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1996 86 CompCas 147 MP, 1994 (0) MPLJ 610
Faizanuddin, Actg. C.J.
Ramashre Chandrakar
vs
Dena Bank And Anr.
DECIDED ON : 24 September, 1993
AGRICULTURE - COMMERCIAL TRANSACTION - SECTION 34 OF THE CODE OF CIVIL PROCEDURE, 1908 - INTERPRETATION - INTEREST ON PRINCIPAL SUM - PENDENTE LITE AND POST-DECRETAL INTEREST - RATE OF INTEREST.
Fact of the Case:
The appellant, a principal debtor, obtained a loan from the respondent-bank for agricultural purposes. The loan agreement specified an interest rate of 4 1/2% per annum above the rate notified by the Reserve Bank of India or at least 11% per annum. The appellant failed to repay the loan, and the bank filed a suit for recovery of the loan amount with interest. The trial court decreed the suit for Rs. 10,995.34 with future interest at the rate of 11% per annum from the date of institution of the suit till recovery. The lower appellate court affirmed the judgment and decree of the trial court, but modified the decree to Rs. 7,272.40 with future interest at the rate of 11% per annum with effect from November 10, 1980, till recovery.
Finding of the Court:
The court held that the loan obtained by the appellant for agricultural purposes constituted a commercial transaction, and therefore, the proviso to Sub-section (1) of Section 34 of the Code of Civil Procedure, 1908 (the Code) read with Explanation II thereof would be fully attracted. Consequently, the appellant would not be entitled to the benefit of the provisions of Section 34(1) of the Code for the purpose of payment of pendente lite or post-decretal interest; but he would be liable to pay the contractual rate of interest and in the absence of any agreement in respect of rate of rent to pay at the rate at which moneys are lent or advanced by nationalised banks in relation to the commercial transactions.
Issues: 1. Whether the loan obtained by the appellant for agricultural purposes constituted a commercial transaction? 2. Whether the appellant was entitled to the benefit of the provisions of Section 34(1) of the Code for the purpose of payment of pendente lite or post-decretal interest? 3. Whether the appellant was liable to pay the contractual rate of interest or the rate at which moneys are lent or advanced by nationalised banks in relation to the commercial transactions?
Ratio Decidendi: 1. The court held that agriculture is a profession which falls within the four corners of the word "business" and if it is a business, it would be covered by Explanation II of the proviso to Section 34 of the Code. Consequently, it would be open to the courts to award the contractual rate of interest or where there is no contractual rate the rate at which moneys are lent or advanced by nationalised banks in relation to the commercial transactions. 2. The court held that the appellant was not entitled to the benefit of the provisions of Section 34(1) of the Code for the purpose of payment of pendente lite or post-decretal interest, as the loan obtained by him for agricultural purposes constituted a commercial transaction. 3. The court held that the appellant was liable to pay the contractual rate of interest or the rate at which moneys are lent or advanced by nationalised banks in relation to the commercial transactions.
Final Decision: The appeal was partly allowed. The decree passed by the lower appellate court was modified only to the extent that the plaintiff-bank would be entitled to interest on the original principal sum, i.e., Rs. 4,728.25, at the rate of 11% per annum with effect from November 10, 1980, till recovery thereof.
Faizanuddin, Actg. C.J.
1. This second appeal by the principal debtor/ defendant No. 1 has been preferred against the judgment and decree dated June 13, 1985, passed by the first additional judge to the Court of District Judge, Durg, in Civil Appeal No. 12A of 1982, arising out of the judgment and decree-dated October 30, 1981, passed by the Additional Civil Judge, Class-I, Durg, in Civil Suit No. 9A of 1980,
2. The plaintiff/respondent No. 1, Dena Bank, is carrying on banking business. It has its branch at Gunderdehi, Tahsil and district Durg. The appellant/defendant No. 1, Ram Ashre Chandrakar, applied to the respondent-bank for grant of loan to meet his agricultural needs, namely, for purchase of seeds and fertilizer for cultivation of his land. The respondent-bank granted a loan of Rs. 4,728.25 to the appellant/defendant No. 1 for the said purpose and advanced the said amount to the appellant on July 25, 1971, for which the appellant executed a demand promissory note dated May 25, 1971 (exhibit P-3). The said promissory note recites that the p loan amount shall carry interest at 4 1/2 per cent. per annum above the rate of interest notified by the Reserve Bank of India or at least at the rate of 11 per cent. per annum. One Heera Ram (since deceased) and respondent No. 2, Sonau Ram, stood as guarantors to the principal-debtor. The promissory note (exhibit P-3) was signed by the principal debtor and his two guarantors. The principal-debtor and his guarantors also executed a letter of continuity (exhibit P-4) on May 25, 1971, as well as deed of agreement (exhibit P-5) pledging the produce in favour of the respondent-bank which was to be raised on his agricultural land as security for repayment of the loan amount. The appellant/defendant No. 1 failed to repay the said loan amount with interest and, therefore, the respondent-bank served a notice, exhibit P-8, to the principal debtor/defendant No. 1 and his two guarantors to repay the loan amount with interest and when the principal debtor and his guarantors failed to pay the amount with interest, the respondent-bank filed a suit for recovery of Rs. 13,210 including the principal and the interest.
3. Heera Ram, one of the guarantors, who was impleaded as defendant No, 2, died during the pendency of the suit and as no legal representatives were brought on record, the suit abated against him. The second guarantor defendant/respondent No. 2, Sonau Ram, did not defend the suit and preferred to remain ex parte. The principal-debtor/defendant No. 1, however, contested the suit by filing the written statement denying the plaintiff/respondent No. 1's claim. He took the plea that the alleged loan amount of Rs. 4,728.25 was not advanced to him in cash by the respondent-bank; but he was supplied with the fertiliser of that value with interest at the rate of 41/2 per cent. per annum. The appellant/defendant No. 1 averred that the respondent-bank had obtained his signatures on various blank papers. He also took the plea that the respondent-bank had filed the suit through its development manager, who had no authority to do so and, therefore, the suit was liable to be dismissed having been filed by an unauthorised person. The appellant/defendant No. 1 also averred that the rate of interest was 41/2 per cent. per annum and the suit was barred by time.
4. The learned trial judge after recording the parties evidence, rejected all the defence pleas and decreed the plaintiff/respondent No. 1's suit for Rs. 10,995.34 with future interest at the rate of 11 per cent. per annum from the date of institution of the suit till recovery/The respondent-bank filed a photostat copy of a power of attorney in favour of Shri U. C. Koya, Development Manager, Raipur, along with an application under Order 41, Rule 27 of the Code of Civil Procedure, 1908. The said application was allowed and the judgment and decree of the trial court was affirmed with a modification that on November 10, 1980, a sum of Rs. 7,272.40
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