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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