V.K.JHANJI, J. - (1.) THIS is plaintiffs' second appeal.
(2.) PLAINTIFFS filed suit for declaration to the effect that they are liable to pay simple interest @ 10.5% p.a. on the loan amount and for mandatory injunction directing the defendants to re-cast the loan account after charging interest @ 10.5% p.a. and return the excess amount charged, if any, to them. Trial Court dismissed the suit. In appeal, the first Appellate Court affirmed the judgment and decree passed by the trial Court. In brief, the facts are that under the Scheme known as "ARDC Scheme", loan was sanctioned by the State Bank of Patiala (defendant No. 1) (for short the Bank). The purpose of the Scheme was advancing loan for construction of godowns in the State of Haryana for leasing out the same to Food Corporation of India (for short the FCI). Under the said scheme, the then Agricultural Refinance and Development Corporation (for short the ARDC) (now National Bank of Agricultural and Rural Development) was to refinance the Bank for advancing loan to the persons for construction of godowns. In the case of the plaintiffs, they applied for a term loan of Rs. 6 lacs for construction of godown at Bahadurgarh District Rohtak. On receipt of the said application, the Bank vide letter dated 5.1.1980 addressed to the plaintiffs sanctioned a loan of Rs. 6 lacs. In regard to interest, the condition was that interest will be charged @ 3% above the ARDC lending rate with a minimum of 10.5%. On sanction of the loan, the Bank applied to ARDC for refinancing vide letter dated 11.3.1980, ARDC approved the proposal of the Bank for advancing loan to the plaintiffs to the extent of Rs. 6 lacs for being refinanced under the ARDC Scheme. The ARDC sanctioned a loan of Rs. 4.80 lacs to the Bank by way of refinance. The sanction was subject to certain terms and conditions contained in Schedules I, II, III enclosed with the said letter and also Memorandum of general agreement dated 26.3.1975 executed by the Bank in favour of ARDC. Clause 5 of Schedule I in regard to rate of interest reads as under :- "5. Rate of interest : (a) The rate of interest for refinance sanctioned by the Corporation will be such as may be determined by the Corporation at the time of each drawal of refinance from the Corporation. At present, the Corporation charges interest at 7-1/2% per annum (from 15.3.1979) on the refinance provided by it in respect of this Scheme. The rate of interest may be varied by the Corporation from time to time. (b) The interest shall be payable to the Corporation every half year on 1 January and 1 July in each year or any other date agreed by the Corporation. (c) The Bank shall charge interest to the ultimate borrower at the rate of 10-1/2% per annum."
(3.) THE ARDC in pursuance of its agreement with the Bank, released the necessary advance to the Bank and the Bank thereafter disbursed the loan amount to the plaintiffs. Before the loan was disbursed, loan agreement, Exhibit P-7 was executed between the Bank and the plaintiffs. Clause 2 of the agreement provided for charging of interest. The same read as under :- "2. The Bank shall advance to the borrowers upto a limit of Rs. 6,00,000/- (Rupees six lacs only) in the said Agricultural Term Loan account and shall charge interest @ 3% above the Agricultural Refinance and Development Corporation (ARDC) refinance rate with a minimum of 10-1/2% per annum in case the refinance from ARDC is available subject to the changes as may be prescribed by ARDC from time to time otherwise at the rate of 1% over the State Bank advance rate rising and failing therewith, with a minimum of 14% per annum subject to the changes as may be prescribed by the Reserve Bank of India from time to time. The interest shall be charged as quarterly rests." ;