JUDGMENT
1. The appellant had preferred an appeal as against the judgment and decree made in OS No. 149 of 1985 dated 18-8-1986 on the file of the Principal Subordinate Judge, Narsaraopet, insofar as it relates to the non-awarding of the contractual rate of interest.
2. The main contention of the appellant-bank is that the Court below should have granted interest @ 14.75% per annum with quarterly rests, as prayed for, and the Court below had erred in granting interest only @ 12 1/2% per annum with proportionate costs.
3. The appellant had instituted a suit for recovery of amount of the strength of a mortgage deed. The case of the appellant/ plaintiff, as averred in the plaint, is that the defendant Nos. 1 to 6 and one late Gnanaprakasam borrowed a sum of Rs. 9,000/- from the appellant-plaintiff and had executed a demand promissory note on 19-10-1976 agreeing to repay the interest at 6% over the bank rate of interest with minimum of 15% of quarterly rests and they had also executed a letter and a mortgage deed and the third defendant and Gnanaprakasam, in fact, had acknowledged the liability on 7-8-1979, 4-7-1979, 22-2-1982, 12-7-1982 and thereafter Gnanaprakasam died leaving behind defendant Nos. 4 to 6 as legal representatives in the suit. Since, inspite of repeated demands, the amount was not repaid, the suit was instituted.
4. The first defendant had filed the written statement, which was adopted by defendant Nos. 2 and 3 and defendant Nos. 4 to 6 had remained ex parte. The plea raised by the contesting defendants was that they had borrowed the loan as crop loan and they are all agriculturists and hence, compound interest cannot be claimed by the appellant-plaintiff and the same is liable to be scaled down as per the provisions of Agriculturists Debt Relief Act 4 of 1938. The Court below had framed the following issues:
1. Whether the contesting defendants are agriculturists and if so whether the debt is liable to be scaled down as per the provisions of the Madras Agricultural Relief Act 4 of 1938?
2. Whether the defendants are not liable to pay the suit costs?
3. To what relief?
Exs. A1 to A21 were marked and especially, in the light of the fact that the debt was not disputed, no oral evidence was let in. The Court below while answering issue No. 1 had observed that Section 21-A of the Banking Regulation Act, 1949 is not applicable to agriculturists in Andhra Pradesh and hence, the debt liable to be scaled out from the provisions of Act 4 of 1938 and the suit was decreed with proportionate costs and a preliminary decree was passed granting simple interest of 5 1/2% for some period and subsequent thereto 12 1/2 % till redemption. The appellant-plaintiff aggrieved by (that portion of) the judgment and decree in non-awarding of the contractual rate of interest, had preferred the present appeal.
5. The Counsel representing the parties had made elaborate submissions in support of their respective contentions. The principal question involved in the appeal is “whether in the facts and circumstances of the case, the judgment and decree of the Court below are liable to be interfered with?”
6. On the strength of the respective contentions of the parties, the following points arise for consideration:
1. Whether the Court below can grant lesser interest than the contractual rate of interest, as specified in the mortgage deed?
2. Whether the provisions of A.P. (Andhra Area) Agriculturists Debt Relief Act, 1938, Act 4 of 1938 can be made applicable?
3. Whether the benefits under the Act 4 of 1938 can be given to the respondents in the light of Section 21-A of the Banking Regulation Act, 1949?
4. Whether in view of Order 34, Rule 11 of the CPC the Court can exercise the discretion of fixing the reasonable rate of interest in the case of a mortgage transaction?
5. To what relief? Point Nos. 1 to 4 :
7. Since, point Nos. 1 to 4 all are interrelated, all these points can be dealt together. The transaction is not in dispute and the only contest is relating to the rate of interest. The main contention of the appellant-bank is that the provisions of Act 4 of 1938 are not applicable at all in view of the specific bar imposed by Section 21-A of the Banking Regulation Act, 1949. Section 21-A of the Banking Regulation Act, 1949, dealing with ‘rate of interest charged by banking companies not to be subject to scrutiny by Courts’ reads as follows:
“Notwithstanding anything contained in the Usurious Loans Act, 1918 (10 of 1918), or any other law relating to indebtedness in force in any State, a transaction between a banking company and its debtor shall not be reopened by any Court on the ground that the rate of interest charged by the banking company in respect of such transaction is excessive.”
