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Andhra Pradesh High Court
Judges : B.P.JEEVAN REDDY, K.A.SWAMI
YOGENDRANATH RAJ (DIED) - Appellant
Versus
State BANK OF INDIA HAVING ITS CENTRAL OFFICE AT BOMBAY AND ONE OF THE LOCAL OFFICES AT SHAMSHEERGUNJ, HYDERABAD REPRESENTED BY ITS BRANCH MANAGER SRI P.SUBRAHMANYAM - Respondent
Decided On : 07-18-86
BANKING REGULATION ACT - SECTION 21-A - APPLICABILITY - PENDING PROCEEDINGS - USURIOUS LOANS ACT - SECTION 3 - APPLICABILITY - AGRICULTURIST - HORTICULTURIST - INTEREST - EXCESSIVE - RATE OF INTEREST - REASONABLE - RELIEF.
Fact of the Case:
Suit for recovery of a sum of Rs. 2,35,927.86 Ps. with interest at the rate of 14% per annum on the said amount from the date of suit till realization. The Bank's claim, in short is the following: the 1st defendant (2nd defendant is the wife of the 1st defendant) was given an overdraft facility, as also term-loan facility by the plaintiff-Bank. The 1st defendant executed a mortgage in a sum of Rs. 1,70,000/-on 5-5-1971. On the date of suit an amount of Rs. 2,17,161.59 Ps. was due on Medium Term loan Account, and a sum of Rs. 18,766.27 Ps. on Cash Credit Crop Loan account. The loans were sanctioned to the 1st defendant for developing a grape garden. The mortgage executed by the 1st defendant pertains to the medium term loan besides the personal guarantee, while the second loan was secured by hypothecation of the crops, farm tools, etc., evidenced by a hypothecation deed dated 16-10-1973 and a promissory note of the same date. The 2nd defendant is the guarantor under both the documents. The defendants did not pay inspite of repeated notices. The 1st defendant by this letter dated 22-6-1974 requested the plaintiff-Bank to inform the amount payable by him, and he was accordingly intimated by letter dated 1-7-1974. Interest payable on the said loans is; 11/2% over and above the State Bank of india advance rate with a minimum of 10% per annum. Under the Second loan, the rate of interest is the same, with the difference that monthly rests are also provided for.
Finding of the Court:
1. The expressions "agriculture" and "agriculturist" in their ordinary sense include "horculture" and "horticulturist". 2. Section 21-A of the Banking regulation Act, 1946, which came into force with effect from 31-6-1984. does not apply to appeals pending on that date. 3. The 1st defendant is an agriculturist and hence entitled to take advantage of the Madras amendment to the Usurious Loans Act, which raises a presumption of law that charging of compound interest to an agriculturist is per se excessive. 4. The interest charged by the plaintiff-Bank is excessive and the 1st defendant is entitled to relief on that account. 5. The reasonable rate of interest that should be allowed is 14% per annum, simple.
Issues: 1. Whether the expressions "agriculture" and "agriculturist" in their ordinary sense include "horculture" and "horticulturist"? 2. Whether Section 21-A of the Banking Regulation Act, introduced with effect from 21-6-1984, applies to the present transactions, since the institution of the suit as well as the decree were earlier to the said date? 3. To what rates of interest is the plaintiff entitled from time to time? Is the interest claimed by the plaintiff excessive?
Ratio Decidendi: 1. The expressions "agriculture" and "agriculturist" are capable of both a narrow, as well as a wider dgginition, and further that the wider definition does include "horiculture" within it. 2. The object and purpose underlying the Madras amendment is to alleviate the misery of a class as such, namely, the agriculturists. It says that, where compound interest is charged to an agriculturist, the Court stall presume that the interest is excessive. The burden then shifts on to the lender to establish that it is not so. 3. While construing such a beneficial provision, the Court does not think it permissible to adopt a narrow interpretation. There is no reason to exclude horticulture from the purview of the expression "agriculture". "horticulture" does include raising of orchards like mango, guava, apple, etc. Without a doubt, it includes the raising of grape gardens as well. 4. Section 21-A of the Banking Regulation Act is not applicable, and that the 1st defendant is entitled to take advantage of section 3 of the Usurious Loans Act, as amended by the Madras amendment aforesaid. 5. The interest charged by the plaintiff-Bank is excessive in the circumstances.
