The borrowers as well as the Bank are the respective petitioners in these writ petitions, which challenge the very same judgment of the Kerala Co-operative Tribunal (for brevity “Tribunal”).
2. The borrowers admittedly were entrepreneurs, running an Oil Mill, who had availed a loan from the Co-operative Bank undertaking to repay the amount with interest in sixty monthly instalments. Mortgage of properties were also executed for securing the loan availed. Admittedly there was default committed in repayment. The Bank proceeded against the borrowers under Section 69 of the Kerala Co-operative Societies Rules, 1969 [for brevity “KCS Rules”] and obtained an award [Exhibits P1 and P4 in the respective writ petitions]. The borrowers filed an appeal against the award, which has been dismissed by judgment dated 11.09.2013 [Exhibit P2 and P5 in the respective writ petitions]; however, granting some reduction in interest. The borrowers challenge the award as such and the Bank challenges reduction of interest, in the respective writ petitions.
3. The grounds on which the award was challenged by the borrowers are not sustainable. The borrowers contend that they were not wilful defaulters and that hasty steps were taken to recover the amounts from the borrowers and the age of one of the borrowers was not taken into account and so on and so forth. None of these can be sustained, since the loan was availed on the terms of an agreement, in which specifically interest on the amounts are a liability on the borrowers. It is also to be noticed that the agreement provided for 13% interest and when the award mulcted interest at the rate of 15%, that was reduced by the Tribunal to 13%, as specified in the agreement. Hence, none of the contentions raised against the impugned orders would stand insofar as the borrowers are concerned.
4. With respect to the Bank's writ petition, the challenge is only insofar as reducing the contractual rate of interest to 6% as is provided under the Code of Civil Procedure. They do not in fact even dispute the reduction of interest from 15% to 13%, as specified in the agreement. The only contention of the Bank is that the transaction being admittedly a commercial transaction, there was no warrant for the Tribunal to reduce the future interest to 6%. The issue whether the Civil Procedure Code, 1908 [for brevity “CPC”] and specifically Section 34 of the Code, is applicable to proceedings under the KCS Act was considered in Kerala State Co-op. Bank Ltd. v. Kerala co- op. Tribunal [2005 (1) KLT 572]. A Division Bench of this Court found that even the Hon’ble Supreme Court in Central Bank of India v. Ravindra & Ors. [(2002) 1 SCC 367] found that Section 34 CPC, being a general procedural provision, has to be applied depending on the fact situation of each case. Though the procedural provisions in the CPC are adopted as general principles, the existence of Note 2 under Rule 67(7)(b) was found to exclude the application of general principles to proceedings under the KCS Act and Rules. It was also found that only in agricultural loans, if at all, the restriction of pendente lite interest should be confined to 6%. The loan availed herein was specifically for commercial purpose. The facts, hence, do not commend application of general principles. In such circumstance, there can be no reduction in the future interest granted and the discretion exercised by the Tribunal in reducing the interest to 6% cannot at all be sustained. The writ petition of the Bank is, hence, allowed. The Bank would be entitled to realise the amounts with interest at contractual rate of 13%.
In the result, WP(C).No.27160of 2013 is dismissed and WP(C).No.31177 of 2013 is allowed. Parties are left to suffer their respective costs.
vku.
Sd/-
K.Vinod Chandran, Judge (true copy )