STATE BANK OF INDIA ELURU Vs. STATE

JUDGEMENT

(1.) The facts:-- The plaintiff , the State bank of India, Eluru Branch is the appellant. It appeals against a judgment of the learned District Judge, Eluruwho in A.S.No. 151 of 1980 confirmed the judgment of the trial Court dismissing a suit filled byt he Bank for recovery of a sum of money advanced by the Bank as loan to an agriculturist. In O.S.No. 176 of 1979 on the fill of the district Munsif, Eluru for recovery of a sum of Rs. 8,260.20. That amount was made up of the principal and compounded interest due on the loan mius the part payments made bythe defendant agrkculturist from time to time .

(2.) The principal sum the defendant borrowedc from the plaintiff was only Rs. 7,200.00 and that amount was secured by a mortgage. But that amount soared to be the suit amount even after the defendant had made part payments because of the stipulation of agreement providing for payment of compound interest. The loan agreement provided for the payment 11/2 of interest subject to a condition of the debtor paying a minmum of 81/2% per annum with quarterly rests on the borrowed amount. Thus the principal amount of loan earned every quarter interest which was added in that quarter to the pricnipal amount. The principal amount thus got geometerically swollen up. In telugu this would be described as (Vernacular omitted). This method of charging interest known as the method of charging compound interest is always condemeed. Lord Wright in Riches v. West Minster Bank Ltd. 1947 AC 390 refers to the saint-socialist scholar Prof. Tawney to say that money-lending was condemned by the medieval mind as usurious. In our country, charging of compound interest is partcularly condemned in relation to the loans advanced to the agriculturists. Many, reports of the famine and other commissions s appointed to look into the causes for the economic misery of the Indian farmer found agricultural indebtedness as one of the principal causes for the economic misery of the farmer and asked for enacting law a prohibiting charging of compound interest. From time to time, the laws enacted by the Legislatures had made several attempts to prohibit levying of compound interest on the llaons borrowed by the agriculturists and otherwise to relieve the framers of their economic burden of debts. The A.P. Agriculturists Relief Act of 1938 otherwise known as the Rajaji Act is one of the outstaning modern instances of such enactments. So is the Usurious Loans Act of 1918 as amended by the Madras Act VIII of 1937. A Full Bench of this Court in K. Purushottam v. K. Nageswara Rao, (1978) 2 APLJ 145: (AIR 1979 Andh Pra 48) agreeing with an earlier Full benchs judgment of Subbarao, (1957) 2 Landh WR 53: (AIR 1957 Andh Pra 546 ) (FB) held that the object of S. 13 of the above A.P. Agriculturists Relief Act. 1938 is to give effect to the statutory rate of interest, if necessary even by disregarding the contractual rate of interest. Mode of fixing allowable rate of interest is settled by S. 13 of Agriculturists Relief Act. Under s. 13 of the A.P. Agricultursts Relief Act.

(3.) The only question that afalls for consideration of this Court in this second appeal is whether the findisng of the Courts below uon the surviving point of the controversy between the parties should be upheld. Previous judgment of this Court:---