The court has the discretion to award interest at a reasonable rate in mortgage suits, even if it differs from the contractual rate, and Section 21-A of the Banking Regulation Act restricts the court from reopening a transaction between a banking company and its debtor on the ground that the rate of interest charged is excessive.

1. This suit is filed by a Nationalised Bank for recovery of a sum of Rs.74,81,271.40P. together with interest at 25% per annum with quarterly rests by sale of the mortgage properties and also personally from the defendants.

2. The facts which are not disputed are, that the first defendant availed financial assistance from the Bank of Tamil Nadu which is now merged with the plaintiff-Bank. It is said that as per three financial facilities of Rs.5,50,000 Rs.7,50,000 and Rs. 1,77,000 amountswere due from the defendants. It is also said that an equitable mortgage has been created by deposit of title deeds by defendants 2 and 3. The facilities were availed for construction of a cinema theatre and for purchase of machineries for the same. It is also averred that the contract rate of interest was 19 1/2% per annum with quarterly rests. Since the Bank is supervised and controlled by the Reserve Bank of India, they are bound to implement the rates of interest as revised from time to time. It is said that from 14. 1982 till 7. 1991 the defendants are liable to pay interest at 91/2% per annum with quarterly rests and from 7. 1991 they are (plaintiff) entitled to calculate interest at 25% per annum with quarterly rests. On the basis of calculation, it is said that the defendants are liable to pay an amount of Rs.74,81,271.40P. It is said that various demands were made for settling the transaction. But in spite of the same, the defendants have not cared to do so, which necessitated the filing of the suit. It is also averred that the defendants had been renewing the documents from time to time.

3. In the written statement filed by the defendants, the transaction is not disputed. They only say that the rate of interest calculated is excessive. According to the defendants, the suit claim is isolated and loaded with interest much more than the borrowed sum that the plaintiff-Bank has a special financial role to play in the economic life of the people, that it is not a money lender only bent upon earning interest, that the industrial finance has different legal incidents, and that the straight and bonafide course for such a Bank is to call for the discharge of the loan if the operation of the account has been irregular, if the project has become a failure, and if the securities have depleted.

4. On the basis of the pleadings, the following issues have been raised: -

.(1) Whether the interest claimed by the plaintiff/Bank is excessive? and

.(2)

.(2) To what relief, if any, is the plaintiff entitled?

5. By consent of parties, Ex.P-1 to P-78 are marked. They are documents filed by the plaintiff bank to prove the transaction and also the Circulars from time to time regarding the rate of interest. Even though the amount borrowed is only Rs.14 lakhs, the amount now claimed is more than Rs.74 lakhs, i.e., more than Rs. 60 lakhs is claimed towards interest, and that is challenged by the defendants in the written statement.

6. Issue Nos. 1 and 2. In the documents executed by the defendants, the rate of interest is mentioned as 19 1/2 per annum with quarterly rests. The lender Bank was the plaintiffs predecessor, namely, Tamil Nadu Bank Limited. The defendants have executed various documents evidencing same.

7. Since the suit is for recovery of money by sale of mortgage properties, the provisions of Section 34 of the Code of Civil Procedure may not apply. We are governed by Order 34, Rule 11, C.P.C. and also Section 21-A of the Banking Regulation Act. Since Order 34, Rule 11, C.P.C. governs the matter, it is better we consider that provision before going to the case-law on the point. It reads thus:- Payment of interest- In any decree passed in a suit for foreclosure, sale or redemption, where interest is legally recoverable, the Court, may order payment of interest to the mortgagee as follows namely:-

.(a) interest upto the date on or before which payment of the amount found or declared due is under the preliminary decree to be