Man Singh and Another vs The State Bank of Patiala

G.R. Majithia, J.—The defendants have come in first appeal against the judgment and decree of the trial court dated 31.7.1978.

Parties have been referred to in the body of the judgment as they were described in the plaint.

Defendant No. 1 applied for grant of three loans on 6.1.1969 for agricultural finances. Two of these are instalment credit loans of Rs. 54,690.76 paise and Rs. 24,779.25 paise respectively. These amounts included finance charges of Rs. 11090:75 paise and Rs. 4779.25 paise respectively. The third loan was of the amount of Rs. 12,000.00 and it was demand cash credit loan (also called crop loan). Defendant No. 2 and Mohinder Singh son of Teja Singh, resident of Chandigarh since deceased stood as guarantors for the repayment of the loans. To secure the loans defendant No. 1 and his mother, defendant No. 3 executed mortgage deed dated 31.10.1969 in favour of the plaintiff-bank in respect of their land measuring 257 kanals and 11 marlas situated in the revenue estate of village Chanauli. Defendant No. 1 also executed three hypothecation agreements dated 3.11.1969, 17.11.1969 and 23.1.1970 respectively hypothecating the Escort Tractor 47 with equipment; the whole of the Rabi crop for the year 1969-70 existing, raised or to be raised from time to time and two tubewells with diesel engine. Further, he also executed three pronotes dated 3.11.1969, 17.11.1969 and 23.1.1970 in favour of the plaintiff in respect of these loans. He also executed three pronotes in respect of the three loans in favour of the guarantors, who further endorsed the same in favour of the plaintiff-bank. The two instalment credit loans were payable in nine half yearly instalments commencing from 31.3.1970 and in case of default in the payment of the amount of loans, he was liable to pay over due interest at the rate of 10% per annum on the amount of the two loans remaining unpaid. The crops loan was also payable on or before 31.7.1970 and on defendant''s failure to pay back the amount of that loan, overdue interest at the rate of 14 percent per annum was to be charged. Defendant No. 1 failed to pay back the amount of the loans as stipulated in various documents executed by him. He om.. paid a sum of Rs. 12,153.50 paise on 20.1.1971. He has not paid anything thereafter towards any of the three loans. The plaintiff therefore, instituted a suit for recovery of Rs. 1,11,212.91 paise inclusive of the overdue interest calculated upto 31.10.1975 against defendant No. 1 and 2. The plaintiff has also claimed future interest at the rate of 10% per annum in respect of the two instalment credit loans and @ 14% per annum in respect of the crop loan with effect from 1.11.1975 till realization. It was also prayed that the amount be got realized by sale of the mortgaged land, crops and hypothecated machinery. Personal decree for recovery of the suit amount was also prayed against the defendants. It was averred that the suit was within limitation as it was based on the mortgage and also because defendant No. 1 and 2 had acknowledged their liability in writing in respect of all the three loans on 5.1.1972 and 2.1.1975. The suit was filed within limitation on 9.3.1975.

The suit was contested by the defendants. A joint written statement was filed on behalf of defendant Nos. 1 and 3. It was admitted that defendant No. 1 had obtained loans from the plaintiff and their land was mortgaged but the details of the mortgage deed were not admitted; that the suit was bad for want of particulars required under Order 34 of the CPC relating to the suit of the mortgagees; that the plaint was defective as it had not been drafted in form No. 45 given in Appendix ''A'' of the Code of Civil Procedure; that payment of Rs. 12,163.50 paise was admitted; that the liability to the extent of Rs. 79,299.50 paise was acknowledged by defendant No. 1. However, it was stated that the defendants never agreed to pay the alleged finance charges of Rs. 11090.75 paise or Rs. 4779.25 paise and any condition with respect of these amounts is by way of penalty and cannot be imposed; that the plaintiff got various documents signed from defendant No. 1 but those were only paper transaction and are not enforceable under law. The liability to pay over due interest @ 10-1/4% and 14% per annum was also questioned. The right of the Bank to charge interest @ 7.50 paise% per annum was also admitted. It was denied that the suit was within limitation. It was also disputed that the authorised person has filed the suit. Defendant No. 2 in his separate written statement stated that he was only a surety and is liable only if the amount of the loans is not recovered from defendant Nos. 1 and 3 and unless the plaintiff exhausts its remedies against the mortgaged property for the recovery of amounts of the loans.

On the pleadings of the parties, the following issues were framed:

Whether the suit has been filed by a duly authorised person? OPP

Whether the plaint is liable to be rejected as alleged in para 2 of the written statement? OPD

Whether the suit is within time? OPP

To what amount as principal and interest, the plaintiff is entitled to recover from the defendants? OPP

Relief.

Issue No. 1 was answered in favour of the plaintiff and it was held that the suit was filed by a duly authorised person; issue No. 2 was answered in favour of the plaintiff; issue No. 3 was also answered in favour of the plaintiff and it was held that the suit was filed within limitation; issue No. 4 was found in favour of the plaintiff and it was held that the plaintiff is entitled to recover a total amount of Rs. 1,11,212.91 paise from defendant Nos. 1 and 2.

The defendants have come up in first appeal.

