N.D. Patnaik, J.
1. This appeal is filed by the plaintiff in O.S. No. 312 of 1984 on the file of the Additional Subordinate Judge, Guntur.
2. The plaintiff-bank a suit for recovery of a certain sum of money from the defendants under an equitable mortgage claiming interest at the contract rate and costs. The contract rate is 9.5 per cent. over and above the Reserve Bank of India rate subject to a minimum of 18.5 per cent. with quarterly rests. The defendants contended that the rate of interest is penal and usurious. The learned Subordinate Judge held that the rate of interest is penal and usurious and reduced it to 12.5 per cent. per annum simple interest and passed a preliminary decree granting four months' time for redemption. The plaintiff filed this appeal, aggrieved by the judgment of the lower court reducing the rate of interest.
3. In this appeal, learned counsel for the appellant contended that subsequent to the insertion of section 21A of the Banking Regulation Act, 1949, it is not permissible for the court to reopen the interest and reduce it. Section 21A of the Banking Regulation Act reads as follows :
'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.'
A Division Bench of this court in Yogendranath Raj v. State Bank of India [1987] 1 APLJ 419; [1988] 63 Comp Cas 405, has considered the effect of section 21A of the Banking Regulation Act, 1949. In that case, the borrower contended that he was an agriculturist as he had raised a grape garden. One of the questions which arose for consideration in that case was whether the raising of a grape garden comes within the scope of 'agriculture'. The Division Bench held that 'horticulture' includes the raising of grape gardens as well and, therefore, 'horticulturist' is included within the meaning of the expression 'agriculturist' occurring in the proviso to clause (b) of sub-section (2) of section 3 of the Usurious Loans Act, added by the Madras (Amendment) Act, 1936. It may be noted that the Madras amendment introduced a proviso to clause (b) of sub-section (2) of the Usurious Loans Act which is as follows :
'Provided that in the case of loans to agriculturists, if compound interest is charged, the court shall presume that the interest is excessive'.
4. The Division Bench held that having regard to the object and the purpose underlying the Usurious Loans Act and the Madras amendment thereto, the court should be inclined to sustain and continue the said relief, unless the statute says to the contrary, either expressly or by necessary implication, In that case, it was held that the interest on the debt advanced by the plaintiff-bank to the first defendant was subject to the liability or obligation of being scaled down in accordance with the provisions of the Usurious Loans Act, as amended by the Madras (Amendment) Act and that the said right cannot be taken away.
5. In the present case, the second defendant did not contend that the is an agriculturist. His only contention is that the rate of interest is penal land usurious. It is admitted that the second defendant is a businessman and the debt is for a commercial purpose. Therefore, the question whether the interest has to be scaled down in accordance with the provisions of the Agriculturists Relief Act or the Madras amendment to the Usurious Loans Act does not arise for consideration in this matter.
6. Learned counsel for the respondent-defendants contended that even subsequent to the enactment of section 21A of the Banking Regulation Act, in several decisions of this court, interest has been reduced under the Usurious Loans Act. He has referred to the decisions of two learned judges in D. Venkanna v. Andhra Bank [1988] 2 APLJ 102 and M. S. Suryanarayana Iyer v. Syndicate Bank [1988] 2 APLJ 463. In both these cases, the interest was reduced under the Usurious Loans Act. But, as pointed out by learned counsel for the appellant, these two decisions did not consider the effect of section 21A of the Banking Regulation Act. Therefore, they are not helpful in deciding the question whether the court can reduce the interest even after section 21A of the Banking Regulation Act was inserted.
7. Learned counsel has also referred to another judgment of this court in Indian Bank v. D. V. C. Krishnam Raju [1988] 2 APLJ 55; [1989] 56 Comp Cas 451 in which it was pointed out that the operation of the Agriculturists Relief Act is not in any way interdicted by Act 1 of 1984 and it is fully operative even after Act 1 of 1984. The Usurious Loans Act also operates even after the commencement of Act 1 of 1984 in relation to debts incurred prior to Act 1 of 1984. That was a case of a loan contracted by an agriculturist. The learned judge considered section 21A of the Banking Regulation Act and also the provisions of the Agriculturists Relief Act and the Madras Amendment to the Usurious Loans Act. As I have stated above, in the present case, it is not the contention that the second defendant is an agriculturist or that he is entitled to the benefits of the Agriculturists Relief Act or the Madras amendment to the Usurious Loans Act. So, that decision is also not helpful.
8. In this case, the suit is filed after section 21A of the Banking Regulation Act was inserted. Considering the Plain meaning of section 21A of the Banking Regulation Act, I agree with the contention of learned counsel for the appellant that the interest cannot be reopened under the Usurious Loans Act on the ground that the interest charged by the bank is excessive.
9. The next question to be considered is about the rate of interest to be awarded after the suit is filed. Section 34 of the Civil Procedure Code Provides that 'where, in so far as a decree is for the payment of money, the court may, in the decree, order interest at such rate as the court deems reasonable to be paid on the principal sum adjudged from the date of the suit to the date of the decree ....' It further reads that the interest shall not exceed six per cent. per annum from the date of the decree to the date of payment. But the proviso reads that, where the liability in relation to the sum so adjudged had arisen out of a commercial transaction, the rate of such further interest may exceed six per cent. per annum but shall not exceed the contractual rate of interest. Explanation 2 says that a transaction is a commercial transaction, if it is in connection with industry, trade or business of the party incurring the liability. Since it is a commercial transaction and the second defendant had borrowed the money for the purpose of a business, I fell it is reasonable to award interest at 12 per cent. per annum from the date of the filing of the suit till the date of payment.
10. The judgment of the trial court is modified by granting a preliminary decree for payment of the amount with interest at the contractual rate till the date of the filing of the suit and subsequent interest at 12 per cent. per annum simple interest till realisation. The appeal is allowed accordingly. The parties are directed to bear their respective costs.