KOLLI VENKATA APPARAO Vs. STATE BANK OF INDIA

JUDGEMENT

(1.) The defendants who have suffered a preliminary decree for a sum of Rs. 2,40,070.80 calculated up to 13/04/1993, i.e., Rs. 55,000 towards principal, Rs. 1,73,693.80 towards interest and Rs. 11,377.00 towards costs in O.S. No. 64 of 1986, a suit for foreclosure filed by the State Bank of India, Agricultural Development Branch, Proddatur, on the file of the Subordinate Judge, Proddatur, are the appellants herein.

(2.) The suit has been filed on the foot of the hypothecation deed dated 10/04/1974, executed by the first appellant as borrower and the second appellant as guarantor for a sum of Rs. 55,000 together with interest at 1/2 per cent. over the SBI advance rate subject to a minimum of 12 1/2 per cent. per annum with half-yearly rests. The appellants admitted the execution of the deed of hypothecation dated 10/04/1974, and the demand promissory notes referred to in the plaint. However, they resisted the suit claim on several grounds, the main being that the interest should be scaled down as per the provisions of the Agricultural Debt Relief Act (Act No. 4 of 1938), and the suit is barred by limitation as far as the second appellant, the guarantor, is concerned. Appropriate issues have been framed. Evidence has been let in on either side, P.W. 1 has been examined and exhibits A-1 to A-39 have been marked on behalf of the plaintiff. The first defendant, who is the first appellant herein, examined himself as D.W. 1 and exhibits B-1 to B-23 have been marked on his behalf. On appraisal of the said oral and documentary evidence, the trial court answered all the issues in favour of the respondent/plaintiff and against the appellants/defendants. Accordingly, a preliminary decree has been passed against the appellants for a sum of Rs. 2,06,803.80 with future interest at 6 per cent. per annum on Rs. 55,000 from the date of the suit till the date of realisation.

(3.) Though several grounds have been raised and lengthy written arguments have been submitted, T. Veerabhadrayya, learned counsel for the appellants, made only two submissions. His first and the principal submission is that compounding of interest with half-yearly rests in respect of agricultural advances is illegal, being contrary to the circulars/directives issued by the Reserve Bank of India and the law laid down by the Supreme Court in Corporation Bank v. D. S. Gowda [1994] 81 Comp Cas 842; [1994] 5 SCC 213. His second submission, which is rather supplementary to the first, is that charging of interest on incidental charges debited to the appellants' account from time to time is not permissible either under the terms of the contract entered into between the parties or under any provisions of law.