A. P. RAVANI, V. H. BHAIRAVIA, J. ( 1 ) ETHICALLY immoral legally untenable and pernicious in its practical implications If one were to comment Upon the judgment and decree under appeal in the aforesaid terms it would be difficult rather almost impossible to contradict the statement on any rational and logical grounds being aggrieved by such judgment and decree passed by the learned C. J. (S. D.) Bhavnagar the appellant Union Bank of India original plaintiff has preferred this appeal ( 2 ) THE respondents are original defendants Defendants Nos. 1 to 3 are principal debtors and defendants Nos. 4 to 6 are guarantors. Defendants are business men Defendant Nos. 1 to 3 had opened cash credit hypothecation account with plaintiff-Bank. In this account loan amount sanctioned was to the extent of Rs. 1 75 0 Necessary documents in favour of the Bank including hypothecation agreement was executed by the principal debtors. Since the margin was not being maintained the Bank insisted for security and hence the principal debtors furnished the guarantee of defendants Nos. 4 to 6. Even thereafter the amount remained unpaid. Hence the plaintiff-Bank issued office demanding the amount due. Thereafter when the notice was not complied with the plaintiff Bank filed suit for recovery of Rs. 3 42 145 ps. with 17. 5 per cent interest. ( 3 ) THE suit was filed on 7/01/1989 Even before the suit became ripe Lok Adalat was to be held in July 1989. The defendants Nos. 1 to 3 who are principal debtors filed written statement while rest of the defendants have not even filed written statement. In the Lok Adalat the defendants filed purshis Ex. 31 admitting the claim of the Bank and praying for instalments and reduction of rate of interest from 17 5 per cent to 12 per cent. The Bank objected to the decree being passed as suggested by the defendants and the objections were filed by Ex. 32. Despite the objections of the trial Court passed decree describing in the decree that suit was called out in Lok Adalat in presence of the advocates of the parties and the compromise decree is passed. The trial Court directed that the defendants shall pay the amount of decretal dues by quarterly instalments Rs. 18 0 with 13 per cent interest (instead of 12 per cent as suggested by the defendants ). The trial Court directed that the defendants shall pay the amount of decretal dues by quarterly instalments Rs. 18 0 with 13 per cent interest (instead of 12 per cent as suggested by the defendants ). It is his decree which is challenged by the appellant original plaintiff-Bank. ( 4 ) IT is evident that the decree is passed as if the plaintiff-Bank has agreed to the compromise. This is contrary to the facts narrated in the judgment. The trial Court has discussed the objections submitted by the plaintiff-Bank and has overruled the objections. Even so the decree is passed as if it is a compromise decree. Thus the decree is not in conformity with the judgment as it is admittedly not a consent decree. Therefore on this ground alone the decree is required to be reversed and set aside arid the matter is required to be remanded to the trial Court for proceeding further in accordance with law. However the reasons given and the conclusion arrived at in the judgment passed by the trial Court are required to be examined and set aside. If this not done it may happen that the same mistake be repeated by the trial Court. ( 5 ) IT is an undisputed position that the transaction between the parties is a commercial one. The Bank advanced loan to the defendants or carrying on their business. Relying on the Division Bench decision of this High Court in the case of Central Bank of India Kutch v. M/s. P. K. Garments Industries Pvt. Ltd. reported in AIR 1986 Guj. 113 : [ 1985 (2) GLR 919 ]. the Bank objected to the grant of instalments and reduction of rate of interest as proposed in consent terms filed by the defendants. The trial Court overruled the objections and imposed the terms of settlement with little variation as regards rate of interest. 113 : [ 1985 (2) GLR 919 ]. the Bank objected to the grant of instalments and reduction of rate of interest as proposed in consent terms filed by the defendants. The trial Court overruled the objections and imposed the terms of settlement with little variation as regards rate of interest. The defendants had agreed to pay 12 per cent interest while the trial Court directed the defendants to pay interest at the rate of 13 per cent per annum The reasons which weighed with the trial Court in overruling the objections of the Bank are (I) that the defendants have shown real intention to make payment and they are ready and willing to pay regular instalments of the amount due and that their financial position is weak (ii) On account of the heavy back-log of the cases in Courts the litigation will be dragged on for years together (iii) The plaintiff-Bank being Nationalised Bank should adopt flexible and pragmatic approach and should not insist for contractual rate of interest ( 6 ) IT is unfortunate that the trial Court has not carefully considered the objections raised by the Bank The Bank had objected on principle and had relied upon a Division Bench judgment of this High Court in the Case of Central Bank of India (supra ). In para 8 of the judgment the Division Bench