9911796707
TMI Blog1991 (12) TMI 284X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellants in RFA No. 219 of 1991. Therefore, Sri S.P. Kulkarni, learned Counsel for the appellants in R.F.A. No. 219/91 submitted that he may be permitted to represent respondents 2 to 7 in R.F.A. No. 396/90. Accordingly, he is permitted to represent them, 6. The first defendant is a registered Private Limited Company having its registered office at Banavasi and administrative office at Bombay. Defendant No. 2 is the Managing Director of the first defendant Company as well as Glendale Fruit Processors Private Limited. Defendant No. 3, who died during the pendency of the suit was also one of the Directors of the 1st defendant company. Defendants 3 to 9 are also the members of the Board of Directors of the first defendant - Company, These facts are not in dispute. 7. The plaintiff-Bank filed the aforesaid suit for recovery of a sum of ₹ 26,66,407.24p with costs and also for interest at 15% p.a on the term loan, 19.50% p.a. on the S.O.D.H. loan and 18.50% p.a. on the P.C.L. Account. 8. The case of the plaintiff is that the first defendant - company obtained the following three types of loan from the plaintiff - Bank on 13.11.1982. 1. Term loan of a sum of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suit thereon and future interest at the rate of 19.50% per annum from the date of the suit till the date of realisation; ii) For a decree for the sale of the movable property described in schedule 'D' of the plaint for the plaint for the realisation of the amount claimed in para B(i) above and the surplus sale proceeds if any for the realisation of the dues claimed in para A(i) above; C(i) For a decree against the defendants personally, jointly and severally directing payment of ₹ 1,31,356.99 as mentioned in para-13 above due under P.C.L. Account No. 1/82 with proportionate costs of the suit and future interest at the rate of 18.50% per annum from the date of the suit till the date of realisation; ii) For a decree for the sale of the movable property described in Schedule 'E' of the plaint for the realisation of the amount claimed in para C(i) above and the surplus sale proceeds if any for the realisation of the dues claimed in paras A(i) and B(i) above; D. For such other and future reliefs as the Court may deem fit under the circumstances of the case to meet the ends of justice be awarded, E. Costs on account of insurance p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement to pay penal interest on overdue amount and compound interest with quarterly rests in respect of the loans advanced to the 1st Defendant. 17. The trial Court, on the basis of the pleadings of the parties raised as many as 19 issues which were as follows:- 1. Does plaintiff-Bank prove that defendants 2 to 9 as Directors of defendant No. 1 Company obtained loan credit facility of ₹ 10 lakhs O.D. facility of ₹ 6 lakhs and P.C.loan of ₹ 8 lakhs on 13.11.82 have executed suit documents and hypothecated the deed agreeing to repay the same along with interest thereon at the minimum rate of 15%, 19.50% and between 12.50% p.a to 18.50% p.a as the respective amounts to be compounded quarterly along with other incidental charges as contended in plaint paras 5 to 9 and 17? 2. Whether the plaintiff-Bank further proves that it has maintained proper and correct accounts in respect of suit transactions as contended in plaint para 13? 3. Whether the plaintiff-Bank further proves that defendants failed to liquidate the suit loan account inspite of making demands and issue of notices as contended in the plaint para 12? 4. Has the suit of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and it was forwarded through post along with letter dated 10.11.1982 for the signature of 4 Directors including defendants 3,4 and 5 and the said letter was received after 13.11.82 at Bombay and therefore, signatures of defendants 3, 4 and 5 were taken only after 18.11.82 i.e., after the loan was advanced in favour of defendant No. 1 as contended in para 3 of his W.S? 13. Do defendant No. 3 further proves that plaintiff-Bank obtained 2 guarantee bonds from him without any consideration and that deed of guarantee not been executed by all the intended co-sureties undertaking defendant 3, 4 and 9 and therefore his liability stands discharged as contended in para 3 of his W.S.? 14. Whether defendant No. 3 further proves that Plaintiff-Bank has not properly maintained accounts in respect of suit transaction as contended in para 11 of his W.S? 15. Do defendants 4 and 5 prove they are not at all necessary parties to the suit and that they are not liable to pay any of the suit claim personally or in any capacity as they have not signed the guarantee agreement as contended in para 1 and 3 of their W.S? 16. Whether defendant No. 6 proves that he has not stood gua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the legal representatives of defendant No. 3 and defendants 4 and 5, and also the Accountant of the 1st defendant Company at Banavasi who also held the Power of Attorney for defendants 1,2,6,8 and 9. They produced 7 documents which were marked as Exts. D 1 to D 7. 