Karnataka High Court
Vijaya Bank vs S. Bhathija And Another on 23 April, 1993
Equivalent citations: AIR1994KANT123, [1995]82COMPCAS161A(KAR), 1992(2)KARLJ609, AIR 1994 KARNATAKA 123, 1993 (2) BANKCAS 634, (1994) 1 BANKLJ 129, (1993) 2 KANT LJ 609, 1994 (1) BANKLJ 291, (1995) 82 COMCAS 161, (1993) ILR (KANT) 2035
Author: R.V. Raveendran
Bench: R.V. Raveendran
ORDER Raveendran, J.
1. This appeal is by the plaintiff in O.S. No. 3518/1982 on the file of the City Civil Court, Bangalore. The plaintiff-Bank filed the suit on 2-12-1982 against the borrower (first defendant) and the guarantor (second defendant) for recovery of Rs. 3,20,095-95 P. with interest at 16.25% per annum from the date of suit till the date of realisation with costs and for a direction for sale of the suit schedule moveable properties for realisation of the decretal amount and for a further direction that the balance if any to be recovered from the defendants personally. For convenience, the parties will be referred to by their ranks in the trial Court.
2. The plaint averments, briefly are : On the request of the defendants, the Bank agreed to give a term loan of Rs. 3,00,000/- against the hypothecation of moveables mentioned in the plaint schedule to the first defendant; The first defendant entered into an agreement with the plaintiff on 5-7-1978 containing the terms of the said loan and in pursuance of it, as and when required, by the first defendant, the plaintiff made advance to the first defendant. The principal amount had to be repaid on or before 1983 in quarterly instalments of Rs. 15,000/-. The first defendant agreed to pay interest on the amount borrowed at 5% over the Reserve Bank of India rate with a minimum of 14% per annum with quarterly rests, by letter dated 5-7-1978. He agreed to pay additional interest of 3% per annum in the event of his failure to pay the instalments in time on the amount so defaulted. By another letter dated 5-6-1978, the first defendant also agreed to pay increase in the rate of interest as per the Directives of the Reserve Bank of India given to the Bank from time to time. The first defendant also executed an on-demand promissory note dated 5-7-1978 promising to pay to the Bank on demand, a sum of Rs. 3,00,000/- with interest at 3% per annum over the Reserve Bank of India rate with a minimum of 14% per annum with quarterly rests. To secure payment of the amounts, the first defendant executed an agreement dated 5-7-1978 hypothecating the moveable properties described in the plaint schedule in favour of the Bank. The second defendant guaranteed repayment of the amounts advanced to first defendant with interest and other charges by executing a letter of guarantee dated 5-7-1978 his liability being limited to Rs. 3,00,000/- and interest accrued thereon. The amounts advanced to the first defendant from time to time and the payments made by the first defendant to the Bank and the other amounts due by the first defendant to the Bank by way of interest and other charges were entered in the Account Books of the Bank and the true extract of the account was produced along with the plaint. As per the said account, a sum of Rs. 3,20,095-95 P was due as on 23-11-1982. The first defendant gave letters of acknow-
ledgment of debt dated 16-7-1980 and 20-1-1982 acknowledging his liability. As the first defendant failed to pay the amount due in spite of plaintiff s notice dated 6-3-1981, and as the second defendant refused to receive notice, the Bank filed the suit against the defendants for the recovery of Rupees 3,20,095-95 P with interest at 16.25% per annum from the date of suit to date of realisation.
3. Defendants 1 and 2 in their written statement admitted the grant of loan facility of Rs. 3,00,000/- and execution of the loan documents; they however, inter alia contended that only simple interest could be charged and recovered only at a rate of 14% per annum and not compound interest at 16.25% with quarterly rests; that the plaintiff was not entitled to charge any additional interest and defendants were entitled to relief under the provisions of the Karnataka Usurious Loans Act in regard to the excess interest claimed; that plaintiff-Bank claimed interest and made debits, contrary to the directives of Reserve Bank of India; They challenged the debit entries in the statement of account relating to penal interest and unauthorised debits to be proved. They did not however specify what according to them was the amount due by them.
