- (1.)This is an appeal by the State Bank of Patiala, arising from a suit filed by the Bank against the respondents-defendants herein, seeking recovery of Rs.4,24,518/-, alongwith interest @ 18% per annum, the total amounting to Rs.7,11,55.27 Paise.
The suit was decreed by the learned Additional Civil Judge (Senior Division), Jalandhar, in favour of the appellant bank but that judgment and decree was reversed by the Additional District Judge, Jalandhar, on a first appeal filed by two of the respondents herein

Consequently, the Bank is now in appeal against that judgment and decree, before this Court.

(2.)The facts, taken from the plaint filed by the Bank, are that respondent-defendant No.1 is a partnership firm, with respondents-defendants No.2 and 3 being the partners of the said firm.
The firm availed of two loans of Rs.3,00,000/- and Rs.60,000/- from the banks' branch at Guru Tegh Bahadur Nagar, Jalandhar, for the construction of a building in Jalandhar, which was then rented out to the bank itself.

As per the agreement executed between the parties, the loan advanced was to be returned with interest on it at the rate of 15.5% per annum, compounded quarterly on the amount of Rs.3,00,000/- and 18.5% per annum, also compounded quarterly, on the amount of Rs.60,000/-, subject to variation from time to time as per directives of the Reserve Bank of India.

(3.)Thereafter, upon a judgment of the hon'ble Supreme Court having been delivered in State Bank of Patiala v. Harbans Singh, 1994 3 SCC 495 , the defendants represented to the Bank to recast the loan by charging simple interest @ 15% per annum, on both the loans, instead of compound interest.
The Bank accepted the representation and consequently refunded a sum of Rs.4,24,518/- to the defendants, on 21.05.1997. However, it was thereafter contended by the Bank that the refund had been made on account of a mistaken impression of the law, as otherwise the payment was not legally due. This was because of the fact that in a subsequent judgment of the Apex Court in Canara Bank v. P.R.N. Upadhaya, 1998 6 SCC 526 , it was held that a Bank can charge the agreed rate of interest even from a borrower from whom it had taken a building on lease and that such interest can be calculated on quarterly rests at a compounded rate.

Harbans Singhs' case was held to be confined to its own facts and was not to be treated as having laid down the law on the subject, as the circulars/directives of the RBI, on the issue of charging of interest from a landlord, had statutory force but were not brought to the notice of the Court.