1994 Supreme(HP) 73

High Court Of Himachal Pradesh
DEVINDER GUPTA
PUNJAB NATIONAL BANK - Appellant
Versus
SURINDER SINGH MANDYAL - Respondent
Civil Suit No. 61 of 1986
Decided On : 04/25/1994

Headnote:

BANKING - LOAN - INTEREST - APPROPRIATION OF PAYMENTS - SECTION 34 OF THE CODE OF CIVIL PROCEDURE - PRINCIPAL SUM ADJUDGED - MEANING OF - INTEREST PENDENTE LITE AND FUTURE INTEREST - AWARD OF - RATE OF INTEREST - DISCRETION OF THE COURT - FACTORS TO BE CONSIDERED.

Fact of the Case:

The plaintiff-bank claimed a decree for Rs. 2,34,722.05 against defendants Nos. 1 and 2 as principal debtors and defendants Nos. 3 and 4 as guarantors. It was alleged that the plaintiff through its Branch at Kotwali Bazar, Dharamshala, at the behest of defendants Nos. 1 and 2 agreed to make available to them a term loan of Rs.1,96,000/- for purchase of a Tata 1985 Model Chassis and for fabrication of bus body thereupon, which was to be plied by them. This financial assistance by way of transport loan was agreed to be made available with condition of repayment of the amount of loan with interest at 2.5% above the Reserve Bank of India rate of interest with minimum of 12.5% per annum with quarterly rests, payable in 42 regular monthly instalments and on defendants Nos.1 and 2 furnishing adequate security for repayment of the amount of loan. Defendants Nos. 1 and 2 accepted the conditions and provided defendants Nos. 3 and 4 as guarantors. Defendant No.2 also pledged his fixed deposit receipt dated 13th November, 1984, which he had taken from the State Bank of India Yol Camp Branch, District Kangra for Rs. 20,000/-. Necessary loan documents were executed by defendants Nos. 1 and 2. Defendants Nos. 3 and 4 also furnished guarantee deeds guaranteeing the repayment of the amount of loan with interest. Loan amount was availed and utilised for the purpose for which it was obtained. Defendants Nos. 1 and 2 had been irregular in making the payment due to some dispute amongst them. Bus was also not being plied since April 1986. A notice was served on all the defendants to repay the amount of loan. Defendants Nos. 1 and 2 had also confirmed the balances. As per the statement of account, the suit amount was due and payable, which the defendants are liable to pay with costs and future interest.

Finding of the Court:

1. The suit has been properly instituted by a person competent to do so. 2. The defendants Nos. 3 and 4 are liable only to the extent of principal amount and not for interest, in terms of the deeds of guarantee. 3. The plaintiff-bank had not obtained signatures of defendants Nos. 3 and 4 on blank form of guarantee. 4. The guarantee is a continuing guarantee and shall not be considered to be cancelled or in any way affected for any reasons whatsoever till the entire debt is cleared off. 5. The inaction on the part of the plaintiff to take possession of the vehicle and to get recovered its amount expeditiously does not absolve defendants Nos. 3 and 4 of their liability. 6. The vehicle as per deed of hypothecation Ex.P-4 stands hypothecated with the plaintiff as a security for the repayment of the amount of loan. 7. The suit amount includes the principal amount, the amounts spent by the plaintiff on behalf of the defendants and interest calculated on the amounts due at the stipulated rate of interest i.e. 12.5% per annum with quarterly rests up to the date of suit. 8. The ordinary rule of appropriation of applying the payment made by the debtor in the first instance towards the satisfaction of interest and thereafter towards the payment of the principal, in the absence of specific directions from the debtor has been approved by the Supreme Court in Meghraj v. Mst. Bayabai, AIR 1970 SC 161. 9. The amount due on the fixed deposit receipt, which is payable to defendant No. 2 by the State Bank of India Yol Camp (FDR No. 110268 dated 13th November, 1984),inclusive of interest accrued thereupon, after getting the same reinvested and renewed from the date of maturity till payment shall be adjustable by the plaintiff towards loan amount. 10. As on the date of suit, plaintiff- bank was entitled to recover a sum of Rs. 2,34,772.05 from the defendants jointly and severally towards the principal along with interest accrued thereupon and towards the amount spent by it on behalf of defendants Nos. 1 and 2. 11. The principal sum for the purpose of S. 34 of the Code is adjudged as Rs. 1,96,000/-. 12. A decree for RS.2,34,722.05 paise with costs of Suit is passed in favour of the plaintiff against the defendants jointly and severally. The plaintiff is also held entitled to pendente lite interest on the principal sum adjudged, namely, Rs. 1,96,000/- at the rate of 12.5% per annum with quarterly rests and future interest from the date of passing of decree till payment at the same rate. Rs. 1,28,000/- paid by defendant No. 2 to the plaintiff is held liable for being adjusted firstly towards the interest and balance, if any, towards the principal. The amount accrued due on fixed deposit receipt, pledged by defendant No. 2, inclusive of interest till the date of realisation, is, however, made liable for being adjusted towards the principal. Insurance premium of Rs. 44,154/for the period till September,1993 is also held liable for being included in the amount recoverable by the plaintiff from the defendants.

Issues: 1. Whether the suit has been instituted by a person competent to do so? 2. Whether guarantors - defendants Nos. 3 and 4 are only liable to the extent of Rs. 1, 86,000 /- 1,96,000 / -? 3. Whether the plaintiff-bank is entitled to recover Rs. 2,34,722.05 P or any other amount from the defendants. 4. Relief.

Ratio Decidendi: 1. The principal sum for the purpose of Section 34 of the Code of Civil Procedure is the original amount lent without the addition thereto of any interest whatsoever. 2. Interest pendente lite and future interest is awardable solely at the discretion of the Court. 3. The normal rule is that pendente lite and future interest should not be refused except for sufficient reasons and it will be for the party resisting the grant of pendente lite and future interest to being on record circumstances justifying exercise of discretion in its favour by disallowing interest. 4. The rate of pendente lite and future interest is also at the discretion of the Court, namely, "not exceeding 6% per annum, as the Court may deem reasonable." 5. The proviso to sub-clause (2) of S. 34, however, in so far as the liabilities arising out of commercial transactions, empowers the Court to grant pendente lite and future interest exceeding 6% per annum, but not exceeding the contractual rate of interest. In case, there is no contractual rate, the rate of interest to be allowed cannot exceed the rate at which moneys are lent or advanced by the nationalized banks in relation to commercial transactions.

Final Decision: A decree for RS.2,34,722.05 paise with costs of Suit is passed in favour of the plaintiff against the defendants jointly and severally. The plaintiff is also held entitled to pendente lite interest on the principal sum adjudged, namely, Rs. 1,96,000/- at the rate of 12.5% per annum with quarterly rests and future interest from the date of passing of decree till payment at the same rate. Rs. 1,28,000/- paid by defendant No. 2 to the plaintiff is held liable for being adjusted firstly towards the interest and balance, if any, towards the principal. The amount accrued due on fixed deposit receipt, pledged by defendant No. 2, inclusive of interest till the date of realisation, is, however, made liable for being adjusted towards the principal. Insurance premium of Rs. 44,154/for the period till September,1993 is also held liable for being included in the amount recoverable by the plaintiff from the defendants. After the adjustments have been made in the manner aforementioned, the balance outstanding at the first instance is made recoverable by sale of the hypothecated vehicle in question, namely, Bus HPK-2170 and balance, if any, against the person and property of the defendants.