Syndicate Bank vs A.V. Angadi and Others

Kirshna Moorthy, J.—The plaintiff in a suit for recovery of money on a mortgage is the Appellant. The first defendant is a Registered Partnership Firm, of which, defendants 2 to 6 are its partners. Defendants 7 and 8 are impleaded as their Co-obligates with defendants 1 to 6 who have executed necessary loan documents along with Defendants 1 to 6 in favour of the plaintiff-Bank.

According to the plaint allegations, defendant No. 1 - the partnership firm and its partners defendants 2 to 6 entered into an agreement with the Food Corporation of India on 29.1.1977 to construct two Godowns of 2500 tonnes capacity each on the specifications laid down by the Food Corporation of India. They had agreed to complete the construction of the two godowns in their land on Gadag-Hubli Road and give delivery to Food Corporation of India within six months from the date of signing of the agreement. For the above purpose, defendants requested the plaintiff-Bank for giving financial aid to be released under the Agricultural Refinance and Development Corporation (hereinafter referred to as A.R.D.C.). Under the said scheme, the plaintiff-Bank agreed to advance money to the defendants on condition that, they have to initially invest for the expenditure towards the cost of the said project in part upto 25% and the balance 75% would be advanced by the plaintiff-Bank as a loan to the defendants. This loan was agreed to be released in part proportionately with the progress of the construction work of the godowns as certified by the Food Corporation of India authorities and for specific purpose and materials only on the production of investment and valuation Certificate of the F.C.I. Accordingly, a loan of Rs. 5,90,000/- was sanctioned to the defendants.

The plaintiff - Bank advanced a total sum of Rs. 5,30,000/- to defendants 1 to 6 with the Co-obligates defendants 7 and 8 towards the said project of the construction of the said godown, as per the terms and conditions agreed and embodied in the Agreement dated 27.1.1978 evidenced by Ex.p.1. An equitable mortgage of the land, in R.S. No. 312/1 was also made by deposit of title deeds, the original registered sale deed along with other relevant documents. The defendants have agreed to repay the loan in instalments of Rs. 12,000/- per month. The first instalment to commence from 30.4.1978 till dosing the loan in full. They have also agreed to pay interest at the rate of 71/2% above the Reserve Bank of India rate subject to the minimum of 161/2% p.a., on 31st March, 30th June, 30th September and 30th December in each year so long as the principal or part remain un-paid. The defendants had also agreed to pay interest at quarterly rests and on failure to pay over due interest at the rate fixed by the plaintiff-Bank from time to time. Defendants 7 and 8 have agreed and accepted alt the terms and conditions of loan and have joined in execution of the ''suit loan documents along with other defendants 1 to 6. The defendants also equitably mortgaged the properties mentioned in Schedule-A by depositing their Title Deeds on 24.1.1978. Defendant No. 2, the Managing Partner of defendant No. 1 firm and the general Power of Attorney of defendants 1 to 6 has created an equitable mortgage of his land bearing R.S.No.288/E by giving additional security for the said loan. The properties so mortgaged as additional security are described in Schedule-B-l in the plaint, On 27.1.1978, as per the above scheme and in accordance with the agreement, an amount of Rs. 77,300/-was released and credited to the defendants suspense Account, for which, they had executed a stamped receipt. As per the above agreement, amounts were paid on 21.4.1978 and on subsequent dates, for which, the defendants have executed duly stamped receipts on the respective dates.