20. Having regard to the several contentions urged on both the sides, the following Points arise for consideration in this Appeal. 1. Whether the appellants R.F.A. 396/90 have proved that the guarantee bonds Exts.P 7 and P 8 dated 13.11.1982 were not supported by consideration, therefore, the bonds were invalid, unenforceable, as such the appellants were not liable for the suit claim? 2. Whether defendant No. 3 has proved that there was an agreement between the Creditor-Plaintiff-Bank and himself that it would not execute or abstain from enforcing guarantee bonds Exts.P 7 and P 8 against defendant No. 3 unless the other sureties also executed the guarantee bonds Exts.P 7 and P 8? 2 A. If Point No. 2 is answered in the affirmative, whether defendant No. 3 can be held to be liable for the suit claim? 2 B. If the points 2 and 2A are answered in the negative, what is the extent of the liabil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per Ext.P-36, Therefore, even if the third-defendant has executed the surety Bonds, Exts.P-7 and P-8 on or subsequent to 18-11-1982, so long as, it is done pursuant to and in conformity with the terms of the sanction order and in compliance with the resolution of Board of Directors, it cannot be stated that the bonds are not supported by consideration. Sri Aswatharam, learned Counsel appearing for the Plaintiff-Bank placed reliance on the following decisions:- (i) AIR 1918 PC 226, Kali Charan v. Abdul Rahman and Ors.; (ii) AIR1984Guj93 , State Bank of India v. Premco Saw Mill; (iii) AIR1929All72 , Chakanlal and Ors. v. Kanhaiyalal Ors. ; (iv), Gulam Hussain v. Faiyaz Ali Khan; 24. Section 127 of the Indian Contract Act, 1872 ('the Act' for short) reads thus:- 127. CONSIDERATION FOR GUARANTEE. - Anything done, or any promise made, for the benefit of the principal debtor, may be sufficient consideration to the surety for giving the guarantee . 25. We are clearly of the view that Section 127 of the Act is worded in unambiguous terms. The Section takes into its fold the past consideration also. The words, anything done ........for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned by one 'S' for four years at an yearly rental of ₹ 14,597/-. A few days later, one 'M' executed a surety bond in a sum of ₹ 5,000/-. The surety died and his heirs asked the lessor to discharge them. Thereupon, the lessor called upon 'S' to furnish a fresh surety and once 'C' executed in favour of the lessor a surety bond for ₹ 5000 /-. This was about two years after the date of the original deed in favour of 'S'. The lessor sued 'C', as well as 'S' for the money due by the latter, and 'C' pleaded want of consideration for the surety bond. It was held that the demand for fresh surety was made by the lessor, and 'C' became a fresh surety in order to save 'S' from the results of failure to comply with the demand of the lessor, which would have been either the forfeiture of his lease or the institution of legal proceedings, as such execution of the surety by 'C' resulted in advantage to the lessee, therefore, there was sufficient consideration for surety bond executed by 'C'. 27.3, However, in Ramnarain's case, the aforesaid Decisions of the Privy Council and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to agree with the view expressed in Ram Narain's case. In Kali Charan's case, it was held in unequivocal terms, that anything done or any promise made for the benefit of the principal, may be sufficient consideration to a surety for giving a guarantee. The ground that the liability of the sureties was for the performance by the principal of the conditions of the lease was an additional ground. The rule that, 'anything done' or 'any promise made' for the benefit of the principal may be a sufficient consideration to a surety for giving a guarantee was laid down not on the ground that the liability of the sureties was for the performance by the principal of the conditions of the lease, but on the interpretation of the contents of Section 127 of the Contract Act. Illustration, 'C' to Section 127 of the Contract Act cannot cut-down the amplitude of Section 127 of the Contract Act. No doubt, it cannot be readily assumed that an illustration to a Section is repugnant to it. But, at the same time, as held by the Supreme Court in SHAMBHU NATH MEHRA v. THE STATE OF AJMER, 1956CriLJ794 an illustration does not exhaust the full content of the Section, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anlal's case, a Division Bench of the very same High Court held, that the past consideration was a good consideration for a surety bond. 27.7. We, therefore, find it not possible to pursuade ourselves to agree with the view expressed in the case of Bank of India v. H.J. Matha Gowder. 