The petitioner's only contention is with respect to the reduction of interest made by the Tribunal in Ext.P4. Admittedly, there is a loan availed of by respondents 2 and 3, the terms of which were regulated by an agreement, wherein, specific rate of interest was also provided. The Tribunal, relying on the decision of the Division Bench of this Court in Kerala State Co-operative Bank Ltd v. Kerala Co-operative Tribunal - 2005(1) KLT 572, found that interest charged is excessive and reduced the same. The interest charged by the Bank was 15.7% with 2% penal interest. The Tribunal reduced it to 12%.
2. The specific contention raised by the learned counsel appearing for the petitioner - Bank is that the petitioner Bank disburses loan to its members after availing finance from its apex Bank and charges interest at 1% above that levied by the financing Bank. In such circumstances, if the interest rate is reduced from 15.7% to 12%, the Bank will have to pay the deficiency in interest from its pocket to the apex Bank, despite the respondents having availed of the loan and enjoyed its benefits.
3. In fact, this Court has considered the afore cited Division Bench decision in W.P.(C) 2372/2014 in the following manner:
“What has been laid down in the afore- cited decision is that, when agricultural loans are the subject matter in issue, the Arbitration Court and the Tribunal could necessarily adopt the procedure contemplated in Section 34 of the Code of Civil Procedure (for brevity “CPC”) and restrict the interest to 6%. However in commercial transactions, the Division Bench of this Court held that Section 34 CPC would not be applicable, since there was a specific provision, as Note 2, in Rule 67(10) of the Kerala Co-operative Societies Rules, 1969 (for brevity “KCS Rules”). Herein the loan was admittedly a housing loan and not an agricultural loan. On a reading of Note 2, it was declared that an amount of discretion has been conferred on the Arbitrator to fix the rate of interest, depending upon varied circumstances like the nature of transaction, the purpose for which the loan was obtained, the reason for default, the rate of interest payable by the Bank or the Societies; as the case may be, to obtain amounts for disbursement as loan, the conduct of the loanee in repaying the loan amount, the total amount outstanding, proportionality of interest accrued and the principal amount and other related and exceptional aspects.
It is specifically brought to the notice of this Court by the petitioner-Society that, the interest payable by the Bank or the Society has been noted as a relevant factor in the afore-cited decision and in the present case the petitioner-Society obtains finance from the apex housing society to disburse loans to its members. The petitioner-Society has to pay the contractual rate of interest to the financing society and this award would not absolve them from their liability. It is to be specifically noticed that the discretion which was conceded to the Tribunal in the afore-cited decision was to fix future interest and it could not import principles of equity in reducing the rate of interest. None of the relevant factors were considered by the Tribunal in reducing the interest rate. In such circumstance, Exhibit P5 to the extent it reduced the contractual rate of interest is set aside. However, it is to be noticed that equity could be employed in absolving the borrower from the liability of penal interest. Hence, this Court finds that the liability to pay penal interest at 2% can be waived and the additional respondents 3 to 6, being the legal heirs of deceased 1st respondent, to the extent they inherited from the deceased borrower, can be directed to satisfy future interest at the rate of 15.2%, being the contractual rate of interest. I do so.”
4. The loan which is the subject matter of this Writ Petition is not an agricultural loan, but is a housing loan. In such circumstance it cannot be said that the declaration of the Division Bench is applicable to all types of loans, and definitely, not to loans other than agricultural loans. The hardship pointed out by the Bank is also relevant and was taken into consideration, in the above extracted paragraphs. Ext.P4, hence, has to be set aside to the extent it reduces the interest. But on grounds of equity this Court finds that liability to penal interest at 2% can be waived and the Bank would, hence, re-compute the amounts due on the agreed rate of interest , excluding the penal interest, and give a statement to respondents 2 and 3 within a period of three months from today showing the arrears as on 15.11.2014. The respondenants shall be allowed to re-pay the said arrears in 10 equal monthly instalments.
3. The instalment shall commence from 21st of November, 2014 and shall be followed up on the 21st of every succeeding month. If two consecutive defaults are committed, recovery proceedings shall be initiated. If the entire amount is paid as directed herein, then the Bank shall raise a further demand for future interest from 15.11.2014, which shall be satisfied as the 11th instalment.
The Writ Petition stands allowed, with the afore mentioned directions. Costs shall be met by the respective parties.
Sd/- K.VINOD CHANDRAN, JUDGE jjj