IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA RFA No. 81 of 2005 with C.O. No. 207 of 2005 Reserved on: 03.08.2009 Date of decision: 15.10.2009 Himachal Pradesh Financial Corporation ... Appellant Versus M/S Mahesh Udyog Workers Welfare … Respondents Association and others. Coram : The Hon’ble Mr. Justice V.K. Ahuja, Judge. Whether approved for reporting?1 For the appellant : Mr. Ajay Kumar, Advocate. For the respondents: Mr. R.K. Gautam, Senior Advocate with Ms. Archana Dutt, Advocate, for respondents No. 1 to 5 and 10. Mr. Sanjay Jaswal, Advocate, for respondents No. 6 to 9. V.K. Ahuja, J. : This is a Regular First Appeal filed by the appellant under Section 96 of the Code of Civil Procedure read with Section 20 of the H.P. Courts Act, 1976, against the judgment and decree dated 28.12.2004 passed by the learned Additional District Judge (Presiding Officer, Fast Track Court), Solan, vide which a decree for a sum of Rs.82, 765/- alongwith interest @ 16½% per annum simple has been passed for realization of the decretal amount as against a claim of Rs.6,27,058.65 alongwith future interest @ 1Whether reporters of Local Papers may be allowed to see the judgment? 2 16½% per annum with half yearly rests as claimed by the appellant/plaintiff. Briefly stated, the facts of the case are that the appellant as plaintiff filed a suit for recovery of Rs.6,27,058.65 as against the defendants. A sum of Rs.4,58,175.65 was claimed as outstanding of term loan, while a sum of Rs.1,68,883/- was claimed as interest alongwith future interest from the date of filing of the suit till realization. Briefly stated, the facts of the case are that the plaintiff is a Corporation established under the State Financial Corporation Act, 1951. Defendant No. 1 was sanctioned a term loan of Rs. 2.50 Lakhs by the plaintiff during the year 1986 for establishing an industrial unit for the manufacture of washing soap. Out of this amount, defendant No. 1 availed a loan of Rs.2.42 Lakhs, while remaining amount of Rs.8,000/- was cancelled by the plaintiff, since the defendant No.1 failed to avail the same. Thereafter, defendant No. 1 again approached the plaintiff and an additional loan of Rs.2.15 Lakhs was sanctioned on 1.1.1987, which was availed by defendant No. 1. Thus, defendant No.1 availed a loan of Rs.4.57 Lakhs from the plaintiff during the years 1986 to 1988 on different dates. An agreement was entered into between the parties on 15.1.1987. The loan was repayable in 14 half yearly installments alongwith interest starting from 10.1.1988 and ending on 10.7.1994. Defendants No. 2 to 8 stood as guarantors for defendant No.1 for repayment of the loan amount. The defendants executed the necessary documents in favour of the plaintiff/Corporation. 3 The defendants failed to repay the outstanding loan in accordance with the terms of the agreement and accordingly, the proceedings were initiated for recovery of the amount. A representation was made by the defendants and the repayment schedule was rescheduled accordingly. However, the defendants failed to pay the amount and proceedings were initiated by the plaintiff under the provisions of the H.P. Public Money (Recovery of Dues) Act, 1973, which again was challenged by defendant No. 1 by filing Civil Writ Petition in this Court. Defendant No. 1 agreed to pay Rs.50,000/- within one month of the passing of the order in that case and thereafter was to adhere to the repayment schedule dated 20.10.1994. Another payment was made by the defendant but he failed to repay the amount as agreed to and thereafter, the plaintiff filed the suit after issuance of notice upon the defendants. The plaintiff has accordingly claimed the outstanding amount, the principal as well as the interest mentioned above and had prayed for passing of a preliminary decree for repayment of the amount and also prayed for sale of the mortgaged property in favour of the plaintiff. The defendants filed written statement admitting that they were sanctioned loan but they challenged the assertions in regard to the interest and pleaded that simple interest was payable @ 11½% only as against 16½% claimed by the plaintiff. They also pleaded that payments were made by the defendant in time but wrongly proceedings were initiated for repayment of the amount. They pleaded that they are not liable to pay the amount since they have made already excess payment to the plaintiff. The defendants also put up counter claim claiming sum of 4 Rs.2,55,108.66 with interest, to which they claimed that they are entitled. On the pleadings of the parties, the followings issues were framed by the learned trial Court:- 1. Whether the plaintiff is entitled to recover a sum of Rs.6,27,058.65 paise alongwith uptodate interest at the rate of 16.50% p-a- with half yearly rest as prayed for? …. OPP 2. Whether the suit is not maintainable in the present form? … OPD 3. Whether the suit is time barred? … OPD 4. Whether the plaintiff is estopped from filing the suit by its own acts and conduct? …. OPD 5. Whether the interest charged by the plaintiff was usurious as alleged? …. OPD 6. Whether the defendant No. 7 never stood guarantor for principal debtors as alleged? …OPD 7. Whether the payments made by the defendants were required to be first adjusted towards principal amount and not towards interest? …. OPD 1,2,4,5,8. 