Defendants 1 to 6 had agreed to complete the construction of the two godowns and to deliver them to the F.C.I. under the terms agreed and accepted by them. The F.C.I. granted extension of time more than once to enable defendants 1 to 6 to complete the construction of the said godowns and give delivery finally till 31.7.1979. Inspite of the said concession and extension of time, defendants 1 to 6 failed to complete the construction of the said godowns even by the extended dated 31.7.1979 due to their own default of not investing their share of 25% cost of the project and even by not utilising the loan amount advanced by the plaintiff-Bank. Thus, by their financial incapacity, improper conduct and dishonest dealings, failed to complete the construction of the godowns and to give deliver to the F.C.I. even by extended time. As a result of which, the F.C.I. terminated the contract with defendants 1 to 6 and refused to take- delivery of the in-complete godowns. Thus, they have committed breach of the terms and conditions of the agreement made with the F.C.I. The balance due and outstanding as on 31.3.1981. from the defendants is Rs. 7,35,679.75 p. Further interest at the rate of 20.5% p.a is payable by the defendants to the plaintiff-Bank. It is alleged in the plaint that, inspite of repeated reminders and notices by the plaintiff-Bank, the defendants did not repay any amount advanced by the plaintiff Bank towards the said loan. Finally, the plaintiff-Bank issued a legal notice through its Advocate on 12.9.1980 calling upon the defendants to dear of the entire loan together with interest. To the above notice, the second defendant, on behalf of the first defendant firm, gave a reply making false and frivolous allegations against the plaintiff-Bank''s Manager. Accordingly, a Suit is filed for realisation of the amount of Rs. 7,53,140.65 p. the amount due as on the date of the suit and has prayed for a decree for realisation of the above said amount and also for passing a decree for sale of the mortgaged properties in case the amount is not paid within the time stipulated by the Court and also for a final decree to be passed with liberty reserved to the plaintiff-Bank to apply for a personal decree against all the defendants under Order XXXIV Rule 6 of the CPC if there is any deficit due after the sale of the suit mortgaged properties.

The defendants filed a written statement, in which, it is admitted that, they have received an amount of Rs. 5,30,000/- altogether on the dates mentioned by the plaintiff-Bank. The creation of equitable mortgage as alleged in the plaint is also admitted. It was also contended that the loan in question is for agricultural purpose and so, compound interest cannot be levied. It was further contended by them that the Food Corporation of India is a necessary party to the suit as the loan is given to the defendants under A.R.D.C. guarantee Scheme for the purpose of construction of godowns for F.C.I. and they are necessary parties. It is further alleged in the written statement that the plaintiff-Bank through its then Manager had been putting obstacles in the implementation of A.R.D.C. scheme from the stage of sanction of loan to the date of disposal of the amount and that there was undue delay in advancing the loan to the defendants inspite of the fact that they had produced necessary Certificates from the F.C.I. showing progress of the construction of the godowns. It is further alleged that the defendants have incurred heavy loss due to deliberate acts of the plaintiff-bank and the untimely non-release of the loan amount in time. It is further alleged by them that the defendants could not complete the godown in time resulting in loss of monthly rental of Rs. 12,000/- from 31.7.1979 from both the godowns. The F.C.I. refused to accept one godown and the defendants were forced to let out one godown to the Central Warehousing Corporation on a monthly rental of Rs. 4,500/- wherein also they had suffered a loss of Rs. 1,500/- per month and as such, the plaintiff-Bank cannot claim interest on the loan advanced to the defendants by the plaintiff-Bank. It is contended by them that though an amount of Rs. 5,30,000/- was released to the defendants under the scheme, payments were delayed and accordingly, the work could not be completed by the defendants due to the breach committed by the plaintiff and as such, the plaintiff-Bank cannot recover anything from the defendants and the Suit is liable to be dismissed.

The parties went to trial and the following issues were framed by the Lower Court:

Whether defendant-2 is a power of Attorney holder of defendant-3?

Whether the plaintiff proved that defendants failed to complete the godown construction work as agreed and that it was due to the defendants financial incapacity improper conduct and dishonest dealings?

Whether defendants prove that due to the deliberate delay in releasing the loan account caused by the Manager of the plaintiff-Bank the defendants could not complete the godown construction work?

Whether such delay caused by defendants a loss of Rs. 12,000/- p.m. as alleged?

Whether the plaintiff-Bank is entitled to recover compound interest and penal interest?

Is the claim of interest by the plaintiff-Bank is hit by provisions of the Usurious Loans Act?

If F.C.I. is a necessary party, if so, is the suit bad for nonjoinder of parties?

Is recovery of Rs. 5,900/- as service charge is illegal?

