JUDGMENT : V. GOPALA KRISHNA RAO, J. 1. This Appeal, under Section 96 of the Code of Civil Procedure [for short ‘the C.P.C.’] is filed by the Appellant/defendant challenging the Decree and Judgment, dated 30.03.1999, in O.S. No. 41 of 1997 passed by the learned Senior Civil Judge, Puttur [for short ‘the trial Court’]. The Respondent herein is the plaintiff in the said Suit. 2. The respondent/plaintiff filed a Suit for recovery of Rs.2,88,667.50 paise being the principal and interest due on an agreement of hypothecation dated 27.02.1993 executed by the defendant in favour of plaintiff’s bank for Rs.1,70,000/- payable with interest at 15.5% p.a. and for further interest and for costs. 3. Both the parties in the Appeal will be referred to as they are arrayed before the trial Court. 4. The brief averments of the plaint, in O.S. No. 41 of 1997, are as under: The plaintiff bank at the request of the defendant extended its financial assistance by granting an agricultural term loan of Rs.1,70,000/- for the acquisition of tractor and trailer and accessories. The plaintiff bank opened a ledger account in the name of defendant and sanctioned the loan amount. The defendant has executed an agreement for the hypothecation undertaking to repay the loan amount of Rs.1,70,000/- with interest at 15.5% p.a. and also executed a revival letter dated 11.01.1995, subsequently, the defendant failed to discharge the suit debt to the plaintiff bank. Inspite of demands, through registered notices, the defendant has not chosen to discharge the amount of Rs.2,88,667.50 paise as on 13.07.1997. Hence the plaintiff bank is constrained to file the suit. 5. The defendant filed a written statement denying all the contents of the plaint and further contended as under: The ledger extract and account copy of plaintiff bank are highly suspicious, mala-fide and misleading. The plaintiff is not entitled to claim interest on 1/2 years rests and the rate of interest is excessive and unreasonable. 6. Based on the above pleadings, the trial Court framed the following issues: (i) Whether the plaintiff is entitled the suit claim? (ii) To what relief? 7. During the course of trial in the trial Court, on behalf of the Plaintiff, PW1 to PW3 were examined and Ex.A1 to Ex.A14 were marked. On behalf of the Defendant DW1 was examined and Ex.B1 was marked. 8. (ii) To what relief? 7. During the course of trial in the trial Court, on behalf of the Plaintiff, PW1 to PW3 were examined and Ex.A1 to Ex.A14 were marked. On behalf of the Defendant DW1 was examined and Ex.B1 was marked. 8. After completion of the trial and on hearing the arguments of both sides, the trial Court decreed the suit vide its judgment, dated 30.03.1999, against which the present appeal is preferred by the appellant/defendant in the Suit questioning the Decree and Judgment passed by the trial Court. 9. Heard Sri M. Vengaiah, learned counsel representing Sri V. Jagapathi, learned counsel for appellant and Sri Venkata Rama Rao Kota, learned counsel for the respondent. 10. The learned counsel for appellant would contend that the decree and judgment passed by the Court below is illegal, improper and contrary to the evidence on record and the probabilities of the case and he would further contend that the trial Court did not appreciate the evidence of both sides properly. He would further contend that the balance sheet of the defendant’s account reveals that it did not account for the amount deposited by the appellant nor interest was properly calculated. 11. Now, in deciding the present appeal, the point that arise for determination are as follows: Whether the trial Court is justified in decreeing the suit and whether the decree and judgment passed by the trial court needs any interference? 12. Point: The case of the plaintiff is that the plaintiff bank at the request of the defendant extended its financial assistance by granting agricultural term loan of Rs.1,70,000/- for acquisition of tractor and trailer and accessories and the defendant has executed an agreement of hypothecation undertaking to repay the loan amount of Rs.1,70,000/- availed with interest at 15.5% p.a. and he deposited title deeds relating to landed properties at Pudi village with an intention to create an equitable mortgage and finally confirmed the balance of Rs.1,83,049/- on 11.01.1995 by executing a debit confirmation letter in favour of the bank and subsequently the appellant/defendant failed to discharge the suit debt to the plaintiff bank. 13. In order to prove the case of the plaintiff, the plaintiff relied on the evidence of PW1 to PW3 and marked Ex.A1 to Ex.A14. 