1. This is an appeal against the judgment of a learned single judge of this court dated December 18, 1981, dismissing the suit filed by the appellant. We propose to refer to the parties hereafter, for the sake of convenience, by their original description in the suit. The plaintiff is a nationalised bank. Defendant No. 1 is a partnership firm of which defendants Nos. 2 to 4 are the partners. The suit was filed by the plaintiff for recovery of a sum of Rs. 74,047.36 with further interest on Rs. 69,149.26 at the rate of 17% per annum from September 1, 1976, till judgment and, thereafter, at the rate of 6% per annum.
2. The Rolevant facts have been set out in the judgment of the learned trial judge and hence we only propose to set out only such of those facts as are necessary for the appreciation of the controversy raised before us. On October 11, 1971, defendant No. 1 made an application to the Bandra Branch of the plaintiff bank for opening a current account. That application was signed by defendants Nos. 2 to 4. Along with the said application, defendants Nos. 2 to 4 handed over a letter stating, inter alia, that they were partners of defendant No. 1 firm and gave special instructions that the current account to be opened could be generally operated by cheques signed by any one of the partners. A copy of the said letter is exhibit 'A' on record. Pursuant to this request of the defendants, a current account bearing No. 115 was opened by the plaintiff bank. That account was operated upon by defendant No. 3 on behalf of defendant No. 1. The case of the plaintiff is that in August, 1973, the defendants requested for an overdraft and that facility was sanctioned. Pursuant to this facility, defendant No. 3 on behalf of defendant No. 1 withdrew several amounts from the account and on September 30, 1975, there was a debit balance of Rs. 63,937.37 due from the defendants. The suit was filed by the plaintiff bank for recovery of this amount with interest at 17%. The plaintiff served for recovery of demand on October 6, 1975, on the defendants and an advocate's notice dated May 7, 1976. According to the plaintiff, the defendants failed to return the amount and hence the suit was filed on August 31, 1976.
3. It may be mentioned that separate written statements were filed by defendants Nos. 1, 2 and 4 on the one hand and by defendant No. 3 on the other. It is not necessary to dilate upon the defences taken up. All the defendants admitted that they had opened a current account with the plaintiff bank as claimed by the plaintiff but denied that they had sought any overdraft facility from the plaintiff. They further complained that no details about the account of the alleged overdraft facility had been supplied to them by the plaintiff. The defendants denied that from time to time there were debit balance in the said account against the defendants, as was claimed by the plaintiff. No issues were framed, as is usually done, before the hearing commenced, but from the judgment of the learned trial judge it appears that he took the view that the sole issue which required determination in the suit was whether the plaintiff has granted any overdraft facility to the defendants and whether the claim on the basis of that facility was maintainable.
4. In support of the claim of the plaintiff, one Manohar Sitaram Sathe, who was working as the branch manager of the Bandra (East) Branch at the Rolevant time, was examined. He stated in his evidence that defendant No. 3 had approached him in August, 1973, and orally sought a temporary overdraft facility which the said Sathe agreed to sanction as it was for a temporary duration. Sathe produced a bundle of the cheques drawn on behalf of defendant No. 1 firm and a copy of the statement of account duly certified under the Bankers' Books Evidence Act, 1891, showing the balance due from defendant No. 1. The statement of accounts of the the said account tendered by Sathe is exhibit 'C' on record and at exhibit 'D' is the record of cheques drawn by the firm of defendant No. 1 on the said account and details of the credit vouchers in respect of the aforesaid account. All these were tendered by Sathe and accepted in evidence. Unfortunately, the defendants were not represented by any advocate at the hearing of the suit and only defendant No. 3 appeared in person. The rest of the defendants, namely, defendants Nos. 2 and 4, remained absent. The only question put by defendant No. 3 to Sathe was as to whether he was authorised to give a temporary overdraft facility and Sathe asserted that he was so authorised to give such facility up to the limit of Rs. 25,000. No other question was put to him which is very unfortunate, looking to the nature of the case of the plaintiff and the state of the accounts, which have been tendered by the plaintiff. Defendant No. 3 entered the witness box on the side of the defendants and all that was stated by him in his evidence-in-chief was that he had not made any request to the said branch manager, Sathe, for the grant of any overdraft facility. In cross-examination, he admitted having signed the application, exhibit 'A', and also having signed the aforesaid cheques tendered by Sathe. He further admitted that the defendants had deposited in the said account a sum of Rs. 14,511.01 by way of a transfer entry and after this amount was deposited, there was a credit balance of Rs. 6,880.90 left in the account. He denied that he had orally applied to the plaintiff bank for any temporary overdraft facility.