27.8. The Decision in State Bank Of India v. Premco Saw Mill, Ahmedabad and Ors. has not considered the point in question. That was a case in which there was an agreement to forbear from taking action against the principal debtor. Therefore, it was held that the surety bond was supported by consideration. Such is not the situation obtaining in the instant case. Therefore, we cannot consider that this Decision is of any assistance to the plaintiff. In addition to the fact that the surety bonds in question were executed for the various loans advanced to the first-defendant, they were also executed in compliance with the terms of the order under which the various loans were sanctioned to the first defendant. The loans were sanctioned by the plaintiff Bank on condition that the Directors of the first defendant should also stand as sureties. This is clear from the letter of sanction dated 11-11-19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by drawing an inference from the proved facts that unless the surety bonds were executed by all the Directors, none was responsible to the liability incurred by the principal-debtor, Ext.P-7 is executed by defendants 2,3,8 and 9, whereas, Ext.P-8 is executed by defendants 2,3,6 and 7. Both the surety bonds, (Exts.P-7 and P- 8), are similarly worded and they relate to the liability of the first-defendant. Admittedly, Exts.P-7 and P-8 are not executed by defendants 4 and 5, who are also the Directors of the first-defendant-Company. The contention of the third-defendant is that there was a specific understanding between the plaintiff and himself, that unless the other Directors - Guarantors execute the guarantee bonds, the guarantee bonds will not be enforced against him by the first-defendant. 29. In Para-3 of the Written Statement, the third-defendant has specifically pleaded as follows:- Accordingly after 18th November 1982 this defendant went to see Branch Manager of the Plaintiff Bank at Bombay....... This defendant says that the signature of this Defendant was taken on two guarantee letters after 18th November 1982 i.e., after the said loans were advanced by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Manager that Defendant-3 should be available around after 5.30 PM. On that day, therefore, Manager asked me to inform defendant 3 to go to the branch office at about 5.30 PM. On that day itself about 5.45 PM. I along with Defendant 3 went to Syndicate Bank Bombay Fort Branch, Defendant 3 perused the documents shown by the Manager. He wanted that all the Directors to be present and signed. The Manager asked Defendant 3 to sign the document and he will get the signatures of other directors later on, Accordingly Defendant 3 signed the said document. Later on defendant 3 and myself confirmed that the above said document was not signed by all the directors, because Defendant 4 was out of India and other directors did not sign. Since defendants 4 and 5 are not signed the suit-page-4 documents, they are not liable to pay any of the suit claim. Defendant 3 is also not liable to pay the suit claim because he signed the suit documents only after the disbursement of the loan amount . In the Cross-Examination nothing has been elicited with regard to the existence or otherwise of the agreement between the plaintiff and the third defendant, as pleaded in the written statement of the thir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver put and secondly, because such subsequent testimony, has no chance of being tested and corroborated. Learned Counsel also place reliance on the following Statement of law made in Cross on Evidence, Sixth Edition, at Page 277. It reads: Any matter upon which it is proposed to contradict the evidence-in-chief given by the witness must normally be put to him so that he may have an opportunity of explaining the contradiction, and failure to do this may be held to imply acceptance of the evidence-in-chief, but is not an inflexible rule and it has been held to be unsuitable to proceedings before lay justices. We are of the view that the Statement of law made by Cross and also the proposition laid down in para 10 in A.E.G. Carapiet's Case (supra) can be accepted in a case where there is no other evidence to judge the probabilities of the case pleaded by the defendant, in the passage extracted from Cross, it is also stated that the said rule is not an inflexible rule. In the instant case, there is other evidence which probabilities the agreement pleaded by the third defendant. We are of the view that the evidence on record does not establish the agreement as set