K.M. Agarwal, J.
1. Aggrieved by the judgment and decree for recovery of 'a sum of Rs. 12, 466/54 p. with compound interest at 11% per annum from 1-1-1977 till 1-11-1979 (for simplicity, suit being filed on 5-11-1979), and simple interest at this rate thereafter till realisation, and proportionate costs of the suit, from the defendants 1 to 3 (jointly and severally) 'passed by the Court below, only one of the defendants, i.e., Kamla Prasad has filed this first appeal.
2. On 25-2-1972 the respondent No. 2 Mohammad Hakim was advanced a loan of Rs. 10,750/- by the respondent No. I for purchase of a Tempo. The appellant and the respondent No. 3 Nazar Mohammad Khan were the guarantors. As per agreement, the rate of interest was 5% above the ReserveBank rate with the minimum of 11% per annum with quarterly rests. The loan was not repaid and, therefore, the respondent No. 1 filed a suit on 5-11-1979 for recovery of a sum of Rs. 20,817/- with pendente lite and post decree interest at the rate of 14% per annum. The suit was resisted by the appellant and the respondent No. 3, but was decreed as aforesaid. Being aggreived, the defendant No. 2 Kamla Prasad alone has preferred this first appeal.
3. Having heard the learned counsel for the appellant and the respondent No. 1, I am of the view that this appeal has no substance and deserves to be dismissed. The first argument of the learned counsel for the appellant that the interest charged is excessive in the light of Section 3 of the Usurious Loans Act, 1918, deserved to be rejected in the light of Section 21A of the Banking Regulation Act, 1949, which reads as follows :--
Notwithstanding anything contained in the Usurious Loand Act, 1918(10of 1918), orany other law relating to indebetedness 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.
Section 21A of the Banking Regulation Act came into force from 15-2-1984. It relates to procedure in the matter of reopening of accounts. It would, therefore, be applicable to the suit transaction which began in the year 1972. The suit itself was decided by the Court below after the date of coming into force of Section 21A of the Banking Regulation Act. It may also be mentioned that as pointed out in paragraph 17 of the impugned judgment, the provisions of the Usurious Loans Act were made inapplicable to nationalised Banks by notification No. F.1-45-VII-N-1-80, dated 12-2-1981. In view of this notification as well, the suit transaction could not be reopened as the respondent No. 1 was a nationalised Bank.
4. The second contention of the learned counsel for the appellant on limitation also deserves to be rejected. In Clause 9 of the Agreement of Guarantee (Ex. P. 10), it was provided that:--
'The Guarantor also agrees that any balances or debts confirmed by the Borrower or his authorised agent or any acknowledgment of liability concerning the same made and signed by the Borrower or his authorised agent shall be binding on the guarantor in the same manner and to the same extent as if the Borrower or his authorised agent was their authorised agent to make such acknowledgment of liability or confirming the balances and the said acknowledgment and confirmation shall be binding on them, as if made by themselves. They further agree that every such acknowledgment by the Borrower or his authorised agent would renew their liability as Guarantor and the Guarantor would be liable for the payment of such acknowledged debts in the same way as for the debts hereby guaranteed.'
The borrower Mohammad Hakim had acknowledged the debt of Rs. 12,466.54p/- on 3-1-1977 vide Ex. P. 26. The suit was filed on 5-11-1979. It was, therefore, in time against the borrower as well as against the guarantor in the light of Clause 9 of the Agreement of Guarantee (Ex. P. 10).
5. It was also argued by the learned counsel for the appellant that by not taking appropriate action in time, the Bank destroyed the security, i.e., the hypothecated Tempo and accordingly in the light of Ss. 139 and 141 of the Contract Act, it had lost its remedy against the appellant as guarantor of the loan advanced to the respondent No. 2. Reliance was placed on State Bank of Saurashtra v. Chitranjan Rengnath, AIR 1980 SC 1528 : 1980 All LJ 654 and State of M.P. v. Kaluram, AIR 1967 SC 1105 : 1967 All LJ 327. This contention also deserves to be rejected in the light of Clause 4 of the Agreement of Guarantee (Ex. P. 10) which reads as follows :--
'The Guarantors hereby consent to the Bank making any variance that it may think fit in the terms of the contract with the Borrower, to the Bank accepting additional or collateral security of any kind determining, enlarging, or varying any credit to him or making any composition with him or promising to give him time or not sue him and to the Bank parting with any security it may holdfor the guaranteed debt. The guarantors also agree that they shall not be discharged from their liability by the Bank releasing the Borrower or by any act or omission of the Bank the legal consequence of which may be to discharge the Borrower or by any act of the Bank which would, but for this present provision, be inconsistent with their rights as guarantors or by the Bank's omission to do any act which but for this present provision, the Banks duty to the Guarantors would have required the Bank to do. Though as between the Borrower and the Guarantors they are guarantors only, the guarantors agree that as between the Bank and the guarantors they are debtors jointly with the Borrower and accordingly they shall not be entitled to claim the benefit or legal consequences of any variation in the terms of the contract and to any of the rights conferred on a guarantor by Sections 133, 134, 135, 139 and 141 of the Indian Contract Act.'
The two cases of the Supreme Court are suits distinguishable. In those cases the security remained with the Bank or the Government. Their status was that of a creditor. In the present case, the security remained with the borrower in accordance with Hypothecation Agreement (Ex. P. 9). In the peculiar facts and circumstances of the present case, it cannot be said that by not taking legal setps or steps for enforcing the security at an early date, the respondent No. 1 was negligent in protecting the security offered by the borrower. Sectiuon 176 of the Contract Act also gives an option to the creditor either to file a suit or to proceed against the security. Under these circumstances, the respondent No. 1 could not be non-suited on the grounds urged by the learned counsel for the appellant.
6. It was lastly contended that there was no agreement between the parties that the Bank would pay insurance charges on behalf of the borrower. The amount of Rupees. 1723,20p/- in total debited in the loan account of the borrower as insurance charges from time to time was, therefore, not recoverable by the Bank. This argument also deserves to be rejected. The accounts were settled and asum of Rs. 12,466,54 p/- was acknowledged by the borrower as outstanding on 3-1-1977. The payment of insurance charges prior to 3-1-1977 cannot, therefore, be looked into by reopening the transaction. So far as insurance charges after 3-1-1977 are concerned, it may be mentioned that the Court below has not awarded such charges. It has only given a decree for Rs. 12,466,54p/- with compound interest at 11% per annum from 1-1-1977 till 1-11-1979 and simple interest at that rate thereafter till realisation.
7. For the foregoing reasons, this appeal fails and it is hereby dismissed. In the circumstances of the case, I make so order as to costs of this first appeal.