The trial Judge correctly found that Shri L.C. Khanna, Assistant General Manager of the plaintiff was duly authorised to sign and verify the pleadings. The plaint was verified by a duly authorised person. It also correctly found that guidelines were laid down in Form 45 of Appendix ''A'' of the CPC for filing a suit under Order 34 Code of Civil Procedure. The guidelines are only directory and not mandatory. The plaintiff has followed the same in substance.

The credit loan is secured by the mortgage dated 3.11.1969 Ex.PW6/A. The period of limitation to enforce the loan on the basis of mortgage is 2 years. The suit is, therefore, within limitation. The liability for these loans was acknowledged vide acknowledgements dated 5.1.1972, Ex.P5 and dated 2.1.1975 Ex.PW4A made by the defendants in favour of the plaintiff. The first acknowledgement was made within three years of the. advancement of the loan by the Bank. The second acknowledgement Ex.PW 4/A was also made within three years of the first acknowledgement dated 5.1.1972. The acknowledgements are in writing and duly signed by defendants Nos. 1 and 2. The suit was filed within three years of the last mentioned acknowledgement dated 2.1.1975 and is, therefore, within limitation. Regarding other two loans the suit is within limitation in view of the acknowledgements Exs.PW 4/B, Ex.PW 4/C, PW 4/D, Ex.P7 and P8. Undisputably the finding under issue No. 3 is unexceptional.

Undisputedly, defendant No. 1 took three loans from the plaintiff. The first loan was of Rs. 54690,25 paise inclusive of finance charges of Rs. 11090.75 paise. This loan was secured by the mortgage deed Ex.PW 6/A and bore interest @ 9-1/4% per annum. It was payable in nine half yearly instalments beginning from 31.7.1970. The second instalment credit loan of Rs. 24,779.25 paise inclusive of finance charges amounting to Rs. 4779.25 paise was advanced to defendant No. 1 by the plaintiff on 30.1.1970. It was also payable in the same manner as the first instalment credit loan. But there was no regular mortgage deed, executed to enforce the recovery of this loan. The third loan which was demand cash credit loan (Crop loan) was advanced to defendant No. 1 on 17.11.1969. In fact the amount actually advanced to defendant No. 1 under this loan was Rs. 11900/ -. It was repayable in lump sum. This loan was also not secured by any regular mortgage although document Ex.PW 6/J had been executed by defendant No. 1 in favour of the plaintiff extending the scope of mortgage deed Ex.PW 6/A to this advance as well. Thus the loan was carrying interest @ 14 percent per annum. Although the rate of interest originally agreed upon charged 9% per annum in respect of the two instalment credit loans but the interest was to be charged @ 10-1/4% per annum in case of default made by the defendants in payment of the amount loans. So far as the demand cash credit loan was concerned, the rate of interest originally stipulated was 9-1/4% per annum but it had been increased to 14% per annum at different stages as deposed by PW8. The rate was allowed to increase under the directions issued by the Reserve Bank of India from time to time. Defendant No. 1 had only paid Rs. 12153.50 paise on 20.1.1971. The defendants do not allege to have made any other payment to the plaintiff. This payment had been adjusted in the first instalment credit loan of Rs. 54690.75 paise leaving a balance of Rs. 42537.25 paise out of that loan exclusive of interest as is depicted from statement of accounts Ex.PW 8/6. The other question which requires consideration to what amount is recoverable from the defendants on account of prime, amount and interest if the condition regarding payment of over due interest on committing default in payment by defendant No. 1 was in the nature of penalty. The trial court correctly come to the conclusion that inclusion of finance charges in the two instalment credit loans was not penal in nature. The amount of interest had been calculated according to the period when any particular instalment became due and interest added thereto. Defendant No. 1 did not make regular payment of the instalments, the bank was deprived of the use of money and it cannot be urged that the finance charges included in the loan amounts partake the character of penalty. The plaintiff granted interest @ 10-1/4% per annum on the amount of loans on committing default by the defendant in repayment of the loan. The parties had agreed that interest would be charged @ 10-1/ 4% per annum if the loan was not repaid as agreed upon. The condition regarding payment of interest on committing default @ 10-1/4% per annum is not penal in nature. The plaintiff is rightly entitled to claim interest @ 10-1 /4% per annum on the amount of loan of Rs. 54690.75 and Rs. 24779.25 paise till the date of institution of the suit. The trial court rightly came to the conclusion that the plaintiff bank would be entitled to the agreed rate of interest-on the amount due upto the date of institution of the suit. The trial court on evidence held that a sum of Rs. 42,527,25 paise was due as balance principal amount and a sum of Rs. 12,163.50 paise as over due interest from defendant Nos. 1 and 2. On instalment credit loan of Rs. 54,690.75 paise, the total amount recoverable of this loan was determined at Rs. 20,000/ - plus interest calculated @ 10-1/4% per annum w.e.f. 1.11.1975 i.e. from the date of institution of the suit subject to grant of further interest on this loan under Rule 11 of the Code of Civil Procedure. The plaintiff was also held entitled to recover Rs. 31,900/ - as the amount of second instalment credit loan plus Rs. 20,000/ - on account of over due interest calculated upto October 31, 1973. The plaintiff is also held entitled to recover Rs. 20,000/- as principal demand cash credit loan and a sum of Rs. 11,900/ - on account of interest calculated upto October 31, 1973. The conclusion arrived at by the trial Judge are unexceptional.

For the reasons aforesaid, I find no merit in this appeal and the same is dismissed with no order as to costs.