Andhra Pradesh High Court - Amravati
Kavuru Venkata Ramanjaneya Swamy vs Penmatsa Venkata Narsimha Raju on 4 November, 2024
1
APHC010555232014
IN THE HIGH COURT OF ANDHRA PRADESH
AT AMARAVATI [3369]
(Special Original Jurisdiction)
MONDAY, THE FOURTH DAY OF NOVEMBER
TWO THOUSAND AND TWENTY FOUR
PRESENT
THE HONOURABLE SRI JUSTICE T MALLIKARJUNA RAO
APPEAL SUIT NO: 99/2014
Between:
Kavuru Venkata Ramanjaneya Swamy and Others ...APPELLANT(S)
AND
Penmatsa Venkata Narsimha Raju ...RESPONDENT
Counsel for the Appellant(S):
1. BOKKA SATYANARAYANA KAMLA
Counsel for the Respondent:
1. P N MURTHY
2.
The Court made the following JUDGMENT:
1. The Appeal, under Section 96 of the Code of the Civil Procedure, 1908
(for short, 'C.P.C.'), is filed by the Appellants/Defendants challenging the
decree and Judgment, dated 05.08.2013 in O.S.No.375 of 2011
11 passed by
the learned III Additional District Judge, Bhimavaram,, (for short, 'trial court').
2. Respondent is the Plaintiff,
laintiff, who filed the suit in O.S.No.
O.S.No.375 of 2011 for
recovery of preliminary for the suit amount of Rs.9
Rs.9,28,666-28
28 Ps., with costs
and with subsequent interest.
interest
3. It is expedient to refer to the parties as they are initially arrayed in the
suit to mitigate any potential confusion and better comprehend the case.
4. The facts leading to the present Appeal, in a nutshell, are as under:
The Defendants, who are brothers, approached the Plaintiff for
financial assistance, and agreed to mortgage the plaint schedule
properties on 15.02.2005. The Plaintiff agreed and lent them for
Rs.2,20,000/- for their business and family needs, as documented
in document No.386/2005. They agreed to repay the same with
interest 24% p.a., in two equal installments of Rs.1,10,000/-, due by
14.02.2007. The Defendants also acknowledged that failure to
repay would allow the Plaintiff to recover the total mortgaged
amount, including interest calculated at a compound rate of Rs.2/-
per year. Despite repeated demands for repayment, the Defendants
have postponed settling their debt and have made no payments
toward either the principal or interest. They have repeatedly made
false promises regarding repayment and have avoided receiving
notices from the Plaintiff. On 08.09.2011, the Plaintiff issued a
registered notice demanding full repayment, but the 2 nd Defendant
refused to accept it.
5. In the written statement, the Defendants refuted the plaint averments
and acknowledged the borrowing of Rs. 2,20,000 from the Plaintiff on
15.02.2005, for business and family needs, but assert that this was done
under conditions imposed by the Plaintiff, who required them to execute two
mortgage deeds for a total of Rs.3,50,000/-. The Defendants also claim they
signed several blank documents as collateral security. The Defendants
contend that they repaid the entire mortgage debt in various installments,
consistently requesting receipts for their payments. However, the Plaintiff
refused, stating that it was not standard practice in finance. They believed
the Plaintiff's assurances that he would return the blank documents after
cancelling the mortgage deeds. Disputes arose regarding interest payments,
leading to heated exchanges between the parties, during which the Plaintiff
allegedly threatened the Defendants. The Defendants assert that the Plaintiff
fraudulently exploited the situation by claiming excessive interest and filing
this suit based on the mortgage deeds. The Plaintiff has claimed over Rs.7
lakhs in interest, despite the actual accrued interest being approximately
Rs.3,57,640 up to the date of filing the suit. The Defendants also mention
another pending case, O.S.374/2011, against them related to the same
mortgage deed. Furthermore, the Defendants claim that the Plaintiff never
made a formal demand for repayment and that they sought an amicable
resolution after receiving a legal notice. They believe the Plaintiff's actions
are intended for unjust enrichment and harassment. In light of these
circumstances, the Defendants request that the Court dismiss the suit and
award exemplary costs.
6. Based on the above pleadings, the trial Court framed the following
issues:
(1) Whether the suit Mortgage Deed is true, genuine and supported by
consideration and binds on Defendant?
(2) Whether the interest claimed in the suit is excessive and liable to be
scale down?
(3) To what relief?
7. During the trial, on behalf of the Plaintiff, P.Ws.1 and 2 were examined and
marked Exs.A.1 to A.4. On behalf of the defendants, D.W.1 was examined and no
documents were marked.
8. After completing the trial and hearing the arguments of both sides, the
trial Court preliminary decreed the suit with costs for Rs.9,28,666-28 ps and
with subsequent interest at 6% p.a., from the date of suit till the date of
payment and further directed the Defendants to pay the said amount within 6
months, failing which the Plaintiff is at liberty to proceed for the sale of the
mortgage deed property on due process of law and further, in case sale
proceeds are not sufficient for the suit amount, directed the Defendants to
pay the balance from their personal and other properties by way of passing
personal decree against the Defendants.
9. Sri B. Satyanarayana, learned counsel representing the Appellants/
Defendants, put forth an argument that the Plaintiff is not entitled to claim a
compounding rate of interest, despite of taking such pleas in the written
statement and framing of issue, the trial Court without providing any
justification, allowed the interest to be calculated at a compounding rate of
24%, which violates the provisions of the Usurious loans act, 1977.
