INDIAN BANK TIRUVANNAMALAI Vs. V A BALASUBRAMANIA GURUKAL

JUDGEMENT

(1.) This civil revision petition has come before us on a reference made by Sethuraman, J. The petitioner is a nationalised bank carrying on the business of banking subject to the provisions of the Banking Regulation Act, 1949, and the control of the Reserve Bank of India. On 1240-1971, the petitioner advanced to respondents 1 to 3 herein a sum of Rs.1850 as agricultural medium term loan, which respondents I to 3 agreed to repay with interest at 4-1/2 per cent per annum, over the official rate of the Reserve Bank of India with a minimum interest of 10-1/2 per cent per annum with quarterly rests. A promissory note Ex. A. 1, dated 12-10--! 1971 was also executed by respondents I to 3 along with the fourth respondent as a co-obligant. On 1-10-1974, the respondents wrote under Ex. A. 3 to the petitioner acknowledging their liability to repay the amounts as agreed, but never the less, no amounts were paid. Thereafter, a notice Ex. A. 4 was issued by the petitioner on 20-5-1975, which was received by all the respondents to which only the first respondent replied under Ex. A. 9 on 28-6-1975, praying for some time to repay the amounts due to the petitioner. In spite of this, the respondents did not make any payment, which obliged the petitioner to issue another notice under Ex. A. 10 on 16-1-1976 to the respondents. Even this notice evoked response only from the first respondent, who, in his reply, under Ex. A. 15 dated 29-1-1976 prayed for time till 15-4-1976 for paying the amount and since the respondents made no payment even thereafter to the petitioner, the petitioner instituted 0. S. 386 of 1977 in the District Munsif's Court, Tiruvannamalai against the respondents herein for the recovery of a sum of Rs. 2,233.10 p. towards principal and interest due under the promissory note Ex.A. 1. In the course of the plaint, the petitioner referred to its being a banking company carrying on business under the provisions of the Banking Regulation Act and the execution of the promissory note by respondents 1 to 4 agreeing to pay interest over the official rate of the Reserve Bank of India with the minimum of 10-1/2 per cent per annum with quarterly rests and proceeded to state that though the respondents were agriculturists, yet, the principal and interest, as agreed to be paid by the respondents, would be recoverable in accordance with the statement of accounts filed.

(2.) In the written statement filed by the first respondent, he admitted having borrowed from the petitioner on the basis of Ex. A. 1, but pleaded that with the borrowed amount and his own, he had carried on agricultural operations for the last five years and sustained loss and that was responsible for his inability to repay the amounts due to the petitioner. The charging of interest on interest as disclosed by the memo of calculation, according to the first respondent was not valid in law. The correctness of the calculation was also disputed and amounts repaid, according to the first respondent, should be credited towards principal. A plea that the claim was barred by limitation was raised by the first respondent. The written statement of the first respondent wound up with the plea that as the loan was an agricultural medium term loan and he had sustained loss in agricultural operations, no liability could be fastened on him in respect of the loan. Respondents 2 to 4 herein adopted the aforesaid defences raised by the first respondent

(3.) On a consideration of the evidence, the learned District Munsif, Tiruvannamalai, found that the respondents had acknowledged their liability to pay the amount as claimed by the petitioner bank and, therefore, the claim is not barred by limitation. Dealing with the right of the petitioner to recover interest at the rate claimed, the learned District Munsif was of the view that since the respondents are, agriculturists, the provisions of the Usurious Loans Act 1918, as amended by Tamil Nadu Act 8 of 1937 (hereinafter referred to as the Usurious Loans Act) have to be applied and that simple interest at 10-1/2 per cent per annum would be fair and reasonable and on this basis, after giving credit to the payments made by the respondents, the petitioner bank was granted a decree for a sum of Rupees 1,651.25 p. with proportionate costs. Aggrieved by this, the petitioner preferred an appeal in A. S. 17 of 1979 before the Sub Court, Tiruvannamalai claiming that a decree as prayed for should have been granted in its favour. The only point debated in the appeal was as regards the usurious nature of the rate of interest claimed by the petitioner bank, particularly in view of the inability of nationalised banks like the petitioner, to charge lower rates of interest owing to the directives issued from time to time by the Reserve Bank of India under the provisions of the Banking Regulation Act. Dealing with this question, the appellate Court held that a nationalised bank is not a social parasite to suck the blood of the common man in the form of interest, that in the case of agriculturists like, the respondents, different considerations would arise, that the rate of interest charged by the petitioner was excessive and that 10-1/2 per cent per annum simple interest as allowed by the trial court would in the circumstances, be fair and reasonable. On this conclusion, the appeal was dismissed against which this civil revision petition has been preferred.