Full Judgment Text
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PETITIONER:
INDER PARSHAD
Vs.
RESPONDENT:
UNION OF INDIA
DATE OF JUDGMENT20/06/1994
BENCH:
RAMASWAMY, K.
BENCH:
RAMASWAMY, K.
VENKATACHALA N. (J)
CITATION:
1994 SCC (5) 239 1994 SCALE (2)553
ACT:
HEADNOTE:
JUDGMENT:
The Judgment of the Court was delivered by
AHMADI, J.- The grievance of the respondent-association in
the High Court related to charging of compound interest on
loans given to its members for the purchase of tractors.
2. The Division Bench of the High Court of Orissa presided
over by the then learned Chief Justice held that the
agreement entered into by the bank with the borrower did not
stipulate the payment of compound interest and hence it was
unnecessary to examine if there existed such a stipulation,
the same would have been enforceable by the Bank. See
paragraph 13 of the judgment. It is true that in the body
of the judgment reference has been made to the case of Bank
of India v. Karnam Ranga Rao1 and it is observed that since
farmers do not have regular source of income other than sale
proceeds of their crops, and receive the sale proceeds
annually, they cannot be expected to have agreed to pay
interest with periodical rests. In paragraph 8 of the
judgment the High Court has observed :
"The present, therefore, is a case which would
make the finding of the Karnataka High Court
relevant insofar as the policy circulars of
the Reserve Bank of India are concerned."
But the High Court ultimately decided in favour of the
borrower because in its view the agreement did not provide
for periodical rests nor did it stipulate for payment of
compound interest, making the above-quoted observations
obiter dicta. In that view of the matter, we see no reason
to interfere as the decision does not ultimately rest on the
aforequoted view based on the Karnataka High Court decision.
We may incidentally say that we have today by a separate
judgment’ dismissed the Bank’s appeal against the said
decision. We dismiss this petition on the short ground that
the
AIR 1986 Kant 242
+ Corporation Bank v. D.S.Gowda,(1994)5SCC213
239
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agreement on which the Bank’s claim is founded does not
provide for payment of compound interest or interest with
periodical rests.
240