Lokam Ramachandra Rao Vs. Bank of Baroda and Another - Court Judgment

1. Heard the learned Counsel on both sides.

2. The first defendant is the appellant. The suit was filed by the first respondent, Bank of Baroda, Guntur Branch, for recovery of a sum of Rs.22,295.55 being the amount due towards the loan sanctioned by the plaintiff to the first defendant for the purchase of a tractor. The second defendant was the guarantor. The amount of loan sanctioned was Rs.34,000/-. The first defendant executed a demand promissory note for the said amount in favour of the Bank. He also executed a hypothecation bond hypothecating the tractor. For due repayment of the loan with interest, costs and other charges, the first defendant has also executed the registered mortgagedeed dated 4-5-1974 mortgaging the properties shown in the schedule. It appears that the second defendant subsequently took over the tractor from the first defendant and sold away the tractor. The second defendant made certain payments to the plaintiff-bank towards the loan. As the balance was not paid, the suit was filed. An ex parte decree was initially passed on 18-6-1983. But the same was set aside on 14-7-1997 on an application filed by the first defendant and the suit was restored to file. Thereafter the first defendant filed a written statement contending, inter alia, that with the consent of the plaintiff the second defendant took over the liability under the suit transaction as the tractor was taken over by him and as such the plaintiff cannot claim any relief as against the first defendant, that the defendants paid more than Rs.60,000/- towards the suit transaction by 4-1-1980, that the plaintiff is not entitled to collect more than the principal towards interest, that the plaintiff is entitled to collect only 11% simple interest and that the plaintiff has to deduct Rs.10,000/- as the defendants are entitled to the benefit of ARDR scheme.

3. Dl also filed a memo stating that D2 died on 17-12-1995.

4. On the above pleadings, appropriate issues were framed by the trial Court. On behalf of the plaintiff PW1 was examined. The first defendant examined himself as DW1. Though the plaintiff filed all the relevant documents along with the suit originally and they were also marked as exhibits earlier at the time of passing the ex parts decree, unfortunately the case record including the exhibits was destroyed subsequently in the year 1989. At the time of the retrial; only the account copy filed by the plaintiff was marked as Ex.Al. No documents were produced by the first defendant.

5. The lower Court found that the account copy filed by the plaintiff was trueThe lower Court rejected the contention of the first defendant that the defendants paid more than Rs.60,000/- towards the suit claim in the absence of any credible evidence produced by the first defendant. It also rejected the contention of the first defendant that his liability for the suit claim is excluded as the tractor was taken over by the second defendant as the plaintiff did not agree for such exclusion. So far as the interest is concerned, the lower Court, following certain judgments of this Court, held that the plaintiff is entitled to recover interest as per the guidelines issued by the Reserve Bank of India. The lower Court, however, upheld the plea of the first defendant that he is entitled for the benefit of loan waiver to the extent of Rs.10,000/- under the ARDR scheme of the Central Government. The lower Court accordingly granted a preliminary decree in favour of the plaintiff deducting a sum of Rs. 10,000/- from the amount due.

6. In this appeal the learned Counsel for the appellant has raised the following contentions:

(i) As D2 died and no steps were taken by the plaintiff to bring the legal representatives of D2 on record, the whole suit abated and no decree could be granted even as against D1:

(ii) As Dl is admittedly an agriculturist and the loan also is agricultural loan sanctioned for the purchase of a tractor, the interest is liable to be scaled down as per the provisions of the A.P. (A.A) Agriculturists Relief Act, 1938 (Act 4 of 193 8).

(iii)Section 21-A of the Banking Regulation Act, 1949, which came into operation with effect from 15-2-1984 cannot be applied to agricultural loans which are covered by the provisions of Act 4 of 1938.

(iv) Plaintiff is not entitled to recover interest in excess of the principalamount applying the rule of Damdupat and

(v) The evidence of PW1 is very vague and unsatisfactory and the suit claim has no legal proof.

7. Taking the last point first, it is to be seen that in the written statement filed by him, Dl has not denied the suit transaction or his liability for the suit claim. In the plaint all the details of the suit transaction are mentioned and along with the plaint all the relevant documents were also filed by the plaintiff and they were also marked as Exhibits at the time of passing the ex parte decree originally. Subsequently the record was destroyed. So under those circumstances EW1 in his deposition could not refer to all the details. Inasmuch as Dl has not disputed the transaction or his liability, I do not find any substance in the contention that the suit claim is not legally proved. Accordingly the same is rejected.

8. So far as the first contention is concerned, even though the suit as against D2 has abated, the claim as against Dl, who is the principal borrower still survives. As the liability is joint and several Dl cannot escape from his liability merely because the claim as against D2 stood abated. Section 43 of the Indian Contract Act provides that when two or more persons make a joint promise, the promisee may, in the absence of express agreement to the contrary, compel any one or more of such joint promisors to perform the whole of the promise. Section 44 provides that where two or more persons have made a joint promise, a release of one of such joint promisors by the promisee, does not discharge the other joint promisor or joint promisors; neither does it free the joint promisor so released from responsibility to the other joint promisor or joint promisors. I do not therefore find any illegality in the decree granted by the lower Court as against Dl.