of this Court to which one of us (myself) was a party has after referring to proviso to Sec. 34 of the C. P. Code and definition not commercial transaction observed as follows (at page No 923 of GLR ). . ordinarily the rate of interest shall be contractual rate or such rate at which moneys shall be lent by the Nationalised Banks in relation to commercial transactions otherwise it will amount to the court granting credit facility to somebody elses money at a lower rate of interest The Bank would not have advanced a commercial loan at a lesser rate of interest. Because the party has committed default in payment and the Bank is required to file a suit against such party such a defaulting party cannot have the benefit of lesser rate of interest There fore ordinarily In such transactions the contractual rate of interest should be the rule and departure a rare exception in such transactions by the Public Financial Institutions where money is advanced on security including personal guarantees the granting of instalments is ruled out because that would frustrate the very purpose of taking security and granting of lesser rate of Interest 1s else ordinarily ruled out the aforesaid observations clearly indicate that the defaulting business men and traders are not entitled to credit facility at a lower rate of interest Precisely for this reason it is observed by the Court that because the party has committed default in payment and the Bank is required to file a suit against such party such a defaulting party cannot have the benefit of lesser rate of interest. ( 7 ) THE trial Court ought to have realised that contractual rate of interest should be the rule and departure a rare exception This is so because ordinarily the Court cannot and would not vary the terms of contract arrived at between the parties The mutual rights and obligations arising out of the contract are required to be respected and enforced by the Courts The Court cannot and would not vary the terms of contract and impose a new contract on the parties This is the basic underlying principle contained in the provisions of Sec. 34 of C. P. Code ( 8 ) IT is true that the Court has discretion to make departure from the aforesaid ordinary rule. But such cases would be only those in which it manifestly appears to the Court that the contract is unfair and unconscionable and its enforcement would be shocking to the conscience of the Court. The parties seeking variation in the rate of interest agreed to be paid should there by cogent evidence that the rate of interest agreed to be paid is usurious excessive or unreasonable. Unless this is shown It would not be just and proper for the Court to vary the terms of contract upon the parties. The parties seeking variation in the rate of interest agreed to be paid should there by cogent evidence that the rate of interest agreed to be paid is usurious excessive or unreasonable. Unless this is shown It would not be just and proper for the Court to vary the terms of contract upon the parties. In cases wherein the amount advanced is to be recovered by public financial institutions if the Courts were to determine the reasonable rate of interest it would be extremely hazardous and it may even lead to disastrous consequences. The task of managing the public money has been entrusted by the nation to the Bankers. It is not entrusted to the Courts. Therefore ordinarily it would not be proper for the Court to aggregate to themselves to task which is not assigned to them. The disastrous consequence which may follow are not difficult to be perceived. The defaulting debtor would in all cases be in a position to advance the case that on account of weak financial position it is not possible for him to make the payment of the amount due. Weak financial position can also be shown by window dressing the statements of accounts. It would not be possible for the Court to scrutinise the jugglery of figure work. If the course adopted by the trial Court is to be confirmed and if the bankers are required to take flexible and pragmatic approach as indicated by the trial Court it would be an invitation to the traders and businessmen to make defaults in making payment and enter a deal with bank officers. The bank officers would be supported by the judgments of the Courts delivered in the name of Lok Adalat. The properly window-dressed financial statements would show that the defaulting debtor was not in a position to make payment in due course. If this course were to be approved the honest debtors who are sincere and regular in making payment would be hit by the dishonest and unscrupulous people. Such persons would be protected under the safest shelter of the order of the Court. If this course were to be approved the honest debtors who are sincere and regular in making payment would be hit by the dishonest and unscrupulous people. Such persons would be protected under the safest shelter of the order of the Court. With utmost respect the trial Court has not realised the pernicious consequences likely to follow if the fist of the trial Court directing the Bankers to be flexible and pragmatic is allowed to remain in operation The path shown by trial Court may be flexible and it may be lebelled as practical also. But it can certainly be not said to be fair and reasonable. If