Andhra HC (Pre-Telangana)
Raja Oil And Flour Mill, Represented By ... vs Canara Bank, Represented By Its ... on 29 August, 2007
Equivalent citations: 2007(6)ALD801
JUDGMENT P.S. Narayana, J.
1. Heard Sri Suresh Kumar representing Sri A.Rajasekhar Reddy, learned Counsel for appellant and Sri V.S.Valluru, learned Counsel representing the respondent.
2. Sri Suresh Kumar learned Counsel representing the appellant had pointed out to the substantial questions of law raised in grounds 15(a) and 15(b), on the strength of which the Second Appeal was admitted and would maintain that the terms and conditions relied upon by the appellate Court while modifying the decree and judgment of the trial Court and granting interest also relate to the cheques, orders and the like but not a case of this nature. The counsel also incidentally pointed out to the respective pleadings of the parties, the evidence available on record and the findings recorded by the Court of first instance and also the appellate Court and would maintain that inasmuch as the bona fide mistake was there both on the part of the Bank and also the customer, charging of interest in such a case definitely cannot be sustained. The learned Counsel also placed strong reliance on certain observations made by the Apex Court in Central Bank of India v. Ravindra
3. On the contrary Sri Valluru, learned Counsel representing the respondent- Bank would contend that even if the terms and conditions as such may not govern in the light of the conduct of the parties, appellant had not chosen to re- deposit the amount immediately and had the advantage of utilizing the said amount and hence granting of interest on such amount, which had been utilized by the appellant, cannot be said to be either unjust or improper and even otherwise the discretion had been exercised properly by the appellate Court while awarding interest in the peculiar facts and circumstances and hence the said findings not to be disturbed.
4. Heard the counsel.
5. On 23.7.1999 this Court made the following order:
In view of the substantial questions of law raised in grounds 15(a) and 15(b), the Second Appeal is admitted.
The said grounds raised under grounds 15(a) and 15(b) read as hereunder:
(a) Whether the appellate Court is right in interpreting Ex.A1 (Bank account opening form) and applying the principle of charging interest in case of over draft facility to the case on hand where over drawing was on account of mistake committed by respondent bank and more so when there is balance available in the account.
(b) Whether the appellate court is right in holding that appellant is expected to the amounts outstanding to his credit and that it is not unilateral mistake and whether the said finding is based on evidence when respondent bank itself admitted that it is mistake committed by its employer.
6. The parties hereinafter would be referred to as plaintiff and defendant as shown in OS No. 9 of 1994 on the file of Principal District Munsif, Bhongir. The defendant is the appellant and the respondent is the plaintiff in this Second Appeal.
7. The plaintiff instituted the suit OS No. 9 of 1994 on the file of Principal District Munsif, Bhongir, for recovery of Rs.14,500/- being the balance of principal and interest and for costs with the following averments:
The plaintiff Bank is a body corporate represented by its Branch Manager, Bhongir. The defendant, sole proprietor of Raja Oil and Flour Mill, Bhongir, and trading under the said name, opened current account on 15.9.1989 in the name of the proprietory concern with current account No. 648. Thereafter, the defendant operated the account regularly. On 20.12.1989 while totaling the balance, a clerical mistake was crept in and the said mistake resulted in over drawing of Rs.8,768/- by the defendant. In the balance column instead of Rs.20,997/-, a figure of Rs.30,997/- was made on 28.12.1989, including in the pass book of the defendant. The defendant who is aware of the said mistake, instead of bringing to the notice of the plaintiff Bank, took advantage and utilized the amount. The above said mistake was detected only on 18.2.1991 and immediately rectified by deducting Rs.10,000/- and consequently the defendant had to deposit Rs.8,876.80 ps to regularize the account. In spite of several requests, the defendant failed to regularize and ultimately stopped Bank transactions subsequent to 4.4.1991. The defendant is liable to pay compound interest at the rate of 24.75%. On 21.12.1992, a notice was issued to the defendant, but the same was refused to receive. The defendant is liable to pay Rs.14,500/- made up of Rs.8,768/- and interest at the rate of 24.75% as on the date of the suit.
8. The defendant resisted the suit by filing written statement with the following averments:
It is true that he over-drawn Rs.8,786/- by withdrawal of Rs.12,000/- on 15.1.1990 and the plaintiff Bank mistakenly written Rs.30,997/- instead of Rs.20,997/- on 28.12.1989. The plaintiff ought to have prepared balance sheet on 31.12.1989 and if such mistake takes place, they ought to have issued notice to the defendant immediately. No notice was issued by the plaintiff dated 21.12.1992 and he did not refuse. The wrong entry was on 28.12.1989 and the suit was filed on 16.1.1993. So, the suit is clearly barred by limitation. The defendant further alleges that he never agreed to pay interest much less at the rate of 24.75%".
