SYNDICATE BANK Vs. KAILASHCHANDRA

JUDGEMENT

(1.) THE appellants - original plaintiffs have preferred this appeal against the judgment and order dated September 29, 1982, passed by the Joint Civil Judge, Senior Division, Nagpur, in Special civil Suit No. 4 of 1982.

(2.) THE plaintiff - Syndicate Bank sued the defendants for recovery of Rs. 73,016. 97. The plaintiff - bank had given two loan facilities to respondent No. 1 trader. On October 16, 1978, a loan of Rs. 10,000 was given for purchase of weighing scales to respondent No. 1 and on August 21, 1979, an overdraft facility of Rs. 20,000 was given. Respondent No. 2 stood surety. The rate of interest was at 3. 5 per cent. above the rate fixed by the Reserve Bank of India subject to a minimum of 12. 5 per cent. with quarterly rests. The amount was to be paid in monthly instalments and, in case of default, overdue interest of two per cent. more than the regular rate was agreed to. The interest was to be paid quarterly and if not, it was to be added to the principal amount. On the first loan, the amount due was Rs. 1,211. 55 and on the second loan, the amount due was Rs. 71,805. 42 - totalling Rs. 73,016. 97. The respondents have not contested the suit on facts. They filed one pursis on September 20, 1982, stating that the plaintiff - bank charged excess interest and cannot charge interest more than the rate mentioned in the Usurious Loans act. The trial court framed issues. Issue No. 1 is as under : "whether the defendants prove that the interest charged is excessive in view of the provisions made in the Usurious Loans Act. If yes, its effect", and answered the issue in the affirmative. The learned trial court held that the first proviso to section 3 (2) (a) of the Usurious Loans Act, 1918, is applicable to advance of money by the bank and ordered that the accounts between the parties be reopened from the beginning.

(3.) THE short question to be decided in this appeal is whether section 3 of the Usurious Loans Act or section 21a of the Banking Regulation Act, 1949 (for short "the Banking Act"), is applicable. Shri Bhangde, the learned advocate appearing for the appellants, submitted that, in view of the bringing of section 21a of the Banking Act on the statute book, the Usurious Loans Act is not applicable. Shri Deo, the learned advocate appearing for the respondents, supported the judgment and order passed by the learned trial court.