( 1 ) THIS appeal has been preferred against the Judgment and Decree dated september 15, 1984 passed by the Civil judge, Hospet, in O. S. No. 45/84.

( 2 ) IT was a suit instituted by the bank of India ("the Bank") which isthe appellant herein, for recovery of a sum of Rs. 30,564/- which was said to be the amount due and outstanding from defendants 1 and 2 out of the loan of rs. 10,000/- granted to them for raising sugar-cane crop. Defendant-3 guaranteed repayment of the loan by executing a letter of guarantee. The documents exchanged between the parties seem to suggest that defendants 1 and 2 ware liable to pay interest at the rate of 4 per cent above the rate prescribed by the reserve Bank of India subject to the minimum of 13 per cent with quarterly rests. The Bank, however, has charged only half yearly rests and also claimed at the same rate in the suit.

( 3 ) DEFENDANTS while admitting the loan taken, however, denied their liability to pay interest with quarterly rests on the ground that the loan was for agricultural purpose and the Bank by the settled practice has no right to charge periodical compound interest. They also prayed for grant of instalments to repay the loan in five equal annual instalments.

( 4 ) ON the basis of the pleadings, the trial Court framed the following issues : (1) Whether the plaintiff was not entitled to charge compound interest? (2) Whether the defendants are entitled for five equal instalments ?

( 5 ) THE parties did not produce oral evidence, perhaps, in view of the fact that the defendants did admit the loan transaction. Defendant-3 remained ex parte. The documents produced by the bank were marked as Exs. P-1 to P-15. Ex. P-1 is the demand promissory mte dated April 29, 1976 for Rs. 10,000/- payable with interest at the rate of 4 parcent per annum above the Reserve bank of India rate subject to the minimum of 13 per cent with quarterly rests. Ex. P-2 dated April 29, 1976 is a letter acknowledging the debt and the liability to pay. Ex. P-3 is a letter of lien and set off. Ex. P-4 is the hypothecation deed in regard to the crop. Ex. P-5 is the guarantee bond by defendant-3. Exs. P-6, P-7 and P-9 are acknowledgments of debt and securities regarding the amount due at that time. Ex. P-8 is an acknowledgment of debt undertaking to pay interest at the revised rate subject to a minimum of 15 per cent with half-yearly rests. The other documents are not relevant except Ex. P-14 which is the account extract of the bank.

( 6 ) THE trial Court after considering the contentions urged and the documents produced, held :". . . . IT has been well settled now that for agricultural loans, in India, the conception of quarterly rest basis i. e. , charging of compound interest does not apply. That being so, the plaintiff would not be entitled to charge compound interest on the loan amount advanced to the defendants 1 and 2. . "with that conclusion, the Court directed the Bank to submit a revised statement of accounts charging simple interest on the amount due. Accordinly, the Bank submitted a revised statement determining Rs. 19,851-66 as the sum due from the defendants. The court then decreed the suit for the said amount with future interest at 6 per cent payable in two annual instalments. The question raised by this appeal is of general nature and it relates to the right of the Bank ' to charge compound interest on agricultural advances. Similar questions nave been raised in a large number of appeals pending in this Court and subordinate courts. The question though reeks of simplicity is not easy for its solution. In order to reach a satisfactory conclusion on the question, this Court by order dated January 16, 1985, issued notice under Order 1, Rule 8 of the code of Civil Procedure, to the Reserve bank of India to inspect the accounts concerned in this case and submit a report. As per the direction, the accounts have been inspected and a report dated june 7, 1985 has been submitted. The officer who submitted the

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