ORDER
J.B. Goel, J.
1. This suit has been filed by the plaintiff bank for recovery of Rs. 1,51,319.61 including interest against the defendant.
2. Briefly the facts alleged are that the defendant is carrying on his business as a dealer in two wheeler automobiles in the name of M/s. Swa- deshi Motors at 1 E-2, Jhandewalan Extension, New Delhi. He had a current account with the plaintiff bank at its Jhandewalan Extension Branch. On 3.6.1983, due to mistake/clerical error on the part of the bank, an excess amount of Rs. 1.00 lakh had been credited in his current account. The defendant on 4.6.1983 had issued a cheque in this account for withdrawing Rs.1.00 lakh and purchased a bank draft in favour of M/s. Bombay Oil Indus- tries Pvt. Ltd. His account was so debited and the bank draft was issued. Later on, in August 1984 the aforesaid mistake was discovered, the defend- ant was asked orally as well as in writing to deposit the said amount with the plaintiff bank which was not done. A letter of demand dated 27.2.1985 and then legal notice dated 22/24.7.1985 were saved on the defendant claim- ing a sum of Rs. 99,479.97 due in his current account. This having not been paid, plaintiff has filed this suit with interest @ 18% per annum for the period 3.6.1983 to 31.3.1985 and thereafter @ 17.5% per annum till the filing of the suit being the prevalent rates of interest charged by the bank. Accordingly the plaintiff has filed the present suit.
3. The defendant filed the written statement primarily contesting his liability to pay interest. It is not disputed that the defendant had issued a cheque of Rs. 1.00 lakh on 4.6.1983 in this account and having purchased a bank draft of Rs. 1.00 lakh in favour of M/s. Bombay Oil Industries Pvt. Ltd. He has taken the plea that the amount was withdrawn by the defendant honestly and bona fide, acting on the representation of the staff of the plaintiff bank that the amount was due in his account and that the plain- tiff bank is estopped from claiming any amount from the defendant. However, he, by way of compromise, was prepared to pay Rs.1.00 lakh in easy instal- ments without interest. No payment was, however, paid.
4. On the pleadings of the parties, the following issues were framed:-
1. Whether the plaint has been signed and verified, and the suit filed by a duly authorised person? Opp 2. Whether the plaintiff made any credit entries in the accounts of the defendant by mistake? 3. Whether the defendant is liable to pay to the plaintiff bank the amounts covered by cheque No. 0146653 dated 4.6.1983 in the sum of Rs. 1,00,000/-? 4. Whether the plaintiff bank is entitled to charge any interest on the amount drawn by the defendant on account of mistake made by the plaintiff bank? 5. Relief.
5. The suit was instituted on 24.10.1985 and though the defendant as pleaded in his written statement had offered that he was prepared to make payment in instalments, but he did not pay any amount either to the plain- tiff bank or in the Court. A letter dated 3.7.1996 was sent by the defend- ant to the plaintiff bank which was placed on record wherein the defendant had offered to pay Rs. 99,479.97 plus Rs. 5,000/- in four equal instal- ments. Still no payment was made for almost two years in spite of the fact that liability to pay the principal amount was not disputed. This amount could have been paid without prejudice. However, this was taken as an admission and a decree for recovery of these two amounts, i.e., Rs. 99,479.97 and Rs.5,000/- was passed under Order 12 Rule 6 CPC on May 20, 1998 and these two amounts were paid on 22.5.1998, by means of two bank drafts. These payments have been made and accepted without prejudice to the rights and contentions of the parties.
During trial, plaintiff examined Shri K.L. Sachdeva, a former Bank Manager as PW-1, whereas the defendant has examined himself as DW-1. During arguments, learned counsel for the defendant did not dispute that an excess payment of Rs. 1.00 lakh had been made to the defendant under mistake by wrongly crediting his account, and defendant’s liability to pay this amount to the plaintiff. He has not pressed issues No. 1, 2 and 3. Accordingly, issues No. 1, 2 and 3 are decided against the defendant.