10. Per contra, Sri P.N.Murthy, learned counsel appearing for the
Respondent/Plaintiff, contends that the trial Court correctly appreciated the
case facts and came to a correct conclusion. The reasons given by the trial
Court do not require any interference.
11. Concerning the pleadings in the suit, the findings recorded by the Trial
Court and in light of the rival contentions and submissions made on either
side before this Court, the following points would arise for determination:
1) Is the trial Court justified in granting the decree at a
compound rate of 24% per annum?
2) Does the trial court's Judgment need any interference?
POINT NOs.1 & 2:
12. The admission by the 1st Defendant, as recorded during the testimony
of DW.1, alongside the assertions articulated in the written statement,
unequivocally delineates that both Defendants availed themselves of a loan
amounting to Rs.2,20,000/- from PW.1 on the 15.05.2005. This transaction
was formalized through a cheque intended for business and familial
expenditures, further corroborated by the execution of the mortgage deed,
denoted as Ex.A.1. In its judgment, the trial Court, particularly in paragraph
11, reflected upon this admission made by DW.1, acknowledging that the
Defendants had acquiesced to an interest rate of 24% per annum. In light of
the pleadings, the trial Court framed an issue, specifically questioning whether
the interest claimed in the suit is excessive and liable to be scaled down.
13. A meticulous examination of the trial Court's judgment reveals a
conspicuous absence of a definitive finding on the pertinent issue at hand. As
previously noted, the Defendants, who are siblings, asserted in their written
statement that they had consented to reimburse the Plaintiff with interest at
the rate of 24% per annum, structured to be repaid in two annual installments
of Rs.1,10,000/- each, due on or before the 14.02.2007. Furthermore, they
acknowledged that should they default on this repayment, the Plaintiff would
possess the right to recover the total outstanding amount, accruing a
compound interest rate of 24% per annum with yearly compounding. Thus, the
Plaintiff contends that, given the Defendants' explicit agreement to a
compound interest rate, he is rightfully entitled to such terms as stipulated.
The terms and conditions outlined in the mortgage deed referenced in the
judgment remain undisputed. However, despite the Defendants' assertion of
having discharged the debt, DW.1 admitted to lacking any documentary
evidence to substantiate the claim of repayment to the Plaintiff.
14. The Defendants assert that the Plaintiff is entitled to interest from the
15.02.2005, marking the date of the document's execution until the
03.11.2011, when the suit was filed. They contend that, at the stipulated rate
of 24%, the accrued interest during this period amounts to Rs.3,57,340/-.
However, they note that the Plaintiff has claimed an interest exceeding
Rs.7,00,000/-, which raises questions regarding the legitimacy and calculation
of the claimed amount.
15. In State Bank of India V. unknown 1 , the composite High Court of
Andhra Pradesh held that:
AIR 1986 AP 291
"In deciding whether a rate of interest is excessive or not, courts will have
regard to the particular facts of a case before them. Such an enquiry will
be conducted by the courts primarily on the basis of the security given by
the debtor for the repayment of the loan and the solvency of the debtor
and the market rate of interest prevailing. Normally, whether the security
offered by the debtor is good and adequate as it is in a case of mortgage
of property, the courts will hold the charging of compound interest to be
excessive. The rate of interest, which may not be excessive on an
unsecured loan, may, therefore, be found to be excessive by the courts
where there is good security."
16. In ascertaining the rate of interest, the Courts of Law can take judicial
notice of both inflation and also fall in bank lending rate of interest. The steep
fall in the Bank Lending interest rate is the main reason for reducing the pre-
lite interest. This Court views that if the interest rate is unconscionable and
usurious, the Court has got the power to interfere. This Court finds that the
awarding of simple interest at the rate of 24% interest from the date of
execution of Ex.A.1 mortgage deed till the date of filing of the suit is just and
reasonable.
17. In light of the aforementioned facts and circumstances, this Court
concludes that the Plaintiff is not entitled to a compounding rate of interest at
24% per annum. Instead, he is entitled for a simple interest rate at 24% per
annum from the date of the transaction until the filing of the suit. Since the trial
Court awarded subsequent interest from the date of suit at a rate of 6% per
annum until the decree, and no cross-appeal has been filed challenging this
rate, this Court sees no justification for interference. Consequently, the
findings of the trial Court regarding the awarding of a compound interest rate
are deemed incorrect and warrant modification. Thus, the points are answered
accordingly.
18. In the result, the Appeal Suit is partly allowed, resulting in the passing
of a preliminary decree for Rs.2,20,000/-, with proportionate costs together
with interest at a rate of 24% per annum from the date of the suit transaction
until the date of filing of the suit, and further, the Plaintiff is entitled to interest
at a rate of 6% per annum from the date of suit till the date of realization as
determined by the trial Court. The remainder of the decree and judgment
rendered by the trial Court shall remain intact. Each party shall bear their
costs in this Appeal.
Miscellaneous petitions pending, if any, in this Appeal, shall stand closed.
___________________________
JUSTICE T. MALLIKARJUNA RAO
Date: 04.11.2024
SAK
THE HON'BLE SRI JUSTICE T.MALLIKARJUNA RAO
APPEAL SUIT NO. 99 OF 2014
Date: 04.11.2024
SAK
