State Bank of Travancore v. L.A. Xavier D'Cruz, Pansi Xavier, The Thiruvananthapuram District Fishermen Federation, and The Sree Niketh Vanitha Federation

**IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT :** **THE HONOURABLE MR. JUSTICE S.S.SATHEESACHANDRAN** **THURSDAY, THE 7TH JANUARY 2010 / 17TH POUSHA 1931** **WP(C).No. 35973 of 2008(G)** **-------------------------AGAINST THE ORDER IN EP.799/2004 IN OS.1340/1993 of I ADDL.SUB COURT,TRIVANDRUM ....................** **PETITIONER(S):** - **---------------** **STATE BANK OF TRAVANCORE, BRANCH AT CHALAI, THIRUVANATHAPURAM, REPRESENTED BY THE MANAGER.** **BY ADV. SRI.R.S.KALKURA** ## **RESPONDENT(S):** - **---------------** **1. L.A.XAVIER D'CRUZ, S/O LINU D'CRUZ, PROPRIETOR, M/S KANAKAN'S ICE AND FREEZING POINT, T.C.45/1215, VALIYATHURA, THIRUVANANTHAPURAM.** **2. PANSI XAVIER, W/O.L.A.XAVIER D'CRUZ, ETHALAM HOUSE, T.C.NO.44/614,VALIYATHURA, THIRUVANANTHAPURAM.** **3. THE THIRUVANANTHAPURAM DISTRICT FISHERMEN FEDERATION, T.C.13/680-1,KARUNALAYAM, GENERAL HOSPITAL ROAD,THIRUVANANTHAPURAM.** **4. SREE NIKETH VANITHA FEDERATION, THIRUVANANTHAPURAM,REPRESENTED BY THE PRESIDENT.** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 07/01/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** ## **WPC.35973/08** ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** **EXT.P1: COPY OF THE PLAINT IN O.S.NO.1340/1993 ON THE FILE OF THE SUBORDINATE JUDGES COURT, THIRUVANANTHAPURAM.** **EXT.P2: COPY OF THE DECREE DATED 30.9.1994 IN O.S.NO.1340/93 ON THE FILE OF THE SUBORDINATE JUDGES CURT, TRIVANDRUM.** **EXT.P3: COPY OF THE STATEMENT ON ACCOUNT KEPT BY THE PETITIONER IN THE NAME OF THE 1ST RESPONDENT.** **EXT.P4: COPY OF THE ORDER DATED 30.9.2008 IN E.P.NO.799 OF 2004 ON THE FILE OF THE 1 ADDITIONAL SUBORDINATE JUDGE'S COURT, TRIVANDRUM.** ## **/TRUE COPY/** ## **P.A. TO JUDGE** ## **S.S.SATHEESACHANDRAN, J. ------------------------------W.P.(C).NO.35973 OF 2008 () ----------------------------------Dated this the 7[th] day of January, 2010** ## **J U D G M E N T** The writ petition is filed seeking mainly the following reliefs: i. to issue a writ of certiorari or any other appropriate writ, order or direction of the nature of certiorari quashing Ext.P4 order as absolutely illegal and wrong. ii. to issue a writ of mandamus or any other appropriate writ, order or direction of the nature of mandamus directing the I Additional Subordinate Judge's Court, Trivandum to execute the decree as it is against the defendants. 2. Petitioner is the decree holder in E.P.No.799 of 2004 in O.S.No.1340 of 1993 on the of the I Additional Sub Court, Thiruvanathapuram and the respondents are the judgment debtors. Decree executed is one passed in the above suit for recovery of money by sale of the mortgage property. WPC.35973/08 2 Petitioner/decree holder is a nationalised bank and the suit claim related to a loan transaction by which, financial assistance was provided to the respondents/judgment debtors on security of the mortgage property. An ex parte decree was passed in that suit. In the execution proceedings taken by the bank by filing E.P.No.799 of 2004, the judgment debtors remained absent. When steps were taken for proclamation to bring the mortgaged property to sale for realisation of the decree debt, it is submitted, the bank was directed to file a statement of the amount due under the decree, most probably for the purpose of fixing the reserve price in the proclamation. The bank filed a statement, in which, it claimed an amount of more than Rs.11 lakhs with interest and cost. Principal amount claimed in the suit was only Rs.3,16,723/- with interest at the rate of 17.25% per annum with quarterly rest. The learned Sub Judge after noticing the wide disparity between the amount claimed in the suit under the decree and also that was sought to be realised on the basis of the decree in execution proceeded with an enquiry over that matter and passed the impugned order holding that the bank was not WPC.35973/08 3 justified in calculating the interest at 17.25% per annum on the principal amount due from the judgment debtors under the loan transaction. The court ordered for recalculating the amount fixing the rate of interest at 6% per annum. The impugned order of the court was directed to be send to the respondents/judgment debtors as well. The court below was of the view that the bank had moved for realising of unconscionable interest and it was against the provisions of the Usurious Loans Act, 1918. Propriety and correctness of that order rendered by the learned Sub Judge, a copy of which is produced as Ext.P4 in the writ petition, is challenged in the writ petition invoking the supervisory jurisdiction vested with this Court under Article 227 of the Constitution of India. 3. I heard the learned counsel for the petitioner. Though notice given, the respondents have not responded to it and pursuant to orders passed by this Court, service was effected by substituted service publishing notice in a national daily. Despite such service also, the respondents have not entered appearance. The learned Sub Judge went wrong in WPC.35973/08 4 passing Ext.P4 order as the execution court cannot go behind the decree, and further more, the exercise taken by the execution court in refixing the interest on the amount due to the bank is also impermissible in view of the statutory interdiction governed by the Banking Regulation Act, 1949 is the submission of the learned counsel for the decree holder bank. I find considerable force in the submissions made by the counsel. Section 21-A of the Banking Regulation Act, 1949 emphatically states that rate of interest fixed by banking companies is not subject to scrutiny of courts. Section 21-A reads thus: “[ **21-A. Rates 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 indebtedness in force in any State, a transaction between a banking company and its debtor shall not be reopened by any Court on the ground that the rate of interest charged by the banking company in respect of such transaction is excessive.]” The apex court in **State Bank of India v. Yasangi** WPC.35973/08 5 **Venkateswara Rao (AIR 1999 SC 896)** interpreting Section 21-A of the Banking Regulation Act has held that the said section applies to all types of a loans which are granted by a banking company and the interdiction preventing a court from scrutinising the rate of interest which is followed by the banks in accordance with the circulars issued by the Reserve Bank of India cannot be subject to scrutiny by the civil court. When that be the law declared by the apex court, and further, the statute itself makes it emphatically clear that no scrutiny is permissible even by the trial court on the rate of interest following the circular issued by the Reserve Bank of India in respect of a loan transaction advanced with the bank, it is seen, the learned Sub Judge in execution of the decree has proceeded with a scrutiny over that matter and directed the decree holder bank to refix the interest. Ext.P4 is clearly unsustainable under law and it is liable to be set aside. I do not wish to express any further opinion on the further directions given by the learned Sub Judge, which are patently erroneous and uncalled for. Setting aside Ext.P4 order, I direct the court below to complete the steps for the WPC.35973/08 6 proclamation and proceed with the execution of the decree in accordance with law and dispose it as expeditiously as possible. Writ petition is accordingly disposed. **S.S.SATHEESACHANDRAN JUDGE** prp