such flexible and pragmatic approach is adopted by the Bankers the end product which may be delivered to the society would of be justice but it would certainly be attrocious injustice and ill-gotten gain by the defaulting debtors. All these would happen at the cost of the society. Such a course will have a dangerous portents for future working of the justice delivery system itself. Thus either on the basis of provisions of law or on the basis of flexible and pragmatic approach suggested by the trial Court the reasons given and the conclusion arrived at in the judgment cannot be sustained. ( 9 ) IN the instant case it is not even shown that the contractual rate of interest agreed between the Bank and the defendants was usurious excessive or unreasonable. Such was not even the case of the defendants. Therefore the representatives of the Bank and the Advocate of the plaintiff were justified in not agreeing to the terms of compromise. ( 10 ) IT is unfortunate that the trial Court has merely made passing reference and has not examined the principle laid down by the Madras High Court in the case of the South Indian Bank Ltd. v. M/s. V. Krishna Chetiar and Bros. reported in AIR 1976 Mad 215 . In para 23 of this judgment the Madras High Court has observed that to find out as to whether a particular rate of interest is usurious excessive or unreasonable the aggrieved party should at least let in evidence to show that such was not the rate of interest which the other banks charged under similar circumstances. There should be strong evidence which should provoke the Court to opine that the rate of interest was usurious excessive or unreasonable. There should be strong evidence which should provoke the Court to opine that the rate of interest was usurious excessive or unreasonable. As indicated hereinabove no such case was even pleaded by the defendants. Even if there be any such pleadings there is no evidence this point. Thus there was no reason to make departure from the rule enunciated by the Division Bench of this High Court in the case of Central Bank of India (supra ). ( 11 ) IT needs to be emphasised that weak financial condition should ordinarily not be the criterion for reducing the agreed rate of interest in commercial transactions. A business man or a trader or an industrialist who has taken loan from commercial bank or any other financial institution would commit default in making payment only when his financial Circumstances may not permit him to make regular payment and only when he is passing through financial crisis. Default in making payment would tell upon his credit. Even one default may be a precursor of major catastrophe. Whenever the Bank or financial institution is constrained to file suit for recovery of money from defaulting debtors in almost all cases it would be a case of weak financial position of the defaulting debtor. Therefore weak financial position of defaulting debtor ordinarily cannot be a relevant circumstance for making departure from the rule that in a commercial transaction the rate of interest to be awarded by the Court should be the contractual rate of interest. ( 12 ) IT is rather painful to observe that the trial Court appears to have been obsessed with the idea of certain number of disposals in Lok Adalat. Lok Adalats are not meant for pressurising the people and bringing pressure on the public officials. The representatives of the Bank were trying to project the public money. They are custodians of public money. They have to safeguard the interest of society. They cannot afford to be flexible and pragmatic as indicated by the trial Court. If they adopt the approach of flexibility and pragmatism keeping their eyes revetted on the disposed figures of the cases and on the encomium to be received in print media and from other interest groups the banker themselves would become bankrupt. They cannot afford to be flexible and pragmatic as indicated by the trial Court. If they adopt the approach of flexibility and pragmatism keeping their eyes revetted on the disposed figures of the cases and on the encomium to be received in print media and from other interest groups the banker themselves would become bankrupt. It is good that the representatives of the Bank have not succumbed to the pressures sought to be brought upon them and have not acquiesced in the decree imposed on them. ( 13 ) FOR the aforesaid reasons the judgment and decree passed by the trial Court is required to be reversed and set aside. However the question arises as to what order should be passed. In the instant case defendants Nos. 3 4 of 5 have not even filed written statement. The suit had not become ripe for hearing. It was hoisted through Lok Adalat. Therefore the proper course would be to remand the matter to the trial Court for proceeding further in accordance with law. ( 14 ) IN the result the appeal is allowed. The judgment and decree passed by the trial Court in Special Civil Suit No. 13 of 1989 is reversed and set aside. The findings and decision arrived at by the trial Court accepting the consent purshis Ex. 31 is also reversed and of aside. The objections submitted by the plaintiff-Bank Ex. 32 are uphold. The suit is remanded to the trial Court for proceeding further with same in accordance with law. (KMV) Suit remanded .