4. On the above pleadings, the following issues were framed :
1. Whether the plaintiff-Bank had succeeded to the rights and liabilities of the former Vijaya Bank Limited?
2. Whether the plaintiff Bank is entitled to proceed against the defendants?
3. Whether the plaint is duty signed and verified by competent person?
4. Whether the 1st defendant has agreed to the rate of interest as claimed in the plaint and the documents?
5. Whether the 1st defendant has acknowledged the debt from time to time?
6. Whether the 1st defendant proves that he has signed the blank papers at the time of availing the loan and they have been filled up by the Bank subsequently to show the present terms stated in the plaint?
7. Whether the 1st defendant had signed blank papers at the time of availing loan and they have been converted to the acknowledgment of loan?
8. Whether the rate of interest agreed is excessive, usurious and against the directives of R.B.I. If so whether the 1st defendant is entitled for reopening the account?
9. Whether the defendants prove that the plaintiff has unilaterally varied the terms of loan and the 2nd defendant is entitled to be discharged?
10. Whether the suit is premature?
I1. Whether the plaintiff is entitled to recover interest? If so what amount?
12. Whether the suit is in time?
13. For what reliefs the parties are entitled?
5. The plaintiff-Bank examined Mr. Shankar Alva, who was the Manager of its K. G. Road Branch at the time of filing the suit as PW 1. It examined Mr. K. Prabhakar Hegde, the Manager at the time of grant of ioan and execution of loan documents as PW2. The Bank exhibited documents marked Exs.P. 1 to P. 18. The defendants did not choose to let in any evidence, either oral or documentary. The trial Court answered all the issues in favour of the plaintiff and against the defendants. However, while answering issues 8 and 11, it held that plaintiff is entitled to interest at 13% per annum on the loan amount from the date of suit. On that basis, the trial Court decreed the suit by its judgment on 28-2-1986 for Rs. 3,00,000/-together with costs and interest at 13% per annum from 5-7-1978 till the date of suit and at 6% per annum from the date of suit till realisation. The trial Court granted six months time to pay the amount decreed and directed that the decretal amount shall be recovered personally from the defendants.
6. The learned counsel for the Bank contended that the trial Court having held all the issues in favour of the Bank, was not justified in reducing the interest claimed; that the trial Court seriously erred in holding that the decision in Krishna Reddy H.P. v. Canara Bank, , laid down any principle or guideline that interest could be awarded only at the rate of 13% per annum up to the date of suit or 6% per annum from the date of suit; according to the plaintiff, the Court ought to have granted : (a) Compound interest at the rate of 16.25% per annum with quarterly rests, from 5-7-1978 to the date of suit instead of simple interest at the rate of 13% per. annum; (b) Compound interest at 16.25% per annum from the date of suit to date of realisation instead of simple interest at the rate of 6% per annam granted by the trial Court. The learned counsel for the defendant, on the other hand, relying on several decisions of this Court tried to justify the rate of interest awarded by the trial Court.
