1. ' This is a suit for recovery of Rs, 6,089,344.11 claimed by the Plaintiff, United Bank Ltd., on account of over-draft granted by it to the defendant, and utilized by the defendant as shown in the statement of account filed with the plaint. The overdraft is stated to have been granted against the security of the promissory notes and pledge of shares. The defendant, in his written statement, has admitted that overdraft, was granted to him and that it was secured by pledge of shares. He, however, denied that the statement of account was correct as, according to the defendant, it included penal, compound, exorbitant and illegal interest. On the pleadings of the parties, the following issues were framed--
(1) Is the suit barred by limitation?
(2) Whether the defendant had executed security documents? If so, are they valid and binding upon the defendant?
2. (2A) Are the statement of accounts relied upon by the plaintiff correct?
(3) Does the interest claimed by the plaintiff include penal interest and is the defendant protected under section 3 of the Usurious Loans Act, 1918, as stated in para. 3 of the written statement?
(4) Are the promissory notes relied upon by the plaintiff void in law and not binding on the defendant?
(5) Whether the claim in the suit for recovery of loan and compound penal interest is unlawful and/or against public policy within the meaning of section 23 of the Contract Act, and if so what is its effect?
(6) Is the defendant liable to pay any amount to the plaintiff? Should the decree be?
3. ' On behalf of the plaintiff, two witnesses, namely, Syed Fazal Hussain (P.W.1) and Naseem Akhtar were examined. They were not cross-examined as the defendant and his counsel had remained absent.
4. ' I have heard Mr. Noorullah Manji, the learned counsel for the plaintiff, and my findings on the issues, with the reasons therefor, are as follows:- ISSUE NO.1:--According to the averment in para. 15 of the plaint, the cause of action for the suit is stated to have arisen on or about the 28th August, 1972, when the defendant executed and delivered to the plaintiff Promissory Note and-several other documents including letter of pledge; on the various dates, as shown in the statement of account, when overdraft was granted to and utilized by the defendant; on the 8th February, 1977, when the defendant executed a fresh promissory note and other documents including letter of pledge; on 30th December, 1976 19th September, 1979, 8th October, 1979, 17th February, 1980, 21st June, 1980 and 3rd September, 1980, when the defendant acknowledged his liability and promised to pay the amount due. The cause of action is further stated to have arisen when the plaintiff demanded repayment.
5. ' Mr. Manji reiterated the contents of para. 15 of the plaint and further contended that since the plaintiff is in possession of the pledged shares, the cause of action continues to arise from day to day. The last part of. Mr. Manji's submission has only to be stated to be rejected. Mr. Manji submitted, correctly, that the cause of action arose, inter alia, on the various dates shown in the statement of account, Exs.6/1/1 to 6/1/29, when the overdraft was granted and utilized by the defendant. The statement of account shows that the overdraft was utilized on various dates between the 28th August, 1972 and 15th January, 1974. Therefore, the cause of action arose on each date when overdraft was utilized and the period of limitation for filing suit expired three years after the date of each utilization. Mr. Manji has relied on the Balance Confirmation Note dated the 30th December, 1976 (Ex.6/10) whereby the defendant has acknowledged his liability to pay Rs,29,34,228/20. However, the period of limitation for filing a suit for recovery of all overdrafts granted and interest accrued upto 29th December, A 1973, expired on the 29th December 1976, and could not be revived by the Balance Confirmation Note executed after the expiry of the period of limitation.
6. ' The statement of account shows that a sum of. Rs,18,80,339/83 was outstanding on 29th December, 1973. The period of limitation for filing a suit for recovery of that sum expired on the 29th December, 1976. The Balance Confirmation Note would, however, cover the overdrafts granted and interest accrued on and after the 30th December, 1973. In respect of the amount due upto the 30th December,1973, the statement of account shows last part payment on the 15th December, 1973.
7. Assuming that this can be treated as part payment within the meaning of section 20 of the Limitation Act, 1908, the period of limitation expired on the 15th December, 1976 i,e. Before the date of the Balance Confirmation Note.
8. Mr. Manji then relied on the Promissory Note (Ex.6/11), the Letter of Continuity (Ex.6/12) and the Letter of Arrangement (Ex.6/13). These documents are dated the 8th February, 1977, and acknowledge that the sum of ' Rs,39,34,228/20 was due on, the date. The promissory note is void as stated hereinabove. Therefore, the period of limitation in respect of the overdrafts granted and interest accrued on or after the 30th December, 1973, which was extended by the Balance Confirmation Note dated the 30th December, 1976, was further extended by the documents/acknowledgment dated the 8th February, 1977. Thereafter, the defendant acknowledged his liability by letter dated the 19th September, 1979 (Ex.6/16), 8th October, 1979 (Ex.6/17), 17th February, 1980 (Ex.)6/18 21st June, 1980 (Ex.6/19) and 3rd September, 1980 (Ex.6/20). Each of these letters was written within three years from the date of the preceding letter and, therefore, the period of limitation was extended upto the 3rd September, 1983. The suit, filed on the 29th August, 1983, was within time in respect of all overdrafts granted and interest accrued on and after the 30th December, 1973, but was barred by limitation in respect of overdrafts granted and interest accrued before that date.