Whether defendants are liable to pay interest in view of their contention at para 16 and 18 and 20 of Written Statement?

Whether defendants are entitled for any instalments?

What order and decree?

The Trial Court after trial, held that the second defendant is the Power of Attorney of the third defendant. It was further found by the Trial Court that it was not due to the defendants financial incapacity, improper conduct and dishonest dealings, they have failed to complete the construction of the godowns as agreed with the Food Corporation of India. It was further found by the trial Court that there was deliberate delay on the part of the plaintiff-Bank in releasing the loan amount and accordingly, the defendants could not complete the godown construction in time. It was further found that, by such delay, defendants incurred a loss of Rs. 12,000/- per mensum. It was also found that the plaintiff-Bank is not entitled to recover compound interest and penal interest. The Trial Court found that the Food Corporation of India is a necessary party and that the recovery of service charges is illegal. It was also found that the defendants are not liable to pay interest. The Trial Court further found that the Suit is pre-mature as the defendants have seven years'' time to pay the amount under the Agreement and the Suit filed in 1981 is pre-mature. On the above findings, the Trial Court dismissed the Suit filed by the plaintiff-Bank, against which, this Appeal is filed.

Before this Court, the learned Counsel for the plaintiff-Bank/ appellant contended that the fact that an amount of Rs. 5,30,000/-was advanced to the defendants under Ex.P.1 agreement dated 21.7.1978 is admitted by the defendants. So also the fact that they executed equitable mortgage of the properties mentioned in A.1 and B.1 as security for the claim is also admitted by the defendants. In these circumstances, the Suit is dismissed on the ground that due to the delay in releasing the loan amount in accordance with A.R.D.C. Scheme has caused loss to the defendants and also on the ground that the Food Corporation of India is a necessary party. It is contended by the learned Counsel for the appellant that, even in case any damage is caused to the defendants, by the delay in releasing the amounts, they will not be entitled to any damages as they have not filed any counter claim claiming damages from the plaintiff-Bank. It was also contended that, even then, the contract was performed by- the plaintiff-Bank by advancing an amount of Rs. 5,30,000/- and without any demur, the defendants having received the amount, are not entitled to claim any damages in. view of Paragraph-3 of Section 55 of the Contract Act. It was also contended that the finding of the trial Court that the F.C.I is a necessary party is wrong as there is no privity of contract between the plaintiff and the F.C.I. and the defendants alone are liable to discharge the liability of the loan advanced to them. So also the finding of the trial Court that the Suit is pre-mature is also wrong as there is a specific clause in Ex.P.1 agreement itself that the Bank is entitled to file a Suit for the whole claim at their discretion even though benefit of instalment payment is granted to the defendants on certain terms. In that view of the matter, the Learned Counsel for the appellant contended that they are entitled to a decree as prayed for. Learned Counsel for the respondents/defendants reputed all these contentions and supported the decree of the Trial Court. At any rate, he contended that, in, view of the default and delay committed by the plaintiff-Bank in advancing the loan in time, the Court has to exercise the discretion by awarding only lower rate of interest than the contract rate of interest under Order 34 Rule 10 of the Code of Civil Procedure.

Having heard elaborate arguments on both sides, we are dearly of the view that the Trial Court grossly erred in dismissing the Suit on the finding entered by it. As stated earlier, the Suit was dismissed mainly on three grounds, viz.,

(i) that by the delay and default in releasing the loan amounts to the defendants, they have suffered a loss of Rs. 12,000/-per mensum, the rent which they would have obtained if the godown was completed in time;

(ii) The Food Corporation of India is a necessary party; and

(iii) the Suit is pre-mature; We shall consider these three questions one by one.

Before considering the above questions, it is necessary to state the scheme under which, the loan was advanced by the plaintiff-Bank.

