I have taken loan from one of cooperative bank but could not paid timely and award has been passed against me for 18% compounding monthly and it was passed in year 2006 now Summon has been issued in year 2017 to pay the amount calculated compounding monthly . I have asked the bank to settle the matter but they are saying that they shall take amount with compounding interest. Can it is permissible to charge the compounding interest ? Could you provide some law or judgment which can help me in supporting my case before the Registrar I am tensed and depressed. Help me out sir
It may be difficult to answer your question without detailed examination of your papers. It is better if you consult some local lawyer with your papers. But, some relevant questions would be:
What were the terms of the loan? Did such terms mention such interest? Does it mention compounded interest @ 18% with monthly rests?
What is mentioned in the award? Does it mention compounded interest @ 18% with monthly rests? If so, does it mention any specific reasoning or legal provision or contractual terms for such interest?
Prima facie, such interest appears to be harsh.
Did you challenge the award?
Cooperative banks have dual control, and the relevant state government rules may also have to be seen.
But, it is relevant to point out that for the Commercial banks (which may not include cooperative banks), the RBI circular allows monthly rests for compounding interest and it says [see this: https://rbi.org.in/Scripts/BS_ViewMasCirculardetails.aspx?id=9043]:
“Banks were advised to charge interest on loans/advances at monthly rests with effect from April 01, 2002. Interest at monthly rests shall be applied in case of all new and existing term loans and other loans of longer / fixed tenor. In the case of existing loans of longer / fixed tenor, banks shall move over to application of interest at monthly rests at the time of review of terms and conditions or renewal of such loan accounts, or after obtaining consent from the borrower.”
So, the details facts of your case will have to be examined by some expert by examining your papers.
Thanks for reply. We have not challenged the award so far as it was exparte award passed in year 2006. Award has mentioned interest compounding and it was mentioned in the agreement about the rate of interest. Though I have not filed any appeal against the same but now in the month of april 2017 I have received one summon to appear before Asst collector to pay the amount otherwise warrant of arrest shall be issued. Please help me as I am needy person with limited means.
You must be logged in to reply to this topic. Log in/Register