IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 1267" DAY OF' OC'FOBER':2()E1:'OL..
PRESENT
THE HONBLE MR.JUs'r1c:E"K; 1,.1\r;;A1\1}_.rD'i\3:A.fi'§Ii'.~
AND
'r1-:E HONBLE MRE.J'U:STICE. E
RFA NO.~.1_ 147109 "2Do&j3. ._(1\/£()'Ei\--I)"'
BETWEEN:
1. Sri.¥)Iit}i'V«it?r1jLJ;(1iI1§
S / 0,8;-Chaffidagrgra S_het_tyfJa1n,
Age? >
R%[at';'Béiafl_jbalIy",._ " "
Ka1t'I1od_VVii?-Eage and Post,
*.Ku--I1'dap'utf'a '" .. ' '
2. Sr1*:t._._Vinuiha'B"P Raj,
_ . _W/ 0; P.1:it11viraj'J ain,
.. Age 42 years.
' R,/a1:...B01amb'é.l1y,
..K'aj,thdd__ViIlage and Post,
' .I{u.1fidapLi.~~ra Taluk. ....APPELLANTS
[By . Nataraj, Advocate)
E' '.~ Manipal Sowbhagya Nidhi Ltci,
Incorporated under the
Company's Act, 1956
A"
IN.)
(No.1 of 1956) having its
Registered office at Manipal of
Udupi Taiuk and having a
branch amongst other Branches
at Kundapura Kasaba Village,
Kundapura Taluk and
Represented herein by their
Power of Attorney. . A
Principal officer and Manager.K__
Sri.M.Ramakrishna Karabap. . 2
46 years. S / o.Laxrninaray-aria Kara--ba'.», A if
R / at Kundapura Kasaba _Vi'i1age_, "
Kundapura Ta1uk_&'_Pos't. " 1'
2. Sri.Mura1idharV Prabhui."
S/ o Vittal 4E'I'abhL:_','''' 0' "
Age: Major. 3...-' _
V ,
M / s. Sahyadri 'Cashew: Processors.
I-Iosav Horavatta. Kttrnta; --~ V
Uttara Karnataka. M 0 ...RESPONDENTS
(By 8: Assts. Advocate for R. 1)
.fi1eduVi1,'--s....S36 of cpc against the Judgement
dated: 20.6.2003 passed in
""O.'S-i--._No';'}.'i;}{)'/ 1.999 on the file of the Civil Judge (Sr.Dn),
Ku'n.dapur.af;' decreeing the suit of money.
_ 'A This Appeal coming on for hearing this day.
"B".'IvIANOHAR, J., delivered the following: -
Aw
JUDGMENT
The appellants are the defendants 1 3
the court below, being aggrieved by the M
decree dated 20~»6«2003 made myo.’s’.No;.ioo,i:i9gs’siege.
the Court of Civil Judge (Sr..Dn.);”Kiindapti.riA .piccfel1″ifedt’V
this regular first appeal.
2. The brief facts of case :.as:ZfollowsV:V’Ad
The plaintiff who in this
appeal filed a ;_the for recovery of
a sum of’– interest at 22% pa.
compounded the date of suit till the date
of realization” the ddecretal amount. In the plaint, the
ihas zcoritflerided that Manipal Soubhagya Nidhi
{Toinpany incorporated under the indian
1958. The plaintiff has been exempted
from uolrrtaining money lenders’ license by the
erGovernment of Karnataka as per notification dated
.9~..’e3–1992. As per the Articles of Association of the
AC”
equitable mortgage of Schedule ‘A’ property. ‘1’ he second
defendant also offered to equitably mortgage
schedule immovable properties as security:.:”for.c::the1 V’
proposed loan and deposited (‘thew
documents of title relating to _schedu__le’*.’_C’
plaintiff to create equitable niortgage
properties. The obtained the
scrutiny report of p the a
loan of ?. defendant on
the co–obligatiitinjpffipfhpof defendant and on the
guarantee A”3%*~<i _ ohnmequitable mortgage of
schedule "A' and "C" "i_r1:moy'able properties as security for
_ the loan onithe condition that the defendants shall
loan with interest at the rate of 22% pa.
'bimonthly. The defendants shall repay the
–V loan”‘withiri month and to pay the incidental charges
fffrelatingfffto the loan as per the rules of business of the
~ piaintirr.