13. In order to prove the case of the plaintiff, the plaintiff relied on the evidence of PW1 to PW3 and marked Ex.A1 to Ex.A14. As per the evidence of PW1, the plaintiff bank granted loan to the defendant and the defendant in turn executed agreement of hypothecation deed under Ex.A1 on 27.02.1993 and deposited the title deeds under Ex.A2 to Ex.A4, Ex.A5 is the confirmation letter, Ex.A6 is the revival letter, Ex.A7 is the another debit confirmation letter. The plaintiff also relied on the ledger extract of the account of the appellant/defendant which is exhibited as Ex.A8. Ex.A9 coupled with Ex.A10 clearly goes to show that prior to institution of the suit, the plaintiff bank issued a legal notice to the defendant and the defendant acknowledged the same under Ex.A10. Furthermore, Ex.A11 also goes to show that the defendant executed arrangement letter dated 27.02.1993 and Ex.A12 also goes to show that insurance premium amount was paid to cover the loan transaction. Ex.A13 is the circular issued by the Reserve Bank of India with regard to rate of interest, Ex.A14 is the another circular issued by the Reserve Bank of India. The plaintiff relied on the evidence of PW1 and also relied on documentary evidence i.e., Ex.A1 to Ex.A14. The evidence of PW1 coupled with Ex.A1 to Ex.A14 clearly goes to show that the appellant/defendant availed loan amount of Rs.1,70,000/- from the plaintiff bank, State Bank of India, Vadamalapeta Branch and failed to discharge the said debt. Furthermore, he created equitable mortgage and also confirmed the balance due of Rs.1,83,049/- by executing a debt confirmation letter as stated supra. 14. The plaintiff also relied on the evidence of PW2 and PW3. Ex.A1, Ex.A5 to Ex.A7 are the crucial documents to prove the suit transaction. PW2 is the one of the witness in whose presence the appellant executed Ex.A1, Ex.A5 to Ex.A7. PW3 is the scribe of Ex.A1, Ex.A6, Ex.A7 and Ex.A11. The evidence of PW2 and PW3 supports the case of the plaintiff about borrowing of money by the appellant from the plaintiff bank and also execution of relevant documents as noticed supra. 15. In order to prove the defense, the appellant/ defendant is examined as DW1. PW3 is the scribe of Ex.A1, Ex.A6, Ex.A7 and Ex.A11. The evidence of PW2 and PW3 supports the case of the plaintiff about borrowing of money by the appellant from the plaintiff bank and also execution of relevant documents as noticed supra. 15. In order to prove the defense, the appellant/ defendant is examined as DW1. As per his evidence, he deposited an amount of Rs.55,000/- towards part payment of the loan but the bankers has not given any receipt on his payment and they obtained his signatures at the time of granting loan. In order to prove the said defense absolutely no iota of evidence is placed by the appellant. The contention of the appellant is that the plaintiff bank obtained his signatures on several documents and the plaintiff bank also not informed the interest at the time of granting loan. Here, it is to be seen that it is not the case of the appellant that he is an illiterate. The execution of relevant documents before the plaintiff bank and also availing of loan amount and creation of equitable mortgage is not at all disputed by the appellant/defendant, therefore, the entire burden rests on the appellant/defendant to prove that the plaintiff bank obtained his signatures on white papers and it is also his bounden duty to prove that he made certain part payment of Rs.55,000/- but the plaintiff bank has not given any receipt to that extent. Absolutely no evidence is placed by the appellant/defendant to prove his alleged defense as taken by him in the written statement. 16. The learned counsel for appellant would contend that the interest claimed by the plaintiff bank is excessive. Per contra, the learned counsel for respondent would contend that the plaintiff bank is entitled to get contractual rate of interest at 15% p.a. from the appellant along with outstanding balance. 17. In a case of N.M. Veerappa vs. Canara Bank and Others, (1998) 2 SCC 317 the Apex Court held as follows: Before summarising the legal position, we shall refer to two other rulings of this Court under Order 34 Rule 11. In Srinivasa Vardachariar and Others v. Gopala Menon and Others, (2002) 1 SCC 367 this Court was dealing not only with the substantive interest prior to suit (which was reduced to 10 compound) but also with interest after suit. In Srinivasa Vardachariar and Others v. Gopala Menon and Others, (2002) 1 SCC 367 this Court was dealing not only with the substantive interest prior to suit (which was reduced to 10 compound) but also with interest after suit. In Para 11 of the Judgment, this Court observed that the discretion exercised by the High Court under Order 34 Rule 11 in that case reducing the interest of 6% from date of suit to date of payment was not liable to be interfered with even though the High Court had not given reasons. It was said that it was obvious, on facts, that the mortgages were executed as far back as 1936 and 1938 and the creditor had waited till 1956 for filing the suit and would, in any event, get interest substantially exceeding the principal amount of the loans. K. Manickchand and Others v. Elias Saleh Mohamed Sait and Another also related to question of interest before suit and after suit. So far as the interest after suit was concerned, the High Court had granted interest at 6% from the date fixed for redemption till date of realisation. The date of suit was 10.1.1950, the date of decree of the trial Court was 27.3.1952. 