Contractual bank interest cannot be reduced as excessive where banking law bars reopening the agreed rate.

Section 21A of the Banking Regulation Act bars reopening a bank-loan transaction on the ground that the agreed rate of interest is excessive, so the contractual interest rate cannot be reduced by a court or prescribed authority under general civil procedure powers. In a mortgage-backed banking transaction, the bank was therefore entitled to recover interest in accordance with the contract rather than a reduced rate of 6.5% per annum. The legal position applied is that special banking legislation prevails over general provisions concerning interest, and the contracted rate governs the claim from the date of suit until realisation.

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Issues: Whether the prescribed authority could reduce the contractual rate of interest charged by the bank to 6.5% per annum in a proceeding arising from a bank loan secured by mortgage.

Analysis: Section 21A of the Banking Regulation Act bars a court from reopening a transaction between a banking company and its debtor on the ground that the rate of interest charged is excessive. The provision is a special enactment governing bank lending, and the general powers concerning interest under the Code of Civil Procedure do not justify overriding the contracted rate in a bank loan where the claim is founded on the agreed terms. The legal position affirmed in the later Supreme Court decision was applied to hold that the bank was entitled to interest according to the contract, and the reduction of interest by the prescribed authority could not be sustained.

Conclusion: The reduction of interest to 6.5% per annum was not justified, and the bank was entitled to the agreed rate of interest from the date of suit till realisation.

Ratio Decidendi: In a banking transaction, contractual interest cannot be reopened or reduced as excessive where Section 21A of the Banking Regulation Act applies, and the bank is entitled to recover interest in accordance with the contract.

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