R.L. Gupta, J.
1. The plaintiff bank has filed this suit under Order 37 of the Code of Civil Procedure, 1908 ('the Code' for short), for recovery of Rs. 2,05,120.59 with costs and interest against the defendants. Defendant No. 1 is alleged to be a firm carrying on business in partner ship at C-4/145, Safdarjung Enclave, New Delhi- 110016 with defendants Nos. 2 and 3 as its partners. Defendants No 4 is stated to be the guarantor and husband of defendant No. 3. It is alleged that, in September, 1976, defendant No. 1 requested the plaintiff-bank for grant of certain facilities like term loan for purchases of machinery and hypothecation limit for working capital requirements. The plaintiff-bank, by its letter dated September 25, 1976, granted secured loan of Rs. 80,000 on hypothecation of machinery purchased and to be purchased and overdraft facility by way of open cash credit up to a limit of Rs. 75,000 on the hypothecation to stock In consideration of the secured lan facility, defendants Nos. 2 and 3 as partners of defendant No. 1 executed various documents like Demand promissory Note. Hypothecation Agreement, Article of Agreement, etc., as detailed in para 5 of the plaint on October 31, 1976. Defendants Nos. 2 to 4 also executed to letter of guarantee in consideration of the bank agreeing and continuing to grant or otherwise giving credit in the name of defendant No. 1 jointly and severally. Defendant No. 4 also separately executed a guarantee letter up to Rs. 80,000 with interest for agreeing and continuing to grant loan or other credit facilities in the name of defendant No. 1. The facilities were availed by the defendants and, on October 14, 1979, defendants Nos. 1 to 3 acknowledged their liability in writing as on September 30, 1979 at Rs. 84,343,65. On October 23, 1979, defendant No. 4 as guarantor also confirmed his liability as on September 30, 1079, at Rs. 84,343.65 and at Rs. 87,960.15 as on December 31, 1979.
2. In consideration of the cash credit (overdraft) facility of Rs. 75,000, defendants Nos. 1 to 3 executed various documents on September 27, 1979, as detailed in para 10 at of the plaint. These are demand promissory note, an agreement for demand cash credit on the hypothecation of movable property, a letter of guarantee by defendants Nos. 2 to 4, a separate letter of guarantee by defendant No. 4 and so on. The defendants also confirmed and admitted in writing on April 17, 1977, a sum of Rs. 72,288.49 due from them as on March 31, 1977, and Rs. 69,969.77 as on september 30, 1979. Defendants No. 4 by a separate acknowledge, confirmed the balance due from him to the plaintiff bank on December 31, 1979, at Rs. 73,393.67. The defendants failed to repay the secured loan in agreement forty monthly Installments of Rs. 2,000 each and cash credit overdraft loan of Rs. 75,000 before October 31, 1977, in spite of a demand letter dated December 24, 1980. Hence the present suit under order 37 of the Code.
3. On being served, three different applications have been moved in this case for leave to defend I. A. No. 2453 of 1981 is on behalf of defendant No. 4. I. A. No. 4380 of 1982 is on behalf of defendant No. 2 while I. A. No 3288 of 1983 is on behalf of defendant No 3. Defendant No 4 is the guarantor. Although a number of defense were raised in the applications on behalf of all these defendants, but only some of these pleas have been urged before me. The first plea, common to all these defendants. is that the suit is not maintainable under order 37 of the Code. In this respect, defendant No. 4 alleges that, so far as he is concerned, the amount is due on the basis of a pronote and since no pronote was executed by him in favor of the plaintiff-bank, Order 37 of the Code was not attracted he was merely a guarantor.
4. In this respect, defendants Nos. 2 and 3 have alleged that since there were two distinct transaction of loan, one suit in respect of both the transaction cannot be filed by the plaintiff and, on this ground, the suit is not maintainable.
5. The second defense which has been pressed before me and which is common to all the defendants is that the suit is time-barred. The signatures of the defendants on the alleged acknowledgment of liability were obtained on blank papers by force and so such signatures had no value and should be ignored.
6. The third defense which is also common to all the defendants is that the interest that has been added by the plaintiff-bank is compounded at 161/2 per cent. with quarterly rests. the bank is not entitled to compound interest and it was entitled only to interest at the rate of 10 per cent. per annum according to commercial usage and Interest Act on the amount of the loan taken by defendants Nos. 1 to 3.