9. Points (ii) and (iii) raised by the Counsel for the appellant, I am afraid, are no longer res Integra as they are concluded by the decision of the Supreme Court in Ms. Bank of India v. Vijay Transport, : [1988]1SCR961 , and the Full Bench decision of this Court in Slate Bank of India v. Avalh Sakru, : AIR1994AP170 . In the former decision the Supreme Court authoritatively held that Section 4(a) of Act 4 of 1938 is applicable to Banks nationalised under the Banking Act and as such the scaling down of debts due to the Bank as provided by Agriculturists Relief Act does not arise. In the later decision the Full Bench of this Court elaborately considered the effect of Section 21-A of the Banking Regulation Act vis-a-vis the provisions of the Usurious Loans Act and the Agriculturists Relief Act and held that after the introduction of Section 21-A of the Banking Regulation Act, 1949 by Amending Act 1 of 1984 the Courts have no power to scale down the interest in respect of the debts due to the Banks. It was further held that Section 21-A of the Banking Regulation Act applies to all transactions entered into between the banking company and its debtor whether the transaction was entered into prior to its commencement or after and that Section 21-A applies to pending appeals irrespective of the fact whether the decree was passed giving relief to the debtor or not. It was also held that Section 21-A makes no distinction between an advance made for agricultural purpose or for commercial purpose and it equally applies to both. It was further held that the provisions of Usurious Loans Act, 1918 (Act 10 of 1918) as amended by Usurious Loans (Madras Amendment) Act 8 of 1936. Section 3 of Madras Agriculturists Debt Relief Act and A.P. Agriculturists Relief Act, 1938 are not applicable to the advance made by the Bank to the Agriculturists. In view of the said authoritative pronouncement of the Supreme Court and also the Full Bench decision of this Court, I do not find any merit in the contentions raised by the learned Counsel for the appellant. The learned Counselhowever sought to contend that money lending and relief of agricultural indebtedness falling under Entry 30 of List II of VJIth Schedule of the Constitution are within the exclusive domain of the State Legislature and that the Banking Regulation Act, which is a Central Legislation, cannot intrude into the field of the Stale Legislature and as such Section 21-A of the Banking Regulation Act cannot make inroads into the powers of the State Legislature and the same cannot, therefore, be applied to agricultural loans coming within the purview of Act 4 of 1938. The learned Counsel submits that this aspect was not considered in the aforesaid judgments of the Supreme Court and the Full Bench decision of this Court. 1 do not, however, think that it is open to the appellant to raise such a contention in the face of the categorical pronouncement of the Supreme Court and the Full Bench of this Court. That apart this question was not raised in the lower Court and I do not think that it can be permitted to be raised for the first time in appeal. Further if any question of validity of Section 21-A of the Banking Regulation Act has to be raised the Union of India will have to be necessarily made a party to the proceedings and in the absence of proper parties, I do not think that this question can be permitted to be raised for the first time at this stage. Points 2 and 3 raised by the learned Counsel for the appellant also, therefore, fail.

10. In support of his contention that the plaintiff is not entitled to recover an amount towards interest more than the principal, the learned Counsel for the appellant placed reliance on the judgment of the Supreme Court in Hukinticfiand v. Fulchcmd, : [1965]3SCR91 . In the said judgment the Supreme Court observed that 'the principle of Damdupat was evolved both as an inducement to the debtor to pay the entire principal and interest thereon at one and the same time in order to save interest in excess of the principal and as a warning tothe creditor to take effective steps for realising the debt from the borrower within reasonable time so that there be not such accumulation of interest as would be in excess of the principal amount due, as in that case he would have to forgo the excess amount. There may be justification for the principle of Damdupat applying in the case of an ordinary creditor and a debtor, but there seems no justification for extending that principle to the case of a trustee who has to pay interest on the funds in his hand with respect to which on certain grounds he is held liable to pay interest.'

11. In the said judgment the Supreme Court after referring to certain Hindu Law Texts held that the rule of Damdupat applies in respect of the interest due to the creditor by the borrower, the debtor and that it applies to cases where a loan is advanced. It is however a moot question whether the said principle is applicable to the loans advanced by Banks which are governed by specific terms and conditions of the contract and also certain statutory provisions like Section 21-A of the Banking Regulation Act. Without going into that question, in view of the peculiar facts and circumstances of the case, I feel that relief should be granted to Dl by following the said principle.

12. In the instant case it is seen that after obtaining the ex part? decree in 1983 the plaintiff kept quiet for nearly 13 years without taking any steps for recovering the amounts due. It is stated that in the year 1996 the plaintiff addressed a letter to Dl calling upon him to approach the plaintiff if he desires for compromise outside the Court. According to Dl it is only on receipt of the said letter he came to know about the suit and the decree and that he applied for setting aside the ex parts decree. Having regard to these facts I think that it is a fit case where Dl should be granted relief applying the equitable principle of Damdupatas laid down in the judgment of the Supreme Court referred to above by limiting the interest to the principal amount. In all other respects the judgment of the lower Court is confirmed.

13. The lower Court shall ascertain the amount that will be due accordingly after giving credit to all the payments made earlier and also after giving credit to a sum of Rs. 10,000/- which has to be waived under ARDR scheme. It will be open to both the parties to file calculation memos in this behalf before the lower Court within two months from the date of receipt of a copy of this order. The lower Court after considering the same shall arrive at the amount for which a decree has to be granted as per this judgment, and accordingly grant a decree for the amount so ascertained.

14. As this judgment is renderedkeeping in view the peculiar facts and circumstances of the present case, it shall not be treated as a precedent in other cases.

15. The appeal is accordingly disposed of. There shall be no order as to costs.