A.S. No.945 of 1998 & Cross Objection in A.S. No.945 of 1998 & R.F.A. No.331 of 2003

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE V.CHITAMBARESH & THE HONOURABLE MR. JUSTICE SATHISH NINAN THURSDAY, THE 31ST DAY OF AUGUST 2017/9TH BHADRA, 1939 AS.NO. 945 OF 1998 (A) & CROSS OBJECTION ----------------------AGAINST THE JUDGMENT IN O.S. NO.63 OF 1995 OF SUB COURT, KASARAGOD DATED 03-06-1998 APPELLANT/DEFENDANT: -------------------- SYNDICATE BANK, VORKADY BRANCH, REPRESENTED BY ITS MANAGER, VORKADY VILLAGE, KASARGOD TALUK, KASARGOD DISTRICT. BY ADVS.SRI.R.S.KALKURA SRI.K.BABU THOMAS SRI.P.C.HARIDAS SRI.P.V.VENUGOPAL RESPONDENT/PLAINTIFF: --------------------- A.THIMMAPPA BHAT, AGED 43 YEARS, S/O.THIMMAYYA BHAT, HINDU, LANDHOLDER, RESIDING AT ARANTHADY HOUSE, KALIYOOR VILLAGE, KASARGOD TALUK. BY ADV. SRI.P.B.KRISHNAN BY ADV. SMT.SADHANA KUMARI ESWARI THIS APPEAL SUIT & CROSS OBJECTION HAVING BEEN FINALLY HEARD ALONG WITH R.F.A. NO.331 OF 2003 ON 21.08.2017, THE COURT ON 31.08.2017 DELIVERED THE FOLLOWING: ## **V. CHITAMBARESH** & ## **SATHISH NINAN, JJ** . = = = = = = = = = = = = = = = = = = **A.S. No.945 of 1998** **&** ## **Cross Objection in A.S. No.945 of 1998 & R.F.A. No.331 of 2003** = = = = = = = = = = = = = = = = = = Dated this the day 31[st] of August, 2017 J U D G M E N T ## **SATHISH NINAN, J** . A.S. No.945 of 1998 arises from O.S. No.63 of 1995 of the Subordinate Judge's Court, Kasargod. The appeal is filed by the defendant in the suit. The suit was filed for a declaration that no amounts are due from the plaintiff-borrower to the defendant-Bank under the loan transaction with the Bank with an alternate prayer to determine the correct amount due under the transaction and for refund of the excess amount if any paid by the borrower towards the loan account. A memorandum of ## **A.S. No.945 of 1998 & Cross Objection in A.S. No.945 of 1998 & R.F.A. No.331 of 2003** -: 2 :- Cross Objection is filed by the borrower challenging that part of the relief that was denied to him. 2. R.F.A. No.331 of 2003 which was originally filed before the District Court, Kasargod as A.S. No.118 of 1998 arises from the decree and judgment in O.S. No.13 of 1997 of the Subordinate Judge's Court, Kasargod filed by the Bank as plaintiff against the borrower and guarantors. The suit was one for recovery of amounts due under the loan transaction. 3. The borrower who is the plaintiff in O.S. No.63 of 1995 and 1[st] defendant in O.S. No.13 of 1997 availed credit facility from the Bank for purchase of a bus. The borrower claims that he has paid excess amounts in the loan account than what was actually payable, that the accounts are not correct, that the interest claimed is exorbitant and that other charges not payable by the borrower have been debited to the account. ## **A.S. No.945 of 1998 & Cross Objection in A.S. No.945 of 1998 & R.F.A. No.331 of 2003** -: 3 :- 4. The court below granted a decree declaring that no amounts are due from the borrower to the Bank. A decree is also passed directing refund of an amount of Rs.1,03,097.73 being the excess amount paid by the borrower to the Bank. The suit filed by the Bank was dismissed. The said decree and judgment are under challenge. 5. Heard the learned counsel on either side. The borrower has sought for a declaration that no amounts are due under his loan account with the Bank, for settlement of accounts and for recovery of excess amount if any paid into the loan account. Court fee is paid under Section 25(d) and Section 35 of the Court fees Act. The Bank challenges the maintainability of the suit. The very frame of the suit has been challenged in the written statement. 6. The question as to under what all circumstances a suit for accounts is maintainable was considered elaborately by a Bench of this Court in Brothers Chitty Fund v. Jacob Mathew (2004 [1] ## **A.S. No.945 of 1998 & Cross Objection in A.S. No.945 of 1998 & R.F.A. No.331 of 2003** -: 4 :- ## KLT 64). The relevant portions of the said judgment are as under: “...A suit for account is an extraordinary remedy which is available to the plaintiff under special circumstances. Such a remedy is frequently resorted to in suits between principal and agent, between partners and other persons between whom there is a fiduciary relationship and also privity of contract. This remedy is not confined to suits between principal and agent or between partners. In equity, a suit for accounts is entertainable where there are