ORDER
O.P. Sharma, J.
1. This is defendants appeal under Section 96 of the Code of Civil Procedure. The appeal is against the judgment and decree dated 28-11-1991 passed by the District Judge (Bank cases) Jammu whereby suit for recovery of Rs. 2.26,922.97 has been decreed. The plaintiff sought recovery of the amount which was advanced to M/s. Guru Nanak Rice Mill, Arnia, a partnership firm of which appellants and respondents No. 2 to 8 were partners. As the amount of loan was not paid the Punjab National Bank respondent herein filed the suit which has been decreed.
2. While the appellants pleaded limitation as bar to the suit the respondents No. 2 to 8 denied their liability on the ground that partnership stood dissolved with effect from 21-8-1980 and therefore, they were not liable.
On the pleadings of the parties the following issues were framed :--
'1. Whether the plaintiff is entitled to recover an amount of Rs. 2,26,922.97 with interest @ 12% p.a. with quarterly rests till realisation from all the defendants? OPP
2. Whether the documents referred to in para No. 10 have been duly executed by the defendants? OPP
3. Relief.'
3. The learned trial Court found both the issues in favour of the plaintiff-bank and decreed the suit. The contention of Mr. Raghu Mehta, learned counsel for the appellants are two fold (i) that the claim is barred by limitation because the acknowledgment of debt by executing the balance confirmation letters after the debt had become barred by time does not save the limitation and (ii) that the interest could not be charged on the interest compounded from time to time and included in the principal. Mr. Chopra argued that defendants had acknowledged the liability to pay the amount claimed in the suit well within the period of limitation and, therefore, the suit was rightly decreed. His further submission is that the interest had been rightly calculated in terms of the agreement and the same is permissible.
4. It is a fact that appellants pleaded that suit was barred by time, but no issue has been framed and rightly so because the cause of action was founded on the letters of balance confirmation dated 4-9-1980, 5-2-1981, 19-8-1982, 4-2-1985, 11-11-1986 and 3-12-1987 in which the appellant Sardari Lal had acknowledged the liability on behalfof all the partners as he was holding power of attorney on behalf of the partners. The appellants did not specifically deny the execution of their balance confirmation. They simply denied the averments. Moreover, the respondents Nos. 2 to 8 neither pleaded limitation as a bar to the suit nor denied the acknowledgment of debt by their attorney holder. They only pleaded that partnership having been dissolved they were not liable. Since the allegations of fact made in the plaint regarding acknowledgment of debt were not specifically denied by the appellants and other defendants, these were taken as admitted by the learned trial Court under Order 8, Rule 5, C.P.C. So the trial Court found that parties were not at variance on the question of limitation and therefore, no issue in this behalf was framed. The appellants also did not press for framing of the issue. Whether the trial Court's action in not framing the issue is in accord with Order 8, Rule 5 may now be noticed. Rule 5(1) of Order VIII reads as under :--
'5. Specific denial.-- (1) Every allegation of fact in the plaint, if not denied specifically or by necessary implication, or stated to be not admitted in the pleading of the defendant, shall be taken to be admitted except as against a person under disability:
Provided that the Court may in its discretion require any fact so admitted to be proved otherwise than by such admission.'
Obviously the Court had the discretion to frame the issue and ask the parties to lead evidence to prove the fact which is deemed to have been admitted. But the Court decided otherwise and this was not objected. Moreover, the appellants have nowhere pleaded how the suit was barred by time. The only plea raised in the written statement is that the suit is not within limitation. This may be yet another reason for not framing the issue. However, according to Mr. Mehta even in the absence of the issue it was obligatory for the plaintiff to prove execution of the letters of confirmations on which the cause of action is founded. Since only two letters of balance confirmation dated 11-11-1986 and 3-12-1987 have been proved, the suit according to him is barred by time. How the learned trial Court dealt with this question may first be considered. The relevant portion of its findings reads as follows :--
'For the reasons discussed above i.e.non-specific denial of the execution of the balance confirmation letters by defendant Balkari Lal and in view of the statements of the witnesses, the execution of the documents vide para-10 i.e. balance confirmation letters is proved and decided accordingly.'
5. Let us now examine whether this conclusion is supported by the pleadings, Reference to all the letters of Balance confirmation has been made in para-10 of the plaint, relevant part of which is extracted below :--
'10. That the outstanding has been acknowledged by the defendants through their Power of Attorney holder, defendant No. 3 by executing various balance confirmation letters, the details of which is given as under:--
1. B. C. Letter dated 4-9-1980 acknowledging an amount of Rs. 91,295,14 as outstanding up to 30-6-1980.
2. B. C. Letter dated 5-2-1981 acknowledging an amount of Rs. 92,860.64 as outstanding up to 31-12-1980.
3. B.C. Letter dated 19-8-1982 acknowledging an amount of Rs. 98,457.96.
4. B. C. Letter dated 2-4-1985 acknowledging an amount of Rs. 72.755.00.
5. B. C. Letter dated 11-11-86 acknowledging an amount of Rs. 1,25,825.50 outstanding up to 30-6-1986.
6. B. C. Letter dated 3-12-1987 acknowledging an amount of Rs. 1,20,952.50 outstanding up to 31-12-1987.
All these B. C. Letters in original are enclosed herewith as annexures H to H/5 to this plaint.'
