Andhra Pradesh High Court - Amravati
M. Venkata Reddy vs State Bank Of India on 28 June, 2024
APHC010129102003
IN THE HIGH COURT OF ANDHRA PRADESH
AT AMARAVATI [3397]
(Special Original Jurisdiction)
FRIDAY, THE TWENTY EIGHTH DAY OF JUNE
TWO THOUSAND AND TWENTY FOUR
PRESENT
THE HONOURABLE SRI JUSTICE VENUTHURUMALLI GOPALA
KRISHNA RAO
FIRST APPEAL NO: 4187/2003
Between:
1. M.VENKATA REDDY, S/O.PULLA REDDY R/O.D.NO.24/516,
SARASWATHI NAGAR, DARGAMITTA, NELLORE.
...APPELLANT
AND
1. STATE BANK OF INDIA, rep. by Chief Manager, Off: Railway
Feeders Road, Nellore Town R/o Nellore.
...RESPONDENT
Counsel for the Appellant:
1. S.LAKSHMINARAYANA REDDY
Counsel for the Respondent:
1. K.M.KRISHNA REDDY
The Court made the following:
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AS 4187 of 2003
JUDGMENT:
-
This Appeal, under Section 96 of the Code of Civil Procedure [for
short 'the C.P.C.'], is filed by the Appellant/defendant challenging the
Decree and Judgment, dated 23.04.2003, in O.S. No.12 of 1998 passed
by the learned District Judge, Nellore [for short 'the trial Court']. The
Respondent herein is the plaintiff in the said Suit.
2. The respondent/plaintiff filed the Suit seeking preliminary decree
against the defendant for recovery of a sum of Rs.8,52,197/- comprising
of principal and interest with subsequent and future interest at 16.5% p.a.
3. Both the parties in the Appeal will be referred to as they are
arrayed before the trial Court.
4. The brief averments of the plaint, in O.S. No.12 of 1998, are as
under:
The defendant borrowed an amount of Rs.3,00,000/- from the
plaintiff bank for the purpose of house construction and created an
equitable mortgage by depositing his title deed dated 07.03.1990 with the
plaintiff bank on 11.07.1991. He agreed to repay the amount in 180
monthly instalments inclusive of interest at 16.5% per annum with
quarterly rests @ Rs.1,670/-. The commencement of payment of
instalment will take place from the date of completion of work or on the
expiry of 18 months from the date of disbursement of first instalment
whichever is earlier. The defendant executed memorandum of term loan
agreement and also confirmed the deposit of title deed made by him by
executing a letter on 13.07.1991. On 12.07.1991 he executed an
arrangement letter for the loan. He availed the loan and in total repaid an
3 VGKRJ
AS 4187 of 2003
amount of Rs.54,000/- in discharge of the loan amount. He failed to repay
the balance inspite of issuing registered notices. Hence the suit.
5. The defendant filed a written statement by denying the averments
mentioned in the plaint and further contended as under: -
This defendant availed loan for the purpose of improving his
agricultural lands. On the date of which the said loan was availed, there is
existence of ready built house. Hence, the contention that the loan was
availed for construction of house is incorrect. The bank cannot charge
interest at 16.5% per annum since it is only agricultural loan. The interest
has to be scaled down. In addition to the above plea, it has been
contended that the persons who signed in the plaint has no locus standi
to file the suit. It is further contended that the suit filed by the plaintiff is
premature since it was filed even before the completion of the period of
180 months. It has been further contended that the defendant alone
cannot create equitable mortgage since the property is the joint family
property.
6. Based on the above pleadings, the trial Court framed the following
issues:
(i) Whether the suit is premature?
(ii) Whether the defendant borrowed the amount for
agricultural purposes and consequently whether the
interest claimed is usurious?
(iii) Whether the defendant has no fight to mortgage the joint
family properties?
4 VGKRJ
AS 4187 of 2003
(iv) To what relief?
7. During the course of trial in the trial Court, on behalf of the Plaintiff,
PW1 and PW2 were examined and Ex.A1 to Ex.A8 were marked. On
behalf of the Defendant DW1 was examined and Ex.B1 to Ex.B9 were
marked.
8. After completion of the trial and on hearing the arguments of both
sides, the trial Court decreed the suit with costs vide its judgment, dated
23.04.2003, against which the present appeal is preferred by the
appellant/defendant in the Suit questioning the Decree and Judgment
passed by the trial Court.
