IMPORTANT POINT
The court established that while a lender is entitled to recover loan amounts, the interest rate must be reasonable and within statutory limits, reflecting judicial discretion.

JUDGMENT :

Venuthurumalli Gopala Krishna Rao, J.

This Appeal, under Section 96 of the Code of Civil Procedure [for short ‘the C.P.C.’], is filed by the Appellant/defendant challenging the Decree and Judgment, dated 23.04.2003, in O.S. No.12 of 1998 passed by the learned District Judge, Nellore [for short ‘the trial Court’]. The Respondent herein is the plaintiff in the said Suit.

2. The respondent/plaintiff filed the Suit seeking preliminary decree against the defendant for recovery of a sum of Rs.8,52,197/- comprising of principal and interest with subsequent and future interest at 16.5% p.a.

3. Both the parties in the Appeal will be referred to as they are arrayed before the trial Court.

4. The brief averments of the plaint, in O.S. No.12 of 1998, are as under:

The defendant borrowed an amount of Rs.3,00,000/- from the plaintiff bank for the purpose of house construction and created an equitable mortgage by depositing his title deed dated 07.03.1990 with the plaintiff bank on 11.07.1991. He agreed to repay the amount in 180 monthly instalments inclusive of interest at 16.5% per annum with quarterly rests @ Rs.1,670/-. The commencement of payment of instalment will take place from the date of completion of work or on the expiry of 18 months from the date of disbursement of first instalment whichever is earlier. The defendant executed memorandum of term loan agreement and also confirmed the deposit of title deed made by him by executing a letter on 13.07.1991. On 12.07.1991 he executed an arrangement letter for the loan. He availed the loan and in total repaid an amount of Rs.54,000/- in discharge of the loan amount. He failed to repay the balance inspite of issuing registered notices. Hence the suit.

5. The defendant filed a written statement by denying the averments mentioned in the plaint and further contended as under: -

This defendant availed loan for the purpose of improving his agricultural lands. On the date of which the said loan was availed, there is existence of ready built house. Hence, the contention that the loan was availed for construction of house is incorrect. The bank cannot charge interest at 16.5% per annum since it is only agricultural loan. The interest has to be scaled down. In addition to the above plea, it has been contended that the persons who signed in the plaint has no locus standi to file the suit. It is further contended that the suit filed by the plaintiff is premature since it was filed even before the completion of the period of 180 months. It has been further contended that the defendant alone cannot create equitable mortgage since the property is the joint family property.

6. Based on the above pleadings, the trial Court framed the following issues :

(i) Whether the suit is premature?

(ii) Whether the defendant borrowed the amount for agricultural purposes and consequently whether the interest claimed is usurious?

(iii) Whether the defendant has no fight to mortgage the joint family properties?

(iv) To what relief?

7. During the course of trial in the trial Court, on behalf of the Plaintiff, PW1 and PW2 were examined and Ex.A1 to Ex.A8 were marked. On behalf of the Defendant DW1 was examined and Ex.B1 to Ex.B9 were marked.

8. After completion of the trial and on hearing the arguments of both sides, the trial Court decreed the suit with costs vide its judgment, dated 23.04.2003, against which the present appeal is preferred by the appellant/defendant in the Suit questioning the Decree and Judgment passed by the trial Court.

9. Heard Sri S. Lakshminarayana Reddy, learned counsel for appellant/defendant and Sri P. Varun, learned counsel on behalf of Sri K.M. Krishna Reddy, learned counsel for respondent/plaintiff.

10. The learned counsel for appellant/defendant would contend that the Court below ought to have seen that the respondent/plaintiff bank is not entitled interest at the rate of 16.5% p.a. on quarterly rests from the date of suit till the date of decree. He would further contend that the plaintiff ban