Bank Of Maharashtra vs G.K. Enterprises And Ors.
2005 Latest Caselaw 891 Del

JUDGMENT

Mukundakam Sharma, J.

1. The present appeal is directed against the judgment and decree dated 12th November, 2001 passed by the learned Additional District Judge, Delhi in Suit No. S-319/2001 whereby the suit filed by the appellant/plaintiff for recovery of Rs. 2,21,354/-, on account of interest, was dismissed.

2. The case of the appellant/plaintiff, as pleaded in the plaint, is that the respondent No. 1, who was defendant No. 1, had opened a bank account with the appellant bank branch. The said respondent/defendant No. 1, along with respondents / defendants 2 and 3 who are the partners of respondent No. 1/defendant No. 1, had also been maintaining a current account /cash credit account and had been conducting their banking business through the branch of the plaintiff bank from time. It is alleged that the a foresaid respondents 1-3 , in connivance with the respondent No. 4 who was working as Branch Manager of the appellant bank at Dr. Mukerjee Nagar Branch, during the period from May, 1986 to September, 1991, entered into a criminal conspiracy, connivance and collusion and thereby allowed passing of cheques, vouchers and pay orders in order to provide assistance to respondents 1 to 3, who received the amount, causing financial loss to the appellant bank. It was also alleged that the amount was withdrawn from time to time by respondents 1 to 3 in connivance of respondent No. 4 without getting any proper loan/cash facility sanctioned and without paying any interest, thereby causing revenue loss to the bank substantially. When the aforesaid fact was established through an investigation carried out by the appellant bank, it issued a letter dated 21st January, 1992 to defendants 2 to 4 to pay the due amount of interest on the aforesaid amount, which was withdrawn from the bank without any proper loan facility. Despite the service of the aforesaid notice to respondents 1-3, they failed to repay the outstanding interest and accordingly the aforesaid suit was filed. Respondents 1,2 and 4 filed their written statement. Subsequently, however, all the respondents failed to appear in the suit and, therefore, they were proceeded ex parte. On being permitted by the court, the appellant led ex parte evidence, during the course of which it examined Shri B.P. Gupta and Shri Mayank Bhushan Pandey, as PW1 and PW2 respectively. The learned trial court thereafter heard the counsel appearing for the parties and by judgment and decree dated 12th November, 2001 dismissed the suit on the ground that there was no agreement to pay interest between the plaintiff and the defendants 1 to 3 and that defendant No. 4 also could not be fastened with any liability to pay interest on account of any transaction in respect of which the present suit was filed. The statement of account was proved by the appellant bank as PW3/12

3. In the judgment and decree passed by the learned trial court a reference was made to the provisions of Section 3 of the Interest Act, particularly to the provisions of Section 3(b) proviso of the Interest Act. The aforesaid findings and conclusions of the learned trial court, as contained in the impugned judgment and decree, is under challenge in this appeal. Despite service on the respondents, none of the respondents was represented before us. The appeal accordingly was set down for ex parte hearin and we heard the learned counsel for the appellant. Our attention was drawn to the provisions of Section 3 of the Interest Act and also to the ex parte evidence, which is on record. In the light thereof, it was submitted by the learned counsel for the appellant that the learned trial court misread and misinterpreted the provisions of Section 3(b) read with the proviso thereof of the Interest Act and, therefore, he has committed an error of law, which is apparent on the face of the records. It was also submitted that the learned trial court erred in not appreciating the fact that on account of unauthorised withdrawal made by respondents 1 to 3 the appellant bank lost its revenue, which is bound to be compensated by paying interest on the said amount. We have carefully considered the aforesaid submissions of the counsel for the appellant before us.

4. The appellant bank has proved the statement of account, on the basis of which the aforesaid claim is made in the plaint, which is Ex.PW3/12. According to the said statement an amount of Rs. 2,21,354/-, as interest, was due and payable by the respondent 1-3 jointly and severally for causing loss to the appellant bank. Before filing of the suit, various notices were issued by the appellant to the respondents 1 to 3 directing them to pay the interest. By notice issued on 25th September, 1993 respondents 1-3 were directed to pay the interest total amounting to Rs. 1,88,231/-, which was calculated at the rate of 15% p.a simple interest in respect of the transactions related to respondents 1 to 3. The suit was filed in the court of Additional District Judge on 21st October, 1994. It is, however, an admitted position that the amount which was withdrawn from time to time by the respondents 1-3 from the bank in connivance with the respondent No. 4, Branch Manager, without getting any proper loan/cash facility sanctioned, was repaid after some time. But, such repayment was admittedly without payment of any interest. The bank was deprived of utilization of the said amount in accordance with law, which could have been utilized by the bank more appropriately for earning its own revenue. However, due to the aforesaid conduct on the part of respondent No. 1 to 3, the bank was deprived of the aforesaid benefit.

5. The learned Additional District Judge had relied upon the provisions of Section 3 of the Interest Act for denying relief to the appellant of payment of interest on the ground that there was no agreement between the parties stipulating payment of any interest. The submission of the counsel appearing for the appellant is that the learned Additional District Judge has misread and misinterpreted the said provisions. In the light of the aforesaid submission, it has become necessary to analyze the provisions of Section 3 of the Interest Act. The relevant portion of the said provision of Section 3 of proviso reads as follows:-

"3. Power of court to allow interest.-(1) In any proceedings for the recovery of any debt or damages or in any proceedings in which a claim for interest in respect of any debt or damages already paid is made, the Court may, if it thinks fit, allow interest to the person entitled to the debt or damages or to the person making such claim, as the case may be, at a rate not exceeding the current rate of interest, for the whole or part of the following period, that is to say,-

(a) if the proceedings relate to debt payable by virtue of a written instrument at a certain time, then, from the date when the debt is payable to the date of institution of the proceedings.