/5%
4. On 13-51997, the plaintiff disbursed the loaiafof
Rs.10.00 lakhs by means of Cheque
favour of the first defendant on the Corporatio.,n’E_San}r.,’
Kundapur. On the said date, J
executed a receipt for having receiy-e_d’»–the said: ‘cheVque.V”
and executed an On Demand f5i=o_xn;issoryi.l\:Iote iniifayour
of the plaintiff, promi’s.iAn’g saidlloan with
interest at 22% pa on demand
by the plaintiff, thirdl vasfguarantor to the
said loan tlettei’ ‘of guarantee dated
l3–5– 1997: is a continuing guarantee
co–extensiy”e..withithes liability of defendants 1 and 2.
herldefendlants 2 deposited ‘B’ and ‘D’ schedule
favour of the plaintiff with an intent to
create mortgage as security of the said loan.
Qn 13:.57»1997, the first defendant also executed a letter
v.”Vf-.Aevidencing the deposit of ‘B’ schedule title deed with the
if .._.plaintiff. However, the defendants failed to repay the
cheque and demanded payment of amount covered
the said cheque by means of registered notice
19-3-1999. Inspite of the same, the defendants’faiioed:'”‘tofh’_”‘ ‘
pay the said amount. T he plaintiff has it
Complainant against the first defeéndiant
138 of the Negotiable Instruin-ents the
Judicial Magistrate the
same is pending’ In had filed a
suit for recoveijéri fiinount.
5. The suit’iWaVs:V’3’originai1y on the file of the Civil
Judge ($r-.I4)’n.]CatVtidu15–i_:’:i1i””O.S.NO.134/1999. In View
_ of .,fg§)’rmation Civil Judge (Sr.Dn.] Court at
said suit was transferred to the court of
{Sr.Dn.) Kundapura and renumbered as
; o.s;1\;oi–[i00/1999.
In pursuance to the notice issued by the Civil
it .,,_.-Jiudge (Sr.Dn.], Kundapura. the first defendant entered
5*
E0
and “C” schedule properties as security on equitable
mortgage in favour of the plaintiff as security of the said
loan. He has also denied the rate of interest ofj22%
p.a. According to the first defendant he has:r*’agreed”.j’t;o’
repay the loan with 12% p.a. and signledgv
Demand Promissory Note with :the:.Coj:-obligant’*of_:the
second defendant 81 on gua»ranteeV”of the
The first defendant has alleged._TthatVV}he has
repaid the major port’i.on pf tl:ie.l’.loa3&~.rg;,prroWed, Which
has not been proper1y….,U/’;e_ductedip_towards”. the principal
amourit. _”lfhe:I_-plgglntiff:intentionally kept the amounts
paid by ‘the defevnd’aAnt_4linipgllallllsuspense account, which is
contigfaryg to it i:2u_siness rules. Though the defendant
“the plaintiff many a times to rectify the
Al”a.noI11alie;3.,.,n__th’e”plaintiff did not heed to the request of
thehdefendalnt. In View of that the defendant has
Iisustained heavy loss due to the irregular adjustment of
.’ the’ payment of loan amount. In View of the irregular
it Wrnaintaining of the account, he has given instruction to
A/v
{V} ~
Whether plaintiff proves that the
plaintiff is a Company under the
Companies Act, 1956?
Whether the Karnataka Money .
and Pawn Broker’s Act is a * _
instituting this suit ‘K_ai1d’ whether, ”
plaintiff proves -_Dth_at rplaintiff
exempted from ____io’bta-i.ning” frnonegy
lender’s license by the.__Government”fof
Karnataka’? V
the that the
ffirst. ‘:”o1qeféi1dét1it rj”equit§ab1y mortgaged
s ‘schedule immovable
second respondent
e’q1ii”taE:ly”v1nortgaged the schedule ‘C’
.__imIn’ova_hle property as security for the
suit loan?
‘To what rate of interest, the plaintiff is
entitled to?
Whether the defendants prove that the
plaintiff has not given deduction to the
/5/
:3
money paid by them in the loan
amotint. _
(vii) Whether defendants prove that
frame of the suit is not proper’?
[viii] What decree or order’?
