K.S. Nagendra Prasad vs K. Aboobacker

K.N. Phaneendra, J.—This Regular First Appeal is preferred against the judgment and decree passed in OS No. 16808/2001 on the file of the XXVI Addl. City Civil and Sessions Judge at Mayo Hall, Bengaluru (CCH-20) in decreeing the suit of the plaintiff in part and particularly not granting the relief as prayed for by the plaintiff.

The plaintiffs suit is for recovery of a sum of Rs. 80,187/- with future interest at 21% p.a., with cost of the suit.

The plaintiffs claim is that -

"The defendant borrowed a sum of Rs. 25,000/- from the Plaintiff by executing an On Demand Promissory Note and Consideration Receipt on 19.3.1991 agreeing to pay interest thereon at the rate of 1.75% per month i.e., at the rate of 21% per annum. The defendant is carrying on business under the name and style of M/s. Omega Auto Lining Industries, manufacturer of seat covers and that the defendant has borrowed this amount for the purpose of carrying business. But in spite of repeated requests and demands and providing number of opportunity, the defendant did not repay the amount. Therefore, the plaintiff has filed a suit for recovery of a sum of Rs. 80,187/-, which includes the principal amount and interest calculated upto the filing of the suit and also claimed interest at the rate of 21% from the date of the suit till the date of realization of the said amount."

The defendant has appeared before the Trial Court and filed his written statement taking various contentions, that the suit is barred by limitation, there is no privity of contract between the plaintiff and the defendant and the plaintiff has no locus-standi to file the suit. The defendant also denied taking of any amount from the plaintiff, execution of ''On Demand Promissory Note'' or ''Consideration Receipt'' etc., He has also denied that he has agreed to pay any interest on the said amount. The defendant has produced the xerox copies of the payment note books. Therefore, he has submitted that the suit is not maintainable and the same is liable to be dismissed.

On the basis of the pleadings of the parties, the Trial Court has framed as many as 8 issues in the following manner:

"1. Whether the plaintiff proves that the defendant has borrowed a sum of Rs. 25,000/- with a interest at the rate of 21% per annum under a cheque bearing No. 0875708, drawn on Canara Bank, Avenue road Branch, Bangalore on 19.03.1991?

If so, whether the plaintiff proves that for having received the said sum, the defendant has executed D.P. Note and Consideration Receipt as alleged?

Whether the defendant prove that one Sri. Sathyanarayana had obtained his signatures on blank papers and on demand promissory note at the time of lending the amount and by mis-using the papers, the present suit is filed?

Whether the defendant proves that he has only two transaction with Sri. Sathyanarayana and paid nearly a sum of Rs. 1,32,150/- as alleged?

Whether the suit is barred by law of limitation?

Whether the plaintiff is a money lender? If so, whether the suit is hit by the provisions of Money Lending Act ?

Whether the plaintiff is entitled to recover the interest at the rate of 21% per annum from the defendant ?

Whether the defendant proves that charging of interest is opposed to the provisions of Usurious Loans Act and Interest Act and also Money Lenders Act ?

Whether the plaintiff is entitled to recover the suit claim as prayed for?

What Decree or Order?"

The plaintiff examined himself as PW-1 and got marked Exhibits P-1 to P-4. Though the defendant has taken up so many contentions, he did not step into the witness box nor got marked any documents. On the basis of the evidence adduced, the Trial Court has passed an ex-parte judgment and decree holding issue Nos. 1, 2 and 7 in the Affirmative and issue Nos. 3 to 6 and 8 in the negative and held that the "defendant is directed to pay a sum of Rs. 50,000/- to the plaintiff with future interest at 10% p.a., and on the principal amount of Rs. 25,000/- from the date of suit till realization and cost of the suit". The appellant/plaintiff has challenged the said decree only on a single point that the Trial Court ought to have decreed the suit as prayed for. There is no occasion for the Trial Court to apply the principles of rule of Damdupat under Hindu Law and reducing the suit claim and also awarding interest at the rate of 10% only from the date of the suit till the date of realization.

