Central Bank of India vs Nalakuditi Bullaiah and Others

B. Prakash Rao, J.—This appeal by the plaintiff-bank is filed against the judgment and decree in O. S. No. 205 of 1983, dated September 17, 1984, passed by the learned Principal Subordinate Judge, Narsaraopet, principally on the sole ground of not granting the interest in view of the amendment of Section 21A of the Banking Regulation Act, 1949.

The court below relying on the judgment in Medikonda Satyanarayana v. Andhra Bank [1984] 2 APLJ 290, has rejected the claim. As regards the question of application of Act 4 of 1938, the issue is no longer res integra and it is covered by my earlier judgment in Union Bank of India and Others Vs. G. Shiva Reddy and Others, , wherein it was held that in view of the said amendment of Section 21A of the Banking Regulation Act, 1949, the Act 4 of 1938 has no application in respect of the banking transactions and the interest charged in pursuance of a mortgage transaction is valid. However, the interest in respect of agricultural transactions has to be only on the basis of yearly rests and not with quarterly or half-yearly rests ; whereas, in respect of commercial transactions, charging of interest with quarterly or any such longer rests is admissible. There is no dispute as to the fact that the present case is pertaining to the loan obtained for agricultural purpose.

Accordingly, the appeal is allowed granting interest on the basis of yearly rests. There shall be decree accordingly. No costs.