create a mortgage over his properties. The second appellant applied for a loan on behalf of the first appellant firm by his letter dated 24-12-1970 marked as ExA.1. He applied for a Cash Credit Facility against hypothication of piece goods collaterally secured by deposit of title deeds of house property belonging to him worth above one lakh rupees. It was only on the basis of this letter, the loan was sanctioned by the respondent-bank. Under Ex A.2, the nature of advance, the limits of the facility and other particulars are indicated by the Bank. It is specifically stated in Ex A.2 that the limit of Rs. 20,000 should be made available on completion of all formalities relating to deposit of title deeds in respect of house property. Ex, A.3 is the true extract of the security ledge which mentions that two sale deeds dated 21-6-1937 and 24-8-1961, Ex. A.13 and A-12 espectively, were deposited by the second appellant as managing partner of the first appellant firm with the respondent Bank. A house tax receipt, ExA.14 and an encumbrance certificate, Ex A.15 were also deposited along with the said documents. The deposit of title deeds was made on 11-2-1971 which is evidenced by a note appended in the security ledger, stating as follows:
T.M. Thambusamy Iyengar (2nd defendant) called at the Bank today and deposited the title deeds and corrected documents as stated above. When making the deposit he orally stated that he did so with intent to creat a mortgage in favour of the Bank as continuing collateral security for advances made and to be made to Sri Venkataramana and Co., for all indebtedness and liability of them whatsoever and all costs and charges outstanding at any time together with interest thereon.
A reading of Ex-A-3 shows clearly that the second appelant had deposited the title deeds with an intention to create a mortgage by deposit of title deeds. This was followed by a letter dated 12-2-1971 by the second appellant to the respondent-Bank stating that the said documents have been delivered to the Bank as security for advances made or to be made by the Bank to the first appellant firm. Learned Counsel for the appellants contends that there is no valid mortgage by deposit of title deeds. According to him, it is only under ExA.4 the documents are alleged to have been deposited with the respondent Bank and the word "hereby" makes it clear that the documents were given to the Bank only on that date: It is therefore, contended by him that Ex:A.4, is an independent transaction by itself and therefore it requires registration. We are unable to agree with the said contentions. A reading of ExA.3 leaves no doubt about the factum of deposit, of title deeds. It should be remembered that the loan itself was sanctioned by the Bank only on condition that the second appellant should create a mortgage by deposit of title deeds as security for the loan. The transaction has to be viewed only from this angle and certain isolated words alone cannot be taken out of the context in order to invalidate a document. This contention of the appellants cannot be true as the second appellant has admitted more than once than he has offered valuable security to the Bank for the advances made or to be made by deposit of title deeds. ExA.4. is one such letter written by the second appellant to the Bank stating that the documents therein have been delivered to the bank as security for advances made or to be made. Simply because there is a word "hereby" before the word "have been delivered" it cannot be construed that it is an independent transaction and is a bargain by itself. The word "hereby" is superfluous in the context in which it is used. If really the documents are deposited only under that letter, then the language would be that the documents are hereby delivered and not the documents have been delivered. Therefore, the word "hereby" has no meaning in view of the words "have been delivered". Moreover, the said objection has not been raised by the appellants either in their written statements or before the trial Court. If is only for the first time, such an objectiion is being raised here. It is seen from Ex.A-8 to A-11 that the second appellant has clearly admitted the factum of moretgage by deposit of title deeds. We find from ExA-11 dated 13-5-1974 in particular that the second appellant has stated thst the appellants had given their house, worth more than one lakh of rupees as additional collateral security for the cash credit sanction. It is significant to note in this connection that this letter came to be written after the documents ExA.16 to A-18 were executed on 1-9-1973. Similarly, in the subsequent documents like letters marked as ExA.19 dated 21-8-1975 and ExA-23 dated 23-9-1976, we find specific reference to the suit mortgage. On a consideration of these materials, we find no difficulty in accepting the case of the respondent Bank that there is a valid mortgage by deposit of title deeds, and this point is answered accordingly."
