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2011 DIGILAW 1025 (KAR)

G. Basavaraj v. H. M. Shivappa Patel

2011-10-20

AJIT J.GUNJAL

body2011
Judgment :- 1. Even though the appeal is listed for admission, with consent, it is taken for final disposal. 2. The appeal is admitted to consider the following substantial question of law: (i) Whether the judgment and decree of Appellate Court is vitiated for not meeting the reasoning given by Trial Court? (ii) Whether the Appellate Court was justified in awarding interest @ 18% on the decreetal amount in the absence of any contract? 3. The facts necessary for the disposal of this appeal can be summarized as follows: 4. During the course of the judgment parties will be referred to as per their ranking before the Trial Court. 5. The plaintiff files a suit for recovery of Rs.25,000/- with interest at the rate of 18% from 5.3.1992 to 5.3.1995. Thus, the total amount recoverable by the plaintiff would be Rs.38,500/-. The plaintiff would aver that defendant had borrowed a sum of Rs.25,000/-as a hand loan from the plaintiff in the month of November 1991 promising to repay the same within a period of three months. Since, the defendant was closely known to the plaintiff he obliged and paid the above said amount. In order to show his good gesture defendant issued a post dated cheque dated 5.2.1992 drawn on Syndicate Bank, Sirigere Branch, Chitradurga District. When the time agreed upon for the repayment of the said amount was about to expire the defendant personally contacted the plaintiff and requested him to grant further time and also requested him not to present the cheque for realization. In the month of March 1992, the plaintiff once again contacted the defendant to ascertain as to whether the said cheque can be presented for realization. The defendant consented and accordingly, the plaintiff through his bankers United Bank of India presented the cheque for realization. The said cheque was returned with an endorsement ‘account closed’. This fact was communicated by the plaintiff to the defendant on 17.3.1992. In the circumstances, the plaintiff was convinced that defendant had closed the account only to avoid to pay the amount borrowed and to defraud the plaintiff. Hence, a notice was issued on 26.6.1992. Notwithstanding the said notice the defendant did not choose to pay the amount. But however, an untenable reply was sent on 16.4.1992. The plaintiff also filed a criminal case in C.C.No.337/1992 on the file of CJM, Shimoga, for recovery of the amount. Hence, a notice was issued on 26.6.1992. Notwithstanding the said notice the defendant did not choose to pay the amount. But however, an untenable reply was sent on 16.4.1992. The plaintiff also filed a criminal case in C.C.No.337/1992 on the file of CJM, Shimoga, for recovery of the amount. Incidentally, it is to be noticed that the said criminal case was filed for the offences punishable under Section 138 of the Negotiable Instruments Act, 1881 and also Section 420 of Indian Penal Code. It is not in dispute that the said criminal case is dismissed inasmuch as the subject matter is one of civil nature for recovery of money. Since, the amount was not paid the present suit is filed. 6. The defendant enters appearance files written statement inter alia contending that the said post dated cheque of 5.2.1992 was given by the defendant only towards the discharge of the loan, which was borrowed earlier in the year 1986. It is the specific plea that in the year 1986 the defendant had borrowed a sum of Rs.15,000/- from the plaintiff undertaking to pay the same with interest whenever the plaintiff demands the same. In the circumstances, the cheque was issued and the same had been presented and the amount borrowed in the year 1986 had been realized by the plaintiff. Hence, in the circumstances, the question of plaintiff basing his claim for recovery of money on the cheque dated 5.2.1992 would not arise. Another contention raised by the defendant is that the suit is barred by limitation inasmuch as the transaction has taken place in the year 1991 and the suit having been filed on 6.3.1995 is bared by statute. 7. On these spacious pleadings, the learned Trial Judge has framed the following issues: (i) Whether plaintiff proves that defendant borrowed a sum of Rs.25,000/- from plaintiff in the month of November 1991 and issued a post-dated cheque bearing No.140414, drawn on Canara Bank as a security? Addl. Issue No.1: Whether defendant proves that suit is barred by limitation. (ii) Whether plaintiff proves that defendant is liable to pay interest at the rate of 18% p.a. on the loan amount? (iii) Is plaintiff is (Sic.) entitled for suit claim? (iv) What order or decree? 8. In support of their respective pleadings both the plaintiff as well as the defendant have examined themselves and have marked the necessary documents. (ii) Whether plaintiff proves that defendant is liable to pay interest at the rate of 18% p.a. on the loan amount? (iii) Is plaintiff is (Sic.) entitled for suit claim? (iv) What order or decree? 8. In support of their respective pleadings both the plaintiff as well as the defendant have examined themselves and have marked the necessary documents. On behalf of the plaintiff, he was examined as PW1 and Exs.P1 to P5 were marked. On behalf of the defendant he was examined as DW1 and no documents were marked. 9. The learned Trial Judge having regard to the evidence let in was of the view that the cheque issued by the defendant was as a security towards the loan borrowed. Hence, the suit filed by the plaintiff is barred by statute inasmuch as under Article 19 of the Limitation Act, the time would commence on the date when the loan is made. Since, the suit itself is filed in the year 1995 it is barred by statute. Aggrieved by the said judgment and decree the plaintiff files an appeal. In the appeal the learned Appellate Judge has recorded a finding that in the absence of any pleadings and also the evidence it cannot be said that the cheque, which was issued by the defendant to the plaintiff can be construed as a security towards the discharge of the loan. Hence, the suit is well within time inasmuch as the cause of action arose on the date when the cheque was presented for realization and the date of dishonour. 