Punjab-Haryana High Court
Surinder Jit Singh And Ors. vs State Bank Of India on 5 July, 2004
Equivalent citations: (2004)138PLR121
Author: Hemant Gupta
Bench: Hemant Gupta
JUDGMENT Hemant Gupta, J.
1. The defendant is in appeal aggrieved against the judgment and decree passed by the First Appellate Court whereby the suit of the plaintiff bank for the recovery of Rs. 1,98,892/- was decreed with future interest at the rate of 12.5 per cent per annum from the date of the decree of that Court till actual realisation.
2. That plaintiff bank advanced a sum of Rs. 81,000/- to Jaggar Singh alias Ujagar Singh, father of defendants No. 1 to 5 for the purchase of tractor on the basis of his request for the grant of loan dated.27.3.1990. In terms of the mortgage deed, the amount of loan was repayable in 18 half yearly instalments of Rs. 4500/- each. Since the borrower failed to make the payment of due instalment, the plaintiff Bank filed a suit for recovery. The trial Court decreed the suit but granted future interest at the rate of 6 per cent per annum from the date of the decree till realisation on the decretal amount if the amount along with interest and costs is not paid within 2 months from the passing of the decree. However, in appeal, the stipulation regarding rate of interest was modified and it was held that the bank is entitled to future interest at the rate of 12.5 per cent per annum from the date of that decree.
3. In the present second appeal, the learned counsel for the appellant has argued that the principal sum was Rs. 81,000/- whereas with capitalisation of interest it is so alleged to over Rs. 1,98,000/-. By placing reliance on Central Bank of India v. Ravindra and Ors., (2001-3)129 P.L.R. 837 (S.C.), it was contended that the award of future interest is covered by the provisions of Section 34 of the Code of Civil Procedure and the amount of interest is disproportionate with the principal sum actually advanced, therefore, the interest at the rate of '12.5 per cent per annum could not be granted. It is further argued relying upon a single Bench judgment of this Court reported in Makhan Singh v. Union Bank of India and Ors. (1989-1)95 P.L.R. 703 that since the trial Court has failed to determine principal amount on which alone the future interest is payable therefore, the decree passed by the Courts below is not sustainable.
4. Following questions of law arise for consideration of this Court in this appeal:-
1. Whether the first Appellate Court has applied the principles of law enunciated by Hon'ble Supreme Court in Ravindra's case (supra)?
2. Whether this First Appellate Court could interfere in exercise of discretion exercised by the trial Court in the matter, of granting of future interest without considering the judgment of Hon'ble Supreme Court on Ravindra's case (supra)?
5. It is apparent from the facts on record that the borrower was to repay the amount of loan in half yearly instalments of Rs. 4500/- each. The first instalment was due on 31.12.1990. However, the borrower has paid a sum of Rs. 12000/- on 6.3.1991 and another sum of Rs. 23,000/- on 7.11.1991. Apart from the said amount the borrower has not paid any instalment therefore, the bank filed a suit for the recovery of the amount of Rs. 1,98,892/- on the ground that a sum of Rs. 90,335/- was due and payable by the defendant on 31.10.1992 when the account of the defendant became non-performing account. After the account is declared non-performing, the interest from 1.11.1992 to 14.6.1998 amounting to Rs. 1,08,557/- is due and payable by the defendants.
6. In Ravindra case (supra) it has been held by the Hon'ble Supreme Court that in case of agricultural loans, the interest cannot be capitalised except on annual or six-monthly rests depending on rotation of crops in the area to which the agriculturist borrowers belong. In the present case, the instalments of loan was payable 6 monthly and therefore, the non-payment of instalment could be capitalised on account of non-payment of half yearly instalment. Thus, there is no infirmity in the capitalisation of interest which was payable half yearly.
7. The argument raised by the learned counsel for the appellant that the future interest is covered by the provisions of Section 34 of the Code is based upon the following finding of Hon'ble Supreme Court in Ravindra's case (supra):
"53(8). Award of interest pendente lite and post-decree is discretionary with the Court as it is essentially governed by Section 34 of the CPC dehors the contract between the parties. In a given case if the Court finds that in the principal sum adjudged on the date of the suit the component of interest is disproportionate with the component of the principal sum actually advanced the Court may exercise its discretion in awarding interest pendente lite and post-decree interest at a lower rate or may even decline awarding such interest. The discretion shall be exercised fairly, judiciously and for reasons and not in an arbitrary or fanciful manner."
8. Suit of a sum of Rs. 81,000/- three instalments of Rs. 4500/- alone were payable on or before 31.12.1991 i.e. instalment due on 31.12.1990, 30.6.1991 and 31.12.1991. However, the borrower has deposited Rs. 35,000/- before the said date. No doubt, thereafter the borrower has failed to deposit any instalment but the fact remains that substantial amount was deposited over and above the amount of instalments due before 3-1.12.1991.
9. Learned trial Court has exercised discretion in granting future interest at the rate of 6 per cent per annum from the date of decree till realisation. However, the first Appellate Court modified the judgment and decree to grant future interest at the rate of 12.5 per cent per annum on the basis of stipulations contained in documents Ex.P3, P4 and P5. The first Appellate Court has not taken into consideration that the component of interest now claimed by the bank is disproportionate with the component of the sum actually advanced. The bank has claimed interest of above Rs. 1 lac even though the borrower has paid Rs. 35,000/- towards instalments out of Rs. 81,000/- advanced as loan. Still further, the First Appellate Court has not given any reason as to whether the interest is fair and reasonable as laid down by the Hon'ble Supreme Court in Ravindra case (supra). Therefore, I do not find that the first Appellate Court was justified in interfering with the discretion exercised by the trial Court in granting future interest at the rate of 6 per cent per annum from the date of decree. Consequently, in respect of both the substantial question of law, it is held that the first Appellate Court has not taken into consideration the law enunciated by the Hon'ble Supreme Court in Ravindra case (supra) and was not justified in interfering in the discretion exercised by the trial Court in the matter of grant of interest.
10. The argument that the principal sum has not been adjudged by the Courts below is without any merit. In terms of the contract between the parties, the interest payable half yearly stand capitalised. Therefore, a sum of Rs. 1,98,992/- is the sum due and payable by the borrower on which future interest is payable. The judgment referred by the learned counsel for the appellant is not applicable in view of the judgment of Hon'ble Supreme Court in Ravindra's case (supra).
11. Consequently, the appeal is allowed and the judgment and decree passed by the learned first Appellate Court granting future interest at the rate of 12.5 per cent per annum is set aside and that of the learned trial Court is restored with no order as to costs.