P. J. Iype v. Kerala Gramin Bank

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: B. Kemal Pasha
Judgment Date: 2017-03-09
Court Decision / Holding: Regular Second Appeal dismissed with costs. All pending interlocutory applications are closed.
Final Disposition: Dismissed

Parties to the Case

Appellants / Petitioners

P. J. Iype

Respondents

Kerala Gramin Bank (formerly South Malabar Gramin Bank)

Legal Representation & Advocates

Counsels for Petitioners

• Sri S. Abhilash
• Sri Siju Kamalasanan

Counsels for Respondents

• Sri T. R. Ravi, SC, Malabar Gramin Bank

Case Synopsis & Summary

This Regular Second Appeal arises from a money suit filed by Kerala Gramin Bank (the Bank) against P. J. Iype for recovery of dues on two linked loan facilities. The Bank asserts that the defendant borrowed ₹30,000 on 14.05.2002 as a Personal Consumption Loan (PCL 30/2002) and executed a link letter to extend an equitable mortgage created on 28.11.2000 for such credit, with acknowledgments on 28.06.2004 and 31.08.2006. A second loan of ₹10,000 (LDTL-10/02) was availed on 14.05.2002, with its own link letter and acknowledgments. The defendant admits the loan transactions but contends that government write‑offs for agricultural loans absolve the bank of recovery. The trial court dismissed the suit for lack of discernible interest in the accounts; the bank appealed, producing Exts. A22–A24 (circulars) to prove interest rates and Exts. A23–A24 (loan applications) to establish the debt. The first appellate court admitted these documents under Order XLI Rule 27 CPC, despite objections. The appellant contends Exts. A23–A24 should have been on record with the plaint and cross‑examination was denied. The High Court upheld the appellate admission, relying on RBI circulars’ binding force (citing Elavakkattu Ceramics and Sardar Associates) to justify the interest regime. Ultimately, the court found no error in the decree and dismissed the Second Appeal with costs, keeping the bank’s claim intact.

Provisions of Law Cited

Code of Civil Procedure, Order XLI Rule 27 CPC

Submissions & Arguments

Contentions of Appellants / Petitioners

The appellant contends that the first appellate court acted illegally by admitting Exts. A22–A24 under Order XLI Rule 27 CPC without giving the respondent a chance to challenge them, and that Exts. A23 and A24 should have been available with the plaint. He also submits that the mortgage created on 28.11.2000 precedes the 2002 loan, raising questions about the transaction chronology and plea that government write‑offs negate recovery; cross‑examination of the bank’s witness on the admitted documents was denied, and the court should have allowed scrutiny of the evidence before relying on circulars to fix interest rates.

Contentions of Respondents

The Bank argues that the RBI circulars governing interest rates bind all banks and that Exts. A22–A24 (the circulars and loan applications) are admissible evidence under the appellate framework. It contends that the mortgage extended to secure the 2002 loan and that the suit ledger and acknowledgments substantiate the debt—particularly since the transactions were not denied in the pleadings. The bank urges that the appellate court correctly admitted the extra documents and that the trial court’s lack of discernible interest was erroneous, justifying the decree on interest and principal.

Cited Precedents (3)

Case Name	Citation	Treatment	Explanation
State of Gujarat and another v. Mahendrakumar Parshottambhai Desai (Dead) by Lrs.	AIR 2006 SC 1864	Positive	Court relies on Desai to hold that Exts. A23–A24 should not have been admitted in appellate proceedings.
Elavakkattu Ceramics, Edappally and others v. Authorized Officer, Standard Chartered Bank, Ravipuram and another	2015 (1) KLT 419	Positive	Cited to support the binding force of RBI circulars on banks.
M/s Sardar Associates and Others v. Punjab and Singh Bank and Others	AIR 2010 SC 218	Positive	Cited for the binding effect of RBI circulars, as affirmed by the Supreme Court.

Extracted Judgment Text

Exact text extracted from official judgment records.