6. Arguments were confined to issue No. 4, i.e., whether the plaintiff is entitled to interest and if so at what rate.
7. Learned counsel for the plaintiff has contended that the amount of Rs.1.00 lakh was paid by mistake which the defendant could not retain and since he has not paid this amount, he is liable to pay the same with inter- est at the rate applicable to overdraft facilities granted by the bank to its customers which according to him initially was 18% per annum and subsequently 17.5% per annum as deposed by PW-1. He has relied on certain au- thorities. He has also contended that the interest is also payable under Interest Act as notice of demand claiming interest was served on the de- fendant; even otherwise, the defendant had used the money of the plaintiff, so the defendant is liable to compensate the plaintiff for the loss of interest suffered by it. Learned counsel for the defendant has contended that the defendant is not liable to pay interest as the amount was with- drawn by the defendant after ascertaining from the bank that he had credit balance to withdraw this amount, he had acted bona fide and the defendant is not liable to pay any interest under law. He has not supported his contention by any case law.
8. I have considered these contentions. As noticed above, it is not disputed by the defendant that the account of the defendant had been wrong- ly credited in excess by Rs. 1.00 lakh by mistake on the part of the plain- tiff bank and the defendant had withdrawn on 4.6.1983 and purchased a bank draft. Section 72 of the Indian Contract Act is attracted which provides that a person to whom money has been paid by mistake must repay or return the same to the person who has made such payment.
9. Now it is well settled that interest may be awarded for the period prior to the date of the institution of the suit if there is an agreement for the payment of the same at a fixed rate or if interest is payable by the usage of trade having the force of law, or under the provisions of any substantive law as for instance Section 80 of the Negotiable Instruments Act or Section 23 of the Trusts Act. Interest could also be awarded in the exercise of equity jurisdiction.
Now interest can be awarded under Sections 3 and 4 of the Interest Act, 1978. There two sections, however, are not exhaustive on the question of entitlement for interest.
10. Section 4(1) of the Interest Act, 1978 provides:- “(1) Notwithstanding anything contained in Section 3, interest shall be payable in all cases in which it is payable by virtue of any enactment or other rule of law or usage having the force of law.”
11. Earlier Section 1 of the Interest Act, 1839 conferred power on the Court to allow interest in cases specified therein, but the proviso to the said Section provided that “interest shall be payable in all cases in which it is now payable by law”. The Privy Council in Bengal Nagpur Railway Co. Ltd. Vs. Rattanji Ramji , referring to the proviso to Sec- tion 1 of that Act observed “this proviso applies to cases in which the Court of equity exercises its jurisdiction to allow interest”. In other words, it was held that this proviso to Section 1 of that Act saves the jurisdiction of the Court to award interest on equitable grounds de hors that Act. This decision was referred with approval by the Supreme Court in Satinder Sing & Ors. Vs. Amrao Singh and Ors. and it was held that “the power to award interest on equitable ground or under any other provision of the law is expressly saved by the proviso to Section 1”. Provision similar to that proviso to Section 1 of the Act of 1839 has now been enacted as Sub-section (1) to Section 4 of the Act of 1978. In other words, Section 3 or Section 4(2) of the Interest Act, 1978 do not take away the power of the Court where interest is otherwise payable by virtue of any enactment or other rule of law or usage having the force of law. Other rule of law will include the power of the Court to award interest on equitable grounds. Section 72 of the Contract Act enacts an equitable principle that where a person has received money from another which he was not entitled to, must refund it to the former. This provision is obviously intended to prevent an unjust enrichment. In other words, the person who has been deprived of his money which legitimately belonged to him, should be re- stored the same. The remedy provided under Section 72 is an action in restitution and is based on equity.
12. In N.V. Joseph Vs. Union of India, , a Division Bench of the Kerala High Court has held that “ordinarily interest cannot be claimed merely because money has been detained as a result of the defendant’s acts or misconduct. But if it is possible to invoke a rule of equity by establishing the existence of a state of circumstances which attracts the equitable jurisdiction, there can be no doubt that interest can be allowed”. In that case, the defendant had received the remittances of salary after the termination of his post for over one year which was being paid by mistake and when after 12 months demand was made of him for repayment, he chose to remain quiet. It was held that the amounts were paid by mistake, principles of equity were attracted and the defendant must pay the amounts so paid with interest.
13. Recently in Mafatlal Industries Ltd. Vs. Union of India & Ors., , a Constitution Bench of the Supreme Court has also held that Section 72 of the Contract Act is based and incorporates a rule of equity and equitable consideration would be application in its application.