7. During arguments, we found that a serious error, which is however arithmetical and clerical in nature, has crept into the judgment and consequently in the decree. The plaint . averments make it clear that Rs. 3,00,000/- was the credit facility limit granted to first defendant on 5-7-1978 and not on loan disbursed on that day. It is also clear that the loan amount was disbursed in stages as and when required by the first defendant. In fact it is seen from the Certified Account extract annexed to the plaint which was marked as Ex. P. 14, that the following amounts were advanced to the first defendant (excluding the debits relating to interest, Bank and service charges) :
DATE AMOUNT ________ ________ 5-7-1978 .. Rs. 30,000-00 15-7-1978 .. Rs. 6,280-00 19-7-1978 .. Rs. 6,075-00 3-8-1978 .. Rs. 3,750-00 30-8-1978 .. Rs. 2,340-00 13-8-1978 .. Rs. 6,225-00 14-8-1978 .. Rs. 8,100-00 13-10-1978 .. Rs. 8,985-00 5-12-1978 .. Rs. 26,147-50 2-1-1979 .. Rs. 2,500-00 12-4-1979 .. Rs. 99,562-50 The sum of Rs. 3,20,095-95 P claimed in the suit is not the aggregate of the amounts advanced, but the balance outstanding as on 26-11-1982, after debiting interest, Bank/ Service charges and after giving credit to the payments made by the first defendant. However, being apparently misled by a statement in the evidence of PW2 that "1st defendant borrowed a term loan of Rs. 3 lakhs on 5-7-1978" and an admission in the written statement that "it is true that Ist defendant, ..... was lent a sum of Rs. 3,00,000/- ....." the trial Court wrongly assumed that a sum of Rs. 3,00,000/-was advanced on 5-7-1978 and decreed the suit for Rs. 3,00,000/- with interest from 5-7-1978. The result of this error is that as per the decree of the Court the amount due by defendants on the date of suit (27-11-1982) is Rs. 4,72,250/- (that is Rs. 3,00,000/- plus Rs. 1,72,250/- being the interest at 13% p.m. on Rs. 3,00,000/- from 5-7-1978 to 27-11-1982) when the amount actually due to and claimed by the plaintiff as on 27-11-1982 is only Rs. 3,20,095-95 P. The defendants have neither chosen to file an appeal nor cross-objections in regard to the said excess decree nor made any application under S. 151 of C.P.C. to rectify this error.
8. On the arguments advanced and the error found, the following points arise for consideration in this appeal :
(i) Whether the plaintiff is entitled to interest, at the rate of 16.25% per annum with quarterly rests, on the amounts due, from 5-7-1978 (date of commencement of credit facility) to 27-1l-1982(date of suit) as against simple interest at 13% per annum granted by the trial Court;
(ii) Whether the plaintiff is entitled to interest on the decretal amount at the rate of Rs. 16.25% p.a. from the date of suit till the date of realisation, instead of 6% per annum awarded by the trial Court;
(iii) Where the trial Court grants a decree in excess of what is claimed, whether the Appellate Court while dealing with an appeal filed by the plaintiff, rectify the error in the absence of an appeal or cross-objection or application by the defendant;
(iv) What is the amount due to plaintiff and what relief.
Points (i) and (ii) : Interest prior to suit and after suit.
9. It is first necessary to find out the terms of contract between the parties in regard to interest and then determine whether having regard to the direction of Reserve Bank of India and/ or the law enunciated by this Court from time to time, it is necessary to vary the interest provided for in the contract.
10. Exs.P. 3 to P. 7 (all dated 5-7-1978) are the relevant documents in regard to interest. Cl. 4 of the Articles of Agreement (Ex.P. 3) between the Bank and the first defendant provides that the borrower shall pay interest on the principal amount or the balance outstanding of the loan at any time at the rate of 5% per annum over and above the Reserve Bank of India rate of interest subject however to a minimum of 14% per annum and such interest to be paid at every month ending with the last working day of calendar month; and that in default of payment of any one instalment of the principal amount or the interest on the due dates, the borrower shall pay on such over-due instalment or over-due interest, additional interest at 3% p.a. over and above the agreed rate of interest; and that any outstanding interest, when debited to the borrower's account, shall form part of the principal amount due by the borrower under the said agreement. Cl. (2) of the Hypothecation Agreement (Ex.P. 4) also contains a . similar provision. Under the on demand promissory note executed by the first defendant in favour of the Bank (Ex.P. 7) he has agreed to pay a sum of Rs. 3,00,000/- with interest at 5% per annum over the Reserve Bank of India rate with a minimum of 14 per cent per annum with quarterly rests. By letter addressed to the Bank (Ex.P. 5), the first defendant agreed that he will repay the amount borrowed in instalments of Rs. 15,000/- per quarter and in default of payment of any of the instalment, he will pay additional interest at 3% per annum on the amount defaulted till payment, and such additional interest when debited to the account will be added on to the principal at the end of every month without any notice to him. By another letter (Ex.P. 6), the first defendant agreed that if there is any increase in the rates of interest chargeable on the loans in pursuance of the directives of Reserve Bank of India, it shall be lawful for the bank to charge interest at such increased rates with or without serving a notice on him and such increases in the rate of interest shall be binding on him. The effect of these documents is that plaintiff is entitled to charge interest at the rate of 5% over the Reserve Bank of India rate with a minimum of 14% per annum and claim an additional interest of 3% per annum in regard to the amounts over-due. The interest is to be compounded with monthly rests, as per the Agreements (Exs.P. 3 and P. 4). The interest is to be compounded quarterly, that is once in three months, as per the promissory note (Ex.P. 7).
