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Madhya Pradesh High Court · body

2007 DIGILAW 543 (MP)

State Bank of India v. Naresh Kumar Singh

2007-05-08

S.A.NAQVI

body2007
JUDGMENT 1. Appellant has preferred this appeal aggrieved by the impugned judgment dated 2.9.1996 passed by IInd Additional District Judge, Gwalior in Civil Suit No. 14-B of 1982 whereby, a decree has been passed in favour of the appellant for Rs. 94,325.61 with interest at the rate of 6% per annum from the date of decree. 2. Admitted fact is that respondent No. 1 Naresh Kumar Singh purchased a Bus No. CPH 8232. 3. The facts of the case in brief are that respondent No. 1 obtained loan of Rs. 1,09,852.60 paise and executed an agreement for hypothecation of vehicle dated 2.8.1977 in favour of the plaintiff/bank. Respondent No. 1 agreed to pay interest at the rate of 14% per annum but as per the direction of the Reserve Bank of India, the interest was charged at the rate of 12.5 % per annum. The interest was to be paid separately with quarterly rests and in case of non-payment of the interest, the remaining interest was to be added in the principal amount. The loan was to be repaid in 50 monthly instalments of Rs. 2,200/- each. Defendant No. 2 stood guarantor to the loan of respondent No. 1 and executed a guarantee deed dated 2.8.1977. Thus, the defendants are jointly and severally liable to repay the loan. The defendant did not repay the loan inspite of repeated demands. The total amount due towards respondent is Rs. 94,325.61 paise on the date of suit. Consequently, appellant/plaintiff filed the suit for recovery of the aforementioned amount against respondent and defendant No. 2. 4. Defendants No. 1 and 2 filed separate written statements. Case of defendant No. 1 is that Bank is not entitled to institute the suit and that he availed the loan under the scheme of the Central and the State Government framed for the unemployed persons. The Central Government and the M.P. Government are the necessary parties in the suit. The defendant/respondent No. 1 further submitted that the Bank has obtained his signature on the blank papers. The defendant/respondent No. 2 vide his written statement denied the execution of the guarantee deed and submitted that the deed may be fraudulently got executed from him by the plaintiff/Bank. 5. Learned trial Court framed 13 issues. After recording evidence, hearing both the parties, perusing evidence and material on record, learned trial Court decreed the suit against respondents. 6. The defendant/respondent No. 2 vide his written statement denied the execution of the guarantee deed and submitted that the deed may be fraudulently got executed from him by the plaintiff/Bank. 5. Learned trial Court framed 13 issues. After recording evidence, hearing both the parties, perusing evidence and material on record, learned trial Court decreed the suit against respondents. 6. Appellant has preferred this appeal only against the part of decree by which, interest at the rate of 6% per annum has been awarded to plaintiff from the date of decree on the ground that the impugned judgment and decree to the extent of the interest is incorrect and illegal. This part of the decree is against the spirit of section 34 of CPC while awarding interest after the date of decree. The discretion exercised by the Court by virtue of this provision is to be obviously exercised in a judicious manner without being affected by arbitrariness and unreasonableness. The loan was for commercial purpose, consequently, as per contractual rate of interest, the interest should have been awarded by learned trial Court. Learned trial Court has committed error in relaxing the rate of interest for the post decree period. 7. Learned counsel for the respondent No. 2 supported impugned judgment and decree in respect of interest. 8. I have heard both the parties at length and perused impugned judgment and record of the trial Court. 9. No cross-objection or cross appeal has been filed by the respondents against impugned judgment and decree. Consequently, the finding arrived at by learned trial Court on Issues No. 1 to 12 is unchallenged and deserves to be affirmed. Consequently, finding on Issues No. 1 to 12 is hereby affirmed. 10. As per appellant/plaintiff, respondent No. 1 obtained loan from plaintiff to purchase chassis of vehicle. After purchasing chassis, respondent No. 1 was to build body of bus on it and consequently, respondent No. 1 obtained loan for plying bus. On going through the agreement i.e. hypothecation of loan, it is proved that the transaction was commercial one and respondent No. 1 obtained loan from appellant/plaintiff for commercial purpose. It is also proved by this document and evidence that rate of interest to the tune of 12.5% per annum was agreed to be paid by the respondent No. 1 on the principal amount. It is also proved by this document and evidence that rate of interest to the tune of 12.5% per annum was agreed to be paid by the respondent No. 1 on the principal amount. It is also proved that respondent No. 2 stood guarantor to the loan of respondent No. 1 and he executed guarantee deed in favour of the appellant. It has been held in (1999) 6 SCC 51 (Hotel Seaking and others v. Kerala Financial Corporation) that in case of a commercial loan provision under section 34 of the CPC shall not be applicable and contractual rate of interest shall be allowed to the borrower. In (1994) 4 SCC 368 (B. Shiananda v. Andhra Bank Ltd. and another) [1994 AIR SCW 2721] (Bank of India v. Kamam Ranga Rao and others) and 1989 (1) Bank CLR 350 (Wood Kumar Vagle v. State Bank of India and another), it has been categorically held that if a loan is for commercial transaction, the plaintiff is entitled for contractual rate of interest and the Court cannot limit rate of interest to 6% per annum from the date of decree till realization of amount. As I have already observed that the loan taken by the respondent No. 1 from the appellant/Bank was a loan for commercial purpose, consequentially, without assigning any reason, learned trial Court cannot use its discretion to limit rate of interest to 6% per annum. Learned trial Court did not assign any reason to limit rate of interest in the impugned judgment. Looking to the principles laid down in aforementioned citations, I am of the view that the appellant is entitled to interest at the rate of contractual rate i.e. 12.5% per annum from the date of decree till realization of the amount. Learned trial Court committed error in awarding interest at the rate of 6% per annum to the appellant. 11. Consequently, appeal is allowed. Impugned judgment and decree passed by learned trial Court is modified and interest of amount is enhanced from 6% per annum to 12.5% per annum as simple interest from the date of decree passed by learned trial Court till realization. Looking to the facts and circumstances of the case, both parties shall bear their own costs of this appeal. Decree be drawn accordingly.