Partly allowed

Rajesh & Ors. v. Dharam Pal

Punjab & Haryana HC9 Jul 2012RSA/979/2011

Case brief

AI extract

What is this about?

In this appeal, the High Court examined whether usurious contractual interest rates charged by a plaintiff against the legal representatives of a deceased borrower could be reduced. The Court held that the rate was unreasonable and reduced it to 16% per annum for the pre-decree period and 6% per annum post-decree under Section 34 CPC, dismissing the appeal with modifications.

What did the court decide?

Interest reduced to 16% per annum from loan date to decree date, and 6% per annum from decree date to realization; appellants to pay within one month.

Rajesh & Ors. Vs Dharam Pal — Contract and Commercial Disputes | Punjab & Haryana HC (2012)

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RSA No. 979 of 2011

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IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH.

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RSA No. 979 of 2011 Date of decision: 09-07-2012

Rajesh and others

… Appellants.

Versus.

Dharam Pal … Respondent

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CORAM:- HON’BLE MR. JUSTICE M. JEYAPAUL

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1. Whether the judgment should be reported in the Digest ?. Yes

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...

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Present: Mr. Ashish Gupta, Advocate, for the appellants

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Mr. R.N.Sharma, Advocate, for the respondent

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M. JEYAPAUL, J :

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The unsuccessful defendants before both the Courts below have preferred the present second appeal.

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Plaintiff Dharam Pal filed suit for recovery of Rs.2,37,500/(principal amount: Rs.1,25,000/- and interest till the filing of the suit: Rs.1,12,500/-) along with interest at the rate of 2.50 per cent per month, of course with future interest that might be decided by the Court.

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Both the Courts below having adverted to the evidence on record held that the plaintiff was entitled to recover a sum of Rs.2,37,500/with interest at the rate of 6 per cent per annum from the date of filing of the suit till the date of realization of the amount.

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Learned counsel appearing for the appellant-defendants would

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RSA No. 979 of 2011

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submit that exorbitant interest has been levied by the plaintiff. The Court has the authority to stipulate reasonable rate of interest even from the date of loan lent to the defendants. He also cited a decision of this Court in Balvinder Singh v. M/s Baisakhi Ram Saina Ram, 2008(2) RCR(Civil) 467, to support his contention that the Court is not deprived of any authority to reduce the contractual rate of interest to a reasonable rate of interest. 5. Per contra, learned counsel appearing for the plaintiff would submit that both the Courts below have rightly held that the plaintiff is entitled to contractual rate of interest till the filing of the suit. Therefore, there is no question of reconsidering the rate of interest fixed by the Courts below, he further argued.

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I adverted to the facts involved in this case. It is a case where suit has been filed by the plaintiff not against a person who borrowed loan but against the legal representatives of the principal borrower. Further, the suit had been laid, as finally pointed out by the counsel for the appellants, at the fag-end of the period of limitation prescribed under the Limitation Act. In other words, the loan was lent by the plaintiff on 5.6.2002 but the suit was laid only on 2.6.2005, i.e. just 3 days prior to the expiry of period of limitation statutorily prescribed. The interest at the rate of 2.5 per cent comes to 30 per cent interest which in my considered view is usurious . As per the provisions of Section 34 of the Code of Civil Procedure, the Court is competent to adjudicate any interest payable not only for the period during the pendency of the suit but also for the period prior to the institution of the suit. Of course, in case of commercial transaction where loan was obtained for industrial, trade or business purpose, the interest may exceed 6 per cent from the date of decree. In all other cases, interest from the date of decree

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RSA No. 979 of 2011

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till the date of realization shall not exceed 6 per cent as per the mandate of Section 34, Code of Civil Procedure.

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In Balvinder Singh's case(supra), this Court considering the poor financial position of the borrower, chose to reduce the rate of interest to 12 per cent per annum. But in the facts and circumstances of this case, I do not find that such a leniency is warranted. However, I find that 30 per cent interest per annum for the loan transaction clinched by the plaintiff with the predecessor of the defendants, is quite usurious and the same will have to be reduced to a reasonable rate of interest.

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In view of the above, I find that 16 per cent interest on the principal amount of Rs.1,25,000/- lent by the plaintiff to the predecessor of the defendants from 5.6.2002, the date on which loan was given to 10.4.2009 when the suit was decreed by the trial Court and 6 per cent interest per annum from the date of decree till the date of realization of the amount, would be fair and reasonable. Therefore, modifying the judgment of the Courts below, it is ordered that the plaintiff is entitled to recover a sum of Rs.1,25,000/- with interest at the rate of 16 per cent per annum from 5.6.2002 till the date of decree and at the rate of 6 per cent per annum from the date of decree till the date of realization. Defendant-appellants shall make payment of the said sum so arrived at, within one month from the date of this judgment.

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With the above modification in the impugned judgment, the appeal is dismissed.

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July 09, 2012 JS

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( M. JEYAPAUL ) JUDGE

Rajesh & Ors. v. Dharam Pal

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Rajesh & Ors. v. Dharam Pal

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