CENTRAL BANK OF INDIA Vs. MAHESH GOVINDLAL VYAS

JUDGEMENT

(1.) THE proceedings in this Appeal arise out of the judgment and order dated 7th October 1985 of the learned Civil Judge, Sr.Dn., Akola. By the impugned judgment and order the suit, which was instituted by the Central Bank of India, the appellant herein, in 1983, has been decreed in part to the extent of Rs.1,18,357/-. The Bank has been allowed interest at the rate of 7% per annum from the date of institution of the suit till realization. There is a direction that the respondent, who is the original defendant, shall pay the decretal amount in six equal yearly instalments, the first of which was due to fall on 1.2.1986. The Appellant/bank is aggrieved by the judgment and decree of the trial Court.

(2.) THE Appellant instituted Special Civil Suit No.69 of 1983 in the Court of the learned Civil Judge, Sr.Dn., Akola for the recovery of an amount of Rs.3,56,281.97 together with interest at the rate of 18% per annum. A direction was also prayed for the sale of certain goods which were hypothecated in favour of the bank. Briefly stated, the case of the appellant before the trial Court was that the defendant was conducting a business of a printing press in the name of "Shri Mudranalaya Akola" as its sole proprietor. The case of the appellant was that on the request of the respondent two credit facilities were granted by the bank, the first being- an open loan of Rs.40,000/- on 31.7.1970 and the second being a term loan in the amount of Rs.75,000/- on 9.7.1970. The case of the appellant was that the respondent had executed various documents including a demand promissory note and a deed of hypothecation in respect of the facilities which were extended by the bank. Thereafter, according to the appellant, the respondent had acknowledged his liability in respect of the loans which were sanctioned by the bank and had executed documents within the period of limitation acknowledging his liability to the bank. Similarly, various documents were executed towards renewal of the loans including demand promissory notes and instruments of hypothecation from time to time. Para 5 of the plaint in which there is a reference to the documents executed by the respondent, refers to the execution of the demand promissory notes, hypothecation agreements, letters of declaration, letters of continuity, balance confirmation and letters admitting to the charging of interest by the bank as notified from time to time. The case of the appellant is that it extended its cooperation to the respondent and that the loans were accordingly renewed until 14.1.1982 and 4.6.1982 respectively by the execution of demand promissory notes and hypothecation agreements by which the respondent agreed to pay the principal amount due together with interest at the rate of 15% per annum. In paragraph 6 of the plaint there is a categoric averment that the respondent had utilized the amount which the Bank advanced to him for the purpose of his business, but he had committed a breach of the agreement entitling the bank to recover its dues. According to the bank, the respondent had failed to pay the loans advanced despite notice. The amount which was due and outstanding has been quantified in para 7 of the plaint as being Rs.1,48,807.63 under the open loan facility and Rs.1,82,183.75 under the term loan facility. There is a categoric averment in para 7 of the plaint that the balance which is due and payable up to the date of institution of the suit together with interest works out to Rs.3,30,991.48 as per the extracts of the bank account of the borrower verified as required by the Bankers Books Evidence Act, 1891 inclusive of interest up to 30.8.1983. The total decretal claim together with notice charges was quantified at Rs.3,56,281.97.

(3.) EVIDENCE was adduced before the trial Court on behalf of the appellant of its Branch Manager, Shri Gopal Yenaswami. The respondent stepped into the witness box in support of his defence and gave evidence. In the course of the evidence of the banks witness, relevant documentary material was placed on the record. A reference will have to be made during the course of this judgment to the oral and documentary evidence at a subsequent stage. At this stage, it would suffice to state that with the assistance of the learned counsel I have perused the pleadings, the oral and documentary material and that the record and proceedings have been examined. By the impugned judgment dated 7th October 1985 the learned trial Judge has accepted the plea of the respondent that an amount of Rs.1,22,889.58 was due and payable as on 22.11.1975. The learned trial Judge held that the bank would be entitled to charge interest thereon only at the rate of 4% per annum which, until June 1983, would work out to Rs.35,468. The total amount recoverable by the bank was worked out at Rs.1,58,357/-. The learned trial Judge held that an amount of Rs.40,000/- has been recovered by the bank and hence the balance which is due and recoverable by the bank has been worked out to Rs.1,18,357/-. Interest has been awarded at the rate of 7% per annum on the aforesaid amount from the date of suit until realization. The learned trial Judge has held that the bank had not filed a complete extract of its ledger account. More importantly, the trial Court was of the view that once the unit of the respondent was taken under the nursing programme, all the documents which were executed by the respondent in regard to the payment of interest must have been superceded and that there would be a novatio or fresh agreement between the parties. Consequently, the learned trial Judge was of the view that the Appellant would not be entitled to charge interest at the commercial rate. The evidence of the respondent that he had been assured that he would be charged interest at the rate of 4% per annum has been accepted despite the absence of any material or any documentary evidence to that effect. The learned trial Judge was of the view that the doctrine of promissory estoppel was applicable and consequently it must be held that the bank could not charge interest more than 4% per annum on the outstanding dues.