AI Structured Summary
Not yet generated for this judgment
Judgment
M.R. Hariharan Nair, J.—The revision petitioner, who is the judgment-debtor in O. S. No. 284 of 1986 of the Sub-Court, Kottayam, is aggrieved that the contentions raised by him during enquiry pursuant to the notice under Order 21, Rule 37 of the Code of Civil Procedure, 1908, regarding unenforce-ability of the decree were found against and warrant ordered.
The petitioner contended before the execution court that the decree holder-bank has calculated interest at 19.5 per cent. per annum on an agricultural loan availed of by the petitioner; that interest at such rate is inadmissible and that if interest is correctly calculated, it could be seen that the judgment-debtor has actually paid more amounts to the bank than what is actually due.
The execution court, after hearing the parties, found that the validity of the terms of the decree cannot be reopened at the execution stage and that the execution court is bound to execute the same as it is. It was based on the said finding that the direction for issuance of warrant was given.
Learned counsel for the petitioner submitted that the decree passed in the case is the result of fraud ; that it is actually a nullity in so far interest had been allowed at an inadmissible rate and that the contract based on which the bank granted loan itself was unconscionable. According to counsel, these aspects should have been taken into account by the execution court.
According to learned counsel for the decree holder-bank, what was allowed was only a cash credit transaction pursuant to the promissory note and agreement executed by the revision petitioner. There was a provision for realisation of interest at a minimum of 15 per cent. with further limit that it shall not exceed by 5 per cent. more than what is allowed by the Reserve Bank of India from time to time. According to him, the claim for interest at 19.5 per cent. per annum is hence within the limits. It is also pointed out that after remaining ex parte at the stage of trial and after suffering a decree which was not challenged in any form known to law, the judgment-debtor cannot be permitted to rake up the question of inadmissibility of interest at the execution stage.
A perusal of the records produced by the revision petitioner himself shows that the suit was filed by the bank specifying the details of the contract and also producing before the court all the documents that had been executed by the defendant at the time of getting the loan. Neither the promissory note nor the agreement executed by the defendant at the time of getting the loan mentioned specifically that it was an agricultural loan. What was sought for and allowed was a cash credit transaction though the petitioner appears to have utilised the loan for purchase of certain agricultural implements.
It is seen from the documents made available by the revision petitioner that on January 30, 1987, the suit was decreed ex parte. The decree provided for realisation of a sum of Rs, 36,138.65 with interest at 19.5 per cent. thereon. The petitioner has no case that he challenged the decree before the appellate court or through any review/correction petition up till now. This is not a case where the petitioner did not get summons in the suit; nor was he unaware of the pendency of the suit. The copy of his letter dated November 10, 1986, addressed to the manager of the bank which is contained in pages 20 and 21 of the documents filed by the revision petitioner itself shows that he was aware of the fact that a suit had been filed against him though he would allege that the suit was not preceded by issuance of any suit notice. The question thus arises whether the inadmissibility of interest can be successfully raised before the execution court.
The petitioner has alleged fraud and nullity. It is true that fraud will vitiate a decree. It is also true that a decree which is a nullity cannot be enforced. But in support of the contention regarding fraud all that is pointed out by the petitioner is that in the plaint there was no specific mention of the fact that what was allowed was an agricultural loan. It is true that there is an intimation sent by the bank to the petitioner on March 7, 1991, which is contained in page 31 of the records made available by the revision petitioner which would go to show that the petitioner was found entitled to receive a sum of Rs. 10,000 under the Agricultural and Rural Debt Relief Scheme. Merely from this communication we cannot jump to the conclusion that what was granted was an agricultural loan. Further the plaintiff had produced before the trial court all the documents executed by the defendant and in such circumstances, it cannot be said that any fraud was played in the matter of filing the suit.
The decree is alleged to be a nullity on the ground that interest claimed was in excess of the rates allowed by the Reserve Bank of India through directions and circulars issued from time to time.
Corporation Bank v. D.S. Gowda [1994] 81 Comp Cas 842 : [1994] 2 BC 613 is relied on by the petitioner to contend that the directives and circulars of the Reserve Bank of India are binding on all banks and that the claim for interest even with half-yearly rests is inadmissible. It was found in the said decision that according to the circulars, so far as loan for agricultural purposes is concerned, at best, interest may be charged with yearly rests and may be compounded if the loan or instalment became overdue. In the present case the bank has charged interest compounded on quarterly rests. If actually the loan is an agricultural loan, probably the crediting of interest with quarterly rests may not be justified under the aforesaid decision ; but even so that is a matter which can be raised only through appropriate pleadings at the relevant (pre-decree) stage or in appropriate review/correction petition.
Section 21A of the Banking Regulation Act, 1949, reads as follows :
"21A. Rates of interest charged by banking companies not to be subject to scrutiny by courts.-- Notwithstanding anything contained in the Usurious Loans Act, 1918 (10 of 1918), or any other law relating to indebtedness in force in any State, a transaction between a banking company and its debtor shall not be reopened by any court on the ground that the rate of interest charged by the banking company in respect of such transaction is excessive."
The operation of the said section was also considered by the Supreme Court in Corporation Bank''s case [1994] 81 Comp Cas 842 aforementioned along with the question whether the claim for interest at 12.5 per cent. per annum for the agricultural loan involved in that case was unconstitutional. It was observed as follows (page 871) :
"We do not express any opinion on this question as the same does not arise in the present case. But if the Reserve Bank has fixed the maximum rate of interest in exercise of the powers conferred by Section 21/35A of the Banking Regulation Act, Section 21A would be attracted and the transaction would not be liable to be reopened on the ground that the rate of interest fixed is excessive even though not exceeding the ceiling determined by the Reserve Bank. In the case of agricultural loans/advances the position has been made amply clear by the circulars referred to earlier which do not permit banks to charge compound interest with quarterly rests. In such cases as observed earlier the interest can be fixed with annual rests coinciding with the time when the farmer is fluid and if thereafter the farmer fails to pay the interest it would be open to compound the interest on the crop loan or instalments upon the term loans becoming overdue."
