ANTHONY AUGOSTINHO FLORENCE FEREIRA Vs. BANK OF BARODA

JUDGEMENT

(1.) THE appellant has filed this appeal against the judgment and decree passed by the Civil Judge, senior Division, Vasco-da-Gama dated February 25, 1987, in Special Civil Suit No. 23 of 1984. The appellant in this case is original defendant No. 2. Respondent No. 1, original plaintiff is bank of Baroda, having its branch office in Goa. Respondent No. 2 is the original defendant No. 1 to whom the plaintiffs had advanced a loan of Rs. 56,000. The present appellant was joined as defendant No. 2 in the said suit as a surety to the aforesaid loan of Rs. 56,000 advanced by the plaintiffs to defendant No. 1. It was contended on behalf of the plaintiff-bank that defendant No. 1 had applied for a loan of Rs. 56,000 some time in the month of March, 1981, as he intended to purchase a Matador pick-up. The said loan was sanctioned by the plaintiff-bank and defendant no. 1 purchased the Matador pick-up on March 12, 1981. As per the terms of the agreement entered into between the plaintiffs and defendant No. 1, defendant No. 1 agreed to repay the aforesaid loan in 56 instalments of Rs. 1,000 each. Defendant No. 1 also agreed to pay interest at the rate of 12. 5 percent per annum to be compounded at quarterly rests. At the time of advance of the aforesaid amount of Rs. 56,000, defendant No. 1 also gave a promissory note promising therein to return the said amount of Rs. 56,000 with interest thereon as agreed upon. Defendant no. 1 also hypothecated to the plaintiff-bank the said Matador pick-up. In the aforesaid transaction entered into between the plaintiffs and defendant No. 1, defendant No. 2, the present appellant, gave a letter of guarantee dated March 12, 1981, guaranteeing the repayment due and payable to the plaintiffs at the foot of the aforesaid loan of Rs. 56,000 and also agreed, in the event of default on the part of defendant No. 1, to repay the amount due under the said loan personally. Since defendant No. 1 committed default, after giving notice, respondent No. 1/plaintiffs filed the suit for recovery of the amount of Rs. 60,338 with interest at the rate of 15 percent per annum with quarterly rests from the date of filing of the suit, i. e. , from March 9, 1984, till actual realisation of the whole amount. The trial court, by its judgment, decreed the said suit and ordered the defendants jointly and severally to pay the amount of Rs. 60,338 together with further interest at the rate of 15 percent per annum with quarterly rests from March 9, 1984, onwards till the realisation of the entire amount. It is this part of the judgment and decree passed by the trial court which is challenged by the present appellant who is the guarantor in the present appeal.

(2.) MR. Rebello, learned counsel appearing on behalf of the present appellant, contended that since as per the original agreement, the agreed rate of interest on the loan of Rs. 56,000 advanced by the plaintiffs to defendant No. 1 was 12. 5 percent per annum even on the date of filing of the suit, the trial court erred in allowing interest at 15 percent on the amount due from defendant No. 1 to the plaintiff- bank. Secondly, it was also argued on the part of the appellant that, contrary to the provisions of the Civil Procedure Code, namely, section 34, the trial court has granted interest of 15 percent with quarterly rests from the date of the filing of the suit until the realisation of the said amount. According to learned counsel for the appellant, the trial court, in view of section 34 of the Civil Procedure Code, ought not to have granted interest with quarterly rests but ought to have granted interest only on the principal amount which was due at the time of filing of the suit at the rate of 12. 5 percent per annum.

(3.) ON the other hand, Mr. Aras, learned counsel appearing on behalf of respondent No. 1-bank contended that the trial court was right in awarding 15 percent interest as, according to him, defendant No. 1 as well as defendant No. 2 agreed to pay the interest as per the banking rules and regulations and, therefore, though the penalty of 2. 5 percent per annum is not mentioned in the original agreement since the parties, i. e. , defendants Nos. 1 and 2 agreed to follow the banking rules and regulations including the Reserve Bank Regulations, the trial court was right in awarding interest of 15 percent per annum.