up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ording to him, preceded the execution of Exs.P.7 and P.8. It is also relevant to notice that the agreement pleaded by the 3rd defendant is also highly improbable. The plaintiff-Bank, while sanctioning the loans, made it a condition that all the Directors of the 1st-defendant should also give personal guarantee for repayment of the loans. If the plaintiff-Bank were to agree that if any one of the Directors failed to execute the guarantee bond, none of the Directors would be liable, the very object of taking guarantee bond would have been defeated by one of the Directors failing to execute it. In that event, the plaintiff-Bank would have placed itself in an uncertain and precarious position where, even the Directors who had executed surety bonds would not have been made liable and no surety would have been available to the Bank. If there were to be such an agreement, we fail to understand why it could be only with the 3rd defendant and why not with the other Directors who also stood in the same position as that of the 3rd defendant. The other defendants who are the Directors of the 1st defendant have not pleaded any such agreement. Therefore, taking into consideration all the evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame as per the finding recorded by us in the preceding paragraph. We are of the view that merely because the deed (surety bond) mentions plural sureties, in other words, drawn up in the plural form but one of them does not join or is signed by only one, it does not absolve the one who has or the others who have, executed it, unless specific agreement in terms of Section 144 is proved. 34. In AYYANNA v. VEERABHADRAM AIR 1926 Mad 62 it has been held that when a contract of guarantee mentions two sureties but only one signs the bond, it binds the surety who signs it unless it is shown that he was to be liable only if the other surety signed it. We have, on consideration of the evidence on record, held that no such agreement is proved by defendant No. 3. 34.1. We are also of the view that the recitals in the surety bonds Exs.P.7 and P.8 also indicate that the surety bond executed by the various directors is an individual guarantee and where there is more than one guarantor, their liability has to be construed as joint and several. 34.2 In para 1 of Ex.P.7 and P.8 after mentioning four names of sureties, it has been specifically stated thus: hereinafter referred to as the Guar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled to execute it. It is submitted that such an understanding can be inferred from the conduct of the parties as evidenced by the condition imposed by the plaintiff in the order sanctioning the loans that all the Directors should stand as sureties and the resolution passed by the Board of Directors of the 1st defendant-Company that all the Directors should execute the surety bond and the surety bonds also were prepared in the names of all the Directors that such an inference would not be inconsistent or incompatible with the Rules of Equity embodied in Section 144 of the Contract Act even if it is held that the agreement pleaded by the 3rd defendant as failing under Section 144 of the Contract Act is not proved. The learned Counsel also placed reliance on a Decision of the Court of Appeal in Chancery in EVANS v. BREMBRIDGE AND ORS., 1843 - 1860 All E.R. 170 the Statement of Law made in Halsbury's taws of England IV Edition, Vol. 20 at para 160 and also the Statement of law made in Sheldon and Fidler's Practice and Law of Banking, 11th Edition at page 328. 35. There is no doubt that the Rules of English Common Law applicable to contracts can be applied by the Courts in I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nderstanding and faith that another person would also enter it, he has a right in equity to be relieved, on the ground that the instrument has not been executed by the intended co-surety. Therefore, it is clear that the aforesaid Decision is of no help to the 3rd defendant because as a matter of fact we have come to the conclusion that no such understanding between the plaintiff and the 3rd defendant is proved in the instant case. The Decision in Evan's case did not merely depend upon the fact that out of the two co-sureties one of them had not executed. On the contrary it was found, as a matter of fact, that there was an understanding and faith between the creditor and the surety that another person would also join the surety bond. 36.1. The following Statement contained in para 160 of Vol. 20 of Halsbury's Laws of England Fourth Edition, was also relied upon by Sri Holla, learned Counsel for the 3rd defendant: Where it is a condition precedent that a guarantee is to be executed by certain named persons as co-sureties, it is the creditor's duty to see that it is executed