**RTþÿÿÿQÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ð¿•0bjbjqPqP ;N::H('%ÿÿÿÿÿÿ¤ÂÂÂÒâââöþþþ86L‚$öȲ²"ÔÔÔÔÔÔGIIIIII$Êh2!6mâÔÔÔÔÔmââÔÔ‚Ô®âÔâÔGÔG“ââßÔ¦ì1Çþ‚²«3˜0ȳ,h!4zh!ßßh!âó@ÔÔÔÔÔÔÔmm®jÔÔÔÈÔÔÔÔöööD :Äööö:öööââââââÿÿÿÿHONOURABLE SRI JUSTICE A.RAJASHEKER REDDY AS.No.413 OF 1997 AND CROSS OBJECTIONS (SR) No.48887 OF 1997 COMMON JUDGMENT: This first appeal is filed against the Judgment and Decree dated 20.11.1996, passed by the Principal Subordinate Judge, Ongole, Prakasam District in OS.No.1 of 1991, wherein the Court below has decreed the suit filed by the plaintiff and consequently the preliminary decree was passed. The plaintiff Bank who is the respondent herein filed Cross Objections vide SR.NO.48887 of 1997. The facts necessary for disposal of the first appeal are that the 1st respondent-State Bank of India has filed OS.No.1 of 1991 for recovery of Rs.5,36,492.08 ps. which consists of Rs.3,24,694.25 ps, being the principal and interest on Rs.3 lakhs, towards term loan; and Rs.2,11,797.83 ps. being the balance of principal and interest towards working capital loan of Rs.2,75,000/-; obtained by the defendants who are appellants herein; and to create a charge over the equitable mortgage properties i.e., plaint A and B schedule properties of D1 and D2 for recovery of the same and for subsequent interest and costs. The suit was filed by the 1st respondent Bank herein for passing of a preliminary decree against the defendants who are appellants herein. In the plaint it is stated that M/s.Balaji Rice Mill is a partnership concern represented by its Managing partners D1 and D2 and partners of the firm, defendants 3, 5 and 6 who are guarantors to the partnership firm. Defendants 4 and 7 are Legal representatives of Sri M.Sambasivarao. The plaintiff bank sanctioned term loan of Rs.3.00 lakhs for the purchase of Rice Mill and Working Capital loan of Rs.2,75,000/- and disbursed the same to the defendant on 05.01.1985 and 26.11.1985 respectively. Defendant Nos.1 and 2 executed Ancillary agreement A and B, pledging the movable machinery and mortgaging land and buildings. Defendants 1 to 3, 5 and 6 executed guarantee agreement for small industrial advances on 04.01.1985. Defendants 1 and 2 constituted a partnership firm on 10.08.1984 under the name and style of Balaji Rice Mill, Ongole. Defendants 1 and 2 executed General agreement for grant of medium term advances to small scale industries and hypothecation of movables, book debts and other assets on 04.01.1985. The defendants 1 and 2 also executed a Demand Promissory note for Rs.2.75 lakhs in favour of defendants 3 to 7 who transferred in favour of plaintiff on behalf of M/s.Balaji Rice Mill, on 26.11.1986, by agreeing to repay the loan with interest at 17.5% p.a. with quarterly rests. Defendants 1 to 7 executed a Demand Promissory note delivery letter in favour of plaintiff. Defendants 2 to 7 executed a guarantee agreement in favour of the bank guaranteeing the payment of the said loan. The above loan is payable on demand. They also created an equitable mortgage by depositing the title deeds on 04.01.1985, 19.03.1986 and 26.11.1986 respectively. They have also executed revival letters on 15.12.1987 and 16.10.1989 for the term loan and working capital loan respectively. Defendants 1 to 7 committed default in payment of the debt as per the terms and conditions of the agreement of loan to partnership firm M/s.Balaji Rice Mill and the partnership firm has to pay outstanding balance of Rs.3,24,695.24 ps. as on 15.12.1990 towards term loan and a sum of Rs.2,11,797.83 towards working capital loan. Inspite of several demands by the plaintiff bank, the defendants failed to discharge the debt and they have not paid the installments in time. Hence the present suit is filed for recovery of Rs.5,36,492.08 ps. The 2nd defendant filed written statement denying the allegations made in the plaint. They have denied that the plaintiff is entitled to the interest at contract rate and he also denied the execution of revival letters. It is also stated that the suit is not maintainable against the defendants, without making the firm M/s.Balaji Rice Mill as party to the suit and without a prayer for a decree against rice mill. It is also stated that the plaintiff is not entitled to compound rate of interest though the loan is borrowed for commercial transaction or purpose. A plea is also taken that the suit is barred by limitation and sought for dismissal of the suit. A memo is filed on behalf of the 3rd defendant by adopting the written statement filed by the 2nd defendant. The defendant No.7 filed written statement denying the allegations in the plaint and admitted that they have obtained term deposit loan and working capital loan for running the rice mill. They could not pay the same due to financial troubles. It is also stated that the rice mill has been leased to one A.Satyanarayana and that he has been paying the loan amount to the plaintiff bank. Even after filing the suit, this defendant paid Rs.80,000/- to the credit of the plaintiff bank in two installments and sought for dismissal of the suit. Defendants 1, 4 to 6 have filed a memo by adopting the written statement filed on behalf of the 7th defendant. The trial court framed the following issues for trial. Whether the suit is maintainable in law? Whether the interest claimed is usurious and excessive? Whether