banking finance law
atul mehta
(Querist) 16 April 2011
This query is : Resolved
i had borrowed rs. 10,00000/ from bank principal amount now they are asking me rs. 40,00000/ including interest and penalty. please inform me is there a law or ruling that the amount payable cannot be more than double the amount barrowed. please inform.
thanks
abhishek
(Expert) 16 April 2011
YES, the law of damdupat
Equivalent citations: 1998 (1) ALD 530, 1998 (1) ALT 735
Bench: B S Reddy
Syndicate Bank, Kurichedu, Prakasham Dist. vs Induri Guravareddy And Ors. on 8/12/1997
ORDER
1. The instant civil revision petition is filed by the plaintiff/decree holder against the order dated: 6-8-1993
dismissing the petition filed under Order XXXIV Rule 5 of The Code of Civil Procedure. The petitioner
herein having obtained the preliminary decree in O.S.No.33/89 filed I.A.No.1104/91 praying to pass final
decree in terms of the preliminary decree and to direct to bring the petition schedule properties to sale for
realisation of the decretal amount in the suit, in pursuance of the preliminary decree dated: 16-1-1991.
2. The petitioner herein filed O.S.No.33/89 basing on a simple mortgage and the trial Court passed
preliminary decree on 16-1-1991 by granting six months time to the respondents/defendants for redumption of
mortgage properly under the said decree. The respondents/defendants failed to pay any amount whatsoever to
satisfy the decree. The petitioner left with no other alternative and in order to realise the decretal amount filed
the application to pass final decree and to bring the mortgage property for sale and for realisation of the
decretal amount.
3. The second respondent alone filed a counter and respondent Nos.4 to 7 filed a Memo adopting the counter
of the second respondent. Respondent Nos.l and 3 remained ex parts. In the counter affidavit the respondents
took a plea that the principal amount borrowed was Rs. 16,400.00 and the suit is filed for recovery of
Rs.21,712.20 including interest. It is their case that the interest is more than the principal amount and as such
the interest over and above and beyond the principal amount is not payable and the Court cannot pass such a
decree for recovery of the amount, where the interest is higher than the principal amount The interest claimed,
according to them, is usurious and excessive and the decretal amount is required to be reduced and in such a
manner that the interest does not exceed the principal amount borrowed by them.
4. No evidence whatsoever was let in by any of the parties. The trial Court after elaborate consideration of the
matter came to the conclusion that the petitioner herein is claiming the amount towards interest more than the
principal amount and the claim is hit by the Rule of "Damdupat". Consequently the application filed by the
petitioner has been dismissed without granting any relief!
5. In this civil revision petition, Sri Mannava Venkata Rao, learned Counsel for the petitioner submits that the
Rule of Damdupat has no application whatsoever to any of the transactions in the State of Andhra Pradesh. It
is submitted that its application is restricted to the City of Calcutta and the Presidency of Bombay. It is
submitted that the Rule of Damdupat as envisaged under the ancient Hindu Law is not at all applicable in
respect of the transactions by the Banking company. It is submitted that Section 25A of the Banking
Companies Regulations Act provide that notwithstanding in any other law the Bank is entitled to the agreed
rate of interest as modified from time to time, in accordance with the rules of the Reserve Bank of India, It is
further submitted that at any rate the trial Court ought not to have dismissed the application filed by the
petitioner-Bank in its entirety and, at least, the petitioner is entitled for the principal amount and the interest
equal to that of the principal amount.
6. The learned Counsel for the respondents tried to justify the order passed by the trial Court by submitting
that the Rule of Damdupat is an equitable Rule and is applicable even in respect of the transactions of the
Banking company.
7. The short question that arises for consideration in this civil revision petition is as to whether the Rule of
Damdupat as envisaged under ancient Hindu Law is applicable to any monetary transaction within the State of
Syndicate Bank, Kurichedu, ... vs Induri Guravareddy And Ors. on 8 December, 1997
Indian Kanoon - http://indiankanoon.org/doc/135852/ 1
R.Ramachandran
(Expert) 17 April 2011
The ultimate decision of the Court in regard to Damdupat is as under:
"12. Under those circumstances and in view of the authoritative statement of principle in N.R. Raghavachariar's Hindu Law (Eighth Edition) and Mulla Principles of Hindu Law (Fifteenth Edition), I have no hesitation to hold that the Rule of Damdupat, which no doubt enunciates equitable Rule, has no application whatsoever to the State of Andhra Pradesh. The Rule cannot be applied either in case of simple loan transaction or in cases of mortgage transaction. The Rule has no application whatsoever in the transactions entered into by the Banking Company. The submissions made by the learned Counsel for the petitioner are upheld."
Thus, the court has held that the claim of interest which is higher than the principal amount is not liable to be rejected.
Anil Kumar-Advocate
(Expert) 17 April 2011
Mr Abhishek has furnished a valuable information to Sri Atul. My thanks goes to Mr.Abhishek.