by the proper parties, and the known insolvency of one of those parties does not dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nction of the loans was that all the Directors should give their personal guarantee to the banking facility extended by the plaintiff-Bank to the 1st defendant-Company. Pursuant to such a condition, the Board of Directors of the 1st defendant-Bank passed a resolution on 11-11-1982 to the effect that all the Directors should execute the surety bonds. Accordingly, the surety bonds were executed as per Ex.P.7 and P.8. Defendants-4 and 5 did not execute the surety bonds. The learned Counsel for the 3rd defendant submitted that from these facts and circumstances, it was apparent that there was an understanding between the plaintiff and the Directors that all the Directors must stand as sureties, otherwise none would be liable as a surety. The plaintiff-Bank imposed a condition that all the Directors should stand as sureties to the banking facilities extended by it to the 1st defendant The intention of the plaintiff-Bank was to have all the Directors of the 1st defendant Company as sureties and not that in the event one of them did not join the surety bond, none of the Directors would be liable as sureties or the surety bond will not be enforced against others and would be treated as inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the light of the finding recorded on Point No. 2, Point No. 2A does not arise. POINT No. 2B: 39. The learned Judge has passed a decree against defendants 3A and 3B without any qualification. The liability incurred by defendant No. 3 personally was as a surety to the loans advanced to defendant No. 1-Company under the surety bonds. Defendant No. 3 was one of the Directors of defendant No. 1. It cannot be held that the liability incurred by defendant No. 3 as a surety was either illegal, unlawful or immoral. Therefore, the heirs of defendant-3 will be liable. However their liability as legal representatives will be limited to the extent of the estate of the 3rd defendant that has devolved upon them. Therefore, the learned trial Judge instead of making a decree in absolute terms against defendants 3A and 3B, ought to have qualified it, by directing that they would be liable only to the extent of the estate of the third defendant, devolved upon them. Point No. 2B is answered accordingly. POINT No. 3: 40. As pointed out earlier, three types of loans were granted to the first defendant by the plaintiff-Bank with varied rates of interest. The types of loans granted were (1) O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch variation in the rate of interest notified in the Notice Board in the Bank premises would be sufficient notice to the first defendant. He has further undertaken to debit the monthly instalments at the rate of ₹ 21,000/- and periodical interest thereon. Ex.P.4 is the list of machineries and equipments hypothecated to the Bank. 42. Except contending in the written statement that there was no agreement to pay compound interest, no evidence was adduced by the defendants in this regard. A reading of clauses 3 and 4 of Ex.P.2 leaves no doubt that the first defendant had agreed to pay interest on the sum of ₹ 10,00,000/- at the rate of 5% above the Reserve Bank of india rate subject to a maximum of 15% per annum on the 31st March, 30th June, 30th September and 31st December each year. It had a!so further agreed that if the instalments and interest were not paid, the loan shall bear overdue interest at the rates fixed by the Bank on such loan from time to time until the interest and or the instalment of the principal in arrears as the case may be are paid. 43. In respect of the second loan i.e., S.O.D.H. A/C No. 8/82, the following are the documents concerning said lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16 together makes it clear that the first defendant has agreed to pay compound interest as stated in Ex.P.12. 45. The documents that have a bearing on the PCL Account No. 1/82 for ₹ 8,00,000/- are as follows. Ex.P.18 is a promissory note date 13.11.1982 executed by the 2nd defendant in favour of the plaintiff bank for a sum of ₹ 8,00,000/- with interest at 2.50% per annum compounded monthly/quarterly for value received. The words compounded monthly/quarterly for value received are sufficient to come to the conclusion that the first defendant has agreed for compounding of interest. Ex.P.19 dt 13-11-1982 is nothing but a covering letter to pronote Ex.P.18. Ex.P.20 is Export Credit Agreement pertaining to the loan in question. It is dated 13-11-1982. Para 6 of this Agreement reads thus: 6. The borrowers agree that interest on the amounts advanced shall be paid to the Bank at the rates stated in the Third Schedule hereto, on the 31st March, 30th June, 30th September and 31st December in each