11. Learned counsel appearing for the parties took us through several decisions, either to rely on them or to distinguish them. It may be useful to refer to all of them briefly. In Bank of India v. Rao Saheb Krishna Rao Desai reported in (1980) 2 Kant LJ 495, this Court was concerned with an agricultural loan secured by mortgage of immoveable properties. This Court examined the question whether the term "quarterly rests" in the loan documents authorised compounding of interest every quarter, and held that charging of compound interest was not permissible in regard to agricultural advances. The following passages are relevant :
"..... though it is true that the term 'quarterly rest' in banking practice would in England normally mean that at the end of every quarter the banker is entitled, if the interest is not paid, to credit that amount to the principal on the assumption that thereby the interest due from the customer is discharged, this custom exists only in the case of the normal commercial banking transactions like overdrafts and it would not apply in the case of a mortgage transaction where money is advanced on the security of landed property, even in England ..... In agricultural financing, the question of the normal commercial banking conditions as in overdrafts would not come into play and the Bank 'custom' and habits which are usual in the case of commercial banking cannot be smuggled into agricultural financing".
12. In D. S. Gowda v. Corporation Bank, this Court was concerned with a loan granted for construction of building. The loan documents provided for interest at 161/2% per annum with quarterly rests. The loan amount was secured by equitable mortgage of borrower's immoveable property. The question for consideration was whether the terms of the mortgage deed providing for payment of interest at 161/2% per annum with monthly rests are valid under the statutory directives of the Reserve Bank of India or could be supported by banking practice; and, whether the interest charged by the bank including penal interest and service charges was excessive and whether the Court could call into aid the provisions of the Mysore Usurious Loans Act, 1923 to mitigate the rigour of the loan transaction. The Court referred to several directives and circulars on interest issued by the Reserve Bank of India and concluded as follows :
(a) that the minimum lending rate was 10% from 1-6-1973, 12.5% from 22-7-1974, 13.5% from 7-8-1980;
(b) that the maximum lending rate prescribed were 16.5% from 15-3-1976, 15% from 28-2-1978, 18% from 13-9-1979 and 19.4% from 7-8-1980;
(c) that Reserve Bank permitted compounding of interest with quarterly rests from 12-3-1976, compounding of interest with monthly rests from 1-7-1977 and reverted to compounding of interest with quarterly or longer rests from 28-2-1978 (except in case of agricultural advances, where compound interest was not permitted).
This Court in conclusion held :
"When any money transaction is sought to be enforced through the Court of law, and the debtor complains that the interest charged was excessive and the transaction was substantially unfair, the Court shall analyse the transaction and the components of the interest charged. If the amount charged by way of interest is found to be excessive in the sense which the Court deems it to be unreasonable having regard to the circumstances of the case, then the Court shall presume that the transaction was substantially unfair. But such presumption may be rebutted by proof of special circumstances justifying the rate of interest charged. If there was no such justification, the Court could reopen the transaction, take an account between the parties and relieve the debtor of all liability in respect of any excessive interest..... If the rate of interest charged is compound interest and the debtor is an agriculturist, the Court shall presume that the interest is excessive."