(b) if the proceedings do not relate to any such debt, then, from the date mentioned in this regard in a written notice given by the person entitled or the person making the claim to the person liable that interest will be claimed, to the date of institution of the proceedings:

Provided that where the amount of the debt or damages has been repaid before the institution of the proceedings , interest shall not be allowed under this section for the period after such repayment.

6. It is correct to hold, as has been held by the learned trial court, that if the written instrument does not envisage payment of interest, no such interest is payable. However, a discretion is granted on the court to allow interest to the person entitled to the debt or damages or to the person making such claim, as the case may be, at a rate not exceeding the current rate of interest, for the whole or part of the period, namely, if the proceedings relate to a debt payable by virtue of a written instrument at a certain time, then from the date when the debt is payable to the date of institution of the proceedings. Such interest is also payable if the proceedings do not relate to any such debt, then, from the date mentioned in this regard in a written notice given by the person entitled or the person making the claim to the person liable that interest will be claimed to the date of institution of the proceedings. The aforesaid provision, therefore, clearly lays down that if there is no written agreement whereunder interest is payable or where there is no clear stipulation of payment of any interest, in that event interest is payable in such case only from the date when the claim is made till the date of institution of the proceedings and for the subsequent period i.e from the date of filing of the suit till realisation. The issue with regard to pendente lite and future will again be governed by the provisions of the Code of Civil Procedure.

7. The aforesaid interpretation is crystal clear on a reading of the provisions of Section 3(1)(a) and (b). There is, however, a proviso added to Section 3(1)(b) which provides that the amount of the debt or damages has been repaid before the institution of the proceedings, interest shall not be allowed under the aforesaid section for the period after such repayment. The aforesaid proviso, therefore, clearly provides that if the amount of the debt or damages has been rapaid before the institution of the suit, interest cannot be paid under the provisions of Section 3 of the Interest Act for a period after such repayment. The learned Additional District Judge has relied upon the aforesaid proviso to Section 3(1)(b) for denial of the claim of the appellant. On a closer scrutiny of the aforesaid provision, however, we find that the learned Additional District Judge has misread the said provisions. The proviso does not altogether bar the payment of interest if the amount of debt or damages has been repaid before the institution of the proceedings. As we understand the proviso, it says, that no interest shall be allowed on the amount for the period intervening after the amount of debt or damages have been paid and the institution of the proceeding

The claim for interest can certainly be made and shall also be payable under Section 3 read with the proviso and till the period the amount was not paid.

8. Here is a case where respondents 1 to 3 overdrew and withdrew substantial amount without getting any proper loan/cash facility sanctioned and after enjoying the same, deposited the said amount without paying interest thereon. Although there was no agreement that the interest would be payable at a particular rate in respect of the amount overdrawn and withdrawn in the account of respondents 1 to 3, in our view, respondents 1 to 3 would be liable to pay interest on the amount. In this regard, we may appropriately rely upon the decision of the Supreme Court in SECRETARY IRRIGATION DEPARTMENT , GOVT. OF ORISSA v. G.C.ROY reported in AIR 1992 SC 732 which allowed and directed for payment of pendente lite interest on the amount which a person was deprived of although legitimately due to him which is more in the nature of compensation for illegal deprivation.

9. The issue regarding payment of interest in the present case could be looked into and analysed from another angle. Various amount was withdrawn by the respondents 1 to 3 from the appellant bank through passing of cheques, vouchers and pay orders without proper authorisation of loan facilities but in illegal connivance with respondent No. 4. When such facilities are availed of through the usual banking procedure, interest is always payable and, therefore, if the said amount would have been withdrawn by the respondents 1 to 3 through the usual means, they would have been liable to pay interest. Just because they circumvented the legal process and withdrew amount from the bank illegally, should it be held that no interest is payable by them on the amount which was illegally withdrawn? The answer to the said question has to be an emphatic 'No'. Therefore, it is a case where equitable jurisdiction as provided for under Section 3 of the Interest Act should be exercised and is held applicable. It is also trite law that interest is recoverable both at law and in equity on money obtained by fraud or conversion and retained by the defendant. It is always open to the court, as the Interest Act is not exhaustive of all claims to interest, to appreciate the facts of each case and then to grant interest in cases not coming strictly within the purview of the said Act on principles of justice, equity and good conscience. The liability of respondents 1 to 3 for payment of interest as per Ex.PW3/10 is stated to be Rs. 1,88,231/-. The respondents did not avail of the opportunity to dispute and rebut the said claim. The evidence led by the appellant herein went uncontroverter and unrebutted. Therefore, we are of the considered opinion that the aforesaid claim for payment of interest is proved and established in the present case. Accordingly we hold that the appellant is entitled to the said amount of Rs. 1,88,231/-, in terms of the demand made by the appellant in their letter which went uncontrovered. In terms of the aforesaid finding, the appeal stands allowed to the aforesaid extent but without any costs.