A.R.D.C. has framed a scheme for refinancing loans advanced for the construction of godowns to the F.C.I. Under the Scheme, the contractors like the defendants have to construct godowns for the purpose of F.C.I. within the prescribed time. In this case, defendants had entered into an agreement with F.C.I. for construction of two godowns on a monthly rent of Rs. 12,000/-. Nationalised Banks will advance amounts upto 75% of the cost of construction which would be refinanced by the A.R.D.C. It is seen that the amounts are advanced by the A.R.D.C. to the Banks at the rate of 8% per annum and from the date of refinancing, the Bank is entitled to only 11% interest from the contractors who construct the godowns. It is under this scheme that the defendants were sanctioned a loan of Rs. 5,90,000/- by the plaintiff-Bank under the scheme. 25% of the cost of godown have to be met by the defendants and 75% to be advanced by the Bank. The amounts will be released only in instalments on the production of a Certificate from the F.C.I. regarding progress of the construction. It-is under this scheme, that admittedly, an amount of Rs. 5,30,000/- was advanced to the defendants on various dates. But in this case, whatever may be the reason, the defendants could not complete the godown within the time stipulated and accordingly, the F.C.I. terminated the contract with the defendants. Thus, it is dear that it is a time bound programme and the construction to be completed and the loan have to be advanced within the time stipulated to enable the defendants to complete the building and handover possession to the F.C.I. within the stipulated time.

Admittedly, in this case, an amount of Rs. 5,30,000/- was advanced to the defendants on the security of the equitable mortgage as mentioned in the plaint, which is admitted in the written statement. The case of the defendants is that they were not able to complete the construction of the godown in time, whereby, the F.C.I. terminated the contract. It is the defendants case that the godowns could not be completed in time due to the default of the plaintiff-Bank in advancing the loan under the scheme in time inspite of the fact that they had produced necessary Certificates from the FC.I. showing the progress of the construction. They have also alleged in the written statement that due to the default of the plaintiff, they incurred a loss of Rs. 12,000/- per month which was the rent agreed to be paid by the F.C.I. on completion of the godown and handing over the same to them. In support of their case, the defendants have adduced large materials before the Trial Court and the Trial Court has also found that the defendants incurred loss due to the default made by the plaintiff. But it is to be noted that the defendants never made a counter claim claiming damages for the alleged breach of the agreement by the plaintiff. It is well settled that if there is such, a claim by the defendants in a Suit, they have to make a counter claim alleging necessary facts and also to pay Court fee on the same. Without doing so, by simply saying that they have incurred a loss, the Trial Court should not have considered that claim and dismissed the Suit of the plaintiff on the ground that the defendants had suffered damages due to the delay on the part of the plaintiff-Bank in advancing the loan. Without making a counter claim in the written statement, the Trial Court should not have gone into that issue at all and the question whether the defendants suffered any damages did not arise at all. In these circumstances, we are dearly of the view that the Trial Court erred in dismissing the suit on the ground that defendants suffered loss due to the fault of the plaintiff so long as there was no counter claim by the defendants, and as such as issue was unnecessary and was beyond the scope of the Suit. The lower Court had no jurisdiction to go into that question and in that view of the matter, we hold that the Trial Court was wrong in dismissing the suit on the ground that due to the breach of the condition of the agreement, the defendants suffered loss and we vacate the finding of the Trial Court to that effect.

There is one more reason for disallowing the claim made by the defendants. Even assuming that they are entitled to raise such a contention without making a counter claim. The defendants have received an amount of Rs. 5,30,000/- as loan under Ex.P.1 agreement, though according to them, it is delayed. The case of the defendants is that, they have incurred loss due to the plaintiff not performing their part of the contract within the time agreed upon between the parties. The effect of failure to perform the contract at a fixed time, in which, time is the essence of the contract is provided for u/s 55 of the Contract Act. Even assuming that the time is essence of the contract, the third paragraph of Section 55 provides as follows:

"lf, in case of a contract voidable on account of the promisor''s failure to perform his promise at the time agreed, the promisee accepts performance of such promise at any time other than that agreed, the promisee cannot claim compensation for any loss occasioned by the non-performance of the promise at the time agreed, unless, at the time of such acceptance, he gives notice to the promisor of his intention to do so."

