1. This substantive appeal is filed by the appellants/original defendants being aggrieved by the judgment and Order dated 11.6.2004, passed by the learned PO of DRT, Ernakulam, in OA-105/2001. By the impugned judgment and order, the learned Presiding Officer allowed the OA filed by the Bank and ordered the defendants to pay to the applicant Bank sum of Rs. 15 lakhs with the interest thereon at the rate of 18% per annum from 16.8.1998 (from the date of transaction of loan) to 24.4.2001 (date of filing of the OA) and, therefore, at the rate of 14% p.a. to the date of decree and 12% p.a. as future interest (post-decree) till realisation and also proportionate costs, etc. He also gave certain consequential declarations and ordered issuance of Recovery Certificate in the above stated terms. Being aggrieved, the appellants have approached this Appellate Tribunal by filing this appeal but their grievance is limited only with respect to the interest portion. Hence, the scope of the appeal is now very limited.
2. I have heard Mr. Siby J. Monippally, the learned Advocate for the appellants and Mr. A.P.S. Kasturi Rangan, the learned Advocate for the respondent Bank I have also gone through the proceedings, which have been called from DRT, Ernakulam, including the impugned Order and the relevant documents.
3. It is the contention of Mr. Monippally, the learned Advocate appearing for the appellants, that the learned Presiding Officer erred in awarding interest @ 18% p.a. from the date of transaction till the date of filing of the OA. He contended that the rate of interest only should be 6% p.a., that it is a banking transaction and, therefore, provisions of Banking Regulation Act and Reserve Bank of India circulars apply. He further argued that no rate of interest is mentioned any where including the Agreement of Loan and Promissory Note, which was given as a collateral security. He argued that when no rate of interest was indicated anywhere, taking recourse to Section 80 of the Negotiable Instruments Act was not proper and the interest should have been awarded only @ 6% p.a. from the date of transaction till filing of the OA.As far as the pendente lite and the post-decree interest is concerned, it was the contention of the learned Advocate for the appellants Mr.
Monippally, that the learned PO did not exercise the discretion judiciously when he granted interest @ 14% p.a. from the date of filing of the OA till date of decree and @ 12% p.a. from the date of decree till realisation. It was pointed out that no reasoning, whatsoever, has been given by the learned PO in arriving at the conclusion as to why the above mentioned rate of interest was being awarded by him. He, therefore, prayed that the entire interest should be reduced and it be awarded at the rate of 6% p.a. only.
4. Mr. Kasturi Rangan, the learned Advocate appearing for the Bank, on the other hand, argued that the transaction was simple money suit and equitable mortgage was created by way of collateral security and even a Promissory Note was executed by the appellants by way of collateral security only. He admitted that no rate of interest was mentioned either in the Loan Agreement or in the Promissory Note. He further pointed out the provisions of Section 80 of the Negotiable Instruments Act, and highlighted that when no rate of interest was mentioned, then in that eventuality, interest has to be calculated at the rate of 18% p.a. from the date at which the loan amount ought to have been paid by the party charged, until tender or realisation of the amount due thereon. He pointed out that this was the position after the amendment of Section 80 of the Negotiable Instruments Act, 1881. He admitted that earlier the rate of interest under these circumstances was 6% p.a., which was now enhanced to 18% p.a. As far as the awarding of pendente lite and post-decree interest was concerned, Mr. Kasturi Ragan, admitted that the learned PO has not give any reason as to why he was not granting interest at that particular rate. He, however, pointed out that the amount of Rs. 15 lakhs was given by way of loan to the appellants and it, was to be repaid in ten instalments of Rs. 1,50,000/- each. He pointed out that the due date for payment of the entire loan was 16.1.1999 and the due date for the first instalment was 16.4.1998. He further highlighted that, however, the defendants committed default at the time of the very first instalment and further argued that though, thereafter, they made some payments, they were irregular in paying the same.