year and also so long as the amounts advanced remain outstanding, the Bank shall be entitled to alter, modify or vary the said rates as the Bank may in its absolute discre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eady pointed out that in Clause 3 of Ext.P.2, the first defendant has undertaken to repay the loan in instalments with interest at the rate of 5 percent per annum above the Reserve Bank of India rate subject to the minimum of 15% per annum on the 31st March, 30th June, 30th September and 31st December each year. The first defendant has also further agreed under Clause-4 thereof that in the event any instalment on the due date remaining unpaid the arrears in the loan shall bear overdue interest at the rate fixed by the Bank until the interest and/or the instalments of the principal in arrears, as the case may be, are paid. 49. The contention of the defendants is that the words 'quarterly rests' are not used in Clause-3 or Clause-4 of Ext.P 2., therefore, they were not aware of the fact that the loan would carry compounding of interest; that even otherwise they were also not told to that effect. 50. However it is contended by the learned Counsel for the plaintiff that in Ext.P.7, the surety bond executed by the defendants 2,3,8 and 9 it has been specifically stated that the guarantors have undertaken to abide by the quarterly rests, Commission and Banking charges and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2th March, 1976 or at any time thereafter and no scheduled commercial bank incorporated outside India shall charge interest on loans-advances/cash credits/overdrafts or any other financial accommodation made or provided by it, or renewed by it or discount usance bills at a rate, in either case, higher than 15.50% per annum: Interest shall be charged with quarterly rests . The meaning of the word 'rest' as stated in Stroud's Judicial Dictionary is as follows:- A rest, in taking an Account, is a pause at which the net balance between receipts and expenses is ascertained, so that interest may be abated or charged according to the finding; e.g. as between mortgagee in possession and his mortgagor. Again in Paget's Law of Banking, 8th Edition (1972) Chapter V., the word 'rest' has been considered with reference to a Decision in YOURELL AND ANR. v. HIBERNIAN BANK LTD., 1918 Appeal cases 372 and it has been held thus: The Bank, by taking the account with these half-yearly rests, secured for itself the benefit of compound interest. This is at usual and perfectly legitimate mode of dealing between banker and customer. This Court in STATE BA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred to above that the interest payable at the end of each quarter as meaning that the interest is payable at the quarterly rest. Hence, we are of the view that in Clause (3) of Ex.P.2 though the words 'quarterly rest' have not been used but it is clear from the contents of Clause (3) that the interest is payable at the end of each quarter; in other words, it is payable with quarterly rest. Hence we are of the view that even in respect of OSL account No. 17/1982, the interest is payable with quarterly rest and as such it is compoundable. The effect of Clauses (3) and (4) as indicated above would be to permit the Bank to claim interest with quarterly rest. 57. As far as the interest on overdue amount is concerned, the documents relatable to each of the loans namely, Ext.P.2. pertaining to OSL loan, Ex.P.12 pertaining to over draft facility and Exts.P.18 and 20 pertaining to PCI loan, clearly mention the interest payable on the overdue loan amount, as well as interest and also provide for compounding. Hence we hold that the plaintiff has proved the agreement between the plaintiff and the defendants 1 and 2 to levy penal interest on overdue amount and compound the interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nks only as an additional aid and it is not intended to replace the directives issued from to time. In the event of any doubts a reference to the relevant directives should be made by the banks. 60. It may be noticed that the letter extracted above is addressed to All Scheduled Commercial Banks with Annexures I to III; it covers the Circulars issued from 1-10-1960 to 10-2-1986. 61. The relevant entries in Annexure-III of the aforesaid letter referable to OSL loan which is otherwise called as term loan and also SODH loan advanced to Small Scale Industries are as follows: Category of advances. Rate of interest per cent per annum. Effective from 2nd March '81 Effective from 1st April '83. Effective from 1st April '85. V. Small Scale Industry. 1. Composite loans upto ₹ 25,000/- (a) Backward areas 10.25 10.00 10.00 (b) Othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer the same since there is no reference to IDBI scheme in the category No. VIII of advances by way of term loan made to a Small Scale Industry. 