RATNAM J.


The Indian Overseas Bank (Salem Main) (hereinafter referred to as "the bank"), the plaintiff in O. S. No. 315 of 1976, Sub-Court, Salem, is the appellant in this appeal. One Appavoo Pillai was the owner of a fleet of buses operating in Salem and Dharmapuri Districts. He died on or about August 17, 1963, leaving a registered will dated March 18, 1957, under which he had made some arrangements for the management of his fleet of buses as well as the division of his properties. Respondents Nos. 1 to 6 in this appeal are the sons of Appavoo Pillai. Respondents Nos. 7 and 8 are the wives of respondents Nos. 1 and 2 respectively. After the death of Appavoo Pillai, the first respondent, one of his sons, who was also appointed as the executor under the will of Appavoo Pillai, entered upon the management of the bus transport business left behind by Appavoo Pillai. For the purpose of payment of taxes on the buses, respondents Nos. 1 to 6 were in need of funds and they approached the bank for financial help to pay off the taxes due to the Government on the buses. The bank sanctioned a cash credit limit of Rs. 2, 00, 000 and the bank was directed by its Cathedral Branch to advance the amounts to the respondents. In order to secure the repayment of advances by the bank to respondents Nos. 1 to 8 jointly, severally or individually up to the sanctioned limit of Rs. 2, 00, 000, respondents Nos. 7 and 8 deposited with the bank certain title deeds relating to the properties owned by them. On July 26, 1973, all the respondents herein, with the exception of the third respondent, executed a promissory note in favour of the bank for a sum of Rs. 2, 00, 000 only agreeing to repay the amount with interest at the rate of 4 per cent. over the Reserve Bank of India official rate of interest with a minimum of 11 per cent. per annum from July 26, 1973, until repayment in full with quarterly rests. On the same day, respondents Nos. 7 and 8 executed a letter referring to the deposit of the title deeds already made by them on July 20, 1973, and stating that the documents had been so deposited with the bank with the intention of securing the repayment to the bank of moneys that are due or that may become due from respondents Nos. 1 to 8 including interest, commission and other banking charges. In view of the execution of the promissory note as well as the deposit of title deeds referred to above, the bank started advancing amounts to the respondents and the first respondent drew the amounts from the bank whenever necessary and the bank had entered the amounts in the accounts kept by it in the regular course of business, debiting interest at the rates agreed. According to the bank, as on December 31, 1975, a sum of Rs. 2, 14, 569.81 was due from the respondents to the bank and the respondents, on April 19, 1976, confirmed by letter the correctness of this amount and also gave a revival letter acknowledging their liability under the promissory note dated July 26, 1973. The case of the bank is that it had been demanding the repayment of the amounts due to it from the respondents and had also issued a notice to that effect on April 17, 1976, but that no payments had been made excepting a sum of Rs. 10, 000 on April 19, 1976, and, therefore, it became necessary for the bank to recover the amounts due from the respondents. It is in this situation that the bank instituted O.S. No. 315 of 1976 praying for the recovery of a sum of Rs. 2, 22, 857.73 by enforcing the mortgage created on July 20, 1973, in its favour by the deposit of title deeds. In the written statement filed by the first respondent, which was adopted by others, while admitting that pursuant to the cash credit facilities to a limit of Rs. 2, 00, 000 extended by the bank, three amounts, namely, Rs. 85, 297.60, Rs. 43, 318.58 and Rs. 35, 179.73 were withdrawn by them on July 26, 1973, July 28, 1973, and August 1, 1973, respectively. It was stated that after taking into account the payments made to the tune of Rs. 26, 795.50 on various dates, a balance of Rs. 1, 37, 000.41 alone will be due with interest at 11 per cent. per annum. The bank, according to the respondents, could charge and claim interest only at 11 per cent. per annum and that the amount claimed was excessive, penal and usurious as well. Finally, the respondents prayed that a decree for Rs. 1, 37, 000.41 with simple interest at 11 per cent. per annum may be granted in favour of the bank with costs at the admission stage and giving two years' time for payment.On a consideration of the oral as well as the documentary evidence, the learned Subordinate Judge concluded that the principal amount payable by the respondents to the bank was Rs. 1, 37, 000.41. Regarding the claim for interest made by the bank, the court below was of the view that the award of 11 per cent. interest with quarterly rests up to the date of the suit would be adequate and reasonable as, according to it, the agreement regarding payment of interest was vague and it was not known whether the respondents actually agreed to pay interest at the rates claimed by the bank. Finally, the bank was granted a preliminary decree for the recovery of a sum of Rs. 1, 37, 000.41 with interest at 11 per cent. per annum with quarterly rests up to the date of the suit plus an amount of Rs. 66.72 in respect of other claims made in the plaint with proportionate costs. Six months time was granted to the respondents to pay this amount. It is the correctness of this decree, particularly as regards the award of interest that is challenged by the bank in this appeal.


