1973 (8) TMI 168 - HC - Indian Laws

Appellants' Arguments Dismissed, Trial Court Judgment Upheld

The court dismissed all contentions raised by the appellants and upheld the trial court's judgment and decree, affirming the plaintiff's entitlement to ... Charging of compound interest with monthly rests - usurious loan-excessiveness under the Usurious Loans Act and Explanation 1 to Section 3 - acquiescence and course of dealing as evidence of agreement to bank accounts - Factory-type loan and liability for watchman's charges - Order 34, Rule 11, Civil Procedure Code-award of interest during period of redemptionWaiver of defence by abandonment in trial court - The appellants cannot raise the objection to trunk call charges in this appeal as that defence was given up before the trial court. - HELD THAT: - The defendants had expressly confined their defence in the lower Court to questions of interest and watchman's salary, and thereby abandoned contest as to trunk call charges. The High Court held that having relinquished that defence at trial, the appellants are not permitted to raise it for the first time on appeal. [Paras 10, 11]Objection to trunk call charges rejected as not maintainable on appeal.Factory-type loan and watchman's charges - acquiescence and course of dealing as evidence of agreement to bank accounts - The defendants are liable to pay the watchman's salary debited to their account. - HELD THAT: - The evidence showed that under the Factory-type loan the bank appointed a watchman to permit the borrower freedom to deal with pledged goods, and that the salary of the watchman was to be borne by the borrower. Monthly statements sent to the firm consistently debited watchman's charges and no written objection was raised; managing partners confirmed the account entries. The continuous conduct and acceptance of the accounts by the defendants established their acquiescence and obligation to pay those charges. [Paras 15, 16, 22, 26]Liability for watchman's charges upheld.Charging of compound interest with monthly rests - acquiescence and course of dealing as evidence of agreement to bank accounts - The agreements and the parties' conduct provide for and establish the validity of charging compound interest with monthly rests. - HELD THAT: - Clause (7) of the written agreements expressly required interest to be calculated on the daily balance and charged to the account on the last working day of each month, language which contemplates addition of interest to the account (i.e., capitalization). Account statements (Exs. A-15, A-16) showed compound calculation and were regularly sent to the defendants; correspondence and admissions (including Ex. A-11) contain no written objection. The defendants' continued use of the overdraft facilities after receiving such statements and notices amounted to implied acceptance of the method of charging compound interest. [Paras 27, 28, 29, 37]Compound interest with monthly rests properly chargeable under the agreements and was rightly allowed.Usurious loan-excessiveness under the Usurious Loans Act and Explanation 1 to Section 3 - The interest charged is not shown to be excessive or usurious under the Usurious Loans Act on the material before the Court. - HELD THAT: - The Court applied the statutory test under Section 3 (as amended) and the principles summarised in prior decisions: the debtor bears the burden of proving that the rate is excessive in the circumstances existing at the date of the loan (taking into account security, debtor's financial condition, risk and frequency of compounding). Here the loans were overdrafts advanced against tobacco and subsequently secured by immovable property; there was no evidence that the security was insufficient or that the rate (81/2% with monthly rests as applied) was excessive compared with prevailing commercial rates or manifestly unconscionable. Mere accumulation of interest due to default did not establish unfairness. Accordingly the presumption under Explanation 1 did not arise. [Paras 40, 42, 43, 55]Claim that interest is usurious rejected for want of evidence; interest held not excessive.Order 34, Rule 11, Civil Procedure Code-award of interest during period of redemption - Awarding interest at the contract rate (10% per annum as applied) from the date of suit until decree under Order 34, Rule 11, C.P.C. is permissible in mortgage cases. - HELD THAT: - The Court confirmed the settled principle that Order 34, Rule 11 governs interest in mortgage suits and may override the general provision of Section 34, C.P.C. for such cases. Interest at the contract rate may be awarded until the period for redemption expires; counsel for appellants conceded the legal position. The plaintiff in fact claimed subsequent interest at a rate not exceeding the contract rate, so appellants had no ground to complain. [Paras 12, 13]Award of interest from date of suit until decree under Order 34, Rule 11 upheld.Final Conclusion: The High Court dismissed the appeal with costs: the objection to trunk call charges was impermissible on appeal, the bank was entitled to debit watchman's charges under the Factory-type loan, the agreements and parties' conduct authorised charging compound interest with monthly rests and such interest was not shown to be usurious, and the award of interest from suit to decree under Order 34, Rule 11, C.P.C. was valid. Issues Involved:1. Entitlement to debit trunk call charges.2. Entitlement to claim watchman's salary.3. Interest claimed contrary to the contract.4. Interest charged being usurious.5. Awarding interest at 10% per annum from the date of suit till the date of decree.Issue-wise Detailed Analysis:1. Entitlement to Debit Trunk Call Charges:The appellants contended that the plaintiff was not entitled to debit the trunk call charges to the account of the firm. However, it was noted that the defendants had given up their contest regarding trunk call charges in the lower court. The court held that it was not open to them to raise this question in the appeal, as both counsel appearing for the defendants had expressly confined their defense to the question of interest and watchman's salary. Consequently, this point was rejected.2. Entitlement to Claim Watchman's Salary:The appellants argued that the plaintiff was not entitled to claim the charges incurred by the bank towards the watchman's salary as it was not covered by the terms of the contract. The lower court upheld the plaintiff's claim on the ground that watchman's charges were being debited every month since the beginning of the transactions, and no objection was raised by the defendants. The court found that the appointment of the watchman was to safeguard the goods pledged and to confer certain flexibility of trade to the defendants. The continuous course of conduct showed that the defendants acquiesced in the debiting of watchman's charges. Therefore, the court held that the defendants were liable to pay the watchman's charges.3. Interest Claimed Contrary to the Contract:The appellants contended that the interest debited to the account of the firm at the rate of 8 1/4% per annum with monthly rests was not covered by the terms of the agreement. The court found this contention untenable based on the clear language of the relevant terms of the contract. Clause (7) of the agreements provided for calculating interest on the daily balance of the account and charging it on the last working day of each month, implying compound interest. The defendants' subsequent conduct confirmed their acceptance of the compound interest. The court held that the agreements provided for charging compound interest, and the defendants had agreed to pay the same.4. Interest Charged Being Usurious:The appellants argued that the interest charged was usurious. The court referred to the provisions of the Usurious Loans Act and relevant case law, noting that the burden of establishing that the interest was excessive lay on the debtor. The court found no evidence to support the claim that the interest was excessive. The interest charged came to about 8.84% per annum with monthly rests at 8 1/2% per annum, which was not deemed excessive. The court held that the defendants failed to establish that the interest was usurious or that the transaction was substantially unfair.5. Awarding Interest at 10% Per Annum from the Date of Suit Till the Date of Decree:The appellants contended that the lower court erred in awarding interest at 10% per annum from the date of the suit till the date of the decree. The court noted that under Order 34, Rule 11, Civil P. C., interest could be awarded at the contract rate till the period of redemption expires, and the provisions of Section 34, Civil P. C., were not applicable to cases of mortgages. The court found this contention devoid of merit and upheld the award of interest at 10% per annum.Conclusion:In conclusion, the court dismissed all the contentions raised by the appellants and upheld the judgment and decree of the trial court, affirming the plaintiff's entitlement to the claimed amount, interest, and costs. The appeal was dismissed with costs.