10. Point No. 2: Learned Counsel for the appellants raises the contention that the respondent Bank had materially altered the promissory note Ex.A.16, the guarantee letter ExA.17 and the letter of hypothecation Ex.A.18. The appellants have hot disputed the execution of these documents on 10-9-1973. According to the learned Counsel, the word "Partners" was not written by the appellants at the time of the execution of these documents. Such a contention does not call for aserious consideration in view of the fact that appellants 2 to 4 have signed "for Sri Venkataramana and Co". The words "for Sri Venkataramana and Co." are affixed with the help of a rubber stamp. This fact is not denied by the appellants. According to them, it is only the word "partners" has been subsequently added and that it must have been done some time after the execution of the said documents. Once it is admitted that they have signed for Sri Venkataramana and Co., it goes without saying that they have signed only in their capacity as partners. Therefore, the addition of the word "partners" is not going to change either their capacity or the nature of the documents. Moreover, there is no acceptable evidence to come to the Conclusion that causing material alteration in the said documents. There is definite evidence to prove that the word "partners" was written at the time of the execution of the said documents. It is seen from the evidence of P.W.2, an officer of the respondent's Bank, that he has filled up the blank forms in ExA.16 to A-18 and that the word "partners" was written by his collegue Palaniappan, P.W.3. The said Palaniappan as P.W.3 has deposed that the said word was written by him at the time of the execution of the said documents. A suggestion was made that P.W.3 did not write the word "partners" in all these three documents. As a matter of fact, P.W.3 was asked to write the word "partners" three times in a piece of paper in the Court at the time of his examination, which is marked as Ex.C.l. The trial Court, on a comparison of his signatures, came to the conclusion that the writings are identical. On a consideration of the evidence of P.Ws.2and3 and on a comparison of the signatures, we are satisfied that there is no material alteration as contended by the appellants Moreover, when the respondent-Bank wrote to the appellants under Ex.A.28 demanding, the amount, the appellants sent a reply under ExA.29 dated 2-5-1977. We find that the question of material alteration was not at all raised at that time. On the oher hand, they have categorically confirmed the equitable mortgage in favour of the Bank and wanted some time for paying the amount. Apart from that, the appellants 3 and 5 have not given evidence before the trial Court relating to this aspect. For the said reasons, we have no hesitation in holding that there is no material alteration as contended by the appellants and this point is accordingly held against them. In view of this finding, we feel that it is unnecessary to refer to the legal principles relating to material alteration.
11. Point No. 3: It is the case of the appellants 3 and 5 that they ceased to be the partners of the first appellant firm as on 31-5-1972 and that they are not liable for the transactions of the firm from 1-6-1972 onwards. It is significant to note in this connection that they have not adduced any evidence on this aspect. The second appellant, who is the father of appellants 3 to 5, examined himself as D.W. 1. He deposed that after 31-5-1972, the partnership was reconstituted and a new partnership deed was executed under Ex.B.9. It is staged that only the appellants 2 and 4 became the partners of the reconstituted partnership. We find that Ex.B.9 is an unregistered one and, therefore, it cannot be relied upon straightaway without further evidence. Learned Counsel for the respondent Bank has rightly pointed out that even after the allaged reconstitution as per Ex.B.9, the appellants 2 to 5 continued to take part in the business of the firm with the respondent Bank as partners of the said firm. According to him, no communication was sent to the Bank about the socalled reconstitution of the firm. D.W. 1 has claimed that a communication was sent to the Bank on 7-7-1972 under the original of Ex.B.10 with a covering letter. Even if the so called reconstitution of the firm is taken to be correct, it is the duty of the partners to intimate the said fact the respondent Bank by registered post. There is absolutely no evidence in this case to prove that such a communication was sent to the respondent Bank. We find there is no acknowledgement of the receipt of Ex.B.9 and B-10. Ex.B-10 is only a carbon copy of the letter. Therefore, no importance can be given to these self serving documents Ex.B-9 and B-10. The plea regarding the alleged reconstitution of the firm cannot be accepted in view of the fact that the appellants 3 and 5 continued to transact the business as partners even after 1-6-1972. We find that Ex.A-16 to A-18 were executed by all the partners on 10-9-1973. ExA-20 is a confirmation letter signed by all the four partners on 12-5-1976. Similarly, the revival letter Ex A-21 also was signed by all of them. Ex.A.30 is a confirmation letter signed by three out of four partners. If really, the appellants 3 and 5.were not partners of the firm from 1.6.1972, there is no reason why they should continue to act as partners subsequently as is seen from the various documents referred to aboye. It was only after the respondent Bank came to know about the reconstitution of the firm, they obtained a guarantee letter from these two persons under ExA.31 on 28-11-1978. Taking into consideration all these facts and circumstances, we reject the contentions of the appellants that there was a reconstitution of the firm after 31-5-1972 and that the appellants 3 and 5 are not liable for the suit claim. This point is, therefore, held against them.