10. The learned Appellate Judge has also found that the plaintiff is entitled for interest @ 18% from the date of the suit till realization of the entire amount. Aggrieved by the same the defendant is in appeal. 11. Mr. R.V. Jayaprakash, learned counsel appearing for the defendant in support of the substantial question of law would contend that awarding of interest at the rate of 18% from the date of suit till realization is not at all warranted. More so, having regard to the scope of Section 34 of Code of Civil Procedure. He submits that the amount, which was borrowed as a hand loan cannot be construed as a commercial transaction, which would warrant interest at the rate of 18%. More so, having regard to the scope of Section 34 of Code of Civil Procedure. He submits that the amount, which was borrowed as a hand loan cannot be construed as a commercial transaction, which would warrant interest at the rate of 18%. Another contention raised by him is that having regard to the findings recorded by the learned Trial Judge and the same having been reversed by the learned Appellate Judge without meeting the reasoning given by it would constitute a substantial question of law. More so, with reference to the issuance of the cheque whether it is towards the security of towards the discharge of the loan. 12. The learned counsel appearing for the plaintiff would submit that the interest, which is awarded by the learned Appellate Judge cannot be disturbed notwithstanding the fact the amount borrowed was not a commercial transaction. Nevertheless under Section 80 of the Negotiable Instruments Act, the interest awardable wound be 18%. 13. It is necessary for us to look into as to what exactly constitute a substantial question of law under Section 100 of Code of Civil Procedure. 14. The phrase substantial question of law as occurring in the amended section 100 is not define in the Code. The word substantial, as qualifying ‘question of law’, means – of having substance, essential, real, of sound worth, important or considerable. It is to be understood as something in contradistinction with – technical, of no substance or consequence or academic merely. But however, the legislature has chosen not to qualify the scope of ‘substantial question of law’ by suffixing the words ‘of general importance’ as has been done in many other provisions such as Section 109 of the Code or Article 133(1)(a) of the Constitution. The substantial question of law on which a second appeal shall be heard need not necessarily be a substantial question of law of general importance. A point of law, which admits of no two opinions, may be a proposition of law but cannot be a substantial question of law. To be ‘substantial’ a question of law must be debatable, not previously settled by law of the land or a binding precedent, and must have a material bearing on the decision of the case, if answered either way, insofar as the rights of the parties before it are concerned. To be ‘substantial’ a question of law must be debatable, not previously settled by law of the land or a binding precedent, and must have a material bearing on the decision of the case, if answered either way, insofar as the rights of the parties before it are concerned. To be a question of law ‘involving in the case’ there must be first a foundation for it laid in the pleadings and the question should emerge from the substantial findings of fact arrived at by court of facts and it must be necessary to decide the question of law for a just and proper decision of the case. An entirely new point raised for the first time before the High Court is not a question involved in the case unless it goes to the root of the matter. It will, therefore, depend on the facts and circumstance of each case whether a question of law is a substantial one and involved in the case or not; the paramount overall consideration being the need for striking a judicious balance between the indispensable obligation to do justice at all stages and impelling necessity of avoiding prolongation in the life of any lis. 15. Insofar as the judgment of the Appellate Court reversing the judgment of the Trial Court cannot be very cryptic. Indeed, the Appellate court has jurisdiction to reverse or affirm the findings of the Trial Court. The first appeal is a valuable right of the parties and unless restricted by law, the whole case therein is open for re-hearing both on questions of fact and law. The judgment of the Appellate Court must, therefore, reflect its conscious application of mind and record its findings supported by reasons, on all the issues arising along with the contentions, which are putforth. However, expression of general agreement with the findings recorded in the judgment under appeal should not be a device or camouglage adopted by the Appellate Court for shirking the duty cast on it. While a judgment of reversal the appellate court must remain conscious of two principles. Firstly, the findings of fact based on conflicting evidence arrived at by the Trial Court must weigh with the Appellate Court, more so when the findings are based on oral evidence recorded by the same Presiding Judge who authors the judgment. While a judgment of reversal the appellate court must remain conscious of two principles. Firstly, the findings of fact based on conflicting evidence arrived at by the Trial Court must weigh with the Appellate Court, more so when the findings are based on oral evidence recorded by the same Presiding Judge who authors the judgment. This does not mean that when an appeal lies on facts, the appellate Court is not competent to reverse a finding of fact arrived at by the Trial Judge. As a matter of law if the appraisal of the evidence by the Trial Court suffers from a material irregularity or is based on inadmissible evidence or on conjectures and surmises the appellate Court is entitled to interfere with the finding of fact. But while reversing a finding of fact the appellate Court must assign its own reasons for arriving at a different finding. An additional obligation has been cast on the Appellate Court by