From the 3rd paragraph of Section 55, it is dear that the promisee cannot claim compensation for the delayed performance of the contract when the promisee has accepted performance, unless he gives notice to the promisor of his intention to claim damages.

As stated earlier, in this case, admittedly, the defendants received an amount of Rs. 5,30,000/-. They accepted performance of the contract without any demur. They never gave any notice of their intention to claim compensation for the delayed performance of the contract at the time when they received the amount or in other words, though, according to the defendants, the contract was performed belatedly they accepted benefit thereof, without reserving their right by issuing a notice stating that they intend to claim compensation; admittedly, no such notice was issued by the defendants when they received entire amount in performance of the contract. By virtue of the provisions contained in paragraph 3 of Section 55 they are precluded from raising any claim for compensation so long as they have not issued any notice as contemplated in. paragraph 3 of Section 55. The defendants having not issued such notice, they are disentitled to claim any compensation for the alleged delayed performance of the agreement by the plaintiff-Bank. In that view of the matter, also, the Trial Court erred in holding that the defendants are entitled to compensation at the rate of Rs. 12,000/- per month. We accordingly reverse the finding of the Trial Court on these issues.

The next ground on which the suit was dismissed is that, the Food Corporation of India is a necessary party to the Suit. That finding of the Trial Court is also equally fallacious. The amount was advanced to the defendants under Ex.P.1 agreement dated 27.1.1978 and the F.C.I. was not a party to that agreement. No doubt, there was an agreement between the defendants and the F.C.I. to give constructed godowns on rent to them at the rate of Rs. 12,000/- per month. The Trial Court has held that the F.C.I. is a necessary party on the basis of the draft agreement prepared by the A.R.D.C., in which, Clause-II provides that the F.C.I. the financing Bank and the borrowers will enter into an agreement, by which, the F.C.I. will pay rent directly to the Bank. Admittedly, no such agreement was executed in this case, for, the godowns were never constructed and handed over to the F.C.I. So long as the godowns were not completed and handed over to the F.C.I. they have no liability to pay the rents to the defendants for the godown. Accordingly, there is no liability on the part of the F.C.I. to pay rent of Rs. 12,000/- per month to the defendants. In these circumstances, we are unable to understand as to how F.C.I. is a necessary party to the Suit when admittedly, there is not privity of contract between the plaintiff and the F.C.I. It is not as if the F.C.I. had guaranteed the payment of the amount by the defendants. Even under the draft agreement, the F.C.I. only pays rent to the plaintiff on behalf of the defendants and the liability to repay the plaintiff-bank rests only with the defendants. In these circumstances, the Trial Court erred in holding that the Suit if bad for non-joinder of the F.C.I. as a party and is liable to be dismissed on that ground. We reverse that finding of the Trial Court as well.

The Trial Court went wrong in holding that the guidelines and directions given by the A.R.D.C. are binding on the plaintiffs.

The next ground on which the suit is dismissed is that it is pre-mature:

The Trial Court held that there is no default clause in Ex.P.1, that in case, failure to pay any instalments, the plaintiff Bank is at liberty to recover all the sums in lumpsum from the defendants. Under the agreement, no doubt, the defendants are entitled to repay the amount in seven years, if the other conditions are satisfied. But Clause-6 of Ex.P.1 agreement is categoric that they are entitled to claim the whole amount at their sole discretion. Clause-6 of Ex.P.1 reads thus:

"Notwithstanding anything contained herein to the contrary or in the security documents and irrespective of the dates of instalments fixed for the repayment of the loan the Bank will be at liberty at its sole discretion to demand by notice in writing and recover the entire amount outstanding with interest and also to enforce the security or recover the moneys in any other manner which the Bank thinks fit"

From the above clause, it is dear that the plaintiff-Bank has got the discretion to demand the money outstanding from the defendants with interest by enforcing the security. The Trial Court has ignored this clause on the ground that it is against the guidelines of A.R.D.C. as laid down in Ex.P.22. We are unable to agree with this conclusion reached by the Trial Court. Clause-6 makes it absolutely dear that the Bank is conferred with full discretion to demand the entire amount outstanding with interest at their discretion. In this case, admittedly, the defendants have not paid any amounts and they were not able to complete the contract with the F.C.I. as well. In these circumstances, the plaintiff-Bank was fully justified in filing a Suit for the entire amount in exercise of their power under Clause-6 of Ex.P.1. The finding, of the Trial Court to the contrary, has to be reversed and we do so.