The impact of the said decision, according to me, is only that if the unconscionable nature of interest or the violation of the directives of the Reserve Bank of India are pointed out by the defendant and it is established that what was availed of was actually an agricultural loan, the trial/appellate court would be justified in going into those contentions in spite of Section 21A quoted supra. According to me, there is nothing in the aforesaid decision which would go to show that at.the execution stage the matter can be raked up.
S.P. Chengalvaraya Naidu (dead) by L.Rs. Vs. Jagannath (dead) by L.Rs. and others, , is relied on to contend that suppression of a vital document in order to gain advantage on the other side would be tantamount to fraud on the court as well as on the opposite party and that the decree obtained in such case can be challenged as inoperative. The facts of that case were entirely different. That was a case where a person obtaining a preliminary decree for partition of property had before filing the suit and after purchasing the property benami for his employer in court auction relinquished his rights in it by executing a release deed in favour of the employer. The non-production and non-mentioning of the release deed at the trial stage was a material defect. It was with reference to the suppression of such material facts and crucial document that the court observed that it is tantamount to playing fraud on the court. As far as the present case is concerned, the averments in the plaint are in accordance with the documents executed by the defendant and all those documents were also produced before the court along with the plaint. In such circumstances, I fail to see how the judgment-debtor can maintain a contention that the suit was filed fraudulently.
K.V. George and Others Vs. The Federal Bank Ltd., Pala, , was another decision relied on by the petitioner. There the transaction, admittedly, was an agricultural loan with liability to pay interest at 11.5 per cent. per annum. In the suit the claim for interest was at 17.25 per cent. compounded quarterly. The defendant remained ex parte and a decree was passed in terms of the plaint. The court found that merely because the defendants have not contested the suit, the court cannot award more interest than the contract rate of interest. Even so, the relief granted by the court was not by way of permission to raise it before the execution court. On the other hand permission was granted to get the clerical error or accidental omission corrected through appropriate petition filed u/s 152 of the Civil Procedure Code. In other words, the direction was only that the decree itself might be corrected by invoking power u/s 152 of the CPC and not that while retaining the decree with the alleged excess interest, a lesser amount can be allowed to be realised as sought for by the revision petitioner in the present case. Hence the said decision also cannot go to the aid of the revision petitioner.
In State Bank of India Vs. Yasangi Venkateswara Rao, , the apex court had occasion to go into the question whether Section 21A of the Banking Regulation Act would apply to all types of loans. It was held that it would apply whether to an agriculturist or a non-agriculturist and that normally when a security is offered by way of mortgage of property, charging of compound interest would be regarded as excessive; but then, entering into a mortgage is a matter of contract between the parties. If the parries agree that in respect of the amount advanced against a mortgage, compound interest would be paid, the court cannot interfere and reduce the amount of interest agreed to be paid on the loan so taken. In view of the said decision and considering the fact that under the promissory note executed in favour of the respondent-bank, the revision petitioner had agreed to pay interest at 5 per cent. over the Reserve Bank of India rate with minimum of 15 per cent. per annum with quarterly rests and considering the fact that even after getting knowledge of the case he failed to contest the matter before the trial court or even to challenge the same before the appellate court, I am of the view that it is futile for him to contend before the execution court that the amount allowed by the decree cannot be realised from him.
Learned counsel for the revision petitioner placed before me a large number of decisions of the Punjab and Haryana High Court and one decision each of the Gujarat, Karnataka and Madhya Pradesh High Courts to contend that in a case where while passing a decree, the court did not fix any date by which interest was payable at the agreed rate and also did not resort to the provisions of Section 34 of the Civil Procedure Code, he could place it before the execution court and that the execution court could exercise such discretion u/s 34 of the CPC to allow interest at the principal amount up to 6 per cent. per annum from the date of institution of the suit till the date of realisation. These decisions go contrary to the view taken by the Kerala High Court. The court below has rightly relied on the decision in Anga-mali Chitty Funds (P.) Ltd. v. V. Sathish Chandran [1990] 1 KLT 422 in this regard. Suffice it to say that when this court has taken a view on the point, reliance cannot successfully be placed on the decisions of the other High Courts. It may also be mentioned here that no authority of the Supreme Court has been placed before me by the petitioner which would show that a judgment-debtor can raise successfully the aspect of excessive nature of interest allowed in the decree as a defence in the execution stage. In fact the decisions of the Supreme Court in Seth Hiralal Patni Vs. Sri Kali Nath, and Vasudev Dhanjibhai Modi Vs. Rajabhai Abdul Rehman and Others, , go against the petitioner.
M.K. Thampan v. Dhanalakshmi Bank Ltd. [1990] 1 BC 320 : [1992] 73 Comp Cas 600 (Ker) relied on by the petitioner is, of course, a case where relief was granted to the defendant in respect of an agricultural loan based on circulars of the Reserve Bank of India; but that relief was given in an appeal where the decree was properly challenged. The challenge regarding interest made in that case was not in execution proceeding and that makes all the difference.
In these circumstances, I am of the view that the court below was right in rejecting the contention of the revision petitioner with regard to the excessive interest and in proceeding with the execution.
This civil revision petition is without merit and it is dismissed.