Prasad Financiers vs K. Aboobacker

K.N. Phaneendra, J.—This Regular First Appeal is preferred against the judgment and decree passed in OS No. 16807/2001 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. 1,28,812/- with future interest at 21% p.a., with cost of the suit.

The plaintiffs claim is that -

"Plaintiff was a firm of two partners by name Sri K.R. Sathyanarayana and Sri K.S. Nagendraprasad. One of them, Sri K.R. Sathyanarayana died on 4.11.1991. The other sole remaining partner became the proprietor of the plaintiffs firm and accordingly, the suit was filed by the proprietor of the firm."

It is stated that the defendant Sri K. Aboobacker S/o. Khader Mir Sahib, borrowed a sum of Rs. 25,000/- on 4.3.1991 and another sum of Rs. 25,000/- on 1.8.1991 by executing an ''On demand Promissory note'' and ''Consideration Receipt'' for valuable consideration and received the amounts by way of cheques and he has also agreed to pay interest at the rate of 21% p.a., 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. 1,28,812/-, 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. It is also stated that the defendant had only two transactions with the said Sri K.R. Sathyanarayana and in that regard he has paid back Rs. 1,32,150/- towards the said two transactions. Further, the defendant has also paid Rs. 10,000/- and another sum of Rs. 15,000/- by way of cheques dated 9.5.1994 and 23.07.1994 and there was a note book maintained by Sri K.R. Sathyanarayana and there are entries made with regard to the repayment of 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 7 issues in the following manner:

"1. Whether Sri. K.S. Nagendra Prasad is the proprietor of the plaintiff as alleged?

Whether the plaintiff proves that the defendant has borrowed a sum of Rs. 25,000/- on 4.3.91 with interest at the rate of 21% per annum under a cheque bearing No. 348668 and further sum of Rs. 25,000/- under the cheque bearing No. 348678 drawn on Canara Bank, Avenue Road Branch, Bangalore as alleged?

If so, whether the plaintiff proves that on 4.3.91 and on 1.8.91, the defendant has executed a D.P. Notes and consideration Receipts in respect of the aforesaid amount as alleged?

Whether the defendant prove that one Sri. Sathyanarayana, who is stated to be the father of plaintiff had availed the signature of the defendant on the blank papers, D.P. Notes, etc., at the time of lending the amount to him and by mis-using the said papers, the present suit is filed?

whether the defendant proves that he has paid nearly a sum of Rs. 1,32,150/- as alleged in Para No. 16 of the written statement?

Whether the suit is barred by law of limitation?

Whether the plaintiff is entitled to recover a sum of Rs. 1,28,812-50ps., with interest at the rate of 21% per annum from the defendant from the date of suit till its realization?

What Decree or Order?"

The plaintiff examined himself as PW-1 and got marked Exhibits P-l to P-11. 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 to 3 in the Affirmative and issue Nos. 4 to 6 in the negative and held that the "defendant is directed to pay a sum of Rs. 1 lakh to the plaintiff with future interest at 10% p.a., and on the principal amount of Rs. 50,000/- 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. 1,28,812/- to Rs. 1 lakh. 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. 1 lakh 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. 50,000/- 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. 1,28,812/- 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."