After going through the entire materials on record, it is a point of law raised by the learned counsel for the appellant that the Rule of Damdupat is not applicable and the court has no jurisdiction to reduce the amount of Rs. 80,187/- to Rs. 50,000/-. On careful perusal of the judgment of the Trial Court, except in a single word stating that the plaintiff is not entitled for more than the double amount of the principal amount including interest, Trial Court has not looked into the provisions which deals with the rule of damdupat and to whom such provision is applicable. Therefore, as rightly contended by the learned counsel appearing for the appellant, the order of the Trial Court suffers from serious illegalities. Admittedly, in this case, the defendant Aboobacker is not an Hindu and therefore, the rule of Damdupat is not applicable so far as the parties to the suits are concerned.

I would like to refer a book "The Mulla principles of Hindu Law" 17th Edition by Satyajeet A. Desai to understand what exactly the rule of Damdupat says and to whom that rule is applicable and whether even after filing of the suit, rule of Damdupat could be applied. At page No. 809 at item No. 596 of the Rule of Damdupat defines that -

"Rule of Damdupat is a branch of the Hindu law of debts. According to this rule, the amount of interest recoverable, at any one time cannot exceed the principal."

Item No. 601, the learned author observed that -

"Persons entitled to claim benefit of the rule -

(1) The rule of Damdupat applies only where both the original contracting parties are Hindus.

(2) All that is necessary for the application of the rule is that the original debtor should be a Hindu. The result is that the rule does not apply if the original debtor was a Mohammedan, though the debt might be subsequently transferred to a Hindu".

The High Court of Bombay, Calcutta and other High Courts, opined that the said Rule does not apply to the persons who are not Hindus. The said rule of Damdupat is only enunciated under the principles of Hindu Law and not under any other law for the time being in force. In this case, the debtor is a Mohammadan. Therefore, the Trial Court without looking into the above said definition of rule of Damdupat and also to whom the principle is applicable, erroneously passed the decree restricting the suit amount to Rs. 50,000/- which is not proper and correct.

So far as the interest awarded by the Trial Court is concerned, the defendant has borrowed loan of Rs. 25,000/-and the Trial Court has awarded 10% interest from the date of the suit till the date of realization of the suit amount on the principal amount of Rs. 50,000/-. Awarding of interest up to the date of the decree shall be on the basis of the contract between the parties. Therefore, from the date of the suit, it is the discretion of the court to award such interest. However, the Trial Court has not at all given any reasons as to why the contract of the parties should be deprecated and why the interest should be awarded only at 10%. The documents produced before the court such as On demand Promissory notes and Consideration Receipts Exs. P-1 to P-4 clearly discloses that the defendant has agreed to pay interest at the rate of 21% p.a., for the value received. There is no reason as to why the court can restrict the interest amount as the defendant has not entered into the witness box nor he has stated anywhere about the interest clause and what was the circumstance to execute such on demand Promissory note and consideration receipt to pay interest at the rate of 21% p.a., Though the interest rate 21% appears to be exorbitant but it does not mean to say that 10% is reasonable. In my opinion, atleast the bank rate of interest as on that date has to be awarded in favour of the plaintiff. In the above said circumstances, I feel it is just and necessary to enhance the rate of interest from 10% to 12% from the date of the suit till the date of realization of the suit claim. In view of the above said discussion the following order is passed:

The appeal is partly allowed. The judgment and decree passed by the Trial Court is modified to the following extent:

"(1) The suit of the plaintiff is partly decreed.

(2) The plaintiff is entitled to recover a sum of Rs. 80,187/- from the defendant and the plaintiff is also entitled to recover interest at the rate of 12% p.a., on the principal amount of Rs. 50,000/- from the date of the suit till the date of realization and the plaintiff is also entitled for cost throughout."