Directions of Reserve Bank not binding on the loanee.

Bellie, J.

1. The plaintiff Bank is the appellant in this Letters Patent appeal. The Syndicate Bank, Pollachi Branch, filed the suit against the defendants for recovery of a sum of Rs. 12,533-55 alleged to be due on a promissory note Ex.A-1, dated 16.2.1970. This promissory note was executed by the defendants for the loan of Rs. 22,900 received from the Bank for purchase of a tractor by the first defendant. First defendant is the son and the second defendant is his father and it appears the second defendant has joined in the promissory note as surety for his son the first defendant. The suit claim is alleged to be due after deduction of the amount paid by the defendants.

2. In the written statement various contentions were raised which were all considered by the trial Court which decreed the suit. With respect to one contention the defendants preferred an appeal and that contention is with regard to the rate of interest charged by the plaintiff Bank and in the appeal A.S. No. 174 of 1980 Swamikkannu, J. accepted the contention of the defendants and modified the decree.

3. As per Ex.A-1, promissory note the interest payable is 9 per cent per annum. The defendants executed on Ex.A-4 on 2.9.1972, a letter acknowledging the debt due under ExA-1 promissory note. Similarly, they executed another acknowledgement letter on 12.9.1974. These two letters obviously have been obtained for the purpose of saving limitation. But, in these letters while stating the case of promissory note and the principal amount no rate of interest has been mentioned. The plaintiff-Bank served a letter ExA-19, dated 12.9.1974 on the first defendant and obtained his acknowledgement thereof. In this letter it is mentioned that in respect of loan No. 19 of 1970 from the Bank by the defendants the rate of interest has been raised from 13 per cent to 14 1/2 per cent per annum from 23.7.1974. While so, as seen from the evidence of P.W.1, farm representative of the plaintiff-Bank, on the principal amount due they have charged interest at 11 per cent from 9.1.1971, at 12 per cent from 1.6.1973, at 13 per cent from 162.1974 at 14 1/2 per cent from 23.7.1974, at 15 1/2 per cent from 1.8.1974, as 21 per cent from 16.2.1975 at 18 per cent from 1.7.1976 and at 17 1/2 per cent from 1.3.1978. According to the defendants the agreed rate of interest mentioned in the promissory note being only 9 per cent per annum, the plaintiff Bank cannot charge interest more than that and hence interest amount calculated at the said rates cannot be allowed. As regards this, the case of the plaintiff Bank is that the Reserve Bank of India would vary the rate of interest chargeable from tune to time and that would be higher or lesser than the prevailing rate and accordingly the Bank would charge interest on the loan amounts and the interest charged in the present case was only because of such variations of interest rates enhanced by the Reserve Bank of India and therefore, the defendants are liable to pay interest at those rates. The trial Court did not accept the case of the defendants and therefore, it decreed the suit for the entire interest charged.

4. In the appeal the learned single Judge of this Court who heard the appeal accepted the contention of the defendants and held that interest could be charged only at 9 per cent per annum and not more than that and therefore, he allowed the appeal which was filed with regard to the excess interest claimed which was Rs. 7,000. As against this judgment the plaintiff Bank has filed this Letters Patent Appeal.

5. Now the learned Counsel for the appellant plaintiff Bank, argues that it is not the plaintiff Bank, which arbitrarily increased the rate of interest 9 per cent and the increase was only because of the direction of the Reserve Bank of India fixing the rates of interest from time to time which was, as bound to do, followed by the Bank, and hence the defendants are liable to pay interest at the increased rate. The learned Counsel has also