13. The above two decisions were rendered prior to the introduction of S. 21A in the Banking Regulation Act, by the Banking Laws (Amendment) Act, 1983 with effect from 15-2-1984. Section 21A reads :
"21 A. 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 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 is excessive."
In Krishna Rcddy H.P. v. Canara Bank, , this Court examined S. 21A and held as follows (at page 231 of AIR) :
"The mandate of this section is that courts cannot re-open the account relating to a transaction between a banking company and its customer on the ground that the rate of interest charged, in the opinion of Courts, is excessive or unreasonable. The Courts, in other words, cannot exercise jurisdiction under the Usurious Loans Act or any other law relating to indebtedness for the purpose of giving relief to a party. This appears to be the intent of the Legislature in enacting the Banking Laws (Amendment) Act, 1983.
Section 21A has, however, no bearing on the jurisdiction of Courts to give relief to an aggrieved party when it is established that the bank in a particular case has charged interest in excess of the limit prescribed by the Reserve Bank of India. The Reserve Bank has enormous power to control advances to be made by commercial banks. The Reserve Bank has power to prescribe or regulate the interest rate structure on advances or other financial accommodation to be made by commercial banks. Section 46(4) of the Banking Regulation Act confers power on the Reserve Bank to impose penalty for contravention of its order, rule or direction. The interest charged by the banks on transactions should therefore be in conformity with the rate prescribed by the Reserve Bank. Banks are bound to follow the direction or circular issued by the Reserve Bank in that behalf. If, in any case, it is proved that the bank has charged interest in violation of the direction of the Reserve Bank, the Court could give relief to the aggrieved party notwithstanding Section 21A of the Banking Regulation Act. The interest charged beyond the rate prescribed by the Reserve Bank would be illegal and void....."
As contended by the learned counsel for the appellant and fairly conceded by the learned counsel for respondents, there is nothing in this decision to hold that only simple interest should be awarded at the rate of 13% per annum up to the date of suit and at the rate of 6% per annum from the date of suit. The trial Court was therefore in error to hold that Krishna Reddy's case directed the award of interest only at such rates. This decision, however, clearly implies that Sec. 21A is applicable to all cases/disputes that were pending as on 15-2-1984 in any court or initiated after 15-2-1984.
14. The next two decisions cited are Bank of India v. Karnam Ranga Rao, and Bank of India v. C. R. Ramaiinga Gupta, . Both deal with award of interest in case of agricultural advances. Hence it is not necessary to refer to them, as in this case we are concerned with a non-agricultural advance.
15. In Syndicate Bank v. Subhas Yen-kappa Savaiker, this Court was dealing with loans advanced for commercial purposes, secured by a mortgage. This Court held that if the mortgage deed provides that the mortgagee will be entitled to add the interest to the principal if the interest is not paid as and when it becomes due and treat it as part of the principal amount and claim interest on the entire sum at the contractual rate, the mortgagee will be entitled to claim interest at the contractual rate not only on the principal sum but also no the sum due as interest, which gets added on to or merged into the principal amount by reason of non-payment of the same as and when it became due.
16. In Jayakunvar Manilal Shah v. Syndicate Bank, this Court was dealing with business advances, similar to the case on hand, secured by hypotheation of moveables. This Court referred to the Reserve Bank Circular dated 13-3-1976 and held :
"As per the Reserve Bank of India Circular referred to above, there is no doubt that a commercial bank like that of the plaintiff, is entitled to levy and recover interest at quarterly rest. The term 'rest' as explained above, means adding of interest at the end of rest period to the principal and from that date onwards it would become part of the principal and the bank can claim interest on it just as principal or as part of the principal sum. Clause (3) of Ex. P. 2 clearly states that the interest is payable at the end of each quarter and in the event it is not paid at the end of each quarter, the amount shall bear overdue interest at the rale fixed by the bank. The overdue interest being more than the interest agreed upon, the interest payable at the end of the quarter, if not paid will bear not only the usual rate of interest but also the overdue interest. Thus, it is clear that the amount of interst becomes part of principal and it becomes an overdue amount unpaid on the date it became due."
