INDIAN BANK ALAMURU Vs. MUDDANA KRISHNA MURTHY

JUDGEMENT

(1.) This Second Appeal has been postrd before this Division Bench on an order of reference made by Chennakesav Reddi J doubting the correctness of a Judgment of Gangadhara Rao J., reported in Union Bank of India vs. Koteswara Rao which held, that a debt due to the Union Bank: by an agriculturist, cannot be scaled down under Section 13 of the Madras Argiculturists' Debt Relief Act (Madras Act No. IV of 1938) herein after referred to as 'the Madras Act'.

(2.) The facts in this second appea are few and are also simple. But the questions of law that call for our response are fairly complicated and vastly important both to the agricultural community and the Banking Community!

(3.) The two defendants are agriculturists. For the purpose of carrying on their agricultural operations they borrowed on 12-6-1973 from the Indian Bank, Alamuru Branch on a promissory note a sum of Rs. 2,100/-. The defendants undertook to pay the Indian Bank interest at the rate of 3 1/2% per annum over and above the offcial rate of interest fixed by the Reserve Bank of India, with quarterly rests, but subject to a condition that the minimum rate of interest payable by them should not be less than 101/2 % per annum in any event. The official rate fixed by the Reserve Bank of India, however, remained fairly high and within a period of three years, the liability of the defendants-agriculturists had jumped to Rs. 3,093-65/-No wonder the defendants could not keep their promise to repay the amounts borrowed from the Indian Bank. The plaintiff-Bank has, therefore, sued the defendants on the foot of the promissory note executed by the defendants for recovery of the principal amount together with interest calculated at 31/2% per annum-over and above the Reserve Bank rate with quarterly rests,