the scheme of the present Section 100 substituted in the Code. The First Appellate Court continues, as before, to be a final court of facts; pure findings of fact remain immune from challenge before the High Court in second appeal. The first Appellate Court is also a final Court of law in the sense that its decision of a question of law even if erroneous may not be vulnerable before the High Court in second appeal because the jurisdiction of High Court has now ceased to be available to correct the errors of law or the erroneous findings of the First Appellate Court even on questions of law unless such question of law be a substantial one. 16. The moot question is whether the cheque issued by the defendant can be construed as one given as a security or towards the discharge of the loan. Indeed, the pleadings in this regard, are required to be looked into. It is neither the case of the plaintiff nor the defendant that the said cheque has been issued as a security. The plaint averments would disclose that defendant in order to show his good gesture on his own accord had issued a postdated cheque dated 5.2.1992, which was drawn on Syndicate Bank, Branch Sirigere, District Chitradurga. The pleadings would disclose that the defendant had personally approached the plaintiff and requested him to grant some more time. The plaint averments would disclose that defendant in order to show his good gesture on his own accord had issued a postdated cheque dated 5.2.1992, which was drawn on Syndicate Bank, Branch Sirigere, District Chitradurga. The pleadings would disclose that the defendant had personally approached the plaintiff and requested him to grant some more time. A reading of the plaint does not disclose that there is an admission by the plaintiff in the pleadings that the said cheque was issued as a security. 17. Indeed, the written statement also does not indicate that the said cheque has been Re: Point No.1 issued to the plaintiff as a security. It is no doubt true that there is a statement made by the plaintiff during the course of his evidence that the said cheque was issued as a ‘Aadhaara’. To my mind unless there is a pleading to that effect either by the plaintiff or by the defendant, a mere stray sentence in the evidence cannot be construed as a substantive one for me to hold that the said cheque was issued as a security and not towards discharge of loan. It is no doubt true that the Bombay High Court in the case of Chintaman Dhundiraj Vs. Sadguru Narayan Maharaj Datta Sahsthan and others reported in AIR 1956 Bombay 553 has ruled that the limitation would commence from the date of transaction and not from the date of dishonour of the cheque inasmuch as if the said cheque is given as a security and not towards the discharge of the loan. The same view is expressed by the Allahabad High Court in the case of Dharam Singh vs. Khan Chand reported in AIR 1966 Allahabad 137 so also the Patna High Court in the case of Arjunlal Dhanji Rathod vs. Dayaram Premji Padhiar reported in AIR 1971 Patna 278. 18. Indeed, all these decisions would rest on the premise that there is a pleading to the effect that the cheques were issued as a security. But however, that is not the case here. The pleadings do not disclose that the cheque was issued as a security. Indeed, the next question would be when does period of limitation commence if the cheque is issued towards discharge of loan. But however, that is not the case here. The pleadings do not disclose that the cheque was issued as a security. Indeed, the next question would be when does period of limitation commence if the cheque is issued towards discharge of loan. This question is no longer resintigra inasmuch as this Court in the case of Surendra vs. Smt. Padma and other reported in ILR 2000 KAR 579 has observed that right to sue in case one of recovery of the amount would commence from the date when the cheques are dishonoured by the bank. 19. In the case on hand the cheque in question was returned with an endorsement account closed’ on 17.3.1992 and the suit is filed on 6.3.1995, which according to me would be well within time. 20. A perusal of the judgment and decree of the Appellate court would clearly disclose that the learned Appellate Judge has considered the evidence of the parties both oral and documentary in extensor and has recorded its finding reversing the judgment and decree passed by the learned Trial Judge. To my mind the evidence having been considered by the Appellate Court and the reasoning having been met and assigned for reversing the findings to that extent the finding cannot be disturbed. Point No.2 21. Insofar as the interest component is concerned Mr. R.V. Jayaprakash, learned counsel is on a firm ground. It is not in dispute that the pleadings would disclose that the amount borrowed was not towards a commercial transaction but it was a hand loan simplicitor inasmuch as both the plaintiff and the defendant appear to be close friends. Hence, I am of the view that awarding of interest at the rate of 18% from the date of suit till recovery would be on the higher side. 22. Indeed Section 34 of the Code of Civil Procedure would deal with the interest, which is awardable in the case of a decree for payment of money. The first proviso to Section 34 would indicate that if the liability in relation to the sum so adjudged had arisen out of a commercial transaction, the rate of such interest may extend upto 6% p.a., but shall not exceed 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 commercial transactions. But the amount which was borrowed by defendant was not a commercial transaction but a hand loan simplicitor. I am of the view that the learned Appellate Judge was not justified in awarding interest at the rate of 18% from the date of suit till the date of realization. To that extent, the petitioner is entitled to succeed. Hence, the following order. Appeal is accepted in part. The Judgment of decree passed by the learned Appellate Judge stands modified to the extent of grant of interest which shall be at the rate of 8% from the date of suit till the date of realization. The rest of the findings are confirmed. Appeal stands disposed of accordingly.