9. ' Mr. Manji did not urge any other grounds to show that the suit was filed within the period of limitation with regard to the entire amount claimed therein. However, I have examined the material on record with a view to ascertain whether limitation was saved by anything on the record. The letter dated the 19th September, 1979 (Ex.6/16) from the defendant stated that "arrangements are being made to pay Rs, 2,50,000 against the advances on or before the 26th September, 1979. As regards schedule of payment, Rs,50,000 will be paid every month from October, 1979." This letter is a clear and specific promise to pay the entire amount due on account of the overdraft within the meaning of section c 25(3) of the Contract Act, 1872, and , therefore, furnished a fresh cause of action for filing a suit for recovery of the entire sum due notwithstanding the fact that period of limitation for part of the amount claimed had, as stated hereinabove, expired on the 29th December 1976. By the letter dated the 8th October, 1979 (Ex.6/17) the defendant acknowledged part payment of Rs,1,50,000 made on the 27th September, 1979; and this part payment is shown by entry dated the 30th September, 1979, in the statement of account (Ex.6/1/27). Then the defendant made part payment of Rs,1,50,000 on the 17th ,February 1980, as acknowledged by his letter of the same date (Ex.6/18). Thereafter, by his letter dated the 21st June, 1980 (Ex.6/19) the defendant, while regretting the delay in payment of five installments, assured the plaintiff that arrangement will be made to make payment before the end of July, 1980. Finally by the letter dated the 3rd September, 1980 (Ex.6/20) acknowledged part payment of Rs,1,00,000 on the same date which is reflected in the entry dated the 3rd September, 1980, in the statement of account (Ex.6/1/28). I, therefore, hold that although the suit was barred by limitation with regard to the sum of Rs,18,80,339/83 which was claimed to be due on the 29th December, 1973, fresh cause of action for the entire amount claimed in the suit arose on the 19th September, 1979, when the defendant promised to pay the amount due. The period of limitation for suit on the basis of promise to pay was extended by part payments made on the 27th September, 1979, 17th February, and the 3rd September, 1980. The suit which was filed on 29-8-1983, is, thus, not barred by limitation.
10. ISSUE NO.2:-- The plea of the defendant in the written statement is that he had signed blank forms which the plaintiff had, subsequently, filled in arbitrarily and wrongfully. The defendant has neither cross-examined the plaintiff's witnesses nor produced any evidence in support of his allegations.
11. The plaintiff's witness u Naseem Akhtar has stated that all documents produced in evidence are genuine. I, therefore, hold that, subject to findings on issue No,4, the documents produced by the Plaintiff were executed by the defendant and are valid and binding on him.
12. ISSUES Nos. 2A and 3:-- These issues are interconnected and may, therefore, be considered together. The defendant has not challenged the statement of account with reference to any specific entry therein but has, in his written statement assailed it generally on the ground that it is totally incorrect, manipulated and includes penal, compound, exorbitant and illegal interest. He has produced no evidence to substantiate the allegation and did not even cross-examine the plaintiff's witness. However, Mr. Manji conceded that penal interest amounting to Rs,68,547 was charged on the 18th April, 1983. He contended that penal interest was protected by the constitution but was unable to cite any provision thereof in support of his contention. He then attempted to argue the penal interest was charged in pursuance of banking practice; but no such practice was alleged or proved by the plaintiff. Penal interest could only be charged if there was an agreement, providing for it, between the parties. Since there was no such E agreement, the plaintiff was not entitled to charge penal interest. In the circumstances, the statement of account, in so far as it includes penal interest is not correct and the plaintiff is not entitled to recover the amount of Rs,68,547.
13. ISSUE No,4:-- Mr. Manji conceded that the stamps on the Promissory Notes (Exhibits 6/3 and 6/11) have not been cancelled. The promissory notes are, therefore, void.
14. ISSUE No, 5:-- The part of this issue, relating to penal interest has already been considered above.
15. As for the remaining part of the issue, the claim for recovery of loan with compound interest cannot possibly be against public policy.
16. ISSUE NO.6:-- In the circumstances, the defendant is liable to pay the plaintiff the amount claimed in the suit viz. Rs,6,089, 344/11 less Rs,68,547 claimed on account of penal interest.
17. The suit is, therefore, hereby decreed in favour of the plaintiff for Rs,6,020,797 with interest as prayed and costs.