JAINATH PRASAD Vs. STATE OF BIHAR

JUDGEMENT

(1.) In Jahuri Yadav v. Bank of India, a learned Judge of this Court, sitting singly, passed a very brief order reported in 1998 (3) Pat LJR 214, declaring that in agricultural loans it was not permissible for the Bank to charge interest at a rate higher than 6.5%. The declaration was said to be in accordance with the decision of the Supreme Court in Corporation Bank v. D. S. Gowda, (1994) 5 SCC 213 : (1994 AIR SCW 2721).

(2.) The order passed by this Court in the case of Jahuri Yadav seems to have caused a state of uncertainty in the matter of recovery of Bank loans. A case came to the notice of this Court in which a District Certificate Officer had issued a general direction to all the Banks in the district asking them to recalculate their dues in agricultural advances charging interest @ 6.5% as directed in the order passed by this Court. It was also reported to this Court that relying upon the order passed in the case of Jahuri Yadav a large number of suits were filed in civil Courts seeking direction to the Banks to determine the overdue amounts in recovery proceedings by charging interest @ 6.5%. The case in hand is another case in which the petitioner seeks relief(s) on the basis of the order passed by this Court in the case of Jahuri Yadav, (1998 (3) Pat LJR 214).

(3.) On 12-9-1990 the petitioner took a loan of Rs. 1,20,000/- for purchase of a tractor from the State Bank of India, Agricultural Development Branch, Motihari. According to the agreement executed by the petitioner and his wife, the loan amount with interest was repayable in nine instalments in the following manner : Instalments Date of Payment1st instalment Rs. 13,333 + interest1-1-922nd instalment Rs. 13,333 + interest1-1-933rd instalment Rs. 13,333 + interest1-1-944th instalment Rs. 13,333 + interest1-1-955th instalment Rs. 13,333 + interest1-1-966th instalment Rs. 13,333 + interest1-1-97 7th instalment Rs. 13,333 + interest1-1-988th instalment Rs. 13,333 + interest1-1-999th instalment Rs. 13,336 + interest1-2-2000 As regards the rate and application of interest the relevant clause (6) in the loan agreement provided as follows :"(6) Interest - Interest will be charged annually at the rate of 4% above the State Bank increase or decrease in the interest rates. Change notice board. Interests will be realised every year in the advance/advances are not paid by the dates fixed then the balance outstanding in the books of accounts on the said date would be liable to 2% penal interest up to the date of payment."