S VADDEMGUNTA VENKATESWARLU Vs. ANDHRA BANK LTD

JUDGEMENT

(1.) Defendants 1 to 5 are appellants. This appeal arises out of a suit filed for recovery of Rs.47,210.38 basing on equitable mortgage. The 1st defendant was contractor and borrowed an amount of Rs.30,000/- from the Andhra Bank. Defendants 2 and 3 agreed to be co-obligants in respect of the loan and defendants 1, 2 and 5 executed a pronote dated 26.9.1970 for Rs.30,000/- promising to pay with interest at 6% p.a., above the Reserve Bank of India rate with a minimum of 11% with quarterly rests. Defendants 1, 2 and 5 deposited the title deeds relating to the landed property mentioned in the A, B and C schedules and created equitable mortgage. It is further stated that none of the defendants are entitled to relief under Madras Agriculturists Debt Relief Act and even otherwise the 1st defendant is an Income-tax assessee at all material times and has been paying property tax to the extent required under law. The 1st defendant filed a written statement denying the allegations and suit is not maintainable. It is stated that the defendants are agriculturists and therefore they are entitled to the benefits under Act IV of 1938 and as such the claim of interest over and above 5-1/2% p.a., is untenable. It is also stated that the rate of interest charged is opposed to Sec.3 of Madras Usurious Loans Act. It is also stated that the 3rd defendant never agreed to mortgage the property and the title deeds were produced only to assess the solvency. The plaintiff did not ask the defendants 2 and 5 to be co-obligants and they did not deposit the title deeds in respect of the properties. None of the defendants executed any memorandum on 29.9.1970 creating an equitable mortgage. On the pleadings set out herein above appropriate issues have framed. The trial Court held that the plaintiffs are entitled to a mortgage decrees as equitable mortgage has been created by defendants 1, 2 and 5. It is also further held that the defendants are not entitled to the benefits under the Madras Act IV of 1938 and the interest is not contrary to provisions of Madras Usurious Loans Act.

(2.) This appeal is confined to the quantum of interest only. The learned counsel for the appellants contended that the interest stipulated is only 6% above the Reserve Bank of India rate with a minimum of 11%, but the charging of interest at different rates, viz., 12%, 13-1/2%, 14-1/2%, 15-1/2% and 17% is not justified and further -the appellants are entitled to the relief under Act IV of 1938 and in any event the rate is violative of Usurious Loans Act.

(3.) Ex.A-14 is the promissory note executed for Rs.30,000/- on 26.9.1970. It is stated therein that the amount of Rs.30,000/- is payable altogether with interest from the date of the execution of the pronote at 6% above the Reserve Bank of India rate with a minimum of 11% p.a. In col.3 of the letter of sanction dated 8.9.1970, Ex. A-12 the rate of interest is stated in a similar manner. Ex.A-14 stipulates that the charge of interest is at 6% above Reserve Bank of India rate from the date of the execution of the promissory note and in any event the interest should not be less than 11%. Therefore, the interest that should be charged by the Andhra Bank on the unpaid amount is at the rate of 6% above the Reserve Bank of India and on the basis of this recital in the pronote the rate of interest is liable to be enhanced if the Reserve Bank of India also increases. Therefore, the charging of interest at varying rates is justified. In this view the initial contention of the learned counsel is untenable.