INDIAN OVERSEAS BANK Vs. VIMALAN

JUDGEMENT

(1.) The Indian Overseas Bank (Salem Main) (hereinafter referred to as the'Bank') the plaintiff in O.S. 315 of 1976 Sub-Court, Salem is the appellant in this appeal. One Appavoo Pillai was the owner of a fleet of buses operating in Salem and Dharmapuri districts. He died on or about 17-8-1963 leaving a registered will D/-18-3-1957 under which he had made some arrangements for the management of his fleet of buses as well as the division of his properties. Respondents 1 to 6 in this appeal are the sons of Appavoo Pillai. Respondents 7 and 8 are the wives of respondents 1 and 2, respectively. After the death of Appavoo Pillai, the first respondent, one of his sons, who was also appointed as the executor under the Will of Appavoo Pillai, entered into the management of the bus business, left behind by Appavoo Pillai. For the purpose of payment of taxes on the buses, respondents 1 to 6 were in need of funds and they approached the Bank for financial help to pay off the taxes due to the Government on the buses. The Bank sanctioned a cash credit limit of Rs. 2,00,000 and the Bank was directed by its Cathedral Branch to advance the amounts to the respondents. In order to secure the repayment of the advances by the Bank to respondents 1 to 8 jointly, severally and individually up to the sanctioned limit of Rs. 2,00,000 respondents 7 and 8 deposited with the Bank certain title deeds relating to the properties owned by them. On 26-7-1973, all the respondents herein with the exception of the 3rd respondent, executed a promissory note in favour of the Bank for a sum of Rs. 2,00,000 only agreeing to repay the amount with interest at the rate of 4 per cent over the Reserve Bank of India official rate of interest with a minimum of 11 per cent per annum from 26-7-1973 until payment in full with quarterly rests. On the same day, respondents 7 and 8 executed a letter referring to the deposit of the title deeds already made by them on 20-7-1973, and stating that the documents had been so deposited with the Bank with the intention of securing the repayment to the Bank of the moneys that are due or that may become due from respondents 1 to 8 including interest, commission and other banking charges. In view of the execution of the promissory note as well as the deposit of title deeds referred to above, the Bank started advancing moneys to the respondents and the first respondent drew the amounts from the bank whenever necessary and the bank had entered the amount in the account kept by it in the regular course of business debiting interest at the rates agreed. According to the Bank, as on 31-12-1975, a sum of Rs. 2,14,569.81 was due from the respondents to the Bank and the respondents, on 19-4-1976 confirmed by letter, the correctness of this amount and also gave revival letter acknowledging their liability under the promissory note D/-26-7-1973. The case of the bank is that it had been demanding the repayment of the amounts due to it from the respondents and had also issued a notice to that effect on 17-4-1976 but that no payments had been made excepting a sum of Rs. 10,000 on 19-4-1976 and therefore, it became necessary for the bank to recover the amounts due from the respondents. It is in this situation, the Bank instituted O.S.315 of 1976 praying for the recovery of a sum of Rs. 2,22,857.73 by enforcing the mortgage created on 20-7-1973 in its favour by the deposit of title deeds.

(2.) In the written statement filed by the first respondent, which was adopted by others, while admitting that pursuant to the cash credit facilities to a limit of Rs. 2,00,000, extended by the bank, three amounts, namely, Rs. 85,297.60, Rs. 43,318.58 and Rs. 35,179.73, were withdrawn by them on 26-7-1973, 28-7-1973 and 1-8-1973, respectively, it was stated that after taking into account the payments made to the tune of Rs. 26,795.50 on various dates, a balance of Rs. 1,37,000.41 alone will be due with interest at 11 per cent per annum. The Bank, according to the respondents, could charge and claim interest only at 11 per cent per annum and that the amount claimed was excessive, penal and usurious as well. Finally, the respondents prayed that a decree for Rs. 1,37,000.41 with simple interest at 11 per cent per annum may be granted in favour of the Bank with costs on the admission scale and giving two years' time for payment.

(3.) On a consideration of the oral as well as the documentary evidence, the learned subordinate Judge concluded that the principal amount payable by the respondents to the Bank was Rs. 1,37,000.41. Regarding the claim for interest made by the Bank, the court below was of the view that the award of 11 per cent interest with quarterly rests up to the date of the suit would be adequate and reasonable as according to it the agreement regarding payment of interest was vague and it was not known whether the respondents actually agreed to pay interest at the rates claimed by the Bank. Finally, the Bank was granted a preliminary degree for the recovery of a sum of Rs. 1,37,000.42, with interest 11 per cent per annum with quarterly rests up to the date of suit plus an amount of Rs. 66.72 in respect of other claims made in the plaint with proportionate costs. Six months' time was granted to the respondents to pay this amount. It is the correctness of this decree, particularly as regards the award of interest, that is challenged by the Bank in this appeal.