8. In order to substantiate of -itlie:
an Officer for the plaintiff Con_1pany–.or1e Vasogdeira r
was examined as P.W. 1 and lgetillmarked.thev-ldolonments
as Ex.P.l to EX.P.46. he first Prithxriraj Jain
examined ._l’1in*1seIf__’asT”DVQ\l’J.i -and no documents were
marked of
C-ourtlflbelow after considering the oral and
led by the parties held issue
Nos..al, in the affirmative. With regard to issue
i’tv.V__has been held that the plajntiff–Company is
eferxemjoted from obtaining money lender license and
if gotfovision of Money Lenders Act has no application to
%
16
counsel further alleges that the periodical repayments
made by the appellant has not been credited to the “loan
account and kept the same in the suspense…aecot1;nt’
and not properly maintained the ledgerpyaceount land
hence, appellants are not liable
These aspects of the rnatterhas notbeen considered;
the court below and sough’t.:_V’dfor aside the
judgment and decree;::4_.pass.ed below by
allowing this appeal. A
12. _’ Sri.K.N.PraVeen Kuinar.
learned for the first respondent
contended that judgnient and decree passed by the
veourlt “is in accordance with law and the rate of
by the first respondent is also in
it _ acco’rdance*vyith the agreed rate of interest. Further the
ie,.:f:irsrt_i”espondent is a Company incorporated under the
.’ Conipanies Act and also obtained exemption under the
“Money Lenders Act. Hence, they are competent to do
/5”
the money lending business. Further eontendedthat
the appellants having obtained the loan
agreed to pay interest at 22°/op.a. compounded’ K
and utilised the amount for their
down and contend that the firstrespondent:
power to do the money lendifigibupsinessly: ‘ll’he’i§eonduct
of the appellants “hands of
this Hon’ble Court of the
appeal. H
13. the arguments
addressedpélby and oral and documentary
evidence. led by. parties.
dispute that the appellants had availed
_ thel””‘l.oan.fr’:om the first respondent–Company for the
eirnproveinent of their Cashew nut business. The
appe’llants are fully aware of the business rules of the
“first respondent–Con1pai1y after executing necessary
/5′
18
documents and equitable mortgage of schedule ‘A’ and
‘C’ properties as security for the said loan and obtained
loan. Since, the appellants have failed to repay-.__>the
entire loan amount, the first respondent has
for recovery of the balance amount. Infactfthe
for Rs.-4.50.000/~ issued by the
dishonoured. In view of that, theV._fii’st
filed a suit for recovery of th’ef.V:a1nount’;._V_ of
the appellants to that the first
respondent is a Company to do the
money lenders 1;v>_i.i.sir1e/iSl’3»,__ .The plaint has not been
properly’ signeddi authorised person and
repayrr1ents.Vrr1ade’1have not been credited to the loan
account. of ” «
before the court below in order to
prove their “case, examined the Officer of the company
: P.W.I in his evidence deposed that the
.’ Ramakrishna Karab was the Manager of the plaintiff-
“Corzzpany at the time of filing of the suit and he was
,5”
19
holding Fower of Attorney to file a suit. The Manager of
the plaintiff–Company signed and verified the suit~.”‘—_pI-Ie
is a competent person to represent 3
Company. The Fower of Attorney executedp’linRfav’ot;1tl K V’
Ramakrsihna Karab was produeeld
P.W.1 deposed that the, plajn’tiff’r– is
incorporated under the Corfrpanies leper the
Memorandum of jrgovmpany,Rifulanybody
wanted to become thepppsharehpolder’;-»Vthieyl-have to make
necessary to e_nro’ll——~’ themselves as
Preferential _ depositing the share
value. tinly.the-_share?’ho’lders of the plaintiff–Company
are entitled lfory loan. Other private parties are not
loan. Further, the State Government by
99-1992 exempted the plaintiff-
Conipany from obtaining the Money Lenders’ License.
said notification was also produced as Ex.P.2.
.l also deposed that for the purpose of taking loan,
T “the loanee has to :%/e’necessary security as per the
20
rules of the plaintiff–Company. In the instant case. the
defendants I and 2 had executed mortgage deed–._as
security for the loan amount. Further regardi.n_g§,f
interest, the first defendant himself has
interest at the rate of 22% per
monthly. Further. as per lfifhelhas theflO11
Demand Promissory Note. oral
evidence deposed thaihthe two
cheques in favour of towards the
arrears of $4,830,000/–
was .noln”–Vavailabi1ity of the fund.
The statement also made known to the
defendants. .2 ._l\/Ionthlyv installments paid by the
been taken to the account. The Ledger
l’extractals;’o””been produced before the court to show
that” account has been maintained by the
.,.:plain_tiff’at Ex.P.29. The said P.W.l was cross–examined
.2 the learned counsel for the first defendant. In the
“cross–examination nothing contrary was elicited from
21
P.W. 1. The suggestion made by the learned counsel for
the first defendant that the rate of interest at 15%.gfor
the loan amount was denied by the P.W.1 V.
that agreed rate is 22% p.a.
