ORDER
1. Defendants in O.S.No. 135 of 1995, on the file of Subordinate Judge, Kulithalai, are the appellants.
2. Plaintiff filed the suit for recovery of the amount borrowed by defendants from plaintiff for their business purpose. First defendant is a firm in which defendants 2 to 4 are partners. Fifth defendant is a guarantor. They had executed necessary documents in favour of plaintiff and borrowed a sum of Rs. 3 lakhs, on 15.11.1980, They have agreed to pay interest at 18% per annum. They have also hypothecated certain machineries. Thereafter, on 17.10.1983 and 16.11.1985, they have acknowledged their liability and renewed the debt. As on the date of suit, nearly, Rs. 95,000 was due with future interest.
3. Second defendant in his written statement contended that the trial Court has no jurisdiction to entertain the suit and he has not acknowledged the
liability. The suit is also barred by limitation. Likewise, fifth defendant is also not liable and he has to be exonerated from his liability. Second defendant has stated in his written statement that the plaintiff is not entitled to interest at 18% per annum, but only at 12 1/2% per annum.
4. Fifth defendant has also filed a written statement supporting the claim of second defendant.
5. On the above pleadings, the trial Court took oral and documentary evidence. P.Ws. 1 and 2 were examined on the side of plaintiff-Bank and Exx. A-1 to A-19 were marked. 2nd defendant examined himself as D.W.1 Ex.B-1 was marked on the side of defendants.
6. The trial Court passed a decree in terms of the plaint. Plaintiff-Bank was also awarded its costs.
7. Trial Court found that all the documents were executed by defendants and they have also acknowledged the liability. Regarding the rate of interest, it was found by the trial Court that the defendants have agreed to pay interest at 9 1/2 % over and above the Reserve Bank rate with a minimum of 18 1/2 per annum. It further found that since the defendants have borrowed the amount in connection with commercial transactions, plaintiff is entitled to claim interest as per contract.
8. The matter was taken in appeal by defendants in A.S.No. 240 of 1997, on the file of District Judge, Trichy. The lower appellate Court confirmed all the findings of the trial Court and dismissed the appeal.
9. In this second appeal preferred by the defendants, they have raised the following questions, which according to them are substantial questions of law:
(1) Whether the Courts below are correct in coming to the conclusion that the suit transaction is only a commercial transaction on the given circum-stances?
(2) Whether the selling of spare parts to the Tractors which would be used in the process of agriculture, would not come under the meaning of agriculture purpose in the Banking business?
(3) Whether, in the given circumstances, the lower appellate Court is correct in applying Sec. 34 of CPC and Section 21-A of the Banking Regulation Act 1949 to the pending mortgage suit?
(4) Whether the provisions of Order 34, Rule 11 CPC override the provisions of Section 21-A of the Banking Regulation Act, 1949 and whether the provisions of Order 34, Rule 11 of CPC is not controlled by the Section 21-A of Banking Regulation Act, 1949?
(5) Whether the Courts below had exercised their judicial discretionary power of Court to determine the rate of interest pending the suit?
and
(6) Whether the judgment reported in N.M.Veerappan v. Canara Bank, would apply to the case on hand?”
10. In a recent decision of the Honourable Supreme Court reported in Kondiba Dagadu Kadam v. Savitri Sopan Gujar and others, . Their Lordships have said that the purpose of amendment to the Civil Procedure Code under Act 104 of 1976 was to minimise litigation, ensure fair trial in accordance with principles of natural justice, to expedite the disposal of civil suits and proceedings so that justice is riot delayed, to avoid complicated procedure to ensure fair deal to the poor sections of the community and restrict the second appeals only on such questions which are certified by the courts to be substantial questions of law. In paragraphs 3 and 4 of the judgment. Their Lordships have said that after the amendment, a second appeal can be file only if a substantial question of law is involved in the case. The memorandum of appeal must precisely state the substantial question of law involved and the High Court is obliged to satisfy itself regarding the existence of such a question. If satisfied, the High Court has to mulate the substantial question of law involved in the case. The appeal is required to be heard on the question so for mulated. However, the respondent, at the time of if the hearing of the appeal, has a right to argue that the case in the court did not involve any substantial question of law. The proviso to the section acknowledges the powers of the High Court to hear the appeal on a substantial point of law, though not formulated by it with the object of ensuring that no injustice is done to the litigant where such a question was not formulated at the time of admission either by mistake or by inadvertence’. Their Lordships also deprecated the practice of the courts in not making a distinction between a question of law and substantial question of law. Their Lordships have held thus, in paragraph 4 of the said judgment:
…..It has to be kept in mind that the right of appeal is neither a natural nor ah inherent right attached to the litigation. Being a substantive statutory right, it has to be regulated time. The conditions mentioned in the section must be strictly fulfilled before a second appeal can be maintained and no court has the power to add to or enlarge those grounds. The second appeal cannot be decided on merely equitable grounds. The concurrent findings of facts however erroneous cannot be disturbed by the High Court in exercise of the powers under this Section
The substantial question of law has to be distinguished from a substantial question of fact. This court in Sir Chunilal v. Mehta and Sons Ltd., v. Century SPG. & MFG.Co.Ltd, , held that:
“The proper test for determining whether a question of law raised in the case is substantial would in our opinion, be whether it is of general public importance or whether it directly and substantially affects the rights of the parties and if so whether it is either an open question in the sense that it is not finally settled by this Court or by the Privy Council or by the Federal Court or is not free from difficulty or calls for discussion of alternative views. If the question is settled by the highest court or the general principles to be applied in
determining the question are well settled and there is a mere question of applying these principles or that the plea raised in palpably absurd, the question would not be a substantial question of law.”
