Partly allowed

Bank of India,Nashik v. Kalu Aabaji Gite and Ors.

Bombay HC24 Mar 2006FA/897/1989

Case brief

AI extract

What is this about?

In a suit for recovery of a bank loan, the High Court held the transaction was not commercial. The trial court was ordered to substitute the decree with the full principal amount and fix 'further interest' at 6% p.a., as the loan was granted to agriculturist respondents for farming purposes.

What did the court decide?

Substituted the trial court decree to include the full principal claimed and limited further interest to 6% p.a.

Bank of India,Nashik Vs Kalu Aabaji Gite and… — Contract and Commercial Disputes | Bombay HC (2006)

¶1

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

¶2

CIVIL APPELLATE JURISDICTION

¶3

FIRST APPEAL NO. 897 OF 1989 WITH CROSS OBJECTION ST.NO.1117 OF 1990

¶4

Bank of India, Deolali Cantonment Branch, Deolali, Dist. Nashik. ... Appellant.

¶5

Versus.

¶6

Kalu Abaji Gite s/o.Abaji Ganpat Gite. 2. Bhausaheb Kalu Gite s/o. Kal;u Abaji Gite. 3. Pandurang Adsare. ... Respondents.

¶7

Shri C.R.Dalvi for the Appellant.

¶8

Shri Hardas for Shri P.N.Joshi for the Respondents Nos.1 and 2.

¶9

CORAM : ABHAY S.OKA, J.

¶10

DATED : 24th March, 2005.

¶11

ORAL JUDGMENT.

¶12

1.	By this A	ppeal th	e App	ellant B	ank of In	dia	has
taken	exception	to	the	Judg	ment	and	De	cree	dated	27th
July	1988 passed		by	the	learned		Joint		Civil	Judge,
Senior	Division,	Nashik	in	a	suit		filed	for	recovery	of
the	loan amount.		The	su	it	was	f	iled	against	the
Responde	nts herein.		Later	on	the		name	of	Res	pondent
No.3	herein who	was	De	fendant	No.3		was	deleted	as	he
expired	during	the	pend	ency	of	the	suit	.	Acc	ordingly

¶13

: 2 :

¶14

the name of Respondent No.3 is also deleted from the

¶15

Appeal.

¶16

2.		The c	ase of th	e Appell	ant is tha	t on the request
made	by	the	Respo	ndents	Nos.	1 and	2,	a	lo	an of
Rs.50,000/-		was	gra	nted	for	purchasing	a	tractor		with a
trailor	and		other	ac	cessories	. The	Re	spondents		Nos.1
and 2	agreed	to	pay	inter	est a	t the rate	of	4%	per	annum
above	the	bank	rate	subj	ect t	o minimum	of	13%	per	annum
or at	s	uch	rate	or	rates	as may be	spe	cified	by	the
Appellant	to		the	Respon	dents	Nos.1 and	2	from	time	to
time.	N	ecessar	y	docu	ments	were execu	ted	incl	uding	a
demand	pro	missory	note	on	21st	January	1975.	T	he	case
of	the	App	ellant-B	ank	is	that	by	l	etters	of
acknowledg	ement		dated	2nd	Ja	nuary 1978	an	d 2	3rd	October
1980,	the		Respo	ndents	adm	itted their	liabi	lity	to	pay
the	amount	to	the	Appe	llant.	The pr	ayer	in t	he	suit is
for	a d	ecree	in	the	sum	of Rs.1,01,	938.13	ps.		with
further	interest	ther	eon	at	the	rate of	3%	over	the	bank

¶17

rate subject to minimum of 13% per annum from the date

¶18

of suit till realisation.

¶19

3.		Only	the	Respondent	No.1	filed	written
statement.		In		the	entire		written	statem	ent	the
Respondent		No.1		has	not	disput	ed his	liability	to	pay
the	amount		as	claimed	in	the	plaint.	The	co	ntentions
which	are	rais	ed	in	the	wr	itten s	tatement	are	(i)

¶20

: 3 :

¶21

interest		on in	terest	cannot	be	c	harged;	(ii)	the	suit
was	barred	by	limitat	ion;	(	iii)	the	Respondent	No.1	was
an	agricultu	rist	and	the		loan	was	granted	for	the
purpose		of	agricu	lture	and		therefore,	further		interest
at	the	rate	more	than	6%	per	annum	cannot	be	claimed.

¶22

In the alternative, the Respondent No.1 prayed for grant

¶23

of instalments.