9. Heard Sri S.Lakshminarayana Reddy, learned counsel for
appellant/defendant and Sri P.Varun, learned counsel on behalf of Sri
K.M.Krishna Reddy, learned counsel for respondent/plaintiff.
10. The learned counsel for appellant/defendant would contend that
the Court below ought to have seen that the respondent/plaintiff bank is
not entitled interest at the rate of 16.5% p.a. on quarterly rests from the
date of suit till the date of decree. He would further contend that the
plaintiff bank sanctioned loan for availing agricultural loan for agriculture
purpose and the said loan was sanctioned for the purpose of
improvement of agricultural lands and he would further contend that the
decree and judgment passed by the trial Court is not sustainable and the
appeal may be allowed.
11. Per contra, the learned counsel for respondent/ plaintiff bank would
contend that on appreciation of entire evidence on record, the trial Court
5 VGKRJ
AS 4187 of 2003
rightly decreed the suit and there is no need to interfere with the finding
given by the trial Court and the appeal may be dismissed.
12. Having regard to the pleadings in the suit, the findings recorded by
the trial Court and in the light of rival contentions and submissions made
on either side before this Court, the following points would arise for
determination:
1. Whether the trial Court is justified in decreeing the
suit by granting interest at the rate of 16.5% p.a. on
quarterly rests from the date of suit till the date of
decree and thereafter 6% p.a. till the date of
realization?
2. Whether the decree and judgment passed by the trial
court needs any interference?
13. Point No.1 :
Whether the trial Court is justified in decreeing the
suit by granting interest at the rate of 16.5% p.a. on
quarterly rests from the date of suit till the date of
decree and thereafter 6% p.a. till the date of
realization?
The case of the plaintiff is that the defendant borrowed an amount
of Rs.3,00,000/- from the plaintiff bank for the purpose of house
construction and created an equitable mortgage by deposing his title
deed dated 07.03.1990 with the plaintiff bank on 11.07.1991. The plaintiff
further contend that the defendant agreed to repay the same in 180
monthly instalments inclusive of interest at the rate of 16.5% p.a. with
6 VGKRJ
AS 4187 of 2003
quarterly rests. The plaintiff further pleaded that the defendant executed
necessary and relevant documents in the plaintiff bank and he availed a
loan of Rs.3,00,000/- from the plaintiff bank and subsequently he repaid
an amount of Rs.54,000/- in instalments and later he failed to pay the
instalments amount and that the plaintiff is constrained to file the suit.
14. Borrowing of amount by the defendant from the plaintiff bank and
execution of all the relevant documents in the plaintiff bank by the
defendant is not at all disputed by the defendant. It was contended by the
defendant that he availed a loan for the purpose of improving his
agricultural lands but not for the purpose of construction of house. In
order to prove the case of the plaintiff, the plaintiff relied on the evidence
of the officials of the bank as PW1 and PW2. It was suggested to the
manager of the plaintiff bank who sanctioned the loan to the defendant in
cross examination by the learned counsel for defendant that the said loan
was sanctioned for the purpose of improvement of agriculture, the said
suggestion was denied by the manager of the bank. Furthermore, the
evidence of PW1 goes to show that the loan was sanctioned for the
purpose of construction of a house on the plot which was vacant. Another
suggestion was put forth by the defendant to PW1 is that the defendant
paid an amount of Rs.1,00,000/- but not Rs.54,000/-, the said suggestion
was denied by PW1. The oral and documentary evidence placed by the
plaintiff bank clearly goes to show that the defendant paid an amount of
Rs.54,000/- towards repayment of the loan towards part payment in an
instalments but the defendant failed to prove that he paid an amount of
Rs.1,00,000/- towards part payment of the debt.
15. The learned counsel for appellant would contend that the suit is
premature since the defendant got 180 months time i.e., the defendant is
7 VGKRJ
AS 4187 of 2003
entitled to discharge the said loan for a period of 15 years and the suit
has to be filed after the expiry of 15 years period only. I am unable to
accept the said contention of the defendant that the suit is premature and
the suit has to be filed after completion of period of 15 years. The oral
and documentary evidence goes to show that the defendant agreed for all
the terms and conditions for the sanction of a loan and agreed to abide
the rules and regulations placed by the bank from time to time and in the
event of failing to do so the bank is having right to file the suit. The
material on record clearly goes to show that in case of default of payment
of any one of the instalment, the plaintiff bank need not wait till the expiry
of 15 years. The plaintiff bank is having liberty to recover the amount
even before the expiry of the prescribed period of 15 years, in view of the
terms and conditions imposed in the loan transaction. It is not the case of
the defendant that he discharged the total amount to the plaintiff bank.