12. Point No. 4: Learned Counsel for the appellants vehemently argued that even if his other contentions are not accepted by this Court, the appellant should be given the benefits available to them under the Usurious Loans Act. According to him, the interest charged by the respondent Bank is usurious and penal. It is contended that appellants 2 and 5 are agriculturists, since the second appellant owns lands by himself and the fifth appellant was adopted by one Ramanujam Iyengar to whose agricultural properties he became entitled to after his death, and, therefore, the respondent Bank is not entitled to charge exhoribitant interest in respect of the loans borrowed by them. Even though the respondent Bank has challenged validity of the adoption of the fifth respondent by Ramanujam Iyengar, the trial Court has chosen to proceed on the basis that it is a valid document. Therefore, it is unnecessary to go into that aspect at this stage. The question to be decided now would be, whether the interest charged by the Bank is excessive and whether this Court could call in aid the provisions of the Usurious Loans Act,1918 (Act 10 of 1918) to mitigate the rigour of the loan transaction, and if so, what relief the appellants are entitled to? Learned Counsel for the appellants, questioned the legality of the compound interest charged by the Bank. According to him, there was no agreement to charge interest with quarterly,or monthly rests and the Bank could not have collected such compound interest without satisfactory sanction by the Reserve Bank of India. He further contended that the interest charged at the rate of 18 per cent per annum on the secured debt is excessive and unreasonable and should, therefore, be scaled down under the provisions of the Usurious Loans Act. Learned Counsel for the respondent - Bank would contend that there was banking institutions to charge compound interest quarterly or monthly rests and also to collect penal interest from the defaulters. According to him, such interest has been charged on the basis of several Notificatioins issued by the Reserve Bank of India. He has relied upon the circular issued by the Central Office of the respondent Bank, Ex.A.26. P.W.1 has explained the procedure in detail in his evidence. According to P.W.3, an Officer of the respondent, the Bank is not authorised to advance loans for an interest lesser than the interest prescribed by the Reserve Bank of India. The simple interest is fixed at 11 per cent per annum, whereas the compound interest on overdue account is fixed at 18 per cent per annum. The appellants have never raised any objection : at any point of time for the rate of interest charged by the respondent Bank. On the other hand; in all the documents which came into existence from the date of ExA.5, it is mentioned that the interest would be charged at quarterly rests.