Final Decision: Appeal allowed in the above terms. There shall be no order as to costs in this Appeal.
( 1 ) TWO questions of law arise in this appeal, viz. , whether the expressions "agriculture" and "agriculturist" in their ordinary sense include "horculture" and "horticulturist" and whether Section 21-A of the Banking regulation Act, 1946, which came into force with effect from 31-6-1984. applies to appeals pending on that date ? Section 21-A declares : "notwithstanding anything contained in the Usurious Loans act, 1918, or any other law relating to indebtedness in force in any state, a transaction between a banking company and its debtor shall not be re-opened by any Court on the ground that the rale of interest chafged by the banking company in respect of such transaction is excessive" factual matrix :
( 2 ) DEFENDANTS are the appellants. The respondent, State Bank of india, filed the suit for recovery of a sum of Rs. 2, 35, 927. 86 Ps. with interest at the rate of 14% per annum on the said amount from the date of suit till realisation. The Bank s claim, in short is the following : the 1st defendant (2nd defendant is the wife of the 1st defendant) was given an overdraft facility, as also term-loan facility by the plaintiff-Bank. The 1st defendant executed a mortgage in a sum of Rs. 1,70,000/-on 5-5-1971. On the date of suit an amount of Rs. 2,17,161. 59 Ps. was due on Medium Term loan Account, and a sum of Rs. 18,766. 27 Ps. on Cash Credit Crop Loan account. The loans were sanctioned to the 1 st defendant for developing a grape garden. The mortgage executed by the 1st defendant pertains to the medium term loan besides the personal guarantee, while the second loan was secured by hypothecation of the crops, farm tools, etc. , evidenced by a hypothecation deed dated 16-10-1973 and a promissory note of the same date. The 2nd defendant is the guarantor under both the documents. The defendants did not pay inspite of repeated notices. The 1st defendant by this letter dated 22-6-1974 requested the plaintiff-Bank to inform the amount payable by him, and he was accordingly intimated by letter dated 1-7-1974. Interest payable on the said loans is; 11/2% over and above the State Bank of india advance rate with a minimum of 10% per annum. Under the Second loan, the rate of interest is the same, with the difference that monthly rests are also provided for.
( 3 ) THE defendants filed a common written statement They admitted the transactions and the documents executed by them. They however disputed the amounts claimed in the suit as incorrect and exaggerated. They submitted that the plaintiff has charged compound interest, and also that the raie of interest charged is against the stipulated interest. According to them, the dues from them cannot exceed Rs. 50,000/ -. They submitted that inspite of repeated requests, the plaintiff-Bank did not furnish the correct and full accounts. They submitted further that they approached the plaintiff-Bank for loans believing in their public declarations that they propose to encourage the agriculturists. The amount mentioned in the mortgage was not paid to the 1st defendant in lumpsum but is made Up of past transactions; the rate of interest charged is not correct ; it is illegal. The inability of the defendants to discharge the loans completely was due to the plaintiff s default and refusal to supply full and correct accounts, showing the principal and interest due from the defendants. Accordingly. they prayed that the suit being premature, may be dismissed with costs.
( 4 ) ON the above pleadings, the learned trial Judge framed the following issues :" (1) Whether D-1 has not received any part of the consideration of Rs. 1,14,000/- which he acknowledged under the mortgage bond dated 5-5-1971 ? (2) Whether the plaintiff advanced Rs. 56,000/- further as stipulated in the said mortgage bond ? (3) To what rates of interest is the plaintiff entitled from time to time ? Is the interest claimed by the plaintiff excessive ? (4) Whether the plaintiff is entitled to expenses debited to the account
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