circumstances of special complication necessitating the taking of accounts. The ordinary remedy at law is a claim for a sum certain. A sum certain may not be a predetermined specific amount if it is ascertainable, though not ascertained, and it would be deemed to be a sum certain according to the well known maxim - _Id certum est quod certum redii potest_ - which means, that is certain which may be rendered certain - See **Anant Ram Munshi Ram v. M/s.Spedding Dinga Sing & Co. and Others** (AIR 1960 Punjab 415). The ruling further states as follows: “The test in all such cases is whether, having regard to the terms of the agreement between the parties and the nature of the work done by the plaintiff, it was possible for him to bring a suit for a definite amount or for an amount which was ascertainable or on the other hand, a total ## **A.S. No.945 of 1998 & Cross Objection in A.S. No.945 of 1998 & R.F.A. No.331 of 2003** -: 5 :- sum could only be determined after the accounts in the possession of the defendant had been examined.” “...It is not a case of any reciprocal arrangement between the plaintiffs and the defendants. It is admittedly a case where the plaintiffs have borrowed amount from the defendants on various occasions and various documents were executed for this purpose. The plaintiffs were aware of those documents and also aware of the amount paid under various documents. What is alleged is that some of the documents were executed under vitiating circumstances, in which case the amount cannot be realised under those documents. It is their further case that some cheques were issued for payment of the amount and this has not been taken into account for the purpose of discharging the debt. We feel that this is not a circumstance necessitating a suit for accounts. It cannot be said that the amount cannot be ascertained...” 7. Therefore, as held by this Court, a suit for accounts is an extraordinary remedy available under special circumstances. It is not a case of any reciprocal arrangements between the parties and is an instance of a mere loan transaction. The claim if any could only be for a sum certain, namely an ## **A.S. No.945 of 1998 & Cross Objection in A.S. No.945 of 1998 & R.F.A. No.331 of 2003** -: 6 :- ascertainable amount. The Apex Court in K.C.Skaria v. Govt. of State of Kerala ([2006] 2 SCC 285) observed thus: “To summarise, a suit for rendition of accounts can be maintained only if a person suing has a right to receive an account from the defendants. Such a right can either be (a) created or recognised under a statute; or (b) based on the fiduciary relationship between the parties as in the case of a beneficiary and a trustee; or (c ) claimed in equity when the relationship is such that rendition of accounts is the only relief which will enable the person seeking account to satisfactorily assert his legal right. Such a right to seek accounts cannot be claimed as a matter of convenience or on the ground of hardship or on the ground that the person suing did not know the exact amount due to him, as that will open the floodgates for converting several types of money claims into suits for accounts, to avoid payment of court fee at the time of institution.” ## **A.S. No.945 of 1998 & Cross Objection in A.S. No.945 of 1998 & R.F.A. No.331 of 2003** -: 7 :- 8. The amounts if any due could be arrived at on a mere arithmetical calculation and the borrower ought to have quantified the amount if any paid in excess by him and sued for the said amount. A suit for settlement of accounts is not maintainable. Even otherwise, as discussed hereunder, we find the claims of the borrower to be devoid of merits. 9. Coming to the claim of the Bank in O.S. No.13 of 1997, the main dispute between the parties is regarding the rate of interest payable. In Ext A1 the hypothecation agreement, the rate of interest is left blank. Obviously, it is an omission on the part of the concerned officers of Bank in not having filled up the relevant portions in the agreement. However, the loan sanction letter produced by the Bank as Ext A16 shows that the rate of interest applicable is 17.5% till the IDBI refinance is sanctioned and availed. Thereafter the rate of interest would be 2.5% above the bank rate with a minimum of 12.5%. The Bank has produced ## **A.S. No.945 of 1998 & Cross Objection in A.S. No.945 of 1998 & R.F.A. No.331 of 2003** -: 8 :- relevant bank circulars as Exts A53 to A55, A75 to A80 and also Circulars of the RBI, Exts A81 to A87 to prove regarding the rate of interest applicable to the account at various periods. The rate of interest varies at various points of time in accordance with the directives of RBI. According to the Bank, interest has been applied in terms of the relevant directives. Here it would be relevant to refer to Section 21A of Banking Regulation Act, 1949 which reads thus: ## “21A. **Rate of interest charged by banking** **companies not to be subject to scrutiny by courts** .