UNION BANK OF INDIA Vs. V SAROJINI DEVI

JUDGEMENT

(1.) This is an appeal preferred by the plaintiff against the judgment and decree dated 15-1-1985 in O.S.No.185 of 1983 on the file of Subordinate Judge's Court, Eluru, in so far as the findings are against the plaintiff. The respondents herein are the defendants in the suit.

(2.) The appellant-plaintiff, Union Bank of India, Eluru Branch filed the said suit for recovery of a sum of Rs.95,332-35 due from the defendants with respect to an agricultural loan advanced to the first defendant. The plaintiff's case is as follows: The plaintiff is a Nationalised Bank. The first defendant an agriculturist, approached the plaintiff bank along with the defendants 2 and 3 for a short term agricultural loan of Rs.25,000/- for investment in sugarcane crop and made an application on 13-6-1974 to the plaintiff. The plaintiff-bank sanctioned the said loan amount of Rs.25,000/-. The first defendant executed a demand promissory note for Rs.25,000/- on 18-6-1974 agreeing to repay the same with interest at 5 per cent over the Reserve Bank of India rate subject to a minimum of 12% per annum with half yearly rests. The first defendant also agreed to pay enhanced rate of interest as per the rules of the Reserve Bank of India that may be charged from time to time. As the security for repayment of the said loan amount the first defendant also created an equitable mortgage by depositing title deeds in favour of the plaintiff-bank on 18-6-1974 and the defendants 2 and 3 stood as guarantors for the first defendant by executing indemnity and guarantee bonds in favour of the plaintiff-bank. The loan of Rs.25,000/- was disbursed to the first defendant. On 11-6-1977 the first defendant executed a renewal promissory note for Rs.36,723-05 in favour of the plaintiff-bank acknowledging the liability of the loan amount due to the plaintiff-bank and promised to repay the said loan amount with interest at the rate of 5% over the R.B.I. interest rate subject to a minimum of 14% p.a. with half yearly rests. Subsequently, the first defendant executed a debt confirmation letter dated 10-7-1979 confirming the correctness of the balance of the loan amount of Rs.47,282-05. The first defendant also executed another renewal pronote dated 5-6-1980 for Rs.51,215-65 acknowledging the liability of loan amount due to the plaintiff-bank and also agreed to repay the same with interest at 4.5 per cent over the R.B.I. rate subject to a minimum of 13% per annum with half yearly rests. The first defendant again executed debt confirmation letter on 2-7-1982 for Rs.78,187-15 confirming the correctness of the balance of the loan amount due to the plaintiffAbank. By 31-8-1983 the defendants became liable to pay Rs.95,332-35 towards the loan amount after giving credit for the amount of Rs.5,000/- paid by the first defendant on 23-6-1977. The plaintiff-bank filed the suit for recovery of the said amount.

(3.) The defendants filed a written statement contending that they are agriculturists and that the first defendant borrowed a sum of Rs.25,000/- as agricultural loan for investment in agriculture, that the interest claimed by the plaintiff-bank is excessive, penal and usurious, that the plaintiff is not entitled to claim compound interest, that the provisions of Act 4 of 1938 are, applicable to the nationalised banks and the plaintiff-bank is not entitled to claim exemption under Sec.4(e) of the Act 4 of 1938 and as such the suit debt has to be scaled down. The defendants also pleaded that the plaintiff-bank is not entitled to claim incidental charges etc.