18. In a case of Central Bank of India vs. Ravindra and Others, (2002) 1 SCC 367 the constitutional Bench of Apex Court held as follows: Though interest can be capitalised on the analogy that the interest falling due on the accrued date and remaining unpaid, partakes the character of amount advanced on that date, yet penal interest, which is charged by way of penalty for non-payment, cannot be capitalised. Further interest, i.e. interest on interest, whether simple, compound or penal, cannot be claimed on the amount of penal interest. Penal interest cannot be capitalised. It will be opposed to public policy. The Apex Court further held as follows: Subject to the above we answer the reference in following terms: (1) Subject to a binding stipulation contained in a voluntary contract between the parties and/or an established practice or usage interest on loans and advances may be charged on periodical rests and also capitalised on remaining unpaid. The principal sum actually advanced coupled with the interest on periodical rests so capitalised is capable of being adjudged as principal sum on the date of the suit. The principal sum actually advanced coupled with the interest on periodical rests so capitalised is capable of being adjudged as principal sum on the date of the suit. (2) The principal sum so adjudged is ‘such principal sum’ within the meaning of Section 34 of the Code of Civil Procedure, 1908 on which interest pendente lite and future interest i.e. post-decree interest, at such rate and for such period which the Court may deem fit, may be awarded by the Court. 19. In a case of Andhra Bank, Hyderabad vs. M/s. Manney Industries and Others, 1993 (0) AIR (AP) 53 the composite High Court of Andhra Pradesh held as follows: This Bench is of the view that the discretion has to be exercised judiciously and supported by reasons for granting interest at 6% p.a. from the date of filing of the suit or rate higher than 6% p.a., and below the contractual rate of interest. In this case the unit has become sick immediately after its commencement and thereafter they could not pay the due amount and another person has taken over the unit and created an equitable mortgage and so under these circumstances and taking into consideration that they have not earned any yield or profit out of the transactions even from the inception of the unit itself and in view of the fact that the unit had become sick immediately after its commencement, the learned judge thought it fit and granted interest at 6% p.a. from the date of suit till the date of realisation. Normally, this court would not interfere with the discretion exercised by the lower court regarding the rate of interest provided it satisfied the reasons that have been given by it are sound and reasonable. We fortified our view even by the decision reported in State of M.P. v. Nathabhai Desaibhai, AIR 1972 SC 1545 , wherein the Supreme Court took into account the conduct of the parties and the reasons given by them which are as follows: “Coming to the question of interest subsequent to the date of the institution of the suit, it was found that the appellant had unlawfully withheld the amount due to the respondent even after coming to know that the collection made was an illegal one. Before instituting the suit, the respondent had issued a notice to the appellant, calling upon the appellant to pay the money illegally collected from it; but despite that notice, the appellant failed to pay back the amount illegally collected from the respondent. That being so, in our opinion, the High Court was justified in awarding interest on the principal amount from the date of the suit.” In the special circumstances of the case, as found by the Court below, which are sound and well founded, granting interest at 6% p. a. from the date of filing of the suit till the date of realization is perfectly justified and does not warrant any interference by this Court. 20. On considering the aforesaid case law and in view of the aforesaid reasons, I am of the considered view that the plaintiff bank is entitled preliminary decree for Rs.2,80,894.50 paise, but plaintiff bank is not entitled to the rate of interest at contractual rate on the principal amount from the date of suit till the date of decree, however, the plaintiff bank is entitled to a simple rate of interest @ 12% p.a. from the date of suit till the date of redemption and thereafter @ 6% p.a. till the date of realization. The findings arrived by the trial Court on appreciation of the evidence in this case, therefore, correct and do not call for any interference except the rate of interest as indicated above. 21. For the reasons stated above, the appeal is allowed in part by modifying the rate of interest from contractual rate to simple interest @ 12% p.a. on Rs.1,70,000/- from the date of suit till the date of redemption and thereafter @ 6% p.a. till the date of realization. The rest of the judgment of trial Court holds good. Considering the facts and circumstances of the case each party do bear their own costs in the appeal. 22. As a sequel, miscellaneous petitions, if any, pending in the Appeal shall stand closed.