This Court also upheld the Bank's claim for penal additional interest, in terms of the Circulars of Reserve Bank of India.
17. In Syndicate Bank v. West Bengal Cements Ltd., AIR 1989 Delhi 107, the Delhi High Court held that where the Bank computed interest with quarterly rests, the total amount due on the date of the suit, including the interest debited from time to time, will be the 'principal sum adjudged' under S. 34 of C.P.C. The Court rejected the contention that under S. 34, interest can be awarded only on the original sum advanced and held that such an interpretation would run counter to the normal banking practice and act as a premium for those not paying interest when it is due at the cost of those making payment of interest when it is due, The Court expressed the following view in regard to interest to be granted under S. 34, C.P.C. from the date of suit (at p. 114 of AIR) :
"The grant of interest at a rate lesser than the contractual rate as a matter of rule, will amount to giving premium to those who trade upon the money of others. The defaulting borrower, in my opinion, cannot be given the benefit of reduced rate of interest as a matter of rule only because the bank had to resort to legal recourse on account of non-payment by the borrower except of course in exceptional or special circumstances will depend on facts and circumstances of each case. One such illustration of exceptional or special circumstances can be where borrower made every sincere effort to pay but failed and grant of interest at contractual rate will render closure of his unit resulting in unemployment of large number of persons. Another such illustration can be the conduct of the creditor himself which may justify the grant of reduced rate of interest. I will not venture to lay down any broad proposition by multiplying these illustrations. Ultimately facts of each case will determine special or exceptional circumstances. No rigid or hard and fast rule can be laid down. In my opinion, in commercial transactions, grant of interest at the contractual rate ought to be the rule and grant of interest at reduced rate a rare exception. The same principles should be applied for deter-
mining the reasonable rate of pendente lite interest."
18. In Central Bank of India v. PRG Industries Private Ltd., , the Gujarat High Court has held that in regard to commercial transactions of Public Financial Institutions, the contractual rate of interst should be the rule and departure, a rare exception, while granting current interest and future interest. In S. K. Engineering Works v. New Bank of India, , the Punjab High Court held that the Bank will be entitled to compound interest at contract rates, compounded in accordance with the contract, from the date of suit to date of realisation. We are in respectful agreement with the aforesaid views expressed by the High Court of Delhi, Gujarat and Punjab.
Though Section 34 of C.P.C. provides that the rates of current interest and future interest, are within the discretion of the Court, the provjso to S. 34 indicates the guidelines for exercise of such discretion. It shows that grant of interest at contract rate should be the normal rule, the use of discretion to refuse interest or reduce the contract rate, being the exception. When the borrower has promised to pay a particular rate of interest and availed the credit and on default by the borrower, when an action is commenced ending in decree, the proper exercise of the discretion would be to grant interest at the contract rate from the date of suit to date of realisation. To reduce or deny interest would amount to penalising the creditor for approaching the Court and encouraging the debtor to deliberately and unjustly prolong the litigation. In particular, habitual reduc-tion or refusal of interest in cases of lending by Banks by Courts, will play havog with Banking and commerce. It should not be forgotten that every lending by a Bank has a corresponding borrowing by the Bank in the form of deposits and the Banks have an obligation to pay interest on such deposits at rates fixed by Reserve Bank of India. It should also be borne in mind that the Reserve Bank regulates the rates of interest chargeable on several types of loans, by taking note of the rate of interest payable to Depositors, cost of servicing and other relevant factors. Of course, if the facts of a particular case warrant reduction, as illustrated by the Delhi High Court in AIR 1989 Delhi 107, the Court may reduce the contract rate of interest by giving reasons justifying such reduction.
