Syndicate Bank vs Krishnamma. I and Others

P. Krishna Moorthy, J.—W.A. No. 35-45/94 arises out of a common judgment in Krishnamma Vs. Syndicate Bank, W.A. No. 1909/94 is against the judgment in W.P. No. 15244/94.

The writ petitioners in all these writ petitions are Small Rubber Growers who were advanced loans by the first respondent-Syndicate Bank under an agreement produced as Annexure-A in W.P. Nos. 5869-5879/93. An agreement entered into by all the writ petitioners are of the same nature and they were executed between the year 1984 to 1986. The agreement provides for the payment schedule as also the Time schedule for re-payment under the agreement. There is gestation of period of seven years for the payment of interest due on the first seven years. The question involved is as to whether under the agreement the writ petitioners are liable to pay simple interest on deferred interest or whether they are liable to pay compound interest on deferred interest.

According to the petitioners, as per the prayer in the Writ Petition they are liable to pay only simple interest on deferred interest though according to the counsel for the petitioners at the argument stage it was submitted that they are not liable to pay interest at all. Anyhow, it is not necessary for us to go into that question at this stage. According to the first respondent-Bank petitioners are liable to pay the compound interest which is provided for in the agreement Annexure-A. Petitioners are also challenging the circular issued by NABARD evidence by Annexure-H which shows that interest is payable on deferred interest in case of loans advanced to Rubber Growers before 1.7.1987. On the basis of that first respondent-Bank has also sent a communication evidenced by Annexure-G to one of the petitioners stating that they are liable to pay interest on deferred interest as the loans are sanctioned prior to 1.7.1987. In these Writ Petition petitioners are challenging their liability to pay interest on deferred interest.

Writ Petition No. 5869-79/93 were disposed of by a Single Judge by his Judgment dated 29th day of September Krishnamma Vs. Syndicate Bank, . In that Judgment, Learned Single Judge following the Decision of the Supreme Court in Kumari Shrilekha Vidyarthi and Others Vs. State of U.P. and Others, considered the question as to whether the agreement is arbitrary and unreasonable. Construing the provision of the agreement, the learned Single Judge came to the conclusion that the petitioners are not liable to pay any interest on accrued/ deferred interest until the due dates of instalments to pay the accrued interest and a second direction was also issued to the Bank to recompute the accounts of the petitioners. The Writ Petition was allowed in the above manner. Syndicate Bank has filed writ appeals No. 35-45/94 against the above judgment.

Writ Petition No. 15244/94 came before another Learned Single Judge and the Learned Single Judge dismissed the above Writ Petition holding that the question as to whether the interest has to be levied on deferred interest is a matter which is to be determined by the interpretation of the Clauses in agreement Annexures A and C and that it can be determined only in an appropriate Civil Proceedings and the jurisdiction under Article 226 of the Constitution of India cannot be invoked in such matter. The learned Judge followed the Decision of the Supreme Court in Central Inland Water Transport Corporation Limited and Another Vs. Brojo Nath Ganguly and Another, and held that the principles of reasonableness of the agreement will not come into play where both parties are businessmen and the contract is commercial transaction. In that view of the matter, learned Single Judge dismissed the Writ Petition against which the Writ petitioners has filed W.A.No. 1909/94.

We heard counsel for the appellant, counsel for NABARD and Counsel for writ petitioners at length. After hearing them, we are dearly of the view that the Judgment in W.P.No. 15244/94 has to be upheld.

It is an admitted fact that the rights and obligations of the parties are governed by Annexure-A agreement entered into between the writ petitioners and the Bank. Now the question is as to whether the petitioners are liable to pay any interest or whether they are liable to pay simple interest or whether they are liable to pay compound interest on deferred interest. It is well settled that when there is relationship of debtor and creditor between the writ petitioner and Bank the lights of parties are to determined on the terms of the agreement. That can be determined only in a regularly instituted suit wherein all questions can be gone into. It is not proper for this Court under Article 226 of the Constitution of India to enter into such controversies and determine the right of parties which arises under the terms of the agreement. The proper remedy of the parties is to agitate all such questions in regard to liability to pay interest before the Civil Court when an appropriate motion is made by the appropriate party at the relevant time.

The Counsel for writ petitioners have challenged the circular issued by NABARD evidenced by Annexure-H and communication issued by Bank to one of the creditors evidenced by Annexure-J wherein it is said that the writ petitioners are liable to pay interest on deferred interest as the loans are advanced before 1.7.87 wherein there was a change in the scheme. But it is to be noted that the circular is only the opinion expressed by NABARD on interpretation of the agreement. So also Annexure-J is the interpretation given by the Bank to the agreement between the parties on the basis of the circular by NABARD. The statement in either in Annexure-H or J can bind the petitioner or Court which will interpreter the terms and conditions embodied in Annexure-A. The liability of the parties will have to be independently determined by the appropriate Civil Court on a true interpretation of the provisions of Annexure-A. The learned Single Judge in W.P.Nos. 5869-5879/93 has interpreted the agreement and has come to the conclusion that the petitioners are not liable to pay interest. We think that the learned Judge was not justified in interpreting the agreement in a proceedings under Article 226 of the Constitution of India which has to be properly done by the Civil Court when any action is initiated to recover the amount from the writ petitioners. Learned Single Judge has exceeded his jurisdiction under Article 226 of the Constitution of India by entering into a controversy of interpretation of the document. In that view, judgment of the Learned Single Judge in W.P.Nos. 5869-79/93'' has to be set a side and we do so.

We make it clear that by setting aside the judgment in W.P.Nos. 5869-5879/93, we have not ventured to interpret the terms of the document nor we have expressed any opinion on the question of liability or non-liability of the petitioner in regard to payment of interest on deferred interest. It is a matter to be decided by the Civil Court by interpreting the document as and when it arises for the same. In W.P.No. 15244/94 the Learned Single Judge has taken a view that this matter has to be adjudicated in the Civil Court with which we agree and accordingly W.A. 1909/94 is only to be dismissed leaving open parties to raise all their contentions in the Civil Court.

In the result, we allow W.A.Nos. 35-45/94, set a side the judgment and dismiss W.P. Nos. 5869-5879/93. W.A. No. 1909/94 is also dismissed. We once again make it dear that we have not expressed any opinion on the question of liability of the petitioners to pay interest on deferred interest which will have to be decided by the appropriate Civil Court untrammelled by any of the observations contained in any of the impugned order.

In the light of the above, we dismiss W.P.No. 8429/94, 9786 & 87/94, W.P. 10803-609/94 with the above liberty reserved to those petitioners as well.