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2002 Supreme(HP) 274
High Court Of Himachal Pradesh
KAMLESH SHARMA,K.C.SOOD
PUNJAB NATIONAL BANK - Appellant
Versus
NARAIN DASS - Respondent
R.F.A. No. 64 of 1997
Decided On : 10/03/2002
Ms. Devyani Sharma, Advocate, for the Petitioner; Mr. Sanjeev Bhushan Advocate Vice Mr. Ajay Sharma, Advocate, for the Respondents.
The main legal point established in the judgment is that agricultural loans cannot be charged compound interest, and penal interest can only be charged once for one period of default and cannot be capitalized.
Headnote:
Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 - Recovery of Loan - Agricultural Loan - Section 21-A of the Banking Regulations Act, 1949 - Compound Interest - Penal Interest - [RECOVERY OF LOAN] - [Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, Section 21-A] - The court discussed the nature of the loan, the applicable interest rates, and the entitlement to penal interest. It interpreted Section 21-A of the Banking Regulations Act, 1949, and highlighted that agricultural loans cannot be charged compound interest and penal interest can only be charged once for one period of default and cannot be capitalized.
Fact of the Case:
The plaintiff bank filed a suit for the recovery of a loan amount against the defendant, who had obtained a term loan for the purchase of a truck. The defendant failed to repay the loan amount as per the agreed schedule, leading to the lawsuit.
Finding of the Court:
The court found that the loan advanced to the defendant was an agricultural loan and therefore, the plaintiff bank was not entitled to charge interest with quarterly rests. The defendants were held liable to pay simple interest at the rate of 12.5% per annum on the loan amount, subject to the adjustment of payments made. The court also ruled that the plaintiff bank was not entitled to guarantee fee, inspection fee, or charges on account of legal or recall notice. Additionally, the plaintiff bank was not entitled to capitalize penal interest.
Issues: The issues included the authorization of the plaintiff's suit, the limitation of the suit, estoppel, prematurity of the suit, the amount to be recovered, entitlement to interest, and the relief sought by the plaintiff.
Ratio Decidendi: The court's decision was based on the interpretation of the nature of the loan, the applicable interest rates, and the entitlement to penal interest, as well as the specific provisions of Section 21-A of the Banking Regulations Act, 1949.
Final Decision: The appeal was partly allowed, and the defendants were held liable to pay simple interest at the rate of 12.5% per annum on the loan amount, subject to the adjustment of payments made. The plaintiff bank was not entitled to guarantee fee, inspection fee, or charges on account of legal or recall notice, and was not entitled to capitalize penal interest.
Kuldip Chand Sood, J.—This first appeal arises out of the judgment and decree of learned District Judge, Hamirpur dated January 10,1997 whereby the suit of the appellant Bank, plaintiff before the District Judge, was partly decreed against the respondent-defendant.
2. The facts in brief. Plaintiff Bank is a body corporate established under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 with its head office at New Delhi. Plaintiff Bank has a Branch at Jahu in Tehsil Bhoranj of District Hamirpur of Himachal Pradesh. Vinod Kumar Chadha, was the Branch Manager of the Jahu Branch of the plaintiff Bank when the suit was filed. He holds general power of attorney on behalf of the plaintiff Bank and was authorised to maintain the present suit.
3. On August 18, 1987, Bhagat Ram, defendant, who died during the pendency of the suit and was substituted by his legal representatives as defendants l(a) to l(c) and respondents No. 1 to 3 in this appeal, approached the plaintiff bank for the grant of term loan of rupees 1,64,000 for the purchase of D.C.M. Toyota Make Truck vide his loan, application of the even date. The plaintiff bank sanctioned a sum of rupees 1,44,000 in favour of Bhagat Ram. The sanction was subject to Bhagat Ram executing the necessary loan documents. Defendants No.2 and 3 Brikam Dass and Chander Ram, respectively, were the guarantors for the due repayment of the loan amount together with interest. Bhagat Ram did not repay the loan amount in accordance with the agreed schedule. Plaintiff filed a suit in this Court for the recovery of rupees 2,31,618 alongwith pendent lite and future interest at the rate of 17% per annum with quarterly rests from the date of the suit till the date of realization of the amount.
4. It transpires during the pendency of the suit, the truck HID 8753 which was hypothecated with the Bank was sold in auction for rupees 55,000 and this amount was released to the plaintiff Bank in terms of the orders of this Court dated April 7, 1994.
5. The case of the plaintiff Bank was Bhagat Ram agreed to pay the amount with interest of 2.5% over and above the Reserve Bank of India rate with a minimum of 12.5% per annum with quarterly rests. The loan was stipulated to be paid in 48 equal monthly instalments of rupees 3,000 alongwith interest commencing from one month after the date of the loan, i.e., December 13, 1987. It was agreed by Bhagat Ram and guarantors that the interest was liable to be charged at the rate as may be applicable from time to time. The loanee and guarantors also agreed to pay the penal interest in case of default in the payment of instalments at the rate of 2% over and above the agreed rate as applicable from time to time.
6. Plaintiff relied upon various confirmation letters including balance confirmation of March 15, 1988, March 15, 1989 and October 24, 1990. It is the further case of the plaintiff Bank that as the default was made by Bhagat Ram and guarantor in the payment of instalments, therefore, the plaintiff Bank was entitled to penal interest as agreed between the parties. Bhagat Ram failed to repay the loan and interest despite demands made including demands made by legal notices on various dates. Copies of those notices were also sent to the guarantors defendants No.2 and 3. It was the case of the plaintiff Bank that an amount of rupees 2,08,669 inclusive of interest upto 2.4.1999 was due from the defendant. For this purpose the plaintiff bank rely upon the statement of accounts, certified in accordance with the Bankers Books Evidence Act. Plaintiff Bank also claimed rupees 22,949 on account of interest and other charges with effect from April 23, 1991 till the date of filing of the suit, that is, December 30, 1991. Plaintiff Bank claimed in all rupees 2,31,618 from the defendants. Plaintiff Bank also claimed future interest at the rate of 17.5% per annum with quarterly rests with effect from December 31,1991, that is, the date succeeding the date