8. Whether the defendants No. 1,2,4,5,8 are entitled to a decree for counter claim? …. OPD 1,2,4,5,8. 9. Relief. Parties led their evidence and the learned trial Court vide its impugned judgment allowed the claim partly in favour of the plaintiff/Corporation for a sum of Rs.82,765/- only alongwith interest @ 16½ per annum simple from the date of institution of the suit till realization of the amount. The plaintiff was also held entitled to apply for final decree for realization of the amount by selling the mortgaged property. 5 An appeal has been filed by the appellant claiming that they were entitled to the whole amount as claimed by them and as such, the appeal is liable to be accepted. I have heard the learned counsel for the parties and have gone through the record. The submissions made by the learned counsel for the appellant were that the learned trial Court has wrongly allowed simple interest only, though according to the terms of the agreement, the interest has to be added in the principal amount after every six months. It was also submitted that the statements of accounts Ext. P-23 and Ext. P-24 were placed on record by the appellants according to which the amount outstanding was claimed from the defendants and the plaintiff was entitled to the amount as per the statement of accounts which are per se admissible. It was also submitted that the presumption of correctness is attached to the statements of account until and unless rebutted by the defendants. It was submitted that the learned trial Court has not given any findings that this statement of account is in correct but has wrongly held that the plaintiff/Corporation was entitled to simple interest which findings are incorrect and as such, the decree has to be passed in totality for the whole amount claimed by the plaintiff. On the other hand, the submissions made by the learned counsel for some of the respondents No. 1 to 5 and 10 was that the payments were made as per the averments and calculations were done by the Court, which proves the excess payment from the defendants and as such, the decree was correct as per the new schedule for repayment of the loan amount. In the submissions made by respondents No. 6 to 9, they took up the plea that they 6 never stood as guarantors though their predecessors were guarantors and their signatures were taken on the blank papers by the plaintiff/Corporation and as such, the respondents are not liable to repay the amount. I have given my due consideration to the submissions made by the learned counsel for the parties during the course of arguments. The submissions made by the learned counsel for the appellant were that the learned trial Court itself had proceeded to calculate the interest i.e. simple interest on the principal sum and had accordingly calculated the interest due and the balance due rather than asking the appellant to furnish fresh accounts as may be necessary. A perusal of the record shows that the appellant/plaintiff had placed on record statements of account Ext. P-24 showing the balance amount due as on that date. A perusal of the judgment shows that the learned trial Court made observations that since a sum of Rs.3,28,000/- was due as principal sum and a sum of Rs.79,000/- was due as funded interest on the date of settlement, therefore, it proceeded to hold that this amount was due on the date the settlement was arrived at in this Court and had accordingly observed that it has no concern with the earlier calculations of the amount due. However, a perusal of the statements of account furnished Ext.P-23 and Ext.P-24 by the plaintiff does not specifically show the amount due as on 21.10.1994,the date of the settlement. However, However, the balance has been shown due as on 31.3.1994 in all Rs.3,94,760/- which had accumulated to Rs.4,41,008/- by 13.12.1994. It is, therefore, clear that on 31.3.1994 a sum of Rs.3,94,760/- was due 7 and in case both these figures of principal sum Rs.3,28,000 and Rs.79,000/- as interest are added, this amount comes to Rs.4,07,000/-, which suggests that the statements of account furnished by the plaintiff cannot be said to be incorrect and prima facie the same was correct, but the learned trial Court took the figure on a specific date itself as per the statement made by the parties before this Court in the proceedings and accordingly, proceeded to calculate the simple interest itself taking every deposit towards the principal amount and not towards the interest. It also proceeded to hold that it was a fresh contract that came into in between the parties and though it admitted that the rate of interest was 16½% per annum, it made observation that there is no mention of half yearly rests therein. The interest has to be calculated on six monthly basis or yearly basis as per the practice and directions of Reserve Bank of India, and the amount is added towards the principal amount. It cannot be said that only simple interest is payable on the principal amount and every deposit should be considered against the principal amount and not towards interest. According to the practice of the bank, they deduct the amount towards interest firstly, and then towards the principal and it cannot be said that the interest could not have been