¶24

The learned trial Judge on the basis of the

¶25

certified	extract	of	ac	count	produced	by	the	Ap	pellant
at Exh.48	came	to	the	conclusi	on that	the	amount	due	and
payable by	the	Resp	ondents	was	only	Rs.56,06	5.12 ps.		He

¶26

therefore proceeded to pass a decree in the said amount along with interest at 13% per annum.

¶27

Shri Dalvi, learned Counsel appearing for the

¶28

Appellant sub	mitted	that	the	certifie	d extract of	the
account gives	ent	ries only	upto	F	ebruary 1981.	He
pointed out	that	the suit	was	filed	on 15th April	1982.
He invited my	att	ention to	Exh.44	whi	ch is the letter	of
acknowledgement		signed by	the		Respondents acknow	ledging
their liability		to pay a	sum	of	Rs.86,911.33	together
with interest	from	22nd Dece	mber	1978.	He pointed	out
the claim made	in	the suit	as	far	as principal amoun	t is
concerned was		never dispute	d by	the	Respondents.	He,
therefore, sub	mitted	that the	trial		Court committed	an

¶29

error by passing a decree only in the sum of

¶30

: 4 :

¶31

Rs.56,065.12 ps.

¶32

6.		The learned	Advoca	te for the R	espondent	s poin	ted
out	that	admittedly	loa	n was	grant	ed	for the	purpose	of
agriculture		and	hence	the	transactio	n	on the	basis	of
which	the	interest	is	claimed	cannot	be	said to	be	a
commercial		transaction.		He	subm	itted	that	section	34
does	not	permit	grant	of	interest	abo	ve 6%	per	annum.
He,	there	fore, sub	mitted	that		the	Appeal	may	be

¶33

dismissed and counter-claim made by the Respondents be

¶34

allowed.

¶35

7. I have	considered the submissions. In the
plaint a specific	averment has been made	after	referring
to the letters	of acknowledgement that	the	amount
outstanding as on	14th April 1982 was	Rs.1,19,038.13	ps.
The said averme	nt is found in paragraph	10 of	the
plaint. In the	written statement at Exh.16	filed by	the
Respondent No.1	there is neither a	general nor	a
specific denial of	the said averment.	Though Re	spondent
No.1 stepped into	the witness box he did	not dispute	his
signature on	the letter of acknowledgement	dated	23rd
October 1980 w	hich is at Exh.44.	Even in	his
examination-in-chief	the Respondent No.1 h	as not	stated
that the amount	due and payable on	the date	of
institution of	the suit was only Rs.56,065.12.	On	a
plain reading	of the certified extract o	f the	loan

¶36

: 5 :

¶37

accoun	t	a	t Exh.	48, it	is app	aren	t th	at th	e la	st	entry
therein	is		of February	1981.	Th	e	suit	was	filed	on	15th
April	1982.		Therefore,	the	learned	Ju	dge	could	not		have
taken	th	e	amount	shown i	n the	e	xtract	as	the	amount	due
and	payable		on the	date of	the	suit	.	There	is	no	denial
by	the		Respondent	of the	correct	ness	of	the	qua	ntum	of
the	p	rin	cipal amo	unt clai	med u	nder	pr	ayer	clause	(a)	of
the	pla	in	t. Th	us the	learned		trial	Judge	ha	s co	mmitted
an	error	i	n decreeing	the	suit o	nly	to	the	exten	t of	the
sum	of		Rs.56,065.12	ps.	The	trial	Cou	rt ou	ght	to	have
pased	a		decree	for	the		prin	cipal	a	mount	of

¶38

Rs.1,09,938.13 as there was no denial to the averments

¶39

made in paragraph No.10 of the plaint.

¶40

The learned Advocate for the Respondents while

¶41

making	submis	sion	in		support		of	hi	s cross-	objection
pointed	out	that	the	P.W	.1 S	hr	i	Raju	S.Pathade	examined
by the	Appel	lant	who	was	an		Ag	ricultural	Finance	Officer
of	the Ap	pellant	admi	tted	that	th	e	loan	was granted	for
the	purpose	of	agric	ulture.	H	e	p	ointed	out	specific
plea	raised	in	the	written	stat	e	ment	and	in	particular
paragraph	8	thereof		that	the	l	oan	was	granted	for
agriculture	purp	ose.		He	pointed		out	the	evidence	of
Respondent	No.1	in	which	he	clea	rl	y	asserted	that he	was
an agri	culturist.	T	here	is	no		cross	exam	ination on	this
aspect.	In	fact		in	the			examinati	on-in-chief,	he

¶42

asserted that he has no other income except the income

¶43

: 6 :

¶44

from the agriculture.