5. I have heard both the Advocates at length. Having heard both the sides and having gone through the proceedings, in my view, there was nothing wrong in charging interest at the rate of 18% p.a. prior to the institution of the Suit/OA. Transaction was a simple loan transaction and the Suit/OA, which was filed, was for repayment of the same and for enforcement of the Bank's securities. If there is no mention of the rate of interest in either the Loan Agreement or in the Promissory Note, then recourse has to be taken to Section 80 of the Negotiable Instruments Act. Section 80 can be reproduced below for the sake of convenience which states as follows: "80. Interest when no rate specified---When no rate of interest is specified in the instrument, interest on the amount due thereon shall, (notwithstanding any agreement relating to interest between any parties to the instruments), be calculated at the rate of eighteen per centum per annum, from the date at which the same ought to have been paid by the party charged, until tender or realisation of the amount due thereon, or until such date after the institution of a suit to recover such amount as the Court directs." 6. Now, as far as the interest prior to the institution of the Suit is concerned, the rate of interest has to be awarded as per the agreement between the parties. If the instrument docs not give any indication as to what was the rate of interest agreed upon, then for ascertaining the intention of the parties, one has to look somewhere. It may be an instrument given by way of collateral security or there might be some correspondence, etc. In the present case at hand, there is a Promissory Note executed by the appellants. In that instrument also, rate of interest is not indicated. But one has to, under the circumstances, take recourse to Section 80 of the Negotiable Instruments Act only and Section 80 of the Negotiable Instruments Act, under these circumstances, says that pre-Suit interest is to be charged at the rate of 18% p.a., and after amendment of 1988, the rate of 6% has been increased to 18%. Therefore, in my view, the pre-institution of the suit interest was correctly charged. The only change which is required to be done is that the interest @ 18% p.a. has to be charged not from the date of transaction but from the date when the amount became due as per provisions of Section 80 of the Negotiable Instruments Act.
Admittedly, the first instalment fell due (not paid) on 16.4.1998, and, therefore, this interest has to be charged from the date of 16.4.1998 till the date of filing of the Suit, which is 24.4.2001.
7. As far as the pendente lite and post-decree interest is concerned, the Court has got discretion with respect to awarding the same.
Needless to say that this discretion has to be judiciously exercised, and when a particular amount was awarded, reason for that has to be given, so that one comes to know as to which were those principles which guided the discretion exercised by the Court. In the present case at hand, no reason is given as to which arc those circumstances or situations which guided the discretion of the Court to come to the conclusion that pendente lite interest to be at 14% p.a. and post-decree interest had to be at 12% p.a. Admittedly, reasoning is not there.
If one goes through the proceedings, it will be revealed that though the appellants committed default at the time of their first instalment, thereafter, they have shown a continuous and consistent tendency in making payment to the Bank. The payment may be irregular, but it was not certainly erratic. Mention of the payments made by the appellants to the Bank from time to time, has been made by the learned PO in the operative portion of the order. Having gone through the same it can be certainly stated that the appellants had intention to repay the money and were displaying that intention by showing colour of their money to the Bank. They, therefore, cannot be branded as outright defaulters having no intention to repay the money and if this was the situation, then some leniency has to be shown to the appellants by reducing the pendente lite and post-decree rate of interest. Taking an overall view of the matter, in my view, ends of justice will be met if the appellants are ordered to pay pendente lite and post-decree interest uniformly at. the rate of 10% per annum.
Regular Appeal RA No. 5/2005 is partly allowed and with respect to the interest -portion, following Order is passed: The appellants to pay interest on the amount adjudicated upon by the learned P;O of DRT, Ernakulam, at the rate of 18% per annum from 16.4.1998 till date of filing of the Suit i.e. 24.4.2001, and at the rate of 10% p.a. from the date of filing of the Suit till date of realisation. Rest of the Order remains as it is. With this modification, Regular appeal RA-5/2005 is partly allowed in the aforestated terms.