Before proceeding to consider the controversy regarding the claim for interest, which is the subject-matter of this appeal, it would be necessary to correct an error in the decree granted by the court below to which our attention was drawn by Mr. M. R. Narayanaswami, learned counsel for the bank. Though, according to the judgment, the principal amount recoverable by the bank is Rs. 1, 37, 000.41, in the decree it is stated to be Rs. 2, 00, 000. Obviously, a mistake has crept in incorporating the principal amount in the decree. Consistent with the stand taken by the respondents in the written statement as well as the finding of the court below on issue No. 1, the respondents are liable to the bank towards principal only for a sum of Rs. 1, 37, 000.41 and not Rs. 2, 00, 000 as erroneously stated in the decree of the court below.That takes us on to a consideration of the rate of interest which is the bone of contention between the parties. While the claim of the bank is that the interest sought to be recovered from the respondents is in accordance with the agreement to pay interest entered into by the respondents with the bank and also the regulations and circulars of the Reserve Bank of India governing the rate of interest on such advances, the respondents refute their liability to pay interest in excess of simple interest at 11 per cent. per annum. In order to substantiate the rival stands thus taken by the bank as well as the respondents, our attention was invited to certain documents which we shall presently refer to. Exhibits A-3, A-4, A-23, A-34 and A-25 were relied on by the bank in this connection. Exhibit A-3 is the promissory note dated July 26, 1973, executed by all the respondents excepting the third respondent in favour of the bank. The recital therein regarding the rate of interest is significant. The rate is specified to be 4 per cent. over the Reserve Bank of India official rates of interest with a minimum of 11 per cent. per annum. D.W. 1 has admitted in his evidence that the recital regarding the rate of interest mentioned in exhibit A-3 is correct. Thus, to begin with, all the respondents, excepting the third respondent, had agreed to pay interest at the rate stipulated in exhibit A-3. Exhibit A-4 is the true copy of the accounts of the bank and therefrom it is seen that the bank has been debiting the withdrawals made by the respondents and the interest thereon and crediting the periodical payments made by the respondents. It is seen therefrom that the respondents had withdrawn on July 26, 1973, July 27, 1973, and August 1, 1973, sums of Rs. 85, 297.69, Rs. 43, 318.58 and Rs. 35, 179.73 respectively. Some remittances have also been made by the respondents amounting to Rs. 16, 795.50 up to the end of December, 1973. There are two debit entries relating to interest on September 29, 1973, and December 29, 1973, in sums of Rs. 3, 007.28 and 4, 421.06. It is also further clear from exhibit A-4 that on March 29, 1974, June 28, 1974, September 27, 1974, and December 30, 1974, interest of Rs. 4, 969.60, Rs. 5, 972.83, Rs. 7, 017.91 and Rs. 7, 623.26 has been debited. Similarly, for 1975, on March 31, 1975, April 28, 1975, May 30, 1975, June 28, 1975, July 30, 1975, August 30, 1975, September 30, 1975, October 31, 1975, November 27, 1975, and December 24, 1975, interest has been debited in sums of Rs. 7, 783.83, Rs. 2, 707, Rs. 2, 837.40, Rs. 2, 787.55, Rs. 2, 922.07, Rs. 2, 965.18, Rs. 2, 912.67, Rs. 3, 052.83, Rs. 2, 998.98 and Rs. 3, 143.53, respectively. The closing debit balance as on December 31, 1975, is shown in exhibit A-4 to be Rs. 2, 14, 569.81. For 1976, on January 30, 1976, February 28, 1976, March 29, 1976, and May 13, 1976, interest has been debited in sums of Rs. 3, 191.10, Rs. 3, 029.70, Rs. 3, 283.23, and Rs. 4, 431.01 respectively. On April 19, 1976, the respondents have also paid an amount of Rs. 10, 000 which has been credited. Finally, the debit balance arrived at as on May 13, 1976, is Rs. 2, 18, 781.85. Exhibit A-23 is a letter dated December 31, 1975, addressed by all the respondents to the bank. In that letter, the respondents have