¶45

9. Section 34 of the Code of Civil Procedure, 1908

¶46

reads thus:

¶47

34.	Interest. (1)	Where and in	so	far	as	a
decree	is for the	payment of	mon	ey,	the	Court
may,	in the dec	ree, order inte	rest	at		such
rate	as the Court	deems reaso	nable	to	be	paid
on	the principal s	um adjudged,	from	the		date
of	the suit to	the date of	the	de	cree,	in
addition	to any	interest adjud	ged	on		such
principal	sum for	any period	prior		to	the
institution	of the	suit, with		further		interest
at	such rate not	exceeding six	per	cent	,	per
annum,	as the Cou	rt deems rea	sonable	on		such
principal	sum, from	the date	of	the	decree	to

¶48

the date of payment or to such earlier date as

¶49

the Court things fit;

¶50

.	P	rovided	that where	the liability in
relation	to the	sum	so	adjudged	had	arisen	out
of	a comm	ercial	transac	tion, the	date	of	such
further	interest	ma	y ex	ceed six	per	cent,	per
annum,	but	sha	ll no	t exceed	the	con	tractual
rate	of inte	rest	or	where	there	is	no
contractual	rate,	the	rate	at whi	ch	moneys	are

¶51

lent or advanced by nationalised banks in

¶52

: 7 :

¶53

relation to commercial transactions.

¶54

. Explanation I.- In this sub-section, "nationalised bank" means a corresponding new bank as defined in the Banking Companies

¶55

(Acquisition and Transfer of Undertakings)

¶56

Act, 1970 (5 of 1970).

¶57

. Explanation II.- For the purposes of this section, a transaction is a commercial transaction, if it is connected with the

¶58

industry, trade or business of the party

¶59

incurring the liability.

¶60

. (2) Where such a decree is silent with

¶61

respect to the payment of further interest on such principal sum from the date of the decree to the date of payment or other earlier date, the Court shall be deemed to have refused such

¶62

interest, and a separate suit therefor shall

¶63

not lie."

¶64

Explanation 2 provides that a transaction is a commercial transaction if it is connected with the

¶65

industry, trade or business of the party incurring the

¶66

liability.

¶67

10.		P.W.3 Shri Shash	ikant Yeshwant Dha	wale examined
by	the	Appellant	categorically	admitted	in	the
Cross-exm	aination	that	the	Respondents	were	given

¶68

: 8 :

¶69

agricutlural		loan.		The	liabil	ity	which	is	the	subject
matter	of	the	suit	canno	t be	said	to	have	arisen	out of
commercial		trans	action		and	therefo	re,	in	terest	under
section	34	of	the	said	Code	could	not	have	exceeded	6%

¶70

per annum. Hence, the cross objection deserves to be allowed to that extent.

¶71

Accordingly the following order is passed:

¶72

i) The	First	Appeal and	the	Cross	Obj	ection	are
partly	allowed.	The	oper	ative	part	of	the
Judgment the follow	of the trial Co ing:	urt is substituted by

¶73

"(a)	The	D	efendants	shall jo	intly		and	severally
	pay to		the	Plaintiff		a	sum	of
	Rs.1,01,938.13	ps.	with pro	portionate
	costs.
(b)	The	de	cretal	amount will	c	arry	an	interest
	at the	ra	te of	6% per ann	um	from	the	date
	of institution	of	the suit	till
	realisation.
(c)	There w	ill	be	a charge	on		the	tangible
	properties and	sta	nding crop	of the
	Respondents fo	r the	decretal a	mount."

¶74

: 9 :

¶75

ii)	Since	both t	he	parties	have	partly	succ	eeded	in
	the Appeal	and	in	cross	objection,		there	will	be
	no order as to co	sts in the Ap	peal	and cross
	objection.
iii)	If any	amount	is	paid	by the	Res	pondents	on	the
	basis of	the	decr	ee pass	ed by	the	trial		Court,
	the Respondents	will be entit	led to	necessary
	adjustment.
iv)	Time of four m	onths is gr	anted	to the
	Respondents to c	omply with t	he dec	ree.

¶76

Judge.

Bank of India,Nashik v. Kalu Aabaji Gite and Ors.

Case brief

What is this about?

What did the court decide?

Bank of India,Nashik v. Kalu Aabaji Gite and Ors.

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

Coram

Case details

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