Kerala Financial Corporation vs C.G. Narayanan

Harun-Ul-Rashid, J.—The defendant in O.S. No. 479 of 1985 on the file of the Munsiff Court, Thrissur, is the appellant in S.A. No. 869 of

1996.

The O.S. No. 479 of 1985 was filed for a declaration that the plaintiff is liable to pay interest at the rate of 5=% per annum and for a perpetual

prohibitory injunction restraining the defendant from claiming interest exceeding 5=% per annum.

The suit was decreed as prayed for and the same was confirmed in appeal.

The plaintiff availed a loan of Rs. 2,65,000/- from the defendant, namely, Kerala Financial Corporation. Ext. A1 is the agreement executed by the

plaintiff. The plaintiff''s case is that he availed the loan as per the terms and conditions contained in Ext. B1, and as per the conditions, he is liable to

pay interest at the rate of 5=%. The defendant contended that prior to the execution of Ext. B1, the defendant has issued a sanction communication

and the loan was disbursed as per the terms and conditions contained in the sanction communication which was duly accepted by the plaintiff. Ext.

B4 is the copy of the sanction communication alleged to have been issued by the defendant prior to the disbursement of the loan amount. Learned

counsel for the appellant pointed out that the terms and conditions set out in the sanction communication dated 29.12.1975 would also form part of

Ext. B1 agreement executed between the parties.

The trial court held that the loan sanctioned in favour of the plaintiff was governed by the provisions contained in Exts. B1 & B4.

The case set up by the plaintiff is that the defendant has no right to enhance the interest rate and that he has not consented to enhance the

interest. The plaintiff also brought to the notice of the trial court, the terms and conditions in a similar document executed in similar circumstances

between a borrower and the KFC. A Division Bench of this Court in Mathew Vs. Kerala Financial Corporation Ltd., held that the defendant has

no right to enhance the rate of interest. The learned counsel for the plaintiff also produced the judgment of this Court in A.S. No. 224 of 1986. The

said judgment was also rendered in a similar set of contexts and facts. In the said decision, this Court, interpreting more or less a similar agreement

containing similar terms and conditions held that KFC has no right to enhance the rate of interest. The learned Munsiff examined the judgment

rendered above and held that the reason stated for enhancing the interest in Ext. B5 are identical with the reason stated in A.S. No. 224 of 1986

and the decision reported in Mathew''s case (supra). Following the said decisions the learned Munsiff held that the defendant has no right to

enhance the rate of interest invoking Clause (31) of Ext. B4. Adopting the very same reasons and conclusions, the appellate court confirmed the

findings of the trial court and dismissed the appeal. I do not find any reason to interfere with the decree and judgment passed by the courts below.

No question of law much less any substantial question of law arises for consideration in the appeal and it is only to be dismissed. In the connected

appeal, namely, S.A. No. 1024 of 1996, the appellant is the plaintiff in O.S. No. 501 of 1988 on the file of the II Additional Munsiff Court,

Ernakulam. In the above said case also the defendant Corporation claimed interest at the rate of 12=% since the Government had cancelled the

subsidy arrangement with the defendant. The trial court passed a preliminary decree for settlement of accounts calculating the loan amount due with

interest at the rate of 5=%. The defendant is also restrained by a decree of injunction from recovering the alleged amount due from the plaintiff

before settlement of accounts. The lower appellate court set aside the decree and judgment of the trial court holding that the plaintiff is liable to pay

interest at the rate of 12=%. In the light of the stand taken by this Court in the connected case, namely, S.A. No. 869 of 1996, the judgment and

decree passed by the court in O.S. No. 501 of 1988 is restored.

In the result, S.A. No. 869 of 1996 stands dismissed.

S.A. No. 1024 of 1996 is allowed, setting aside the decree and judgment of the lower appellate court in A.S. No. 160 of 1993 on the file of the

III Additional Sub Court, Ernakulam. There will be no order as to costs.