16. The first defendant e::aminded””himse1–i7as
and deposed that for the of of
Cashew nut businessigghe €10.00
iakhs from the pglajntitfand repaid the
said a.1noun_t.3__: he had agreed
to rate of 22% p.a. and
not at . and he has repaid
?.114,;£5,342}–‘-as”on the date of filing of the suit. In
irregularity in maintaining the account, the
the first defendant was not taken into
V . accdo’un*t’:ar;d’ also contended that they have not executed
«,Vany.__ mortgaged deeds. However, in the cross»
– examination he has admitted that the properties have
hheen mortgaged as per Ex.P.9, Ex.P.10, Ex.P.11. On
A”
22
Demand Promissory Note has been marked as EX.P.15.
in the evidence he has deposed that he is not d1.:’e._pfor
. 1′
any money to the plaintiff–Company. 3
defendant has not produced any documents’-iin p
of his case.
17. The first defendant dispiitedetlheafact that
he has availed the lalthslf for the
improvement of’ his cashew and he has
admitted the f “of ‘1’n.o=rtgage deeds as
securiigy to _’thle_–vloan.yaInoi;nt. _’ Further, he has admitted
to repaygflthel 22% interest per annum
con1}po’unded ll Having accepted the loan with
V:’theKucondition_vmentioned therein, it is not open to the
tovcontend that the plaintiff is a Company
and’ it cannot do the Money Lender’s business without
obrtaining permission from the State Government. With
— ‘Ai”e,€glard to the rate of interest also the first defendant
/iw
denied that he has agreed to pay the interest in simple
interest of 22% p.a.
18. The evidence led by the paifties is Vefy” t’_hat~_ if”
the defendants had agreed to re’payf_”‘ttie
with 22% p.a. compounded”tnenVthly'”Ixtithin’»:VaA”§je’riod of ” it
six months. Since the defen.dVa’nts’«._faiIed”to_re%>ay the
loan amount and legal notice
was issued bytlie of the
loan. The two defendant for
Rs.50,0.0o–/-,uf;a;§i£i;’¥¢:.Rs.4f.»5o,o0ec,L out of which, the
chequelvlof by the Banker and
the chequxfigjf was dishonoured on the
‘”‘~,.gFO11iI:ld§Q.f .non–availability of funds in the account.
was also made available to the
:”:l’he defendants have verified the loan
account.
éw
24
19. The only grievance appears to be that rate of
interest with compounded monthly. At the tirrgie-tgof
taking the loan. having agreed for the it/fiA1=e’..g
defendants cannot turn down and say thatthe samiedits’
arbitrary. The Hon’b1e Suprerne;;Co’urt; ‘
reported in 2001 SAR (CIVIL) 390’~–in=the I11-{E
CENTRAL BANK or 1NnIA<:'fir/s "AND
OTHERS, at paragraph._':50 judgrrient it is
cleariy held that in of of Banking
Regulations has been
taken A' transaction between the
Banking on the ground that the
rate gotingterestcharged is excessive and the provision
has_gibee"'11.Ag givegn overriding effect over the Usury Loan
Eiiizeince, it is clear that the Court cannot
V . reo}:ien 'the""rate of interest. Moreover, the defendant
Aééthrieither the written statement nor in the oral evidence
–‘ their little finger about the interest charged
” the piaintiff«~Co1npany except stating that defendants
/{M
Pa)
‘J1
have only agreed to pay interest at 12% p.a. But,-‘–._the
documents produced and relied upon by V.
company clearly reveals that the defendants
to pay interest at 22% p.a. with rriorlilthlylre’sts..llV:l5urther.’V7
D.W.1 in his evidence has admitted that J/’igreedi it
to pay simple interest at the ‘of 2é%” the
defendants are fully aware The
court below after considering’ ldocurnentary
evidence led by filed by the
plaintiff.
20. or illegality in the
preliminaryVr;lecre’e’V._ by the court below. The
passed bylt 1e–«court below is only a preliminary
will get a chance to agitate the
matter onceliazgain in the Final Decree Proceedings.
Vhli”‘.,.4.4_l:1ence, find that the appellants have not made out
“a”1”;.y_pc.é_’.se to interfere with the well–considered order