United Commercial Bank vs P. Chandrasekaran and Another

P. Sathasivam, J.—Plaintiff in O.S.No. 1018 of 1985 on the file of Subordinate Judge, Tiruchirapalli, aggrieved by the decree relating to

reduction of interest, namely, 9 per cent instead of 12.5 per cent as agreed, has filed the present appeal. In view of the fact that the subject matter

of the appeal relates to rate of interest payable by the defendants to the plaintiff bank for the decreed amount, it is unnecessary for this Court to

refer the other details as averred in the plaint and written statement.

Heard the learned Counsel for the appellant as well as respondents.

There is no dispute that the first defendant, who has been holding a valid driving licence for driving heavy vehicles, approached the plaintiff bank

in July 1981 for a loan of Rs. 2,36,000 for purchase of lorry chassis, constructing body and for purchase of other parts for the same. On

20.7.1981, the first defendant as the principal debtor and one Dhanabagyathammal, his mother, as guarantor gave an application to the plaintiff for

the loan. Based on their representation regarding ownership of 2 acres of nanja land and a house in Puthur and that Dhanabagyathammal is the

owner of a house in Puthur and besides they were willing to deposit a sum of Rs. 60,000 being the margin to be provided towards the value of the

vehicle, the. plaintiff bank agreed to give loan for the purchase of lorry. On 28.7.1981, the first defendant duly executed a term loan agreement for

the sum of Rs. 2,35,000 for the purchase of lorry agreeing to repay the same with interest at 2 1/2 per cent per annum above the Reserve Bank

rate subject to a minimum of 12.5 per cent per annum or at such other rate as may be notified by the bank from time to time as on 30th June and

31st December of each year; and that the entire amount including interest is repayable in 48 equal monthly instalments commencing from October

1981. Since the defendants failed to repay the amount as agreed, the plaintiff was constrained to file the suit. Before the Sub Court, one

Vijayakumar, an officer of the bank was examined as P.W.1 and Exs.A-1 to A-27 marked in support of their suit claim. On the other hand, no

one was examined on the side of the defendants and one letter dated 20.11.1984 addressed to Rajarathinam alone has been marked as Ex.B-1.

The learned Subordinate Judge after framing necessary issues and after considering the oral and documentary evidence, decreed the suit for Rs.

2,69,433.38 with interest at 9 per cent per annum for the said amount from the date of the suit till date of realisation. As stated earlier, regarding

the interest alone the plaintiff bank has preferred the present appeal.

There is no dispute that the defendants entered into an agreement with the plaintiff bank under Ex.A-2 relating to a term loan. It is also not

disputed that the defendants have agreed to repay the loan amount of Rs. 2,35,000 along with interest at 12.5 per cent per annum in 48 equal

monthly instalments commencing from the month of October 1981. In other words, there is no dispute that the plaintiffs are entitled to levy interest

at the rate of 12.5% per annum for the loan amount of Rs. 2,35,000. It is not the case of the defendants that they were not aware of the rate of

interest, nor they were not given adequate time to repay the amount. A perusal of the impugned order, particularly paragraph 14 which deals with

issue No. 4, shows that before filing the present suit, the plaintiff bank had sent registered letters/ notices to the defendants claiming the loan

amount with interest at 12.5 per cent. It is also not disputed that the first defendant borrowed the loan amount to purchase a lorry chassis and

agreed to repay the loan amount with interest at 12.5. In such a circumstance, undoubtedly the plaintiff bank is entitled to the loan amount with

contractual rate of interest, namely, 12.5 per cent. As rightly argued by the learned Counsel for the appellant, the learned Subordinate Judge has

not assigned any reason in reducing rate of 12.5 per cent. In this regard, learned Counsel for the appellant very much relied on a decision of this

Court in Indian Overseas Bank Vs. Mrs. V. Vaijayanthimala and Others, In that decision, the Indian Overseas Bank has filed a suit for recovery of

a sum of Rs. 74,81,271.40 together with interest at 25 per cent per annum against the defendants therein before the Original Side of this Court.

S.S. Subramani, J., after referring the decision of the Supreme Court in Corporation Bank Vs. D.S. Gowda and Another, , upheld the claim made

by the bank regarding the rate of interest and decreed the suit with costs at 12 per cent per annum from the date of suit till date of realisation. It is

also brought to my notice a Division Bench decision of the Karnataka High Court in Syndicate Bank v. M. Jeevandar Kumar and Ors. (1995)2

B.C. 257 (D.B.). The Division Bench after referring to Section 34, C.P.C. as well as contractual rate as agreed to by the parties explained the

relevant factors for proper exercise of the discretionary power. No doubt, Section 34, C.P.C., enables the Court to award further interest at such

rate not exceeding 6 per cent per annum from the date of the decree to the date of payment. In view of the fact that the first defendant has

borrowed the loan amount for purchase of a lorry chassis and agreed to repay the same in 48 instalments with interest at 12.5 per cent, I am of the

view that in the absence of any reason for reduction of rate of interest, the judgment and decree of the Court below in so far as grant of interest is

liable to be set aside. The rate of interest, namely, 12.5 per cent claimed by the Bank cannot be said to be excessive. Though the court has

discretion as to the rate of interest to be awarded pending suit and thereafter, the said discretion has to be exercised in a judicious manner.

Discretion howsoever wide can never be exercised in a fanciful or whimsical manner. On the contrary, the wider the discretion and the greater the

implications of its use one way or the other, the more cautious and sparing should be its use. As observed by the Division Bench of the Karnataka

High Court, disclosure of reasons provides transparency to the thought process of the Court or authority exercising the discretion vested in it and

enables an appellate Court, to consider whether the same has been exercised along sound and judicial lines. Non-disclosure of reasons for taking a

particular view on the contrary shrouds the exercise of discretionary power in suspicion of arbitrariness. Considering the purpose for which the

loan was advanced and the agreement between the parties as evidenced from Ex.A-2, I hold that the plaintiff bank is entitled to interest at the

contractual rate, namely, 12.5 per cent from the date of suit till date of realisation. The contrary conclusion arrived at by the learned Subordinate

Judge is set aside.

Net result, the appeal is allowed. Considering the grievance expressed by the respondents, there shall be no order as to costs.