14. In the present case, the plaintiff has been deprived of the use of its money by mistake committed in wrongly crediting Rs. 1.00 lakh in the cur- rent account of the defendant and the defendant has retained and utilised the same wrongfully. He has avoided to pay the same after mistake was realised and demands to pay were made from him. Besides the money, the bank has been deprived of its legitimate entitlement to interest which it would have earned if given to defendant or anybody else in an overdraft facility account. The defendant has been benefited to that extent. He has avoided to pay and utilised the bank funds for over 15 years. Suit was filed when letter and lawyer’s notice of demand Ex. PW-1/8 for refund of the amount with interest had no effect. If he disputed liability to pay interest to show his bona fides, he should have paid the undisputed amount at least without prejudice to liability to pay interest. His offers to pay in instalments were not sincere as no instalment even was paid. He paid some amounts when a part decree under Order 12 Rule 6 CPC was passed against him. There is no justification nor any valid ground has been shown for withholding the amount and not refunding the same at the earliest or at least when letters/notices were served on him and even after the suit was filed which remained pending for over 13 years. In the circumstances, the plaintiff is entitled to interest and the Court would grant interest on equitable grounds.
15. In this case, the amount was overdrawn by the defendant in his current account. If the plaintiff is entitled to restitution, which it is, it should get its refund with interest. The rate of interest would be the rate of interest charged by the bank on loans or at which rate it would have lent the amount to the defendant by way of overdraft facility incurrent account. PW-1, Shri K.L. Sachdeva, who was the Branch Manager of the plain- tiff bank at the relevant time, has deposed that the rate of interest under overdraft facility was 18% per annum when the amount was overdrawn and subsequently from 1.4.1985 it was reduced to 17.5% per annum till the date of filing of the suit and the interest was payable quarterly. He has also deposed that the rates of interest were prescribed by the Reserve Bank of India. Obviously, Reserve Bank of India prescribes rates of interest on various categories of loans under Banking Regulations Act, 1949 and these are binding on the specified banks. There is neither cross-examination of PW-1 on this aspect nor there is any evidence led in rebuttal by the de- fendant. This testimony of this witness remains unchallenged.
16. The plaintiff is thus entitled to interest @ 18% per annum from 4.6.1983 when the amount was overdrawn till 31.3.1985 and from 1.4.1985 till 24.10.1985 when the suit was filed at the rate of 17.5% per annum with quarterly rests. In the plaint, the plaintiff has claimed interest on the outstanding amount of Rs. 99,479.97 amounting to Rs. 51,839.64. That this amount of interest would accrue at the aforesaid rates is not disputed during arguments. Plaintiff is thus entitled to Rs. 99,479.97 as principal amount and Rs. 51,839.64 as interest, in all Rs. 1,51,319.61 till the filing of the suit.
17. Plaintiff would also be entitled to pendente lite interest, i.e., from the date of institution of the suit till decree under Section 34 CPC at the same rate of interest of 17.5% per annum on the principal amount as there is no ground not to award interest at this rate especially in view of the conduct of the defendant who has been unfair in retaining the amount for over 15 years.
18. Plaintiff is also entitled to future interest from the date of decree till realisation. The liability has arisen in relation to a commercial transaction as the amount was withdrawn in current account, used for his commercial purpose and the amount was also paid by him to a commercial firm. Plaintiff is further awarded interest from the date of decree till realisation at the same rate of 17.5% per annum on the principal amount of Rs. 99,479.97 under Section 34 CPC.
19. The suit of the plaintiff is accordingly decreed and a decree is passed in favour of the plaintiff and against the defendant :
1. for recovery of Rs. 1,51,319.61;
2. for pendente lite interest from the date of institution of the suit till the date of the decree @ 17.5% per annum on the princi- pal amount of Rs. 99,479.97; 3. for future interest at the same rate of 17.5% per annum on the principal amount of Rs. 99,479.97 till realisation, and 4. for costs of the suit. 20. Adjustment shall be given in the decretal amount of the amounts of Rs. 99,480/- and Rs. 5,000/- paid by the defendant by means of two bank drafts in Court on 22.5.1998 which amount the plaintiff will be entitled to adjust first towards the interest that accrued due under this decree. p class="centerAlign">