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR. JUSTICE B.KEMAL PASHA THURSDAY, THE 9TH DAY OF MARCH 2017/18TH PHALGUNA, 1938 RSA.No. 102 of 2014 () ----------------------- AGAINST THE JUDGMENT AND DECREE DATED 23-09-2013 IN AS 71/2012 of III ADDITIONAL DISTRICT COURT, KOZHIKODE AGAINST THE JUDGMENT AND DECREE DATED 29-11-2011 IN OS 598/2009 of III ADDITIONAL SUB COURT, KOZHIKODE APPELLANT/RESPONDENT/ DEFENDANT: --------------------------------------------------------- P.J.IYPE, AGED 42 YEARS, S/O JOSPEH, PEKKAL HOUSE, P.O. MUTHAPPAN PUZHA, THIRUVAMPADY AMSOM, THIRUVAMPADY DESOM, KOZHIKODE DISTRICT BY ADVS.SRI.S.ABHILASH SRI.SIJU KAMALASANAN RESPONDENT/APPELLANT/ PLAINTIFF: ------------------------------------------------------- KERALA GRAMIN BANK, (FORMERLY SOUTH MALABAR GRAMIN BANK), ANNAKKAMPOYIL BRANCH, REPRESENTED BY ITS PRINCIPAL OFFICER SRI. U.N.SATHYA RAJ, S/O U.N. GOVINDAN, DEAPAM, PAYYOLI AMSOM, PAYYOLI AMSOM, KOZHIKODE DISTRICT ## BY ADV. SRI.T.R.RAVI, SC, MALABAR GRAMIN BANK THIS REGULAR SECOND APPEAL HAVING BEEN FINALLY HEARD ON 09-03-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ## **B. KEMAL PASHA, J.** ````````````````````````````````````````````````````````````` R.S.A. No.102 of 2014 D ````````````````````````````````````````````````````````````` _Dated this the 9[th] day of March, 2017_ ## **J U D G M E N T** ~ ~ ~ ~ ~ ~ ~ ~ ~ The defendant in O.S. No.598/2009 of the III Additional Subordinate Judge's Court, Kozhikode has come up with the Second Appeal by challenging the judgment and decree passed by the III Additional District Court, Kozhikode, in A.S. No.71/2012. 2. The suit is one for realisation of money. The plaintiff is a bank. According to the plaintiff, the defendant borrowed an amount of ₹30,000/- on 14.05.2002 from the plaintiff bank as a Personal Consumption Loan No.PCL 30/2002, by executing various documents and by agreeing to repay the same with interest at the rate of 16% per annum with monthly rests. On the same day, the defendant had allegedly executed a link letter requesting to extend and RSA.102/2014 : 2 : continue the mortgage already created in favour of the bank on 28.11.2000, for repayment of the aforesaid loan amount. Liabilities were acknowledged on 28.06.2004 and 31.08.2006. The defendant had allegedly deposited the title deeds described in the plaint A schedule on 28.11.2000, in respect of the property shown in plaint B schedule, thereby creating an equitable mortgage in favour of the bank. The same was continued through the aforesaid link letter. 3. On 14.05.2002 itself, the defendant had borrowed another amount of ₹10,000/- by way of LDTL-10/02 loan, thereby agreeing to repay the same with interest at the rate of 14.5% per annum compounded half yearly. A link letter of the aforesaid mortgage was also executed. Liabilities were acknowledged on 28.06.2004 and 31.08.2006 by executing acknowledgments. According to the plaintiff, the defendant defaulted payment of instalments, thereby an amount of ₹96,313/- fell due in PCL 30/02 and an amount of ₹18,021/fell due in LDTL-10/02, with future interest. RSA.102/2014 : 3 : 4. The defendant has admitted the loan transactions and at the same time, contended that the government had decided to write off such loans taken for agricultural purpose and, therefore, the bank is not entitled to recover any amount. 5. The trial court initially dismissed the suit by holding that the interest portion is not discernible in the accounts, and the amount of interest due was not proved. Aggrieved by the said dismissal, the plaintiff preferred A.S. No.71/2012. 6. Before the first appellate court, the plaintiff produced three circulars for proving the interest and also the two applications for the said loans preferred by the defendant. Those documents were admitted by the lower appellate court under Order XLI Rule 27 CPC as Exts.A22 series, A23 and A24. The three circulars were marked as Exts.A22(a), A22(b) and A22(c). 7. The Second Appeal has been admitted by this RSA.102/2014 : 4 : ## Court on the following substantial questions of law:- _“1. Whether 1[st] Appellate Court is justified in admitting evidence by way of additional documents without being given opportunity to the contesting respondents to challenge the same, and reversing the judgment and decree of trial court on the basis of such additional evidence?