CANARA BANK Vs. K MUHAMMED KUNHI

JUDGEMENT

(1.) The only point for decision in this appeal by the plaintiff viz. the Canara Bank is relating to the rate of interest chargeable on the loan advanced by it to the defendant under a promissory note Ext. Al dated 7-11-1977.

(2.) The promissory note Ext. A1 is for the repayment of a loan of Rs. 9000/-advanced by the plaintiff bank to the defendant. Ext. A1 provides for interest at 3 1/2 % per annum above the Reserve Bank of India rate or at 12 1/2 % per annum whichever is higher. The interest is to be compounded periodically as provided for in Ext. A1. The plaintiff has produced Ext. A2 accounts as per which the total sum payable is Rs. 13199.50. The accounts show that the interest had been added to the capital every six months.

(3.) The defendant admitted the execution of the promissory note. The only defence to the suit is that no compound interest is leviable by virtue of the provisions of the Usurious Loans Act, 1918. The court below, following the decision of a Division Bench of this Court in State Bank of Travancore v. C. T. George ( 1975 KLT 416 ) has reopened the accounts and has decreed simple interest at 12 1/2% till the date of the suit and future interest at 6% till the date of realisation. It is against this that the plaintiff bank has come up in appeal.