the suit is barred by law of limitation against D2 and D3? Whether the defendant is not liable for costs? The trial Court basing on the evidence of PW1 to PW5 decreed the suit. No evidence is lead on behalf of the defendants. Against the said Judgment and Decree in OS.No.1 of 1991, present appeal is filed. Learned counsel for the appellants/defendants contended that the appellants obtained loan in two parts i.e., term loan and Working Capital loan and as per the agreement the interest on them term loan is to be charged @ 12.5% p.a. while the interest on the Working Capital Loan is to be charged @ 17.5% p.a. But the Court below has granted interest uniformly @ 17.5% p.a. on both the loans, which is erroneous and the same is not permitted according to law. He relied on the Judgments rendered on by the Supreme Court in Corporation Bank vs. D.S.Gowda and Another and Central Bank of India v. Ravindra and Others. On the other hand learned counsel appearing for the 1st respondent Bank filed cross objections stating that the subject loan is for commercial purpose and the Court below ought to have granted interest @ 15.5% p.a. with quarterly rests on cash credit account and interest @ 12.5% p.a. with quarterly rests on the term loan account from the date of decree till the date of payment. He also submits that since loan is obtained for commercial purpose, as per the proviso to Section 34, the subsequent interest is to be calculated as per the contractual rate i.e., 17.5% on the term loan and 12.5% on the working capital loan. Since both the counsels have confined their arguments only to the above stated grounds, I am only dealing with the same. In page-4 of the Judgment, it is clearly mentioned that the amount advanced towards term loan is Rs.3,00,000/- and working capital is Rs.2,75,000/and the rate of interest is also mentioned as 12.5% towards term loan and 17.5% towards working capital loan. It is also clearly mentioned that the amount due towards term loan is Rs.3,24,694.25 and working capital is Rs.2,11,797.83. As per the agreement the interest should have been calculated @ 12.5% on the amount due towards term loan and @ 17.5% on the amount due towards working capital. But the trial Court granted interest @ 17.5% on the total suit amount which includes term loan and working capital loan, and the same appears to be erroneous and against the contractual rate. Though learned counsel cited the Judgments, I do not see how they are helpful to the case of appellants. Similarly, as per the proviso under Section 34 of the Civil Procedure Code the subseqnet interest is to be calculated as per the contractual rate. Section 34 of CPC reads as follows; 34. Interest:- 1) Where and in so far as a decree is for the payment of money, the Court may, in the decree, order interest at such rate as the Court deems reasonable to be paid on the principal sum adjudged, from the date of the suit to the date of the decree, in addition to any interest adjudged on such principal sum for any period prior to the institution of the suit, (with further interest at such rate not exceeding six percent, peer annum as the court deems reasonable on such principal sum), from the date of the decree to the date of payment, or to such earlier date as the Court thinks fit: (Provided that where the liability in relation to the sum so adjudged had arisen out of a commercial transaction, the rate of such further interest may exceed six percent per annum, but shall not exceed the contractual rate of interest or where there is no contractual rate, the rate at which moneys are lent or advanced by Nationalised banks in relation to commercial transactions.) (2) Where such a decree is silent with 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 interest, and a separate suit therefore shall not lie. Admittedly, the loan obtained by the defendants in the suit is for commercial transaction. The trial Court erroneously granted subsequent interest @ 6% p.a., without taking into account the contractual rate of interest between the parties. As such, interest rate granted by the trial Court is required to be modified @ 12.5% on the term loan and 17.5% on the working capital loan. Accordingly, the cross objections filed by the 1st respondent/plaintiff, are allowed. In view of the above facts and circumstances, the Judgment and Decree of the trial Court is modified, decreeing the suit by granting 12.5% interest on term loan amount and 17.5% on working capital loan and subsequent interest @ 12.5% on the amount which is sanctioned towards term loan and 17.5% towards working capital. Accordingly the judgment and decree of trial Court is modified to the extent indicated above. Both the Appeal and Cross Objections stands disposed. As a sequel thereto, miscellaneous petitions if any pending in the Appeal, shall stand closed. _______________________________ A.RAJASHEKER REDDY, J 04.06.2015 t k. (1994) 5 SCC 213 (1996) 5 SCC 279 PAGE PAGE 7 +,BCijkz{|}! 5 P › œ þ ÿ B D Ä ôå×ʽʬ½¡ô— å‰{m{‰Q_Q?_#h€ïh€ïCJHOJQJmH sH h@i{CJOJQJmH sH h€ïCJOJQJmH sH h…•CJOJQJmH sH h>+CCJOJQJmH sH hÀJæCJOJQJmH sH h¥;CJOJQJhÔe5CJOJQJ hÔe5>CJOJQJmH sH h¥;5>CJOJQJhÔe5>CJOJQJh¥;CJOJQJmH sH h¥;5CJOJQJmH sH h¥;5CJOJQJ+,Cjk}œ þ ÿ efòó¨óêââÚÏÀ´À´À´¥™¥´¥$„ЄÐa$gdv5$„Ðdà„Ða$gd— BP$„ЄÐa$gd@i{$„Ðdà„Ða$gd¥; $dàa$gd¥;$a$gd¥;$a$gd¥; Ægd¥;$ Æa$gd¥;H0o0”0þþþÄ Å 5hyz–°±ïü`adefƒŸ¬ñòó ˆ ‰ ¤ ÷ ø ù
