State Bank of India vs Karnati Kotaiah Naidu and Others

G. Radhakrishna Rao, J.—This is an appeal filed by the Plaintiff bank against the Judgment and decree made in O.S.No. 160 of 1979 dated 12-12-1980 on the file of the Subordinate Judge, Nellore.

The State Bank of India, the appellant herein, filed a suit for recovery of amount on the basis of interest stipulated in the agreement that has been executed at the time of obtaining the loan. The interest that is being charged, admittedly is more than two and a half per cent than the rate fixed by the Reserve Bank of India. The Lower Court framed certain issues and issue No. 1 reads as follows: "whether the amount claimed in the suit is correct."

The lower Court relying upon the Judgment in Union Bank of India v. D. Koteswara Rao 1979 (1) APLJ 87 which has been extracted below has found that the interest that has been charged is usurious. It held as follows:

"Under Section 3 of the Usurious Loans Act, if the interest is excessive Court shall presume that the translation was substantially unfair. But such presumption may be rebutted by proof of special circumstances justifying the rate of interest. In the case of loans to agriculturists, if compound interest is charged, the Court shall presume that the interest is excessive. In the instant case, the Plaintiff-bank did not adduce any evidence to rebut the presumption. Consequently it has been held that the rate of 11 � per cent interest per annum with half yearly rests is excessive."

Accordingly the learned Judge granted an interest of 13 � per cent per annum from the date of the suit till the date of redemption.

Sri. Raghava Rao, learned Counsel for the appellant relied upon the Division Bench Judgment of this Court in G. Lakhshmi Narasayamma v. B. Satyavathi 1986 (1) APLJ 353 wherein the learned Judges came to the conclusion that the explanation is directed to faciliate proof of the sole requirement viz., that the transaction is substantially unfair. So they have found that the presumption cannot be invoked that the interest is excessive. Where the interest that has been charged is unfair or excessive that is a matter to be decided with reference to time of granting of the loan that has been awarded thereon at one time. The charging of interest from time to time and the finding of the Court whether it is unfair depends on the circumstances of the case and depends mostly on the economy of the country in general and the economy of the persons that is charged as a class of persons. We agree with the view that has expressed by the Division Bench of this Court which has made an attempt to show that the debtor cannot be burdened with the proof that interest charged is unfair. But whatever material that has been let in by both the parties, it is for the Court to give a finding whether the interest charged is unfair, or not. We affirm that it is the duty of the Court to give a definite finding. In this case, after considering the position in Union Bank Of India v. D. Koteswara Rao (1st cited supra), the learned Judge came to the conclusion that the appellant-bank has charged the compound interest over and above the Reserve Bank of India''s interest rate. The Lower Court has rightly found that it is usurious. The reasoning given by the lower Court is in conformity with the view expressed in Union Bank of India v. D. Koteswara Rao (1st cited Supra) and also in the Division Bench Judgment of this Court in G. Lakhshmi Narasayamma v. B. Satyavathi (2nd cited supra). What all we find is that it is the duty of the Court to find out whether the respondents are emitted for the benefit of Usurious Loans Act or not. As the Lower Court has rightly granted simple interest following the Division Bench Judgment of this Court, we find that there are no merits in the appeal. Accordingly, the appeal is dismissed. No order as to costs.