The material on record reveals that the plaintiff bank lend an amount of
Rs.3,00,000/- to the defendant, the same is not at all disputed by the
defendant.
16. The learned counsel for appellant would contend that the interest
claimed by the plaintiff bank is usurious and penal since the loan
sanctioned by the bank is an agricultural loan. As stated supra, no piece
of evidence is adduced by the defendant to show that he obtained the
loan for agricultural purpose. Furthermore, the material on record clearly
goes to show that the defendant obtained the loan for the construction of
a house on the plot which is vacant. It was pleaded by the defendant that
the plaintiff bank obtained his signatures on the blank forms and later
they filled up the said columns, the same is stated by the defendant in his
evidence. It is important to note that in the written statement itself the
defendant never pleaded that his signatures were obtained in the blank
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forms. Therefore, the said oral contention of the defendant which was
taken by the defendant during the course of trial that that his signature
was obtained on a blank forms is not sustainable.
17. The learned counsel for appellant would contend that the
defendant borrowed an amount of Rs.3,00,000/- towards principal
amount from the plaintiff bank and an amount of Rs.54,000/- was
discharged by the defendant towards part payment of the debt, the trial
Court passed a preliminary decree for Rs.8,52,197/- and also granted an
interest @16.5% per annum with quarterly rests from the date of suit till
the date of decree which is not sustainable under law. The law is well
settled that the word may "in Section 34 of Civil Procedure Code confers
a discretion of the Court to award or not to award interest or to award
interest at such rate as it deems fit".
18. In a case of M/s.Radha Agencies and others vs. Vijaya Bank1,
the Division Bench of the composite High Court of Andhra Pradesh held
as follows:
The third argument relates to charge of interest @ 12% per annum
from 19-1-89 i.e., the date of suit till the date of realization. The
learned counsel submits that, interest has to be paid on interest
and it is not reasonable. On the other hand, the learned counsel for
the respondents submits that at no point of time during the trial the
interest sought by the plaintiff was challenged, but the learned
counsel for the appellants has relied on a judgment of Supreme
Court in N. M. Veerappa v. Canara Bank, AIR 1998 SC 1101 in
which the Supreme Court considered the effect of S. 21-A of the
Banking Regulation Act vis-a-vis Order 34, Rule 11, of CPC and in
2002 0 AIR(AP) 91
9 VGKRJ
AS 4187 of 2003
almost similar circumstances the Supreme Court allowed 6%
interest from the date of the suit till its realization. We accordingly
accept this argument and direct that the rate of interest shall be
reduced from 12% to 6% per annum with effect from 19-1-89 till the
date of realization.
19. In a case of N.M.Veerappa vs. Canara Bank and others 2, the
Apex Court held as follows:
Before summarising the legal position, we shall refer to two other
rulings of this Court under Order 34 Rule 11. In Srinivasa
Vardachari-ar & Ors. v. Gopala Menon & Ors.6, this Court was
dealing not only with the substantive interest prior to suit (which
was reduced to 10 compound) but also with interest after suit. In
para 11 of the Judgment, this Court observed that the discretion
exercised by the High Court under Order 34 Rule 11 in that case
reducing the interest of 6% from date of suit to date of payment was
not liable to be interfered with even though the High Court had not
given reasons. It was said that it was obvious, on facts, that the
mortgages were executed as far back as 1936 and 1938 and the
creditor had waited till 1956 for filing the suit and would, in any
event, get interest substantially exceeding the principal amount of
the loans. K. Manickchand & Ors. v. Elias Saleh Mohamed Sait &
Anr also related to question of interest before suit and after suit. So
far as the interest after suit was concerned, the High Court had
granted interest at 6% from the date fixed for redemp-tion till date of
realisation. The date of suit was 10.1.1950, the date of decree of
the trial Court was 27.3.1952.
(1998) 2 SCC 317
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AS 4187 of 2003
20. In a case of Central Bank of India vs. Ravindra and others3, the
constitutional Bench of Apex Court held as follows:
Though interest can be capitalised on the analogy that the interest
falling due on the accrued date and remaining unpaid, partakes the
character of amount advanced on that date, yet penal interest,
which is charged by way of penalty for non-payment, cannot be
capitalised. Further interest, i.e. interest on interest, whether simple,
compound or penal, cannot be claimed on the amount of penal
interest. Penal interest cannot be capitalised. It will be opposed to
public policy.