13. While considering the applicability of the Usurious Loans Act, we have to take note of the provisions of the Banking Regulation Act, 1949. The respondent Bank, which is a Nationalised Bank, is bound by the provisions of the Banking Regulation Act. The question that is raised now for the first time before this Court is, whether the charging of interest at certain rates by a Nationalised Bank functioning under the Banking Regulation Act, in accordance with the regulations and directives issued by the Reserve Bank of India periodically, would fall within the scope of the provisions of the Usurious Loans Act. According to the respondent Bank, the provisions of the Usurious Loans Act will not be applicable, in so far as the respondent Bank is concerned. According to the learned Counsel for the respondent, the provisions of the Banking Regulation Act, which are later in point of time, will prevail over the provisions of the Usurious Loans Act. According to him, even assuming that the provisions of the Usurious Loans Act would apply, yet, on proof of special circumstances which may even be traced to a statute, the particular rate of interest charged being in accordance with the directions of the Reserve Bank of India, the provisions of the other Act cannot be brought in aid. According to the learned Counsel for the appellants, Section 2 of the Banking Regulation Act will not preclude the applicability of the provisions of the Usurious Loans Act, as the same having been enacted as a valid piece of beneficial legislation to give relief to agriculturists from the excessive burden of indebtedness. It is further contended that in all cases where the debtor is an agriculturist and a higher rate of interest is charged, the presumption that the transaction is unfair is conclusive and that thereafter there is no question of the existence of any special circumstances, which would justify the charging of a high rate of interest, as otherwise, the very object of the beneficial legislation would be defeated. In this connection, we have to note the relevant provisions of the Usurious Loans Act. The Act conferred, additional power on Courts to deal with cases of usurious loans of money or kind. According to Section 3(1) of the Act, if the Court has reason to believe that the interest is excessive or that the transaction was as between the parties there to substantially unfair, the Court may exercise all or any of the powers enumerated in the said section. Sub-clause (i) to Section 3(1) empowers the Court to re-open the transaction, take an account between the parties, and relieve the debtor of all liability in respect of any excessive interest. The Explanation to the said section clarifies the meaning of the expression "transaction" for purpose of Section 3(1)(i), when a suit was brought about on a series of transactions. Section 3(2)(b) of the Act laid down the circumstances to be taken into account by the Court in considering the question whether the interest is excessive under this section. The said Usurious Loans Act, 1918 has been amended by the Tamil Nadu Act VIII of 1937. Under the amended Section 3(1) of the Usurious Loans Act, a new Explanation was inserted, according to which, if the interest is excessive, the Court shall presume that the transaction was substantially unfair, but that such presumption may be rebutted by proof of special circumstances justifying the rate of interest. A proviso was added to Clause (b) of Sub-section (2) of section3 of the Act to the effect that in the case of loans to agriculturists, the Court shall presume that the interest is excessive, if compound interest is charged. Relying on this Explanation, learned Counsel for the appellants argues that who there is special protection given to the agriculturists under this Act, the provisions of the Banking Regulation Act cannot take away such a beneficial provisions. It is unnecessary for us to go into the matter is detail now in view of the categorical decision rendered by a Bench of this Court in Indian Bank, Thiruvannamalai V. Balasubramania Gurukkal (1982)2 M.L.J. 238 where the identical questions were raised. The Bench has considered the question whether there is an irreconcilable inconsistency between the provisions of these two Acts and held as follows.
The avowed object of the Banking Regulation Act, 1949, is to consolidate and amend the law relating to banking and there under provision is made for the regulation and control by the Reserve Bank of India of the carrying on of the business of banking by banking companies including the rates of interest on advances by Banks. Any contravention on the part of the banks to charge interest if the rates specified under Section 2l(2)(c) is made punishable under Section 46(4) of the Banking Regulation Act, 1949. The primary object of the Usurious Loans Act, is to confer a power on Court to afford relief to a debtor, if the Court has reason to believe that a particular transaction between the parties is substantially unfair. No particular rate of interest, as reasonable interest or excessive interest, has been prescribed in the Usurious Loans Act and the reasonableness or otherwise of the rate of interest in any given case has to be decided and determined in the light of the statutory provisions contained therein. In other words, the provisions of the Usurious Loans Act do not in any manner control or regulate the charging of rates of interest, but are intended merely to afford relief from a claim for excessive interest in cases where the transaction is considered to be substantially unfair. It is obvious that the spheres of operation of these two enactments are very different, in that one is concerned with the control and regulation of the business of banking including the rate of interest on advances to be made by the banking companies, while the other is intended to secure relief from excessive claims for interest sought to be enforced through Courts. On a consideraation of the diverse scope of the operation of the provisions of these enactments, we are of the view that the provisions of the Banking Regulation Act, 1949, alone regulate the rate of interest on advances by nationalised banks and that there is no inconsistency between its provisions and the provisions of the Usurious Loans Act. The contention of the learned Counsel for the petitioner in this regard has, therefore, to be negatived. Equally, the contention of the learned Counsel for the respondents that the provisions of the Usurious Loans Act will prevail over the provisions of the Banking Regulation Act, 1949. has also to be rejected.