confirmed the debit balance of Rs. 2, 14, 569.81 as on December 31, 1975. No objection had been raised by the respondents at that time that the rate of interest charged in the several amounts detailed above up to December 31, 1975, was either excessive or not agreed to be paid at all. It is seen that though the third respondent did not originally sign the promissory note, he has also, however, confirmed the balance under exhibit A-23, at Rs. 2, 14, 569.81. Exhibit A-34 is an interest calculation memo filed by the bank. That clearly brings out the rates of interest charged periodically as well as the amount debited towards interest in exhibit A-4. In exhibit A-4, on September 29, 1973, there is a debit entry for interest in a sum of Rs. 3, 007.28. The rate of interest has been worked out at 11 per cent. On December 29, 1973, there is a similar debit entry for interest in a sum of Rs. 4, 421.06 and this again has been worked out at 11 per cent. On March 29, 1974, interest of Rs. 4, 969.60 is debited at the rate of 13 per cent. On June 28, 1974, interest at 15 per cent. has been charged and the amount debited is Rs. 5, 972.83. Similarly, on September 27, 1974, 15 per cent. interest has been charged and the amount debited is Rs. 7, 017.91. Again, on December 30, 1974, 17 1/2 per cent. interest has been charged and the amount debited is Rs. 7, 623.26. On March 31, 1975, interest in a sum of Rs. 7, 783.83 has been debited at the rate of 17 1/2 per cent. Interest at the same rate of 17 1/2 per cent. has been debited on April 28, 1975, May 30, 1975, June 28, 1975, July 30, 1975, August 30, 1975, September 30, 1975, October 31, 1975, November 27, 1975, and on December 24, 1975. It is after charging interest at the aforesaid rates and giving credit to such payments as were made by the respondents, that the balance as on December 31, 1975, was arrived at Rs. 2, 14, 569, 81, which was confirmed by the respondents under exhibit A-23. Similar debit entries for interest at 17 1/2 per cent. have been made for the months of January to March, May and June, 1976. It is thus clear from exhibits A-4, A-23, and A-34 that consistent with the recital in exhibit A-3 regarding the rate of interest, the bank has been debiting the respondents with interest at the rates in excess of 11 per cent. ranging up to 17 1/2 per cent. That has also been accepted by the respondent without demur. The inaction of the respondents is attributable only to the agreement entered into by them to pay interest at the rate mentioned in exhibit A-3 ; as otherwise, they would not have confirmed the debit balance of Rs. 2, 14, 569.81 as on December 31, 1975, under exhibit A-23. There is also one other significant circumstance that, under exhibit A-25 dated April 17, 1976, the respondents were called upon by a lawyer's notice to repay a sum of Rs. 2, 24, 182.71. In paragraph 1 of that notice, after referring to the sanction of cash credit limit of Rs. 2, 00, 000, it is stated that the rate of interest was agreed to be raised according to the directions of the Reserve Bank of India. Though this notice was received by all the respondents as shown by the acknowledgments, exhibits A-26 to A-33, not one of them sent any reply demurring about the claim for interest as made in exhibit A-25. This would also, in our view, clearly establish that the respondents had agreed to pay interest at the rates periodically fixed by the Reserve Bank of India ; as otherwise, they would have sent a reply disputing the rate of interest as claimed in the notice, exhibit A-25. Exhibits A-21 and A-22 are copies of the circulars issued by the Reserve Bank of India to the bank and therefrom it is seen that the rate of interest claimed by the bank against the respondents is in accordance with those circulars. Above all, the tenor of the letters, exhibits A-18 and A-20 written by the first respondent to the bank clearly make out that the respondents had not, in any manner, objected to the charging of interest as done, but had only prayed that they should be excused for the delay and that serious attempts will be made to make payments and clear the