B.V. Nagarathna, J.@mdashThough this matter is posted for admission with the consent of learned counsel on both sides, it is heard finally.
2. The defendant has preferred this appeal by challenging the Judgment and Decree passed in O.S. No. 1/2004 dated 13.6.2005 and R.A. No. 74/2005 passed on 31.10.2006.
3. The relevant facts for the disposal of this appeal are that the respondent/plaintiff had filed original suit seeking recovery of a sum of Rs. 95,125/- with costs and interest at the rate of 2.3% p.m. from the date of suit till the date of realization from the defendant. The said suit was decreed in part to an extent of Rs. 50,000/- being the principal sum with interest at 12% p. a from the date of advance till the filing of the suit and at 6% p. a from the date of suit till realization. Being aggrieved by the Judgment and Decree, particularly with regard to the rate of interest, the plaintiff filed an appeal before the Additional District Judge, Chitradurga in Appeal No. 74/2005 The first appellate court allowed the appeal of the plaintiff and held that the interest has to be not at 12% p.a but at the rate of 2% p.m. and accordingly, modified the said Judgment and Decree. The same is challenged in this appeal.
4. I have heard the learned counsel for the appellant and learned counsel for the respondent.
3. It is contended on behalf of the appellant that although the transaction in question is this case is a private transaction, the first appellate court was not justified in awarding interest at the rate of 2% p.m as it is excessive and is contrary to the banking rate of interest for the relevant point of time. He has relied upon a decision of the Apex Court in the case of
6. Per contra, it is submitted on behalf of the respondent that in the instant case a private loan transaction was entered into between the two persons and the rate of interest agreed to by the appellant was 2.5% p.m. However, the first appellate court has awarded only at the rate of 2% p.m. which has been accepted by the respondent. Therefore, there is no merit in this appeal which does not raise any substantial questions of law and hence the appeal may be dismissed.
7. Having heard the counsel on both sides, the only point that arises for my consideration is as to whether the rate of interest which has been prescribed in the loan transaction in question is hit by Section 23 of the Indian Contract Act and the same is not enforceable.
8. From the material on record, it is not in dispute that there was a loan transaction between the parties and that the Judgment and Decree passed by the trial court has been accepted by the appellant with regard to the principal sum. However, it is only with regard to the rate of interest which was prescribed by the order of the first appellate court that the appellant has a grievance. It is the contention of the appellant that in view of there being excessive and usurious rate of interest prescribed in the loan transaction, the said clause of the promissory note cannot at all be enforced and therefore, the high rate of interest which has been fixed by the first appellate court cannot be made applicable to the facts of the present case.
9. On a reading of the decision of the Apex Court in Central Bank of India''s; case referred to supra, it is seen that the rate of interest even in the case of a private transaction has to-be in terms of RBI directives and circulars issued to a banking company which has to be treated as a standard for the purpose of deciding whether the said rate is excessive, usurious or opposed to public policy. However, it is to be noted that in the instant case the rate of interest is prescribed in a promissory note and u/s 79 of the Negotiable Instruments Act, when a specified rate is expressly made payable in a promissory note or a bill of exchange, then the same would hold good until the realization and interest at the specified rate shall Lave to be calculated. But u/s 80 of the Act, when no interest is specified in an instrument, notwithstanding any agreement relating to interest between any parties to the instrument can be calculated at. 18% p.a from the date at which the same ought to be paid by the period charged until realization. Keeping in mind the dictum of the Supreme Court in the case referred to supra as well as the aforesaid provisions of the Negotiable Instruments Act particularly Section 80 wherein it is stated that 18% can be the rate of interest despite there being an agreement to the contrary in any instrument, I am of the considered view that the Judgment and Decree of the first appellate court has to be modified and the rate of interest has to be at 18% p.a instead of 2% p.m as awarded by the first appellate court from the date of transaction till the date of suit. The rate of interest decreed by the trial court for the period subsequent to the suit shall remain undisturbed.
10. Therefore, no substantial question of law arises although, the judgment and decree of the trial court is modified in the above terms. Appeal is allowed in part. Parties to bear their own costs.
