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Judgment
A.N. Gupta. J.
The appellant had taken a loan of Rs.35,0007 sometime in the year 1988 from the respondent under the scheme known as "Selfemployment scheme for the educated unemployed youth (SEEUY). With the help of the said amount, the bank had purchased machinery for weaving and had provided the same to the appellant. The appellant did not pay the money and the recovery proceeding were initiated against him against which appellant filed a suit against the respondent. Learned trial court dismissed the suit on 26.5.1996 against which appellant filed first appeal which has also been dismissed by the Special Additional District Judge, Faizabad by means of his impugned judgment dated 23.7.1996 aginst which he has preferred the second appeal.
The only point raised by the learned counsel for the appellant before me in this second appeal is that the respondent has charged interest at the rate of 12% per annum but with quarterly rests. His challenge is confined to the quarterly rest of the interest.
Learned counsel for appellant as well as Sri A. N. Verma for the respondent have been heard. Sri Verma wanted time to study the matter and to obtain further instructions. This request has been rejected as the matter involved is so small that it hardly needs to be detained for a period more than a decades. In fact that would mean denial of justice.
In view of this, matter is being finally disposed of after hearing the arguments of learned counsel for both the parties. It is true that in the agreement executed between the parties it has been provided that the loan taken by the appellant from the respondent shall be repayable with interest at the rate of 12% with quarterly rests but the learned counsel for the appellant has drawn attention to the guidelines issued by to HeadOffice of the respondent which are dated 1st July, 1986. The subject of the guide lines are regarding the loan advanced under the Selfemployment Scheme. In these guidelines rate of interest prescribed is 12%per annum for nonbackward area and for backwards area it is 10% per annum. It has nowhere been provided that the interest shall be compoundable at the end of each quarter. Apart from these guidelines, rate of interest with quarterly rest is per se penal in nature. In this connection it has to be remembered that the loan was advanced under the Selfemployment Scheme as a social measure. In fact, appellant was not able to repay the amount in its entirety. Under such scheme rate of interest compoundable at the end of each quarter cannot be permitted to remain because it goes against the nature of the scheme.
In view of the above, second appeal is allowed at the admission stage itself to the extent that the respondent is entitled to realise interest from the appellant at the rate of 12% per annum which shall be compoundable at the end of each year and not at the end of each quarter.
(Appeal Allowed)