dues. Further, it is seen from exhibits A-2, A-3, and A-22 that the rate of interest charged at 17 1/2 percent. is quite in order and accords with the recital in exhibit A-3 and the instructions issued by the Reserve Bank of India periodically to the bank with reference to the interest chargeable on advances of the kind made to the respondents.However, reliance was placed by learned counsel for the respondents on exhibits A-1, A-2 and A-21 to contend that the rate of interest charged is not in accordance with those documents. Exhibit A-1 is an intimation relating to the sanction. No doubt, it is stated that the interest chargeable is 11 per cent. per annum. Exhibit A-2 is an advice regarding the extension of credit facilities and there also the rate of interest is mentioned to be 11 per cent. per annum. However, while actually executing the promissory note, the respondents had agreed to pay interest at 4 per cent. higher than the Reserve Bank of India official rate and that would mean that they had agreed to pay 15 percent. interest. Therefore, exhibits A-1 and A-2 cannot be pressed into service by the respondents. Exhibit A-21 also does not assist the respondents, for, it is seen therefrom that the interest chargeable in respect of advances against title deeds is 15 per cent. Further, from exhibit A-22, it is seen that the banks have been empowered to charge penal rates varying from 1 per cent. to 2.5 per cent. over and above the normal rates applicable and that would justify the charging of interest at 17.5 per cent., as has been done. Thus, none of the documents relied on by the respondents do establish that they are not liable to pay interest at the rates claimed by the bank. We, therefore, find, differing from the court below, that the interest claimed by the bank at the rates referred to earlier against the respondents is quite in order.


Learned counsel for the respondents invited our attention to certain decisions holding that the rates of interest as charged in this case are excessive and should be relieved against. However, we find that, on the facts and circumstances of this case, the decision of the Division Bench in Indian Bank v. Balasubramania Gurukkal 1984 (56) CC 41, 1982 AIR(Mad) 296, 1982 (11) MLJ 238 (Mad) would govern this case. Therefore, it is unnecessary to refer to the decisions relied on by learned

counsel for the respondents.A faint contention, as raised by learned counsel for the respondents, that the deposition of the witnesses recorded in court had not been signed by the presiding officer and, that, therefore, no reliance can be placed on that evidence. However, we are of the view that there is absolutely no substance in this contention. Under Order 18, rule 5, Code of Civil Procedure, as it stood prior to its amendment by Act 104 of 1976, it was obligatory to read the evidence in the presence of the judge and the witnesses and the judge was also obliged to correct the same and sign it. However, under the amended provisions of Order 18, rule 5, Code of Civil Procedure, this does not appear to be necessary. We have, therefore, no hesitation in rejecting this contention. A reference was also made to section 21A of the Banking Laws (Amendment) Act, 1984, and to some related decisions. We do not see how that question would be relevant at all for this case. We, therefore, refrain from dealing with it. Thus, on a careful consideration of the documentary evidence and other circumstances, we hold that the respondents are liable to the bank in a sum of Rs. 1, 37, 000.41 towards principal and Rs. 85, 071.35 towards interest up to the date of the suit, i.e., June 19, 1976, totalling to Rs. 2, 22, 071.76 and interest at 17.1/2 per cent. per annum on Rs. 1, 37, 000.41 up to July 31, 1978, i.e., the date of the decree in the suit and future interest from August 1, 1978, up to the date of realisation at 9 per cent. per annum. There will be a preliminary decree as indicated above with proportionate costs in the place of the decree granted by the court below. Consequently, the appeal is allowed to the extent indicated with costs against the respondents.