7. All the above pleas have been controverter on behalf of the plaintiff by filling replies. It is alleged that the suit is not only based on a demand promissory note but also on a written contract and agreement of guarantee between the parties and, thereforee, is triable under Order 37 of the Code against all the defendants. The bank also denied that the signatures of either of the defendants on any of the acknowledgment were obtained by force and counting time from the acknowledgment, the suit is within limitation. Regarding the lea that the bank could not charge interest at the rate of 161/2 per cent. per annum, it is stated that the interest has been charged by the plaintiff-bank in accordance with the directives issued by the Reserve Bank of India from time to time. Moreover, after the coming into force of the Banking Laws (Amendment) Act, 1983. The question of interest charged by a bank is not justiciable. It is further stated in this reply that, at the time of filling of the suit, the nationalised banks were entitled to charge interest on loans advance for commercial transactions like the present one at 20.55 per cent, inclusive of overdue interest.
8. I have heard the arguments advanced by learned counsel for the parties and have carefully perused the record. Learned counsel for the defendants contended that the suit being based on a demand promissory note was not maintainable under the provisions of Order 37 of the Code so far as the guarantor is concerned since the suit against other defendants is based upon the alleged balance amount due from the defendants and is not purely based on the demand promissory note, it is also not maintainable against defendants Nos. 1 to 3 under Order 37. On the other hand, learned counsel for the plaintiff contended that a suit under order 37 of the Code can be filed not only on the basis a demand promissory note but also on the basis of written contract between the parties as that if some balance is alleged to be due by a bank on the basis of a written contract a suit under order 37 of the Code is maintainable.
9. Types of suits which are governed by Order 37 of the Code are detailed in rule 1(2) of Order 37 of the Code. According to this sub rule Order 37 of the Code applies to :
(a) suits upon bills of exchange, hundis and promissory notes :
(b) suits in which the plaintiff seeks only to recover a debit or liquidated demand in money payable by the defendant, with or without interest, arising -
(i) on a written contract ; or
(ii) on an enactment, where the sum sought to be recovered is a fixed sum of money or in the nature of a debt other than a penalty ; or
(iii) on a guarantee, where the claim against the principle is in respect of a debt or liquidated demand only.
10. A careful perusal of the above provision goes to show that suits under Order 37 are maintainable not only on the basis of a promissory note but also to recover a debt or liquidated demand in money on the basis of a written contract or on an agreement of guarantee between the parties. Defendants Nos. 1 to 3 not only executed demand promissory notes in favor of the plaintiff-bank but also executed the hypothecation agreement and article of agreement on October 31, 1976. A hypothecation agreement is nothing but a written contact between the parties, it incorporates the grant of loan facilities to the defendants by the plaintiff-bank upon certain terms and conditions including the rate of interest which is payable After executing these agreements/ contracts, all the defendants continued to acknowledgment their liability t the plaintiff-bank in respect of the hypothecation agreement and agreement of guarantee executed by them up to October 14, 1979, for instance, confirmation letter dated October 14, 1979 is executed by defendants Nos. 1 to 3. It says :
To The Branch Manager, Vijay Bank Limited, Sector 9, R. K. Puram, New Delhi. Dear Sir,
I/We acknowledgment receipt of your confirmation letter dated October 10, 1979, and I/we hereby confirm and admit the correctness of the balance of my/our loan Account No, cash credit due to the bank and also I/we acknowledge my/our indebtedness of Rs. 6996.77 due to the bank as at the quarter ended September 30, 1979. Place : New Delhi Yours faithfully Date : 14/10/79. for sansu Industries, sd. S. K. Jain, sd. Savita jain Partners.