charged on the total amount due as on particular date i.e. after six months or one year as per the practice of the bank. The approach made by the learned trial Court in calculating the interest itself on every deposit made cannot be said to be correct and it could have at the most asked for fresh statements of account if it was not satisfied or even the defendants could have been asked to furnish fresh statements of account after getting it verified from the charted 8 accountant or so. The calculations made by the learned trial Court itself considering the every part payment towards the principal amount and itself calculating the simple interest, this approach cannot be said to be correct. Once the statement of account prima facie was not held to be in correct, the same should have been relied upon but the manner in which the interest has been calculated by the Court itself after deducting every part payment towards the principal amount cannot be said to be in correct. There is nothing in the evidence to show that the statements of account furnished by the plaintiff was in correct or it was not in accordance with the directions issued by the Reserve Bank of India, for which fresh calculation could have been got done and the amount outstanding could have been easily shown. The oral statement of the defendant that there was no provision for six monthly rests or so cannot be taken as correct who has not challenged specifically as to how the statements of account was in correct by placing the correct statements on record. The question of rescheduling does not lead to the inference that it was a afresh contract arrived at in between the parties, it only shows that a fresh schedule was agreed to by the parties for payment of the amount in view of the settlement. It was a concession given to the plaintiff in regard to manner of the payment of the amount and in case he failed to adhere to the same, he cannot be said to be entitled to any specific benefit or deduction in the interest. These are adjustable in case the party makes payment in accordance with the schedule agreed to in between the parties, but it is clear that the amount was not paid 9 to them as agreed and, therefore, the plaintiff was entitled to decree of the whole amount. In regard to the charging of interest at reasonable rates on lendings on periodical rests and capitalization thereof on remaining unpaid, the learned counsel for the appellant had relied upon the decision in Central Bank of India Vs. Ravindra and others, (2002) 1 Supreme Court Cases 367. A perusal of the same shows that in considering the case filed by a bank, their Lordships had observed that charging of interest at reasonable rates on lendings of periodical rests and capitalization thereof on remaining unpaid was held to be permissible under the Banking Regulations Act, 1949, as well as the Reserve Bank of India circular issued thereon and as such, the said approach of the appellant/plaintiff of charging interest after six months with periodical rests cannot be said to be incorrect. Therefore, I am not inclined to accept the approach of the learned trial Court to be correct in calculating the interest and coming to the conclusion that only a sum of Rs.82,765/- was due to the plaintiff by taking figures of principal and interest separately. The suit ought to have been decreed in accordance with the statements of account, which prima facie were proved to be correct. There being no evidence to the contrary, the suit should have been decreed for whole amount shown by the plaintiff vide their statements. In view of above discussion, the appeal filed by the appellant is liable to be accepted and the suit of the plaintiff shall be deemed to have been decreed in all for the whole sum as claimed by the plaintiff as shown in the statements of account. However, in case 10 any amount advertently had not been shown which was paid by the defendant, the plaintiff shall be entitled to make necessary correction if proved on record that the said payment was not shown wrongly and incorrectly. However, as the things stand, the suit of the plaintiff is liable to be decreed for the suit amount of Rs.6,27,058.65 alongwith interest at the agreed rate. In view of the above discussion, I accordingly hold that the appeal filed by the appellant is liable to be allowed and suit of the plaintiff stands decreed alongwith agreed rate of interest from the date of filing of the suit till realization alongwith costs accordingly. C.O. No. 207 of 2005: No specific arguments were raised in regard to the Cross Objections filed by the respondents. These Cross Objections are mainly in regard to the question as to whether the penal rate of interest could be charged or interest charged was incorrect which plea has been considered while considering the arguments in the main appeal. Nothing was pointed out during the course of arguments that the respondents were entitled to any amount as claimed by them by way of counter claim and, therefore, there is no merit in the Cross Objections filed by the respondents, which are dismissed accordingly. The appeal filed by the appellant is allowed as detailed above and the Cross Objections are dismissed. Parties are left to bear their own costs. ( V.K. Ahuja ), October 15, 2009 Judge (BSS) 11