19. Thus the following position emerges in regard to interest chargeable by Banks :
"(a) Banks are entitled to interest at contract rates, subject to the ceiling or limitations placed by the Reserve Bank of India in its circulars /directives;
(b) Whenever the contract provides for compounding of interest, either specifically or impliedly by use of the words "with rests", the Banks are entitled to compound interest, except in the case of agricultural advances;
(c) The Courts can only examine whether the rates of interest claimed is excessive or not with reference to the directives of Reserve Bank of India. The Courts cannot reduce the contract rate of interest either under the provisions of Usurious Loans Act or any other law relating to indebtedness or principles of equity;
(d) Normally in regard to Bank claims, the Courts should award current interest (from the date of suit to date of decree) and future interest (from the date of decree to date of realisation) under S. 34 of the Code of Civil Procedure, at the contract rates. 'Contract rate of interest' refer not only to the 'rate of interest', but refers also to compounding of interest. Thus if contracl provides for quarterly rests, the interest granted under S. 34 should be at the contract rate with qualerly rests (except in the case of agricullural advances). If the Courts want to reduce the rate of interest, either current or future, such reduction should be supported by reasons."
20. Having regard to the above principles, the plaintiff-Bank is entitled to interest as per the contract, thai is 5% over the Reserve Bank of India rate with a minimum of 14% per annum (plus additional or penal interest 3% per annum) with quarterly rests, subject however to any ceiling or limitation placed by Reserve Bank in its circulars/ directives. The plaint does not however disclose the Reserve Bank of India rates, or the actual rates of interest charged. In the prayer column, plaintiff has claimed interest at 16.25% per annum. The Manager of the Bank (P.W. 2) states that interest is at 5% over the Reserve Bank of India rate with a minimum of 14% with quarterly rests and that the First Defendant had to pay additional interest at the rate of 3% in the event of default. He further states that the loan was borrowed for commercial purposes and the rate of interest payable on the date of suit was 16.25%. In the cross-examination, P.W. 2 admitted that he could not give the breakup of principal and interest on any particular date, nor the amount of penal interest debited to the account. He further admitted that the Bank cannot charge interest or incidental charges at more than what is directed by the Reserve Bank of India and confirmed that when the interest is calculated at the end of every quarter, principal and interest will be treated as principal for the next quarter. None of the documents exhibited by the Bank disclose the rate of interest chargeable from time to time, on the basis of Reserve Bank of India directives nor do they disclose the actual rates charged. On the basis of the Reserve Bank directives extracted in D. S. Gowda's case and Jayakunvar Moni-lal Shah's case (ILR (1992) 2 Kant 1053), the learned counsel for plaintiff contended that the Bank will be entitled to interest at 16.25% per annum as claimed in the suit. It is seen from the directives contained in the Annexure to Reserve Bank of India letter dated 10-2-1986 (extracted in Jayakumar Manilal Shah's case) interest on term loans granted to Small Scale Industrial Units was fixed at 13.5% from 2-3-1981. Earlier to 2-3-1981, the Bank was entitled to a maximum of 15% from 28-2-1978, 18% from 13-9-1979 and 19.4% from 7-8-1980. The Circular dated 26-6-1976 permitted additional interest up to a limit of 2.5%. Thus the Bank, prima facie, was entitled to charge 17.5% (that is 15% + 2.5%) from 5-7-1978, 20% (5% over 12.5% plus 2.5%) from 13-9-1979 and 21% (5% over 13.5% plus 2.5%) from 7-8-1980.