- Notwithstanding anything contained in the Usurious Loans Act, 1918 (10 of 1918), or any other law relating to indebtness in force in any State, a transaction between a banking company and its debtor shall not be re-opened by any court on the ground that the rate of interest charged by the banking company in respect of such transaction is excessive...” 10. Therefore, the court is not entitled to sit over the rate of interest charged by the Bank on the allegation that it is excessive. Of course, ## **A.S. No.945 of 1998 & Cross Objection in A.S. No.945 of 1998 & R.F.A. No.331 of 2003** -: 9 :- this does not affect the jurisdiction of the court to look into the account to find out as to whether interest applied is in tune with the relevant directives. The Bank has applied interest at rates prevalent and applicable at the relevant time in accordance with the relevant Circulars. The borrower has not produced any material to find that rate of interest was wrongly applied. Therefore we are inclined to uphold the claim for interest as raised by the Bank. 11. As regards the claim for penal interest, though the court below noticed that Ext A1 agreement enables the bank to realise the same for defaulted installments, the court below negatived the claim holding that the Bank has not referred to any RBI Circular authorising recovery of the same. No directives of the RBI interdicting charging of penal interest on defaulted installments has been brought to the notice of the court. Therefore, in view of the agreement between the parties enabling ## **A.S. No.945 of 1998 & Cross Objection in A.S. No.945 of 1998 & R.F.A. No.331 of 2003** -: 10 :- recovery of penal interest, we are inclined to uphold the claim of the Bank. 12. Regarding the claim for interest tax, Ext A85 Circular of the RBI indicates that the lending rates given therein are exclusive of interest tax. The banks have been advised to pass on the incidence of the interest tax pro rata to the borrowers. This is sufficient enough to hold that the Bank is entitled to recover interest tax. 13. The claim for CGC commission has been negatived by the court below. We find that clause 7 of Ext A16 sanction letter gives authority to the Bank to recover CGC commission. So also is the claim for insurance premium amount which is included in clause 3 of Ext A16. The mere fact that the borrower intimated the Bank not to renew the premium amount will not disentitle the Bank from effecting payment of the same since it is the requirement of the creditor bank to have its security retained. The loan was availed agreeing to ## **A.S. No.945 of 1998 & Cross Objection in A.S. No.945 of 1998 & R.F.A. No.331 of 2003** -: 11 :- the terms and conditions in the loan sanction letter. Thereafter the borrower is not entitled to resile from the same. 14. Therefore, on an overall assessment of the claims, it is found that the Bank is entitled for a decree in its favour. Considering the rate of interest that is applicable to the facility and considering the fact that the facility commenced in the year 1981 and the suit is of the year 1997, we deem it appropriate that the interest payable be fixed at 6% per annum from the date of suit till realisation. In the result, R.F.A. No.331 of 2003 is allowed. The judgment and decree in O.S. No.13 of 1997 of the Sub Court, Kasargod are set aside. The Bank is granted a decree for realisation of Rs.94,728/- with interest at the rate of 6% per annum from the date of suit till realisation by sale of B schedule movable and C and D schedule immovable properties and also from the defendants ## **A.S. No.945 of 1998 & Cross Objection in A.S. No.945 of 1998 & R.F.A. No.331 of 2003** -: 12 :- jointly and severally. A.S. No.945 of 1998 will stand allowed and the Suit O.S. No.63 of 1995 will stand dismissed. The Cross Objection in A.S. No.945 of 1998 is dismissed. No costs. Sd/- **V. CHITAMBARESH, JUDGE.** Sd/- **SATHISH NINAN, JUDGE.** Vsv /true copy/ P.S. to Judge