According to the opinion of the Bench which decided the said case, the relevant circulars issued by the Reserve Bank of India contained instructions with reference to the charging of a particular rate of interest, and that this would be a special circumstance justifying the nationalised bank in charging the rate of interest, as otherwise, the petitioner bank would have violated Section 21(c) read with Section 21(3) and the penalities provided for violation thereof under Section 46(4) of the Banking Regulation Act would stend attrached. It was further held that the whole object of the provisions of the Usurious Loans Act was only to save agriculturist debtors from the oppression of private money-lenders and nationalised banking institutions, as we have to-day, charging rates of interest in accordance with the circulars issued by the Reserve Bank of India from time to time, were farthest from the contemplation of the makers of the Usurious Loans Act. This conclusion was arrived at on the basis that a nationalised bank functioning under the provisions of the Banking Regulation Act and subject to the control of the Reserve Bank of India as the apex bank, has no free hard in relation to the stipulation of interest on advances made by it to debtors and this could constitute a special circum stance within the meaning of Explanation 1 to Section 3(1) of the Usurious Loans Act.
14. The above said contentions have now to be considered in the light of the latest amendment of the Banking Regulation Act as amended by the Banking Laws (Amendment) Act, 1983 (Act I of 1984). Section 21-A of the Act reads as follows:
Not withstanding anything contained in the Usurious Loans Act, 1918 or any other law relating to indebtedness in force in any state, a transaction between a banking company and its debtors shall not be respened by any Court on the ground that the rate of interest charged by the Company in respect of such transaction is excessive.
This provision interdicts the assessability to Court impugning the transaction between the bank and the debtors on the ground that the interest is excessive. This was inserted obviously to get over the plea of usurious sting in the rate of interest charged by the Bank. In this connection a decision of the Andhra Pradesh High Court reported in Andhra Bank Ltd., v. B. Narasimma (1986 Bank J. 708) was relied upon wherein the constitutional validity of Section 21-A of the Banking Regulation Act was challenged. In the said decision, as earlier decision of the same Court in M. Satyanarayana v. Andhra Bank Ltd., Eluru is referred to. The substance of the above decisions is that Section 21-A of the Banking Regulation Act is legal and enforceable and does not apply to debts eligible to benefits ander A.P. Agricultural Indebtedness Relief Act (Act IV of 1938). It was further held that the expression "Debtor" used in Section 21-A does not take in its sweep the agriculturist debtor; It is unnecessary for us to go into this question in this appeal, as we are taking the view that the appellants are not agriculturists in the strict sense of the term used in the relevant Acts.
15. Learned Counsel appearing for the appellants drew our attention to a decision of D.S. Gowda v. Corporation Bank A.I.R. 1983 Karn. 143 where the identical question was considered by a Bench of the said Court. The learned judges, who decided the said case, referred to a decision of this Court in Indian Bank, Thiruvannamalai v. Balasubramania Gurukkal . After eleaborately considering the entire matter, the Karnataka High Court expressed their inability to follow the decision of this Court for the various reasons. According to them, all the relevant circulars and directives of the Reserve Bank of India were not brought to the notice of the said Court.Their attertion was drawn to the circulars issued by the Reserve Bank of India in 1972,1974 and 1976 and commanding all commercial banks including nationalised banks not to charge compound interest on agricultural loans. A particular reference was made to the circular issued in Ref.DEO D.NO. B.P.B. C.94/C-453 (A) 76 dated 17-8-1976. Even otherwise, the learned Judge of the Kanataka High Court were not inclined to accept the soundness and tenability of the reasonings found in the said judgment of this Court. They did not agree with the principle declared therein to the effect that the directives of the Reserve Banks would constitute a special circumstances within the scope of the Explanation-I to Section 3(1) of the Usurious Loans Act. In this background, an earnes appeal was made by the Learned Counsel for the appellants that though this Bench is bound by the earlier decision of this Court we may consider the question of referring the matter to a larger Bench. Even though the matter may require a second look, we feel that it is not necessary at this stage to make such a reference, since on facts we find that a decision by a larger Bench on this point may not be relevant to dispose of the present appeal.
