STATE BANK OF INDIA Vs. MANDAV UDYOG

JUDGEMENT

(1.) -The appellant-Bank has filed the above appeal against the judgment and decree passed by a learned Single Judge of this Court on 25.4.1994 in Civil Suit No. 110 of 1986, whereunder the suit filed by the appellant-Bank against the defendants came to be decreed, not as prayed for, but in a partial manner rendering the plaintiff-appellant ineligible to certain rights claimed under the terms of the loan transaction. Having regard to the narrow and limited controversy in the suit and in the absence ofany cross-objections filed by the defendants, it is unnecessary for us to delve at length with the entire gamut of pleadings, particularly, the various contentions raised by way of defence to the suit claim by the defendants-respondents before the Court below. Suffice it to notice that the plaintiff's claim for a decree of Rs. 9,86,349.19 on account of principal and interest said to be due on three loan facilities stated to have been made available by the plaintiff-Bank to the defendants. The first loan facility is stated to be on Medium Term Loan with a limit of Rs.l lac, the second one being Medium Term Loan with a limit of Rs. 5 lacs and the third being Cash Credit with a limit of Rs. 1 lac. It was also claimed and over which there is no controversy between parties that the loan facilities were made available for the business activities of the defendants and in order to secure the re-payment of the loan several documents came to be executed with two equitable mortgages also created to secure the repayment of the amount due under the loan. As on the date of the filing of the suit, the defendants were said to be under liability for the following sum as against the three category of loans advanced by the plaintiff-appellant:

(2.) A decree for the total amount with interest at the rate of 13.5% per annum with quarterly rests has been prayed for with also. The said suit was instituted on 22.12.1986. As indicated earlier, it is unnecessary to deal with the other terms of defence except the claim that there was a dispute raised with reference to the rate of interest, to which the plaintiff-Bank would be entitled to recover from - the defendants and, if at all, on which part or portion of the amount decreed the interest would become payable. For the sake of completeness, it may be noticed that the loan documents are comprised in three agreements, marked as Exts. P-3, P-30 and P-33 and that there was no challenge made on behalf of the defendants to the items debited by the plaintiff to the defendants' account even during the course of arguments. The respective sanction letters pertaining to the loans in question were marked as Exs. P-2, P-29 and P.32.

(3.) Having regard to the above, after trial and on the basis of the materials placed on record, the learned Single Judge after taking into account the relevant documents governing each loan, viz. Medium Term Loan of Rs. 1 lac: Ex. P-2, Ex.P-3 and Ex. P-75; for Medium Term Loan of Rs. 5 lacs: Ex.P-29, P-30 and P-31 and Cash Credit Term Loan of Rs. 1 lac: Ex. P-33, Ex.P-34 and Ex P-35, the plaintiff was held entitled to interest at the rate of 13 1/2% per annum with quarterly rests in relation to first two loan transactions and the third loan transaction at the rate of 14% per annum with quarterly rests. The learned Single Judge also held that as on the date of the filing of the suit a consolidated amount of Rs. 9,86,349.10 was due and payable by the defendants to the plaintiff on three loan facilities, inclusive of interest. Taking into account the fact that during the pendency of the suit part of the mortgaged property, with the permission of the Court, was permitted to be sold and out of the sale proceeds a sum of Rs. 3,50,000/- was said to have been tendered and paid towrds the principal amount on behalf of the defendants and on the view that in the light of the instructions imparted by the debtor at the time of making payment to appropriate the same against the principal due, the learned Judge observed that it was for the creditor to have either accepted as if was proposed or not to have accepted the amount and returned the same but once having accepted the amount the creditor is bound to follow the instructions of the debtor. In that view of the matter, the learned Single Judge held that all payments made during the pendency of the suit, which 'were to the tune of Rs 6,36,943.53 are liable to be adjusted towards the principal sum and not towards the interest. Applying the principles laid down by the yery learned Judge in Punjab National Bank v. Surrender Singh Mandyal and Others, rendered on the very same day dated 24.4.1994, the learned Single Judge also held that for the purposes of Section 34 of the Code of Civil Procedure, the 'principal sum adjusted' means the principal sum outstanding excluding any interest or any other item and thereby adjudged the principal amount due and payable by the defendants to be as follows in respect of the three items of loans :