9. On the strength of the above pleadings, the following issues were settled before the Court of first instance:
1. Whether the plaintiff is entitled for recovery of suit debt?
2. Whether the suit is barred by limitation?
3. Whether the plaintiff is entitled to claim and recover interest at the rate of 24.75% per annum?
4. To what relief? The trial Court recorded the evidence of PW.1 and DW.1, marked Exs.A1 to A5 and after recording findings, came to the conclusion that in the light of the admission made by the defendant that he is liable to pay the principal amount of Rs.8,876.80 ps, the plaintiff Bank is entitled to claim interest and accordingly partly decreed the suit only for an amount of Rs.8,876.80 ps being the principal amount with proportionate costs and the rest of the suit claim was dismissed. Aggrieved by the same, the plaintiff carried the matter by way of appeal AS No. 9 of 1994 on the file of Senior Civil Judge, Bhongir and the appellate Court at paragraph 7 framed the following point for consideration:
Whether the trial Court erred in disallowing the interest to the appellant- plaintiff Bank on the excess amount drawn by respondent-defendant and if so, the judgment and decree of the trial Court to the above extent is liable to be set aside.
The appellate Court proceeded to discuss with the evidence available on record commencing from paragraphs 8 to 11 and ultimately allowed the appeal holding that the plaintiff Bank is entitled to interest at 24.75% per annum on the amount of Rs.8,876.80 ps from 24.12.1992 till the date of filing of the suit with subsequent interest at 6% per annum on the said amount from the date of filing of the suit till the date of realization and accordingly modified the decree and judgment of the Court of first instance. Hence, the present Second Appeal.
10. As can be seen from the evidence available on record, the aspects of payment of excess amount of Rs.8,768/- and also the receipt of the excess amount by the defendant are not in serious controversy. The appellate Court while dealing with the terms and conditions specified in Ex.A1 had referred to the relevant portion and the said relevant portion reads as hereunder:
I request and authorize you to honour all cheques or other orders drawn by me on the said account or bill of exchange accepted or notes drawn by me and I request you to debit such cheques and other orders and bills of exchange and notes as also the amount of any dishonoured notes and cheques to the said account whether such account be for the time being in credit or over draft and I agree undertake to pay interest on all such amounts debited to my account at the rates as may be applicable to the over draft account from time to time from the dates of over drawings up to the date of over drawings is clear by me". The appellate Court recorded certain findings at paragraph 11 and came to the conclusion that inasmuch as the defendant is liable to made good of the amount he had and received with interest since he had derived the benefit and also having observed that to show bona fides, immediately the amount was not re- deposited, came to the conclusion that the plaintiff Bank is entitled to the interest also.
11. Strong reliance was placed on the decision of the Apex Court in Central Bank of India case (1 supra), wherein the Apex Court at paragraph 46 observed as hereunder:
It was submitted from the borrowers' side that such an interpretation of Section 34 of the Civil Procedure Code as canvassed on behalf of the banks, if accepted, may result in anomalous situations emerging. To wit, it was pointed out that if the bank deliberately and unscrupulously delays the suit being filed, for such period of delay the bank would gain an advantage by continuing to charge interest at the contract rate and by capitalizing the same. If the suit was filed promptly then the contract would cease to operate and the debtor would be relieved from the rigour of the contract and find solace under the operation of Section 34 of the Civil Procedure Code. True it is that once a suit is filed in the court, so far as Section 34 of the Civil Procedure Code is concerned, the relationship of parties ceases to be governed by contract between the parties and comes to be governed by Section 34 of the Civil Procedure Code. Still the submission has to be repelled for several reasons. Firstly, the bank can afford to wait or delay the filing of the suit only during the period of limitation which delay would not be illegitimate. Secondly, nothing prevents the debtor, even during the period of this delay, to pay or tender the amount of interest as and when it falls due and thereby prevent its capitalization. Thirdly, the court is not powerless to deny the bank's claim for interest, if in the facts and circumstances of a given case the court is persuaded to hold that filing of the suit was delayed for the purpose of deliberately gaining an unfair advantage over adverse financial condition of the defendant. In such cases the pre-suit interest though claimed in accordance with the contract would be denied by the court on the ground of public policy and on the ground of the creditor having tried to gain an unfair advantage over the debtor by a deliberate inaction of himself; no one can take advantage of his own wrong.
12. There cannot be any quarrel relating to the proposition laid down by the Apex Court. It may be true that the terms and conditions specified in Ex.A1, which had been relied upon by the appellate Court, may not be strictly applicable to the facts of the present case. It may be the mistake on the part of the Bank and equally it may be the mistake on the part of the customer, who had received the amount. On a careful analysis of the evidence available on record, the evidence of PW.1 and DW.1 and also Exs.A1 to A5, this Court is of the considered opinion that though the mistake had been detected, the defendant had not re-deposited the amount immediately, and on the other hand he had the advantage of utilizing the said amount. Since the appellate Court exercised the discretion on the ground of equity, this Court is not inclined to disturb the said findings.
13. Inasmuch as the terms and conditions, which had been relied upon by the appellate Court in Ex.A1, do not strictly apply to the present facts of the case, this Court is of the considered opinion that the quantum of interest to be modified and therefore the plaintiff Bank is entitled to the interest only at 12% per annum instead of 24.75% per annum on Rs.8,768/- from 24.12.1992 till the date of filing of the suit with subsequent interest at 6% per annum on the said amount from the date of filing of the suit till the date of realization of the amount.
14. Accordingly the quantum of interest is hereby modified and the Second Appeal is partly allowed to the extent indicated above. The parties to bear their own costs.