11. Their Lordships further went on and held thus in paragraphs 5 and 6:
“It is not within the domain of the High Court to investigate the grounds
on which the findings were arrived at, by the last court of fact, being the first
appellate court. It is true that the lower appellate court should not ordinarily
reject witnesses accepted by the trial court in respect of credibility but even
where it has rejected the witnesses accepted by the trial court, the same is no
ground for interference in second appeal when it is found that the appellate
court has given satisfactory reasons for doing so. In a case where from a given
set of circumstances two inferences are possible one drawn by the lower
appellate court is binding on the High Court in second appeal. Adopting any
other approach is riot permissible. The High Court cannot substitute its opinion
for the opinion of the first appellate court unless it is found that the conclusions
drawn by the, lower appellate court were erroneous being contrary to the
mandatory provisions of law applicable or its settled position on the basis of
pronouncements made by the Apex Court, or was based upon imadmissible
evidence or arrived at without evidence.
6. “If the question of law termed as a substantial question stands already decided by a larger Bench of the High Court concerned or by the Privy Council or by the Federal Court or by the Supreme Court, its merely wrong application on the facts of the case would not be termed to be a substantial question of law. Where a point of law has been pleaded or is found to be arising between the parties in the absence of any factual format, a litigant should not be allowed to raise that question as a substantial question of law in second appeal. The mere appreciation of the facts, the documentary evidence or the meaning of entries and the contents of the document cannot be held to be raising a substantial question of law. But where it is found that the first appellate court has assumed jurisdiction which did not vest in it, the same can be adjudicated in the second appeal, treating it as a substantial question of law. Where the first appellate court is shown to have exercised its discretion in a judicial manner, it cannot be termed to be an error either of law or of procedure requiring interference in second appeal. This court in Reserve Bank of India v. Ramkrishna Govind Morey, held that whether the trial court should not have exercised its jurisdiction differently is not a question of law justifying interference.” (Italics supplied)
12. Why I have extracted the above legal position is because regarding the rate of interest, the matter is governed by contract between the parties, in a recent decision of the Honourable Supreme Court, reported in State Bank of India v. Yasangi Venkateswara Rao, , their Lordships have held that interference of court in deciding with the rate of interest is very much limited. In that case, their Lordships have held as follows, in paragraph 7 and 8:
“7. We are unable to understand as to how the High Court could come to the conclusion that Parliament had no jurisdiction to enact Section 21-A. There can be no doubt that Section 21-A deals with the question of the rate of interest
which can be charged by a banking company. Entry 45 of List I of the Seventh Schedule clearly empowers Parliament to legislate with regard to banking. The enactment of Section 21-A was clearly within the domain of Parliament. The said section applies to all types of loans which are granted by a banking company, whether to all types of loans which are granted by a banking company, whether to an agriculturist or a non-agriculturist, and, therefore, reference by the High Court to Entry 30 of List II was of no consequence. In our opinion, the said Section 21-A had been validly enacted.
8. We also find it difficult to agree with the observation of the High court that normally when a security is offered in the case of mortgage of property, charging of compound interest would be regarded as excessive. 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. The mortgaging of a property is with a view to secure the loan and has no relation whatsoever with the quantum of interest to be charged.” (Italics supplied)
13. Even on merits, I do not think that the Courts below have considered the question in the right perspective. Even the contract rate is 18 1/2% over and above Reserve Bank of India rate. The courts below have awarded only 18 1/2%, i.e., the minimum agreed. It is well-known that during the relevant time, ordinary lending rate of interest varied between 16 to 24% per annum. Even though Section 34, C.P.C. may not apply, since the machines have been hypothecated, Courts below have taken into consideration Sec. 34, C.P.C. only for the purpose of considering it as a commercial transaction.
14. The questions of law raised in the memorandum of appeal have already been decided by the Honourable Supreme Court, and the Courts below have also applied the correct legal, principles in awarding the rate of interest, taking into consideration the facts of the case.
15. In the result, I hold that the second appeal is without merit, and consequently the same is dismissed. No costs. C.M.P.No.8087 of 1999 for stay is also dismissed.