_ _2. Is it necessary to afford opportunity to the contesting respondent to cross examine a witness through whom a document is produced before the appellate court?_ _3. Whether the 1[st] Appellate court is justified in reversing the judgment and decree of the trial court in which admittedly a mortgage was created on 28.11.2000 for availing a facility on 14.05.2002?”_ 8. Heard learned counsel for the appellant and learned counsel for the respondent. 9. The learned counsel for the appellant has pointed out that the lower appellate court ought not to have admitted RSA.102/2014 : 5 : Exts.A22 series, A23 and A24 under Order XLI Rule 27 CPC, since those documents were in the possession and power of the respondent even during the filing of the suit. It has also been argued that an opportunity to cross-examine the witness of the bank on the basis of the aforesaid documents was not extended to the defendant. It has been further argued that the loans were availed on 14.05.2002 only; whereas, the mortgage was allegedly created on 28.11.2000. 10. It is true that the bank could have produced Exts.A23 and A24 along with the plaint itself. In such a circumstance, the lower appellate court ought not to have admitted the said two documents in view of the decision of the Apex Court in _**State of Gujarat and another v. Mahendrakumar Parshottambhai Desai (Dead) by Lrs.** [AIR 2006 SC 1864]._ 11. Regarding Ext.A22 series, the said documents are circulars. The said circulars were produced by the bank RSA.102/2014 : 6 : in order to prove the interest rate applicable. Those circulars were issued on the basis of various circulars issued by the Reserve Bank of India from time to time. The learned counsel for the respondent has invited the attention of this Court to the decision in _**Elavakkattu Ceramics, Edappally and others v. Authorised Officer, Standard Chartered Bank, Ravipuram and another** [2015 (1) KLT 419],_ wherein it was held in paragraph 10: _“As a matter of fact, the RBI is controlling the entire affairs in the field of Banking, by virtue of its pivotal role and the relevant provisions of the RBI Act and the Banking Regulation Act, with power even to impose penalty upon the Banks (including in national sector) on violation of the fiscal mandate. Accordingly various circulars have been issued from time to time, which are having binding force upon all the Banks. Binding effect of the Circulars issued by the RBI has been asserted and upheld on different occasions by the Apex Court,_ RSA.102/2014 : 7 : _including in M/s Sardar Associates and Others v. Punjab and Singh Bank and Others, 2009 KHC 4895 : AIR 2010 SC 218 : 2009 (8) SCC 257 : 2009 (3) KLT SN 66.”_ 12. Even though a higher rate of interest could be charged as per the notification, it seems that the lower appellate court has passed the decree by charging interest at the rate of 6% per annum from the date of suit till date of realisation. Of course, the bank had charged interest at the rates noted in the circulars. When those transactions were not specifically challenged in the written statement and some evasive denials were resorted to by the defendant, the admission of those circulars by the lower appellate court cannot be found fault with at present. 13. When the transactions were not denied in the written statement, the argument that a mortgage was created on 28.11.2000 and the loans were availed on 14.05.2002 also does not assume any importance at all. Even according to the bank, it was on the basis of the link RSA.102/2014 : 8 : letter that the earlier mortgage created by the appellant in favour of the Bank, was invited to the transactions relating to the present loans. When transactions are not denied, the questions referred to above in the Second Appeal do not, in fact, arise at all. 14. On going through the impugned judgment and decree rendered by the lower appellate court, this Court is satisfied that there is absolutely nothing to interfere with the same. The Second Appeal is devoid of merits and is only to be dismissed with costs, and I do so. In the result, this Regular Second Appeal is dismissed with costs. All pending interlocutory applications in this appeal are closed. Sd/- **(B.KEMAL PASHA, JUDGE)** aks/10/03 _// True Copy //_ _PA to Judge_