The Apex Court further held as follows:
Subject to the above we answer the reference in following terms:
(1) Subject to a binding stipulation contained in a voluntary
contract between the parties and/or an established practice or
usage interest on loans and advances may be charged on
periodical rests and also capitalised on remaining unpaid.
The principal sum actually advanced coupled with the interest
on periodical rests so capitalised is capable of being
adjudged as principal sum on the date of the suit.
(2) The principal sum so adjudged is 'such principal sum' within
the meaning of Section 34 of the Code of Civil Procedure,
1908 on which interest pendente lite and future interest i.e.
post-decree interest, at such rate and for such period which
the Court may deem fit, may be awarded by the Court.
(2002) 1 SCC 367
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AS 4187 of 2003
21. In a case of Andhra Bank, Sultan Bazar, Hyderabad vs.
M/s.Manney Industries and others 4 , the composite High Court of
Andhra Pradesh held as follows:
This Bench is of the view that the discretion has to be exercised
judiciously and supported by reasons for granting interest at 6% p.a.
from the date of filing of the suit or rate higher than 6% p.a., and
below the contractual rate of interest. In this case the unit has
become sick immediately after its commencement and thereafter
they could not pay the due amount and another person has taken
over the unit and created an equitable mortgage and so under
these circumstances and taking into consideration that they have
not earned any yield or profit out of the transactions even from the
inception of the unit itself and in view of the fact that the unit had
become sick immediately after its commencement, the learned
judge thought it fit and granted interest at 6% p. a. , from the date of
suit till the date of realisation. Normally, this court would not
interfere with the discretion exercised by the lower court regarding
the rate of interest provided it satisfied the reasons that have been
given by it are sound and reasonable. We fortified our view even by
the decision reported in State of M. P. v. Nathabhai Desaibhai, AIR
1972 SC 1545, wherein the Supreme Court took into account the
conduct of the parties and the reasons given by them which are as
follows: "coming to the question of interest subsequent to the date
of the institution of the suit, it was found that the appellant had
unlawfully withheld the amount due to the respondent even after
coming to know that the collection made was an illegal one. Before
instituting the suit, the respondent had issued a notice to the
1993 0 AIR(AP) 53
12 VGKRJ
AS 4187 of 2003
appellant, calling upon the appellant to pay the money illegally
collected from it; but despite that notice, the appellant failed to pay
back the amount illegally collected from the respondent. That being
so, in our opinion, the High Court was justified in awarding interest
on the principal amount from the date of the suit". In the special
circumstances of the case, as found by the Court below, which are
sound and well founded, granting interest at 6% p. a. from the date
of filing of the suit till the date of realization is perfectly justified and
does not warrant any interference by this Court.
22. On considering the aforesaid case law and in view of the aforesaid
reasons, I am of the considered view that the plaintiff bank is entitled
preliminary decree for Rs.8,52,197/-, but plaintiff bank is not entitled to
the rate of interest at contractual rate on the principal amount till the date
of decree, however, the plaintiff bank is entitled to a simple rate of interest
@12% p.a. from the date of suit till the date of redemption and thereafter
@6%p.a. till the date of realization, accordingly the point No.1 is
answered.
23. Point No.2:
Whether the decree and judgment passed by the
trial court needs any interference?
The findings arrived by the trial Court on appreciation of the
evidence in this case, therefore, correct and do not call for any
interference except the rate of interest as indicated above.
24. For the reasons stated above, the appeal is allowed in part by
modifying the rate of interest from contractual rate to simple interest @ 12%
p.a. on the principal amount from the date of suit till the date of
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redemption and thereafter @6% p.a. till the date of realization. The rest of
the judgment of trial Court holds good. Considering the facts and
circumstances of the case each party do bear their own costs in the
appeal.
As a sequel, miscellaneous petitions, if any, pending in the Appeal
shall stand closed.
_________________________
V.GOPALA KRISHNA RAO, J
Date: 28.06.2024
sj
14 VGKRJ
AS 4187 of 2003
THE HON'BLE SRI JUSTICE V.GOPALA KRISHNA RAO
APPEAL SUIT No.4187 OF 2003
Date: 28.06.2024
sj