21. Normally it would have been neces-
sary to examine in detail, the Reserve Bank of India circulars and find out the exact rate of interest applicable and determine whether interest has been charged in accordance with such rates and whether any unauthorised debits have been made to the borrower's account. But due to the peculiar facts of this case, that exercise may not be necessary. As noticed earlier, the Suit is filed for recovery of a sum of Rs. 3,20,095.95 said to be due as on the date of suit (27-11-1982) as detailed in Ex. P. 14, the Statement of Account. The suit has been decreed determining the amount due as on the date of suit as Rs.4,72,250/-. The defendants have not filed any Appeal or cross-objection in regard to the said decree. Hence it is unnecessary to go into the question whether the interest charged is in accordance with Resere Bank of India directives. Even if interest has been claimed in excess of the contract rate, the question of reducing the decree to a sum below the suit claim does not arise and the plaintiff will be entitled to the entire amount claimed as on the date of suit, namely, Rs. 3,20,095.95.
22. The next point relates to interest payable on the amount decreed from the date of suit to date of realisation. The plaintiff has claimed interest at 16.25% per annum from the date of suit to date of realisation. The trial court has awarded 6% per annum from the date of suit to date of realisation. The contract rate, subject to Reserve Bank ceiling, would be 16% per annum as discussed in para 20 above. The learned counsel for the plaintiff submitted that even in regard to current and future interest, compounding of interest should be allowed. But neither the plaint nor the memorandum of Appeal seek compounding of interest from the date of suit. They merely sought interest at 16.25% per annum without using the words 'compound interest' or 'interest with quarterly rests'. Hence the plaintiff is not entitled to compound interest from the date of suit. Hence we allow interest at 16% per annum on the amount decreed from the date of suit to date of realisation.
23. Before parting with this aspect, we feel it necessary to refer to the absence of proper pleadings in regard to interest in Bank suits in general. We invariably find that the plaints in Bank suits do not specifically disclose (a) the rates of interest charged from time to time from the date of loan to date of suit; (b) the rates of interest permissible as per circulars/directives of Reserve Bank of India for the corresponding period; and (c) an averment that in the statement of Accounts, the debits regarding interest and other charges are in accordance with the terms of contract and Reserve Bank of India direc-tives. If proper particulars are given in the plaints supported by corresponding documents, the scope of disputes in Bank matters will considerably be narrowed.
Point No. 3 :
24. The amount claimed in the suit as on the date of suit is Rs. 3,20,095.95. The amount decreed as on the date of suit is Rs. 4,72,250 (Rs. 3,00,000 + interest of Rs. 1,72,250/ -). The question that arises for consideration is whether in the absence of an appeal or cross-objection by the defendant, the decree can be modified in an Appeal filed by the plaintiff. It is a well settled rules of law that no Court can grant a relief which is not claimed and the aci of a court shall prejudice no man. If the amount claimed is Rs. 3,20,095.95, decreeing the suit for Rs.4,72,250/- is clearly without jurisdiction. This error is apparent on the face of the record and is evident from a mere reading of the decree without reference to any record or even the judgment. Under S. 152 of, [he Code of Civil Procedure, any clerical or arithmetical mistakes in judgments, decrees or orders or errors arising therein from any accidental slip or omission may at any time be corrected by the Court either of its own motion or on an application of any of the parties. Under S. 151, the Court has the inherent power to make such orders as may be necessary for the ends of justice or to prevent abuse of the process of Court. While examining the question whether an executing Court can entertain an objection to the validity of a Decree, the Supreme Court in the case of Vasudev Dhanjibai Modi v. Rajabhai Abdul Rehman, held that where the decree was on the face of the record, without jurisdiction, the executing Court can entertain an objection to it. If an Executing Court can correct such an error and when the Court has the power to suo motu correct any error, we hold that in the interest of justice, the Decree and Judgment should be corrected so that the amount decreed does not exceed the suit claim itself.
25. For the foregoing reasons, we allow this Appeal and modify the Judgment and Decree of the trial Court. In modification of the Judgment and Decree of the Court below, we decree the suit for a sum of Rs. 3,20,095.95 with interest at 16% per annum from the date of suit to date of realisation. The plaintiff will be entitled to costs of the Suit and this Appeal. The decretal amount shall be recovered by sale of the suit schedule movables and the balance shall be recovered personally from the defendants, who shall be liable therefor jointly and severally.
26. Appeal allowed.