TMI Blog1985 (2) TMI 305X X X X Extracts X X X X X X X X Extracts X X X X ..... nnum on the following averments : - On June 19, 1969, the defendant availed of a loan of ₹ 15,500/- on the security of Immovable properties with the deposit of title deeds so as to create an equitable mortgage in favour of the Bank. In order to ensure prompt repayment of the loan, the defendant also executed an on Demand Promissory Note for a sum of ₹ 15,500/- in favour of the Bank. On October 14, 1969; the defendant again availed of another loan of ₹ 10,500/- by extending the said security and on executing another Promissory Note for a sum of ₹ 10,500/-. The defendant also hypothecated his crops and live-stock by executing necessary agreements. In all, the defendant had taken ₹ 26,000/- as loan from the Ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 10,500/- on the hypothecation of C and D schedule properties? (3) Whether the plaintiff is entitled to claim interest at 13 per cent? (4) Whether the accounts furnished by plaintiff are correct? (5) Whether the defendant was liable only in a sum of ₹ 6537-53 on both these transactions as on 17-12-1971? 5. On behalf of plaintiff, Mr. Nagesh Rao the Agricultural Extension Officer of the Bank has been examined as P.W. 1. He was the only witness on behalf of plaintiff. The documentary evidence produced consists of the relevant loan papers. The defendant in turn has examined himself as D.W. 1 and produced two documents as Exhibits D1 and D2. 6. P.W. 1 after producing the extract of loan account Exhibit-P7 has stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dant he has agreed for the compounding of interest at every quarter. As such he cannot now say that the plaintiff is not entitled to charge compound interest. The defendant has not taken up a plea that the interest claimed by the plaintiff is excessive or it is barred under the Usurious Loans Act. The interest charged by the plaintiff which is between 9% and 13% depending upon the increase in the Reserve Bank rate cannot be considered to be excessive. The learned counsel for the defendant has not placed before me any authority to show that charging of compound interest is unfair or is excessive. There is no provision in the Usurious Loans Act which prohibits charging of compound interests. The Court finally decreed the suit as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not have awarded interest again from April 1, 1972. The Court, however, could have awarded interest at the rate of 13 per cent per annum from June 17, 1972, up to the date of decree on ₹ 23,241-74 and not on ₹ 23,940-97. On the future interest from the date of decree till realisation, the rate of 6 per cent is justified in view of the constraint imposed by explanations 1 and 2 to proviso to Sec. 34 of, the C.P.C., since the loan was admittedly for agricultural purposes. 9. Re: Point No. (2) : Plaintiff has claimed interest at the rate of 13 per cent as per rules of business, trade, usage and custom. But no evidence has been produced in proof of such trade practice, usage or custom. All that P.W. I in the course of his e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it clear that the banks have been precluded from recovering interest with quarterly rests on agricultural advances. The effect of the said circular was elaborated examined by this Court in Gowda, D.S's case AIR1983Kant143 wherein it was observed that the circular is binding on all Commercial Banks and Banks are precluded from charging interest contrary to the terms thereof. Mr. Shivakumar, learned Counsel for the respondent-Ban k, does not dispute this proposition. He, however, submitted that the restraint imposed by the said circular will be ineffective in view of the recent amendment to the Banking Regulation Act by insertion of Sec. 21A, and this amendment takes away the jurisdiction of Courts to reopen the rate of interest charg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... serve Bank has power to prescribe or regulate the interest rate structure on advances or other financial accommodation to be made by Commercial Banks. S. 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 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 direction of the Reserve Bank, the Court could give relief to the aggrieved party notwithstanding S. 21A of the Banking Regulation Act ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
