Allowed

Ind Bank Housing Ltd. v. D.Vincent

Kerala HC5 Apr 2017RFA/208/2008

Case brief

AI extract

What is this about?

The High Court allowed an appeal against the dismissal of a money recovery suit. Rejecting the application of the Damdupat rule and the claim of prematurity due to default in instalments, the court held the debt was recoverable. It exercised discretion to grant interest at 6% p.a. from the date of the suit.

What did the court decide?

Decree for realization of Rs. 3,18,879 with interest at 6% per annum from the date of suit till realization and costs.

Ind Bank Housing Ltd. Vs D.Vincent — Contract and Commercial Disputes | Kerala HC (2017)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT:

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THE HONOURABLE MR.JUSTICE V.CHITAMBARESH & THE HONOURABLE MR. JUSTICE SATHISH NINAN

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WEDNESDAY, THE 5TH DAY OF APRIL 2017/15TH CHAITHRA, 1939

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RFA.No. 208 of 2008 ( ) ------------------------

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AGAINST THE JUDGMENT AND DECREE IN OS.48/2004 of SUB COURT,NEYYATTINKARA DATED 15-02-2007

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APPELLANT/PLAINTIFF:

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IND BANK HOUSING LTD THIRUVANANTHAPURAM BRANCH NOW THE BRANCH IS MERGED WITH MADURAI BRANCH AND REPRESENTED BY ITS BRANCH MANAGER MADURAI BRANCH.

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BY ADV. SRI.S.EASWARAN

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RESPONDENTS/DEFENDANTS:

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1. D.VINCENT, S/O P.DEVASAHAYAM, WORKING AS DRIVER, COMMISSIONERATE OF RURAL DEVELOPMENT, L.M.S.COMPOUND, THIRUVANANTHAPURAM AND RESIDING AT KUZHIVILA KANNIMATHATTU PUTHEN VEEDU, KULATHOOR, P.O.UCHAKADA THIRUVANANTHAPURAM

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2. RETNAM N.PILLAI, RESIDING AT IDINJAYYATHU, KURAMPALA, PANDALAM PANDALAM P.O., PATHANAMTHITTA DISTRICT.

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R,R1 BY ADV. SRI.BIJU BALAKRISHNAN

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THIS REGULAR FIRST APPEAL HAVING BEEN FINALLY HEARD ON 30-03-2017, THE COURT ON 05.04.2017 DELIVERED THE FOLLOWING:

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V.Chitambaresh & Sathish Ninan, JJ. ============================== R.F.A No.208 of 2008

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==========================

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Dated this the 5^th day of April, 2017

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JUDGMENT

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Sathish Ninan, J

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A suit for recovery of money due under a loan transaction, dismissed as hit by the rule of Damdupat and on the ground that the suit is premature for nonexpiry of the loan period, is under challenge by the plaintiff Banking Company.

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The first defendant availed a loan of `80,000/from the plaintiff on 11.12.2003 on execution of necessary loan documents and furnishing security. In terms of the agreement, the loan amount is to carry interest at the rate of 16.5% per annum with half yearly rests. The loan was repayable in 240 equal monthly instalments. On default in payment in terms of the agreement the loan was recalled and the suit was filed.

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The court below applied the rule of Damdupat and held that as the amount of interest claimed in the

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A.S No.208/2008

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suit is in excess of the principal amount of `80,000/-

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the plaintiff is disentitled to the claim. The dismissal of the suit on the said ground is unsustainable. The Rule of Damdupat has its origin under the pristine Hindu law. The constitutional bench of the Apex Court in Central Bank of India v Ravindra and Others ((2002) 1 SCC 367) held that interest may be charged on periodical rests and can also be capitalised in terms of the contract voluntarily entered into between the parties. It was also held that the principal sum as on the date of suit includes the principal sum advanced added with the interest accrued thereon. The Apex Court refused to accept the rule of Damdupat and held thus, “At times the interest charged and capitalised is manifold than the amount actually advanced. Rule of damdupat does not apply”. Therefore the said finding of the court below is unsustainable.

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The court below has held that the suit is premature

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A.S No.208/2008

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since the period of loan has not expired. The court below lost sight of the fact that period of 20 years for the repayment of loan is provided to enable the borrower to wipe off the debt by paying it in 240 equal monthly instalments. On default on the part of the borrower to pay off the loan amount in terms of the loan agreement, the account will become a nonperforming asset and the creditor has a right to proceed against the debtor for recovery of the entire loan amount. The creditor cannot be asked to wait till the expiry of the entire loan period. After having violated the terms of agreement, the debtor does not have any right to seek for postponement of exercising the rights of the creditor for recovery of the debt. When the loan amount is payable in instalments and there is default in payment of the instalents, the cause of action for realisation of the amount under each of the instalments commence/accrues on the default of each instalment. If for recovery of the

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A.S No.208/2008

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defaulted instalments, the plaintiff waits for a period of more than three years for institution of the suit for recovery of the said defaulted amount, the plaintiff runs the risk of the claim being barred by limitation. As regards defaulted amount, the right of the plaintiff to institute a suit could not be challenged. The only question would be regarding the right of the plaintiff to sue for recovery of the balance loan amount which is payable by the borrower in the succeeding months. There the plaintiff is by virtue of the terms of the agreement entitled to claim the entire balance amount by recalling the loan in case of default in payment of instalments. The court below omitted to take note of Clause 17(i) of Ext.A1 agreement which provides that if one of more of the events specified therein happens, then, the entire amount could be claimed by the plaintiff on issuing a written notice to the borrower. Here the suit was preceded by Ext.A10 notice dated 30.06.2003.

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A.S No.208/2008

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Therefore, the finding of the court below that the suit is premature, is unsustainable. The court below was not justified in dismissing the suit on the aforesaid grounds.

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The contract rate of interest is 16.5 % with half yearly rests. No doubt the rate appears to be on the higher side. Anyhow, the defendants voluntarily entered into the agreement agreeing to pay the interest claimed. In Central Bank of India v Ravindra and Others ((2002) 1 SCC 367) the apex court held

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thus:

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“Award of interest pendente lite and post-decree is discretionary with the court as it is essentially governed by Section 34 CPC dehors the contract between the parties. In a given case if the court finds that in the principal sum adjudged on the date of the suit the component of interest is disproportionate with the component of the principal sum actually advanced the court may exercise its discretion in awarding interest pendente lite and post-decree interest at a lower rate or may even decline awarding such interest...”

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By exercising the discretion in terms of Section 34

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A.S No.208/2008

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of the Code of Civil Procedure and in tune with the judgment of the Apex Court in Central Bank of India's case (supra), we hold that the plaintiff is entitled to interest only at the rate of 6% per annum from date of suit till realisation.

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In the result, the appeal is allowed. The plaintiff is granted a decree for realisation of `3,18,879/with interest at the rate of 6% per annum from the

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date of suit till realisation and also the costs in the suit by sale of the plaint schedule property and from the defendants.

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Appeal is allowed as above.

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Sd/- V.Chitambaresh, Judge

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vdv

Ind Bank Housing Ltd. v. D.Vincent

Case brief

What is this about?

What did the court decide?

Ind Bank Housing Ltd. v. D.Vincent

Case brief

What is this about?

What did the court decide?

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