11. A similar acknowledgment is jointly made by defendants Nos. 2 to 4 on the same date. It is also admitted that the cash credit account was secured by them by a demand promissory note date October 31, 1979, for Rs. 75,000 and that the acknowledgment was being made by them for the purposes of section 18 of the Limitation Act, 1963. In the case of Mrs. Sushila Mehta v. Bansi Lal Arora [1982] 1 Del 320, this court dealt with a suit under Order 37 based on a receipt given by the payee for allotment of a share in a proposed private limited company. On a similar objection being taken as in the present case, the court held, 'the plaintiff paid the application money for allotment of shares. The defendants accepted it. Thought it is true that defendants No. 2 came into existence a few months later, the payment of Rs. 1 lakh by the plaintiff as application money and its acceptance by the defendant constituted a contract' similarly, in the present case, the defendants approached the plaintiff-bank for grant of banking facilities. The bank accepted the proposal and granted them a secured loan of Rs. 80,000 on the hypothecation of machinery and overdraft facility by way open cash credit limit. This grant of banking facility by the plaintiff was a accepted by the defendants in consideration of which they executed a demand promissory note, a hypothecation agreement and an agreement of guarantee. All these steps taken together constitute a written contract between the parties and if there is any violation of the written contract, the plaintiff-bank, I am of the view, is entitled to file a suit for recovery of a liquidated amount as in the present case which is apparent from the books of account maintained by the plaintiff-bank in the due course of its business. Copies of these books of account duly certified under the Bankers' Books Evidence Act are admissible in evidence. these have been fled. thereforee, the suit is maintainable. As said above, acknowledgment has been made by the defendants on October 14, 1979. The present suit was filed on March 19, 1981, and is, thereforee, well within time. The plea that the signatures of the defendants were obtained on blank papers by force is neither here nor there and is simply illusory. The defendants utilised the credit facilities granted by the bank over a number of years without raising their little finger to this effect and, thereforee, this argument is stated simply to be rejected outright.
12. Learned counsel for the defendants then submitted that the interest rate charged by the plaintiff-bank was exorbitant and that it was not entitled to charge interest beyond the rate prescribed under he interest Act, 1978. The aforesaid Act empowers the court to allow interest in any proceedings for the recovery of any debt or damages or in any proceedings in which a claim for interest in respect of any debt or damage already paid is made, at a rate not exceeding the current rate of interest. If the proceedings relate to a debt payable by virtue of written instrument at certain time. Interest can be allowed by the court from the date when the debt is payable to the date of the institution of the proceedings. This in short is the gist of section 3 which deals deals with the powers of the court to allow interest. It is not shown on behalf of the defendants that the current rate of interest. It is not shown on behalf of the defendants that the current rate of interest is 10 per cent. Rather the current market rate is not less that 18 per cent. as understood in common parlance. Even other wise, the provisions of this Act will not be applicable in the present case because, in the case of a loan granted by a bank, an amendment has been made by the Banking laws (Amendment) Act 1983, Section 21A of this Act is as follows :
'Notwithstanding anything contained in the Usurious Loans Act 1918 (10 of 1918), or any other law relating law to the indebtedness in force in any state, a transaction between company and its debtor shall not be reopened by and court on the ground that the rate of interest charged by the banking company in respect of such transaction is excessive.'
13. In the present case, there is a written contract between the parties as contained in the hypothecation agreement dated October 31, 1976, that the borrower shall pay interest on the principle amount or the balance outstanding of loan at any time at the rate of 71/2 per cent. per annum over and above the Reserve bank of India rate of interest subject, however, to a minimum of 161/2 per cent. per annum and such interest is to be paid every month ending with the last working day of calendar month Clause 2(c) further provides that, in default of payment of any one installment of the principal amount on the due the borrower shall pay on all such overdue Installments or such portion thereof as shall then remain outstanding interest at 3 per cent. per annum over and above the agreed rate mentioned in clause (b) above. As laid down by section 21A, the court is not empowered now to reopen this transaction between the parties on the ground that the rate of interest charged by the plaintiff-bank respect of the transaction is excessive. It is the case of the plaintiff-bank in para 17 of the plaint that the defendants failed to repay the secured loan in 40 monthly Installments of Rs. 2,000 each. the defendants are also alleged to have failed to pay the cash credit overdraft loan of Rs. 75,000 before October 31, 1977. In these circumstances, the plaintiff bank is fully entitled to claim penal interest on overdue Installments thereforee, I am of the view that the plea regarding the interest being charged by the plaintiff-bank as excessive also does not raise triable issue.
14. Learned counsel for the defendants also submitted at the bar that, in view of the fact that the defendants were allowed to file a written statement by the learned Deputy Register, the plaintiff-bank was not entitled to claim summary procedure My attention has not been drawn to any such order passed by the Deputy Register. Even if that be so, I am of the view that the procedure under order 37 which is otherwise available to the plaintiff cannot be circumvented in this manner. Moreover, no pleas has been taken in either of these application that leave to defend should be granted in this situation.
15. thereforee, I am of the view that thee is no merit in any of these application for leave to defend and they do not raise any triable issue In fact the pleas have been raised only to prolong the litigation. These applications are, thereforee, rejected and the plaintiff is hereby granted a decree for recovery of Rs. 2,05,120,59 with costs and pending and future interest at the rate of 20.55 per