The words “any other law relating to indebtedness in force in any State” also assume importance in deciding the present dispute in controversy. In State Bank of Hyderabad v. Advath Sakru, (FB), the Full Bench of this Court had arrived at a conclusion that the bar under Section 21-A-of the Banking Regulation Act, 1949 will apply at all stages of suit, viz., suit, appeal or second appeal etc., and to any Court, trial Court, appellate Court or second appellate Court until the suit is finally disposed of by a final Court of appeal, which decree alone is the decree in the suit. In United Commercial Bank v. K. Aruna Kumar, , while dealing with Section 21-A of the Banking Regulation Act, 1949 in respect of the rate of interest in the case of agricultural loans/advances, it was held that the restriction on Courts to reopen Bank account on the rate of interest charged does not apply to all transactions entered into by Banking Company with its debtors, irrespective of purpose of loan and in the case of loans and advances to agriculturists for agricultural purposes, Banks have to follow the directives of Reserve Bank of India in the matter of charging interest and Courts can reopen the account and disallow interest charged in excess of the rate prescribed by RBI notwithstanding the provisions of Section 21-A of the Act. It is made clear that, however, the Court below had totally erred in observing that the provisions of Act 4 of 1938 will be applicable as though such provisions will have an overriding effect though a specific provision Section 21-A of the Banking Regulation Act, 1949 was incorporated. The transaction in question is a mortgage transaction and Order 34, Rule 11 of CPC deals with the payment of interest. It is needless to mention that Section 34 of the Code of Civil Procedure is the general provision dealing with interest. The learned Counsel for the respondents had placed strong reliance on a decision of the Division Bench of this Court reported in Sri Panduranga Traders and others v. State Bank of India, Vatluru Branch, (D.B.), wherein, the Division Bench held while dealing with Section 21-A of the Banking Regulation Act, and Order 34, Rule 11 of CPC, in the case of applicability of bank loans and mortgage decrees, the Court has power to exercise the discretionary power under Order 34, Rule 11 CPC to fix the rate of interest from the date of suit till the date of realisation notwithstanding Section 21-A of the Banking Regulation Act, 1949. In N.M. Veerappa v. Canara Bank, , the Apex Court held that the provisions of Section 21-A of the Banking Regulation Act, 1949 are not intended to override the central legislation in the CPC under Order 34, Rule 11 of CPC. However, in State Bank of India v. Yasangi Venkateswara Rao, , the later decision of the Apex Court, it was observed that a bank loan transaction cannot be reopened by the Court on account of excessive interest in view of Section 21-A of he Banking Regulation Act, 1949. It was, no doubt, brought to my notice that the prior decision of the Apex Court was not considered in the subsequent decision and the Division Bench of this Court in Sri Panduranga Traders v. State Bank of India, (supra) had followed the prior decision of Supreme Court in Veerappa’s case (supra) on the ground that the said judgment had stated the law elaborately and accurately giving reasons and the Division Bench, in fact, had observed at page No. 518, as follows:
“The next judgment to be considered is the judgment in Yasangi Venkateshwara Rao’s case . We may point out that this is a case where the legislative competence of the Parliament to enact Section 21-A was being considered. The Supreme Court while considering the legislative competency of the Parliament held that enactment of Section 21 (sic 21-A) is within its competence and they were not considering the power of the Court to reopen the transaction under Section 21-A of the Banking Regulation Act It is no doubt true that there was an observation that the High Court would not normally declare charging of compound interest as excessive when a security is offered in the case of mortgage of property. The learned Judges also observed that “Entering into a mortgage is a matter of contract between the parties. If the parties agree that in respect of the amount advanced against a mortgage compound interest will be paid, we fail to understand as to how the Court can possibly interfere and reduce the amount of interest agreed to be paid on the loan so taken.” With great respect, we are of the view that these observations are not supported by any reasons. Further, these observations were not made in the context of interpreting Section 21-A of the Banking Regulation Act as the question of interpretation of Section 21-A of the Banking Regulation Act did not arise in the said decision. The judgment in Veerappa’s case is supported by reasons. Therefore, though the judgment in Yasangi Venkateswara Rao’s case is a later judgment, later to the judgment in Veerappa’s case , since the judgment in Veerappa’s case is supported by reasons, we follow the same as it is now well settled that where there is a direct conflict between the two decisions of the Supreme Court rendered by co-equal Benches, the High Court must follow the judgment which appears to it to state the law elaborately and accurately. (Ref: Seethalakshmi Ammal v. State , Ganga Saran v. Civil Judge .
8. Coming to the facts and circumstances of the case, though the reasoning adopted by the Court below is not a correct reasoning, however, interest @ 12 1/2% had been granted, but, interest @ 14.75% with quarterly rests had been negatived. It is, no doubt, true that the Reserve Bank of India guidelines and the other directives in the case of agriculturists had not been taken into consideration and there is no discussion in this regard, evidently since these questions were not specifically raised and argued by the respective Counsel before the Court below. But, however, on the overall facts and circumstances of the case, I am satisfied that the Court below had exercised the discretion in fixing the rate of interest in a mortgage transaction. In view of the foregoing discussion and also in the light of the decision of the Apex Court in Veerappa’s case (supra), I am of the considered opinion that the ultimate conclusion arrived at by the Court need not be disturbed.
9. Point No. 5 (to what relief): In the light of the reasons recorded above, and also in the light of the decision of the Division Bench of this Court reported in Sri Panduranga Trader’s case (supra), I do not see any grounds to interfere with the judgment and decree of the Court below and hence, the appeal being devoid of merits, the same is accordingly dismissed. But, since the parties had fought this litigation only on the question of interest, it is not a fit case of awarding any costs. Hence, no order as to costs.