16. Bearing the above principles in mind, we now proceed to find out whether any of the appellants are entitled to the benefits under the Usurious Loans Act as agriculturists. In this connection, we find that the appellants have not let in any satisfactory evidence to show that they are entitled to get such benefits as agriculturists. In order to become eligible to get such benefit, the appellants have to establish that they are agriculturists as defined under the Tamil Nadu Agriculturists Relief Act, 1938. If has been repeatedly held by the Supreme Court and this Court that merely from the fact that the debtor had a saleable interest in agricultural lands, there is no warrant for a assumption that the debtor is certainly an agriculturist and that it is necessary to see whether the debtor, in addition to possessing a saleable interest in agricultural lands, is possessed of other assets which might bring him within any of the provisio attached to the definition of agriculturist. If the creditor proves that the debtor in addition to his having a saleable interest in agricultural lands possessed other properties or carried on other business which might result in the debtor being liable for income-tax, or agricultural Income-tax or profession tax, or property tax, the onus shifts to the debtor to prove that the other assets or the business carried on by him did not involve him in any such liability and, therefore, he does not come under any of the provisos to the definition of agriculturist, as laid down by this Court in Arunugha Nadar v. Kumara Pillai (1981) 2 M.L.J. 35. In this case, we find that admittedly the appellants were carrying on business and owned other properties. Apart from that, they have been paying income-tax also for the business carried on by them. The appellants have not discharged the onus on their part.
17. There is yet another circumstance which we have to take into account in this connection. As laid down in Jugra Lodha v. Nataraja Naicker (1981) 2 M.L.J. 150, it is well-established that before a debtor claims the benefit of Madras Act IV of 1938, as amended by Madras Act VIII of 1983, he should prove that he was an "agriculturist" both on the date of the debt and on the date when the debt is sought to be recovered by filing suit. In addition he has to prove that he was an agriculturist on 1-3-1972. In this case, the suit mortgage is dated 11-2-1971. There is no acceptable evidence in this case to show that any of the appellants was an agriculturist as defined under the Act either on 11-2-1971 or on 1-3-1972. They have not established that they come within the definition of the term "agriculturist" defined under the Act. It is significant to note that before the filing of the present suit, they have never claimed any benefit as agriculturists nor did they raise any question of Usurious nature of the loan. In this case, the second appellant alone has filed a written statement claiming benefits as an agriculturist. The other appellants have not been exafliined in this case. It was also pointed out to us that the second appeljant has stated "nil" against the column "lands" in his statement of assets and liabilities given by the appellants to the respondent Bank, In Ex.A-39. In oral evidence also, D.W.1 has not furnished any details as to the nature of interest possessed by him in agricultural lands which would enable him to come under the definition of "agriculturist" under the Act. Excepting a bald statement that he is an agriculturist, no acceptable evidence has been adduced "in this case on that aspect. Therefore, we are unable to accept their case on this point and we, therefore, hold that the appellants are not entitled to any benefits under the Usurious Loans Act. Accordingly, this point is answered against the appellants.
18. However, there is only one minor aspect which may require clarification. Though the respondent Bank has relied upon various documents to show that the appellants have agreed to pay interest with quarterly rests, no document has been produced before Court to show that there was such a agreement before the date of Ex.A.5, i.e. 2.5.1973. It is only in this document we find for the first time that the payment of interest will be paid in full with quarterly rests. Therefore, in calculating the interest, the respondent Bank is not entitled to calculate on the basis of quarterly rests in respect of interest payable on any outstanding before 2.5.1973. The difference in such interests can be worked Out and deducted from out of the total amount payable by the defendants at the time of passing of the final decree. Excepting this minor modification, we do not find any reason to interfere with the findings of the trial Court.
19. In the result, this appeal is dismissed. No costs.