( 1 ) LIFE Insurance Corporation of India (hereinafter called, the plaintiff) filed a suit being O. S. No. 574 of 1984 on the file of the court of I Additional Judge, City Civil court, Hyderabad, for recovery of a sum of rs. 37,810. 50 ps. from the defendants. The trial Court by judgment dt. 8-7-1988 decreed the suit for Rs. 34,547. 74 ps. denying interest as well as penal interest claimed by the plaintiff. Therefore this regular appeal filed.

( 2 ) THE facts are not much in dispute except some controversy regarding alleged payment made by the defendants. Briefly stated the facts are as follows. The defendants applied for loan of Rs. 50,000. 00 on 12-4-1971 for construction of a house, repayment of the existing loan and investment in business. The plaintiff sanctioned Rs. 40,000. 00 as loan on 28-6-1971. The defendants executed a registered mortgage deed on 5-9-1971 mortgaging their land and house. The amount was duly disbursed by cheques. An additional loan of rs. 10,000/- was sanctioned and disbursed on 9-2-1972. The defendants executed necessary documents. The loan is payable in half yearly instalments commencing from 1-4-1972 with interest at 10% per annum. If t