Now the question is as to what is the amount that is due to the plaintiff and what is the interest which they are entitled to claim; Ex.P.51 is the statement produced by the plaintiff-Bank which shows that they have charged the contract rate of interest till the amount was refinanced by the A.R.D.C, Thereafter, they have charged only the interest as stipulated in A.R.D.C. which they are entitled to. Accordingly, the plaintiff-Bank is entitled to realises the amount of Rs. 7,53,140-65p. as on the date of Suit. The amount if calculated on that basis is not disputed by the defendants and as the plaintiff-bank has charged only interest as per the scheme, the plaintiff is entitled to realise the aforesaid amount as on the date of the suit.

The only further question to be considered is as to what is the rate of interest which the plaintiff is entitled from the date of the Suit. It was contended by the Learned Counsel for the plaintiff that, being a mortgage suit under Order 34 Rule 11 C.P.C. they are entitled to claim contract rate of interest even from the date of suit and that the Court has no discretion in the matter. But we find it difficult to accept this contention. Even under Order 34 Rule 11 C.P.C., the Court has discretion to award interest from the date of suit at the rate which seems reasonable to the Court as it provides that the Court ''may'' order payment of interest to the mortgagee.

This Rule was interpreted by the Supreme Court in Soli Pestonji Majoo and Others Vs. Gangadhar Khomka, held:

"It is apparent that the new rule 11 as inserted by the Amending Act 21 of 1929 provides that the Court "may order payment of interest to the mortgagee upto the date fixed for payment at the rate payable on the principal. It was held by the Federal Court in Jaigobind Singh v. Lachmi Narain Ram, AIR 1940 FC 20 that the language of the rule gives a certain amount of discretion to the Court so far as interest pendente lite and subsequent interest is concerned and it was no longer absolutely obligatory on the Courts to decree interest at the contractual rates upto the date of redemption in all circumstances even if there is no question of the rate being penal, excessive or substantially unfair within the meaning of the Usurious Loans Act, 1918. In view of the Principle laid down by the Federal Court in this decision we are of opinion that in the circumstances of the present case the respondent should be granted interest on the principal sum due at the contractual rate till the date of the suit and simple interest at 6 per cent p.a. on the principal sum adjudged from the date of the suit till the date of the preliminary decree and also at the same rate till the date of realisation."

In the light of the above decision, it is clear that it is not obligatory that, in all circumstances, the Court should award contract rate of interest from the date of suit. But discretion is vested in the Court to award lesser rate of interest taking into account the circumstances of the case.

Further question to be considered is as to whether in the circumstances existing in this case would warrant granting of lesser interest to the plaintiff from the date of the suit.

