State Bank of India vs Sri Vishal Sahani

R. D. Khare, Chairperson

The present appeal have been preferred by the appellant bank under Section 20 of the Recovery of Debts and Bankruptcy Act, 1993 (hereinafter referred to as “the RDB Act”) against a part of the judgment dated 29.05.2018, whereby the Original Application filed by the appellant has been allowed but the interest has been reduced to 12% per annum simple instead of 12.30% per annum with monthly rests.

The brief facts of the matter are that the respondent-borrower was granted two term loans aggregating to Rs. 44.50 lakhs on different dates i.e. on 31.08.2013 and 06.01.2014  for  purchase  of  two  trucks  @  13.50%  and 13.40% per annum with monthly rests. In order to secure the said loan facilities, the respondent-borrower had executed several security documents including agreements dated 31.08.2013 and 06.01.2014 of loan-cum-hypothecation, whereby the borrower had agreed to create charge of the bank over the said trucks purchased from the funds of the bank. Since the defendant failed to maintain the financial discipline, therefore, both the loan accounts were classified as NPA.

Thereafter, the appellant-bank issued a demand notice dated 26.10.2016 under Section 13(2) of the SARFAESI Act, 2002 demanding a sum of Rs. 29,14,762.82. Since respondent-borrower did not pay any heed to the said demand, therefore, the appellant-bank filed an original application No.1000 of 2017 under Section 19 of the RDB Act for recovery of Rs. 32,62,975.24 along with future and pedentelite interest @ 12.30% per annum with monthly rests from the defendant from 16.12.2017 till the full and final payment of the bank.

The Tribunal below vide order impugned allowed the aforesaid O.A. in toto but the interest as claimed by the bank @ 12.30% per annum with monthly rests has been reduced to 12% per annum simple. Being aggrieved by said part of the order impugned, the present appeal has been filed by the appellant-bank.

Learned counsel for the appellant submitted that the sole question involved in the present case is that the Tribunal below has refused to grant the contractual rate of interest and has reduced the interest to 12% per annum simple, although no such prayer was made on behalf of the parties, therefore, the order impugned passed by the Tribunal below is bad in law. The learned counsel further submitted that in spite of passing the order impugned, no amount has been deposited by the respondent-borrower. It was, therefore, prayed that the order impugned to be extent of reducing the rate of interest to 12% per annum simple may be set aside and the contractual rate of interest as claimed in the original application may be allowed.

It appears that despite service of notice, no one had appeared on behalf of the respondent-borrower, therefore, he was directed to be proceeded ex-parte vide order dated 15.02.2021 of this Tribunal.

Considered the arguments and perused the record.

The main dispute in the present case is that without considering the documents available on record and assigning any reason, the Tribunal below has reduced the rate of interest while passing the order impugned.

It is settled proposition of law that the Court or Tribunal may reduce the rate of interest for pendentelite and future in its discretion, but there should be a cogent and convincing ground for exercising such discretion. Furthermore, when the Tribunal felt that interest @ 12% p.a. simple on reducing balance is fair from 14.12.2017 till date of recovery, then it was obligatory on part of the Tribunal below to assign the reason for reduction in the rate of interest, but not a single word has been whispered in the impugned order as to what was the reason for reaching on the conclusion of reduction in the rate of interest. Thus, the discretion so exercised appears to be arbitrary and perverse.

The general rule is that the rate of interest during the pendency of the suit and for future period should be at the contractual rate, unless there are circumstances, which may disentitle the creditor to get the same. In the present case, there is nothing on record, which may show any reason or circumstances for reducing the rate of interest, so the appellant-Bank is entitled to charge the interest on the contractual rate.

In view of the aforesaid, the appeal is partly allowed and the impugned order dated 29.05.2018 passed by the Tribunal below is modified to the extent that the appellant is entitled to charge the contractual rate of interest as claimed in the original application. Rest part of the impugned order is confirmed. No order as to costs.

A copy of this judgment be supplied to the parties as well as to the DRT concerned and be also uploaded on e-drt portal.