STATE BANK OF INDIA Vs. VISHWANATH

JUDGEMENT

(1.) THE only question raised in this appeal is whether the creditor bank can levy the guarantee fees or charges from the borrower and debit such amount to the account of the borrower ?

(2.) BEFORE dealing with the submissions made by learned counsel for the appellant, it is necessary to give some facts. The appellant/plaintiff-bank had advanced an agricultural term loan of Rs. 45,600 to respondent No. 1/defendant No. 1, Vishwanath S/o. Motiram Lothe, on May 5, 1982, for purchase of the tractor. Respondent No. 1 had executed an agreement of hypothecation and agreed to the terms and conditions contained in the said agreement. Respondent No. 2/defendant no. 2 is the guarantor, who executed the deed of guarantee and thereby guaranteed the repayment of the loan advanced by the plaintiff-bank to defendant No. 1. Defendant No. 1 agreed to pay interest at 12. 5% per annum minimum 4% below the State Bank of India advance rate. The loan amount was to be repaid in instalments of Rs. 6,514 payable in March, 1983, to march, 1989. In case of default in payment of any instalment as mentioned above, the entire balance in the account then outstanding with interests, costs, commissions and charges was to become payable, if the bank so chose.

(3.) RESPONDENT No. 1/defendant No. 1 has failed to pay the instalments regularly as agreed. The defendants had also acknowledged their liabilities on July 9, 1984, and July 20, 1984, by executing revival letters in favour of the bank. Respondent No. 1/defendant No. 1 had also executed the declaration under section 5 of the Maharashtra Provision of Facilities for agricultural Credit by Banks Act, 1947, creating a charge on agricultural land having Survey nos. 166, 155, 128 and 97 of village Cawarra. As defendant No. 1 was not regular in making payments of instalments, a registered notice was issued by the bank to the defendants. On August 31, 1987, the outstanding amount against the defendants was Rs. 56,566 including interest up to september 15, 1987. As the defendants failed to clear the dues the plaintiff-bank filed the suit against the defendants.