6. Defendants No. 2 and 3 the appellants herein have in the written statements simply stated that 'Para 10 is denied' while the other defendants-respondents Nos. 2 to 6 pleaded ignorance about the acknowledgment of debt by the appellant Sardari Lal. The learned trial Court relying on Order 8, Rules 4 and 5, CPC came to the conclusion that execution of the balance confirmation stood admitted and, therefore, found that the suit was not barred by limitation. We may now notice the decision of the apex Court in case Sampuran Singh v. Naranjan Singh, AIR 1999 SC 1047 in which it has been laid down that (at Page 1050) :--
'Section 18 Sub-section (1) itself starts with the words 'where, before the expirationof the prescribed period for a suit or application in respect of any property or right, and acknowledgment of liability in respect of such property or right has been made. . . .' Thus, the acknowledgment, if any, has to be prior to the expiration of the prescribed period for filing the suit in other words, if the limitation has already expired, it would not revive under this section. It is only during subsistence of a period of limitation, if any, such document is executed, the limitation would be revived afresh from the said date of acknowledgment.'
But having found that the defendants have admitted the execution of all the letters of Balance confirmation details of which is given in the plaint, the question of acknowledgment of the debt after it had become barred by time does not arise. So the judgment has no application to the facts of the case.
7. Mr. Mehta next argued that interest is payable only on principal and not on the interest which is added to the principal after being compounded. In support of this he placed reliance on the decision of the High Court of Bombay in case Union Bank of India v. Dalpat Gaurishanker Upadyay, AIR 1992 Bombay 482 (FB). But this is not the correct legal position in view of the law laid down in Corporation Bank v. D.S. Gowda, (1994) 5 SCC 213 : (1994 AIR SCW 2721) holding that :--
'In Krishna Reddy v. Canara Bank, AIR 1985 Kant 228 it was observed as under (at Page 231) :--
'The mandate of this section is that Courts cannot reopen the account relating to a transaction between a banking company and its customer on the ground that the rate of interest charged, in the opinion of the Courts is excessive or unreasonable. The Courts, in other words, cannot exercise jurisdiction under the Usurious Loans Act or any other law relating to indebtedness for the purpose of giving relief to any party. This appears to be the intent of the Legislature in enacting the Banking Laws (Amendment) Act, 1983.
Section 21A has however, no bearing on the jurisdiction of Courts to give reliefs to an aggrieved party when it is established that the bank in a particular case has charged interest in excess of the limit prescribed by the Reserve Bank of India.'
Therefore, according to the High Court if,in any case, it is shown that the Bank was claiming interest in excess of that permitted by the circular/direction of the Reserve Bank, the Court could give relief to the aggrieved party notwithstanding Section 21A to the extent of interest charged in excess of the rate prescribed by the Reserve Bank. A distinction must be drawn between Court's interference on the premise that the interest charged is excessive and Court's interference on the premises that the interest charged is in contravention of the circulars/directions issued by the Reserve Bank. These circulars/directions having been issued under Sections 21/35A of the Banking Regulation Act would have statutory flavour. In the judgment impugned in this case the Division Bench of the High Court summed up this :
'The Courts cannot reopen any account maintained by banks relating to transaction with its customers on the ground that the rate of interest charged, in the opinion of the Courts, is excessive or unreasonable. Section 21A of the Banking Regulation Act is a restrain on such power of Courts. However. In any case, if it is proved that the interest charged by banks on loans advanced is not in conformity with the rate prescribed by the Reserve Bank then the Court could disallow such excess interest and give relief to the party notwithstanding the provisions of Section 21A. Banks are bound to follow the directives or circulars issued by the Reserve Bank prescribing the structure of interest to be charged on loans and any interest charged by banks in excess of the prescribed limit would be illegal and void. Bank cannot charge compound interest with quarterly rests on agricultural advances.' We are in respectful agreement with the above interpretation placed on Section 21A of the Banking Regulation Act.'
8. The proposition was reiterated in Bank of Baroda v. Jagannath Pigment & Chem., (1996) 5 SCC 280 holding that :--
'2. The appellant-Bank had filed a suit to recover a sum of Rs. 1,66,759.29 p. with interest and costs. The suit was decreed for the said amount with proportionate cost. Future interest was awarded at the rate of 13 1/2 per cent per annum on the said amount of Rs. 1,66,759.29 from the date of the suit till payment or realisation. Against the said decree the borrower preferred an appeal, First Appeal No. 364 of 1986, in which one ofthe contentions raised was that the bank was not entitled to claim compound interest and convert the principal sum claimed as inclusive of interest and that the Court was not justified in granting future interest on the said principal sum-adjudged. The High Court accepted the contention and modified the decree in that it held that future interest should be calculated on the sum borrowed, viz. Rs. 1,20,675.59 p. and not the principal sum-adjudged i.e. 1,66,759.29 p. Counsel for the appellant-Bank states that this approach of the High Court runs counter to this Court's decision in Corporation Bank v. D. S. Gowda, (1994) 3 Scale 46 : (1994 AIR SCW 2721). The respondents though served have not chosen to enter an appearance and contest this appeal.'
So no reliance can be placed on the judgment of the High Court of Bombay in view of the law declared under Article 141 of the Constitution. Both the contentions having failed the appeal is dismissed with costs.