63. It is next contended that even charging the interest at 13.50% on the loan advanced on the OSL account, the defendants are liable to pay interest at 15% because they have not paid the principal sum and the interest as and when the same became due. As the principal sum and the interest became overdue as per Clause (4) of Ex.P.2, the bank was entitled to claim interest on the overdue principal sum as well as on the interest. In this regard apart from the terms contained in Ex.P,2, learned Counsel placed reliance on the Circular of the Reserve Bank of India dated 26th June, 1976, in which it is stated thus: 2. Reserve Bank enjoins on commercial banks that they should follow the guidelines suggested by the Committee, which are broadly as follows: (1) Circumstances under which penal rates of interest could be levied by banks and the justification for such levy . In sub-para (ii), the levels at which penal rates should be charged is mentioned. Clauses (a) and (d) are relevant for our purpose which are as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank amounting to over ₹ 25 lakhs. Therefore, as per V Category of advances, the plaintiff-Bank is entitled to claim interest at the rate not exceeding 19.50%, 18% and 17.50% as mentioned in the Circular. In this regard, the learned Counsel for the plaintiff placed reliance on Ex.D.7 the sanctioned letter, it may be noticed in this regard that there is no plea raised by the plaintiff that the first defendant has availed the loans over and above ₹ 25 lakhs. There to no evidence on record. Therefore, it is contended by the defendants that such a contention should not be allowed. As there is no foundation laid in the pleadings and no issue also was raised in this regard, we are of the view that the contention of the plaintiff which is not a pure question of law cannot be considered in the appeal for the first time. It is accordingly rejected. Therefore, we consider the case only on the basis that the loan availed by defendant-1 is over ₹ 2 lakhs and less than ₹ 25 lakhs. In that event the interest that can be levied by the plaintiff on the SODH account 8/82 would be 17.50% P.A. upto 31st March 1983 and at 16.50% P.A. from 1st April 1983 upto 31st March 1985 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st as and when the same became due. On the contrary, it is contended by Sri Aswatharam, learned Counsel for the plaintiff that even as per the aforesaid rates of interest, the Bank ought to have claimed ₹ 1,60,838.69 whereas it has claimed ₹ 1,31,356.99 ps. Therefore the decree is required to be modified in this regard. It is not possible to accept this contention because the original claim of the plaintiff itself is for ₹ 1,31,356.99 ps. As such it cannot be enhanced in appeal. Therefore, we are of the view that the plaintiff cannot be allowed to claim excess amount by way of interest on the amount due under the PCL loan account as it has not made any such claim in the plaint. 67. Accordingly, Point No. 4 is answered in the affirmative. Subject to the modification by way of reduction of the amount claimed under OSL Account No. 17/82 as indicated earlier, Point No. 5 is answered in the negative. Miscellaneous Contentions: 68. It is contended by learned Counsel for the plaintiff that the learned trial Judge has ordered simple interest from the date of the suit at the rate of 15% on the principal sum pertaining to term loan, and at 15.5% on the principal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extracts which were produced along with the plaint was challenged. In the case decided by the Supreme Court, referred to above, the defendant challenged the particular entry pertaining to ₹ 10,000/-but the plaintiff therein did not produce any evidence to prove that entry. Hence, the Supreme Court specifically held that the said entry was not proved. Therefore, in the absence of any challenge to any of the specific entries in the accounts extract, produced by the plaintiff and in the light of provisions contained in Section 21A of the Banking Regulation Act, it is not possible to accept this contention. Hence, it is rejected. 71. For the reasons stated above, both the Appeals are allowed in part. The judgment and decree of the trial Court are modified in the following terms: The suit of the plaintiff as against defendant-4 and defendant-5 is dismissed with costs. There shall be a decree in favour of the plaintiff for a sum of ₹ 26,06,811.99 ps. against defendants 1 to 3A and 38 and 6 to 9, jointly and severally, and defendants 2 and 6 to 9 are also personally liable, with proportionate costs throughout, with interest at 15% on the principal amount of ₹ 15,6 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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