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Judgment
JUSTICE R. D. KHARE, CHAIRPERSON
The present appeal has been filed 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 and order dated 01.10.2019, whereby the O.A. No. 312/2019 filed by the appellant-Bank has been allowed, but the rate of interest has been reduced from 14.5% P.A with monthly rests to 10% P.A. simple.
Brief facts of the present case are that the respondent no. 1 was granted a cash credit facility of Rs.7.50 lacs through its proprietor-respondent no. 2. In order to secure the said facilities the respondent no. 3 created equitable mortgage over his properties by depositing the original title deeds with the appellant-Bank. In addition to it, the respondents also executed various loan documents in favour of the Bank i.e. loan agreement, hypothecation agreement, irrevocable power of attorney, letter of undertaking, letter of additional undertaking, general power of attorney, letter of continuity, D.P. Note, guarantee agreement and letter of authority. Since, the borrowers has failed to adhere the terms of the loan agreement, therefore, the account was classified as NPA on 13.06.2013. Thereafter, the appellant-Bank filed an O.A. No. 312/2019 before the Tribunal below for its recovery of Rs.50,30,983.15 together with pendent-lite and future interest @ 14.5% p.a with monthly rests. The Tribunal below vide order impugned has allowed the said O.A. in toto, but has reduced the future interest from 14.5% to 10% p.a Simple from 14.06.2013 till realization of the entire sum due and recoverable with costs. Being aggrieved by a part of the said order, the present appeal has been filed by the appellant-Bank.
Learned counsel for the appellant submitted that the question involved in the present appeal is that the interest part has been reduced from contractual rate of interest @ 14.5% to 10% simple per annum without giving any reason, which could not be done. It was therefore prayed that the order impugned may be set aside to the extent of reducing the rate of interest.
It appears that despite service of notice through paper publication, no one has put an appearance on behalf of the respondents, therefore, they were directed to be proceeded ex-parte.
Considered the arguments of the learned counsel for the appellant and perused the material available on record.
The main controversy in the present case is with regard to the reduction of rate of interest.
Admittedly, the Tribunal below while allowing the claim of the Bank has reduced the rate of interest from 14.5% to 10% p.a. simple, but for the same, reasons have been assigned by the Tribunal below in paragraph No.12 of the order impugned, which are as under:-
"In the present case, the applicant bank has sanctioned the loan facility to the defendants and due to non-payment, the account of the defendants was declared as NPA on 13.06.2013, with NPA amount of Rs.22,01,809.15, while the applicant bank has filed the O.A, for recovery of Rs.50,30,983.15 as on 02.02.2019, by adding the interest and penal interest from 14.06.2013 to 02.02.2019. But on perusal of the statement of account and loan documents, including sanction letter, it appears that the applicant bank has charged the rate of interest on higher side along with the penal interest, after the date of NPA. Therefore, the applicant bank is entitled to get the recovery certificate for the NPA amount of Rs.22,01,809.15 as on 13.06.2013 with interest @ 9% p.a. simple till realization."
In addition to above, no doubt, bank can claim the interest, which is settled at the time of advancing the loan till the closure of the same. But in case of the account being NPA, the contract executed between the bank and the borrower comes to an end and no terms and conditions of the said agreement can prevail in future when recovery suit is filed before any Court of law. Once the suit is filed before the Tribunal by the bank claiming the amount including the interest, then it is the discretion of the court to award the compensation by way of interest in addition to the principal amount. However, in this regard, the Hon'ble Supreme Court has held in its judgment passed in Central Bank of India Vs. Ravindra and Ors., (2002) Supreme Court cases 367 as under:-
"The principal sum adjudged would be the sum actually loaned plus the amount of interest on periodical rests which according to the contract between the parties or the established banking practice has stood capitalized. Interest pendente lite and future interest (i.e. interest post-decree not exceeding 6 per cent per annum) shall be awarded on such principal sum i.e. the principal sum adjudged on the date of the suit. It is well settled that the use of the word 'may' in Section 34 confers a discretion on the court to award or not to award interest or to award interest at such rate as it deems fit. Such interest, so far as future interest is concerned may commence from the date of the decree and may be made to stop running either with payment or with such earlier date as the court thinks fit."
In view of the discussions as held above, there is no infirmity or illegality in the order impugned with regard to the reduction of rate of interest from (14.5%) to (10%), therefore, the same does not call for any interference by this Tribunal. Consequently, the appeal is dismissed with no order as to costs.
A copy of this judgment be forwarded to the parties as well as the DRT concerned and be also uploaded on the e-DRT portal.