IMPORTANT POINT
Courts below were clearly in error in refusing interest as claimed by plaintiff-Bank in terms of R.B.I. circulars enhancing rates of interest.

ORDER

Heard learned counsel for the parties.

2. This appeal is by the plaintiff-Bank aggrieved by the impugned judgment and decree of the High Court dismissing their first appeal and affirming the judgment of the trial court. The appellant- Bank filed suit for recovery of total amount of Rs. 16,15,091.05 against the defendants. The appellant advanced loan of three kinds to the defendant No. 1 and defendant Nos. 2 and 3 were the guarantors. When the defendants failed to make payment of the amount borrowed, the plaintiff was constrained to file the suit. The defendants resisted the claim of the plaintiff on various grounds. In view of the pleadings of the parties, the trial court framed the following issues:-

"1. Whether defendants have agreed to pay interest at 5% per annum above the Reserve Bank of India rate subject to minimum of 11% per annum, to be compounded quarterly?

2. Whether the interest claimed is highly excessive and exorbitant under the Usurious Loans Act?

3. Whether plaintiff is not entitled to more than Rs.21,500/- as service charges?

4. Whether defendants have acknowledged the debts and if not, whether the suit is barred by limitation?

 5. Whether suit is bad for misjoinder of cause of action?

 6. Whether defendants are entitled to instalments claimed?

7. To what reliefs are parties entitled?

Additional issues:-

1. Whether the plaintiff Bank is justified in unilaterally raising the rate of interest?

2. Whether the interest charges is correct?"

3. The plaintiff-Bank examined its officers as PWs-1 and 2 and got marked documents as P-1 to P-40. The defendant No. 1 entered the witness box and examined himself as DW-2 and one Krishnamurthy, a Chartered Accountant was examined on behalf of the defendants as DW-1. The defendants got marked documents as D-1 to D-40. The trial court, having considered and appreciated the evidence placed before it both documentary as well as oral, recorded findings on issue Nos. 1 to 3 in the affirmative and on issue Nos. 5 and 6 and additional issue Nos. 1 and 2 in the negative. As far as issue No. 4 is concerned the trial court recorded a finding that the defendants have acknowledged all the debts and the suit claim of the plaintiff under three loans was within time. However, during the course of the argument before the trial court, learned counsel for the defendants disputed only about the higher rate of interest charged by the plaintiff-Bank. The learned counsel for the defendants also made a specific statement that defendants give up all other contentions. It was further submitted that the defendants were ready to pay the loan amount due from them with agreed rate of interest compounded with quarterly rests but they were not ready to pay the higher rate of interest as claimed by the plaintiff under the pretext that the RBI has enhanced the rate of interest. The learned trial Judge in view of the submissions, as can be seen from the judgment, has recorded that the only point that came up for decision was as regards the charging of higher rate of interest by the plaintiff. The trial court decreed the suit of the plaintiff for recovery of Rs.9,82,963.47 against the defendants with current rate of interest at the rate of 11% per annum from the date of the suit on the balance amount due from the defendants. The trial court refused to grant interest at the enhanced rate claimed by the plaintiff in terms of the agreement keeping in view the Reserve Bank circulars. The plaintiff-Bank to the extent of refusal of interest at the rate claimed filed regular first appeal before the High Court. The High Court did not find any good ground to differ with the finding recorded by the trial court as regards rate of interest. In that view, the first appeal was also dismissed by the High Court. Hence, the pla