Stat of Bank of India, Kothapet vs Kandula Satyanand and anothers

The plaintiff Nationalised Bank is the appellant before this Court. The suit, OS No.187 of 1980 on the file of the Subordinate Judge, Rajahmundry was filed by the plaintiff-Bank for recovery of a sum of Rs.75,374-45 being the amount due on a promissory note and also based on the mortgage bond.

For the sake of convenience the parties to this appeal will be referred to as they are arrayed in the suit.

The trial Court decreed the suit. However, while decreeing the suit the trial Court held that Section 21A of the Banking Regulation Act, 1949 is not retrospective and consequently held that the defendants are entitled to the benefit of Andhra Pradesh (Andhra Area) Agriculturists Relief Act, 1938 (Act IV of 1938). Aggrieved by the said finding, the plaintiff-Bank has filed this appeal.

The only question that falls for consideration in this appeal is:-

"Whether in view of the insertion of Section 21-A in the Banking Regulation Act, 1949 by Banking Law (Amendment) Act, 1983 (Act I of 1984) Courts are precluded from subjecting transactions entered into between the Banks and borrowers from scrutiny under the provisions of Act IV of 1938 or Usurious Loans Act, 1918 with a view to giving relief thereunder and if so, whether such relief is permissible?"

It is the settled position that after the introduction of Section 21-A in the Banking Regulation Act, 1949 by Amendment Act I of 1984, Courts have no power to scale down the interest in respect of debts due to Banks, A Full Bench of this Court in State Bank of Hyderabad and Vs. Advath Sakru and another, , considered the question elaborately and held that Section 21-A of the Banking Regulation Act applies to all transactions entered into between the Banking Company and its debtor, whether the transaction was entered into prior to its commencement or after and that Section 21-A applies to pending appeals irrespective of the fact whether a decree was passed giving relief to the debtor or not. It was also held that Section 21-A makes no distinction between an advance made for agricultural purpose or for commercial purpose and it equally applies to both. It was further held that the provisions of Andhra Pradesh (Andhra Area) Agriculturists Relief Act, 1938 (Act IV of 1938) and Usurious Loans Act, 1918 (Act X of 1918) as amended by the Usurious Loans (Madras Amendment) Act VIII of 1936, Section 3 of Madras Agriculturists Relief Act were not applicable to the advances made by the Banks to the agriculturists. The Supreme Court also had an occasion to uphold the validity of Section 21-A of the Banking Laws Amendment Act I of 1984 in State Bank of India Vs. Yasangi Venkateswara Rao, . The Supreme Court has also upheld the validity of the amendment to Section 21-A as inserted by Banking Laws Amendment Act 1 of 1984 and has held that the Court cannot interfere and reduce the amount of interest agreed to be paid on the loan so taken. A learned single Judge of this Court (Sri Justice C.V.N. Sastri) in Andhra Bank, Chilakaluripeta v. Inturi Narayana 1997 (6) ALD 443 : 1997 (3) APLJ 423, following the above Full Bench decision Advath Sakra (supra), allowed the appeal filed by the Bank, holding that after the introduction of Section 21-A in the Banking Regulation Act, 1949, by Amending Act I of 1984, Courts have no power to scale down the interest in respect of debts due to the Banks.

The learned Counsel for the respondents brought to my notice a decision of the Supreme Court in Corporation Bank Vs. D.S. Gowda and Another, , wherein the Supreme Court held that as per the circulars/directions issued by the Reserve Bank of India under the Banking Regulation Act, 1949 and under Sections 21 and 35, the Banks have to fix annual rests coinciding with the time when the farmer can repay and if thereafter the farmer fails to pay the interest, it would be open to compound the interest on the crop loan and instalments upon the term loan becoming over due. In view of the decision of the Supreme Court in Corporation Bank (supra) the trial Court is directed to levy interest on the basis of annual rests and give relief as termed by the Supreme Court.

The appeal is allowed subject to the above observation with regard to levy of interest on the basis so annual rests and the suit is decreed with costs. Three months time is granted for redemption. There will be no order as to costs in the appeal.