2005 (5) TMI 699

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....leaded in the plaint, is that the respondent No. 1, who was defendant No. 1, had opened a bank account with the appellant bank branch. The said respondent/defendant No. 1, along with respondents / defendants 2 and 3 who are the partners of respondent No. 1/defendant No. 1, had also been maintaining a current account /cash credit account and had been conducting their banking business through the branch of the plaintiff bank from time. It is alleged that the a foresaid respondents 1-3 , in connivance with the respondent No. 4 who was working as Branch Manager of the appellant bank at Dr. Mukerjee Nagar Branch, during the period from May, 1986 to September, 1991, entered into a criminal conspiracy, connivance and collusion and thereby allowed ....

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.... and that defendant No. 4 also could not be fastened with any liability to pay interest on account of any transaction in respect of which the present suit was filed. The statement of account was proved by the appellant bank as PW3/12 3. In the judgment and decree passed by the learned trial court a reference was made to the provisions of Section 3 of the Interest Act, particularly to the provisions of Section 3(b) proviso of the Interest Act. The aforesaid findings and conclusions of the learned trial court, as contained in the impugned judgment and decree, is under challenge in this appeal. Despite service on the respondents, none of the respondents was represented before us. The appeal accordingly was set down for ex parte hearing and ....

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....in respect of the transactions related to respondents 1 to 3. The suit was filed in the court of Additional District Judge on 21st October, 1994. It is, however, an admitted position that the amount which was withdrawn from time to time by the respondents 1-3 from the bank in connivance with the respondent No. 4, Branch Manager, without getting any proper loan/cash facility sanctioned, was repaid after some time. But, such repayment was admittedly without payment of any interest. The bank was deprived of utilization of the said amount in accordance with law, which could have been utilized by the bank more appropriately for earning its own revenue. However, due to the aforesaid conduct on the part of respondent No. 1 to 3, the bank was depri....

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....ntitled or the person making the claim to the person liable that interest will be claimed, to the date of institution of the proceedings: Provided that where the amount of the debt or damages has been repaid before the institution of the proceedings , interest shall not be allowed under this section for the period after such repayment. 6. It is correct to hold, as has been held by the learned trial court, that if the written instrument does not envisage payment of interest, no such interest is payable. However, a discretion is granted on the court to allow interest to the person entitled to the debt or damages or to the person making such claim, as the case may be, at a rate not exceeding the current rate of interest, for the wh....

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.... amount of the debt or damages has been repaid before the institution of the suit, interest cannot be paid under the provisions of Section 3 of the Interest Act for a period after such repayment. The learned Additional District Judge has relied upon the aforesaid proviso to Section 3(1)(b) for denial of the claim of the appellant. On a closer scrutiny of the aforesaid provision, however, we find that the learned Additional District Judge has misread the said provisions. The proviso does not altogether bar the payment of interest if the amount of debt or damages has been repaid before the institution of the proceedings. As we understand the proviso, it says, that no interest shall be allowed on the amount for the period intervening after the....

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....e usual banking procedure, interest is always payable and, Therefore, if the said amount would have been withdrawn by the respondents 1 to 3 through the usual means, they would have been liable to pay interest. Just because they circumvented the legal process and withdrew amount from the bank illegally, should it be held that no interest is payable by them on the amount which was illegally withdrawn? The answer to the said question has to be an emphatic 'No'. Therefore, it is a case where equitable jurisdiction as provided for under Section 3 of the Interest Act should be exercised and is held applicable. It is also trite law that interest is recoverable both at law and in equity on money obtained by fraud or conversion and retained....