We are dearly of the opinion that such circumstances exist in this case. Though we have found that the defendants are not entitled to claim any damages for want of making any counter claim, from the materials in the case, we are dearly of the opinion that there was delay on the part of the plaintiff-Bank in releasing the loan amount to the defendants thereby they became unable to complete the contract with the F.C.I. Under the Scheme, the plaintiff Bank was liable to advance loan in instalments in accordance with the progress of the work of the godown on the basis of the Certificate issued by the F.C.I. in that regard. In this case, there is clear evidence to show that there was wanton delay of releasing the instalments inspite of the defendants producing the necessary Certificate from the F.C.I. In fact, in one letter, the F.C.I. had even written to the Bank that by their delay in advancing the amount, the construction of the godown is being delayed. It is to be remembered that it was a time bound programme. The loan itself was, sanctioned nearly 12 months after the date of application and the first instalment was advanced on 27.1.1978. On 18.8.1978, the defendants produced a Certificate from the F.C.I. Engineering Ceil stating that the investment of the defendants for the construction of the godowns was to the extent of Rs. 1,52,000/-, as on that date, 25% of the total cost had been invested by the defendants by that time. Inspite of that, an amount of Rs. 33,750/- was released by the Bank only on 21.4.1978 and 12.5.78. Again on 30.5.1978, the defendants submitted a Certificate from the F.C.I. showing that their investment was to the extent of Rs. 1,99,746/-. Inspite of that, the instalment was released only on 30.1.1978, i.e., two months after the Certificate was produced. By Ex.D.9 letter dated 8.8.1978, the F.C.I. had addressed a letter to the General Manager of the Plaintiff-Bank complaining that the Bank is not releasing the amount against the Certificates issued by them and that necessary instructions may be given to co-operate with the borrowers to complete the godown by 30.9.1978. In the meantime, on 26.9.1978, A.R.D.C. has sanctioned refinance to the plaintiff-bank. Thereafter, on 6.12.1978, the defendants submitted a Certificate from the F.C.I. Engineering Cell showing that their investment as on that date was Rs. 3,51,530/-; inspite of that, an amount of Rs. 49,250/-was released only on 28.5.1979 against Ex.P.36 Release. By letter Ex.D.8, dated 1.6.1979, the F.C.I. wrote the Divisional Manager, Syndicate Bank, that the defendants have invested more than 25% of the margin money by the borrower and release the balance of Rs. 3.10 lakhs in one instalment arid to complete the time bound scheme in time. Inspite of that, the amounts were released only on various dates between 27.6.1979 and 20.8.1979. Thus it is evident that inspite of the defendants complying with the conditions under the scheme, there was delay in releasing the loan amount instalments by the plaintiff bank which might have affected the completion of the godown by the defendants. Anyhow, it is not necessary for us to express any final opinion on that aspect when the above issue is not before us for determination. At any rate, it is dear that there was inordinate delay on the part of the plaintiff bank in releasing the amounts to the defendants under the terms of the scheme and the agreement. In these circumstances, the defendants are justified in making a prayer to the effect that the Court should exercise discretion by granting lower rate of interest from the date of suit atleast in exercise of the power under Order 34 Rule 11 CPC. For reasons stated above, we are of the opinion that the plaintiff is entitled to only lesser rate of interest than the contract rate of interest from the date of the Suit.

Admittedly, the amount of loan has been refinanced by A.R.D.C. to the plaintiff-bank at the rate of 8% p.a. In these circumstances, it would be in the interest of Justice, if we restrict the claim of interest of the plaintiff from the date of suit at the rate of 9% simple interest per annum. Accordingly, the plaintiff-Bank will be entitled to only 9% simple interest per annum from the date of suit till the date of realization.

For the aforesaid reasons, we also exercise our discretion under Order 34 Rule 10 CPC and hold that the plaintiff is not entitled to the costs of the Suit.

In paragraph 73 of the Trial Court Judgment, it has criticised the conduct of P.W.1 who was functioning as the Manager of the Plaintiff-Bank. As we have accepted the case of the plaintiff that they are entitled to realise the amount, those observations are unwarranted. Even if there is delay in the disbursement of the instalments, the criticism made by the Trial Court against the conduct of P.W.1 is not justified. He could have been more prudent in making the advance, but he has only taken steps in the interest of the Bank and there is no material to show that he was intentionally delaying the payments for causing loss to the defendants. Making enquiries with the other Banks regarding security offered by the defendants for other loans is a common banking practice to verify the credit of a debtor. P.W.1, could not be found fault with. Accordingly, we expunge the observations made by the Trial Court in regard to the conduct of P.W.1.

In the result, we allow this Appeal, set aside the Judgment and decree of dismissal by the Trial Court and pass a decree for realisation of amount of Rs. 7,53,140.65p. with interest at the rate of 9% simple interest from the date of suit by sale of the mortgaged properties. A decree under Order 34 Rule 4 in Form-5(A) of Appendix-D of the CPC in the above terms shall follow.

The parties shall bear their costs.