SYNDICATE BANE MOODABIDRI BRANCH Vs. M JEEVANDAR KUMAR

JUDGEMENT

(1.) this is a plaintiffs first appeal arising out of a suit for recovery of money, which was tried and decreed by the 1st additional civil judge, mangalore, by his judgment and decree dated the 13th of february, 1991. The grievance in the appeal is however limited only to that part of the decree by which the court below has disallowed compound interest for the period prior to the suit, and awarded pendente lite and future interest at the reduced rate of 6% simple as against the contractual rate of 16.5% per annum. A few facts necessary for the disposal of the appeal may be stated first: respondent No. 1 who is the principal debtor, applied for and secured a term loan of rs, 1 lakh from the appellant bank's 'moodabidri branch' on 26-4-1976, with a view to liquidate a preexisting debt incurred by the said respondent for developing his farm. The loan amount was repayable by the borrower in yearly instalments of Rs. 20,000/- each for the first two years and thereafter one yearly instalment of rs, 15,000/- each for the next two years, with the stipulation that the entire loan amount with interest due on the same shall be cleared by him by the end of 30th of march, 1981. Another facility by way of an overdraft with an outer limit of Rs. 50,000/- was secured by the said respondent on the 26-4-1976 itself from the appellant-bank, for what the parties admit was an agriculture purpose namely development of the borrower's farm thereby making the said loan an agriculture loan. It is not in dispute that proper documents were executed by the defendants for a total consideration of Rs. 1,50,000/- received by the principal borrower including a mortgage deed, and a loan agreement dated 26-4-1976 stipulating the terms and conditions governing the loan transactions entered into by the parties.

(2.) the borrower-respondent, having committed default in the repayment of the loan amount outstanding against him, the appellant-bank instituted a suit in the court below for the recovery of the same on the 27th of october, 1986, i.e., more than five years after the date fixed for repayment of the amount secured by him. In the suit the appellant-bank prayed for a decree for the recovery of an amount of Rs. 4,87,727.80 on account of the term loan inclusive of interest calculated upto 15-10-1986 and a further amount of Rs. 1,29,306.30 on account of the overdraft facility making a total of Rs. 6,17,034.10. This amount the appellant claimed with interest pendente lite and future @ 16.50% per annum, besides a decree for sale of the mortgaged landed properties and hypothecated machineries and moveables described in the suit schedule.

(3.) in the written statement filed by the respondent borrower, he raised a three-fold defence to the suit. In the first place he contended that the loan secured by him was obtained and utilised for agricultural operation and development of agricultural land, with the result that the rate of interest charged by the appellant-bank was contrary to the reserve bank of India directives on the subjec . In the second place he contended that the suit filed by the appellant-bank was time barred, and lastly that during the pendency of the suit, the defendant borrower had made certain payments, credit whereof was due to and claimed by him.