5. In his judgment, the learned judge took the view that the only question which really arose for determination was whether the claim made by the plaintiff bank of the temporary overdraft facility to defendant No. 1 in August, 1973, is correct. After considering the evidence on record and certain rules which were shown to him, the learned trial judge rejected, and, in our view, rightly rejected the evidence of Sathe to the effect that he had agreed at the request of defendant No. 3 in August, 1973, to give temporary overdraft facility to defendant No. 1 firm. The learned judge has pointed out the circumstances which led him to that conclusion. He has, for example, pointed out that the story of having granted temporary overdraft facility trotted out by Sathe was highly improbable. It is common knowledge that even when a clean overdraft facility is to be given by a bank, a written application or a promissory note would at least be required. It was not as if only one cheque in respect of which defendant No. 1 had overdrawn had been credited by the bank. The account in question has been operated as an operated as an overdraft account for a considerable period of time extending to about one year and it is just not possible to believe that such facility could have been given by any branch manager in the regular course of business without even a written application. Moreover, as pointed out by the learned trial judge, there is a discrepancy in this connection between the first demand notice served by the plaintiff on October 6, 1975, and what is stated in the evidence of Sathe. According to that notice, the overdraft facility was granted on January 15, 1972; whereas according to the averments in the plaint and the evidence of Sathe, it was granted in August, 1973. It is true that Sathe has not been cross-examined on this point, but the discrepancy is so glaring that the learned trial judge was justified in taking note of it, particularly in view of the fact that defendant No. 3 was appearing in person and was not trained to cross-examine.
6. It was strongly contended before us by Mr. Tulzapurkar that as per the statement of accounts, exhibit 'A', there was a debit of Rs. 30.20 on September 28, 1973, in the said account. On October 12, 1973, there was a credit of Rs. 14,511.01 by way of a transfer entry as admitted by defendant No. 3 and defendant No. 3 also admitted in evidence that after this credit entry, the credit balance in the said amount came to Rs. 6,880.90. According to Mr. Tulzapurkar, this would show that defendant No. 3 had impliedly admitted that there was an oral agreement whereby defendant No. 1 firm had secured overdraft facility from the plaintiff and that it would also show that interest was agreed to be paid at 17% on the amount overdrawn, because Rs. 30.20 represented interest at 17% per annum on the debit balance for the Rolevant period. In our view, this contention of Mr. Tulzapurkar must be rejected. In the first place, this theory which he has propounded was nowhere put to the witness. It was now shown to the witness that Rs. 30.20 was interest calculated at the rate of 17% on the amount overdrawn. Nor was it put to the witness, viz., defendant No. 3, that his admission of the credit balance in the account would lead to the conclusion which Mr. Tulzapurkar wants to support. There is nothing on record before us to show that the amount of Rs. 30.20 has been calculated at the rate of 17% as aforesaid and, if that was the case of the plaintiff bank, it surely ought to have been put to defendant No. 3. It is also significant that the extracts of accounts at exhibit 'C' show that entries in respect of the major items of interest in favour of the plaintiff have been made only on June 28, 1975, September 30, 1975, December 29, 1975, and March 30, 1976. These entries aggregate to over Rs. 12,000; whereas before that there were only two entries for interest due on the overdraft and those do not aggregate even to the sum of Rs. 500. This would run counter to the theory that the defendant had agreed to pay interest at 17% per annum on the amounts overdrawn. However, the fact remains that the extracts of the accounts have been tendered by the plaintiff in court and under section 2 of the Bankers' Books Evidence Act, 1891, these must be taken as the certified copies of the entries appearing in the aforesaid current account. It is true that it was not put to defendant No. 3 that those accounts were correct. But, on the other hand, it must be appreciated that although defendant No. 3 went into the witness box, he has not disputed the correctness of these accounts. Moreover, at exhibit 'D', we have details of all the cheques drawn on behalf of defendant No. 1 on the said account and of all the credit vouchers issued in respect of the aforesaid account and none of these has been disputed by defendant No. 3. The conclusion which must inevitably follow is that the said account was substantially overdrawn by defendant No. 3 acting on behalf of defendant No. 1 as partner thereof. All the partners of defendant No. 1 firm and had agreed that the account could be operated by any one of them.
7. As to the question whether there was any agreement to grant overdraft facility, it might be useful to note that in Halsbury's Laws of England (fourth edition) volume 3, at page 155, it has been stated as follows :
'A customer may borrow from a banker by way of loan or by way of overdraft. A loan is a matter of special agreement. In the absence of agreement, express or implied from a course of business, a banker is not bound to allow his customer to overdraw. An agreement for an overdraft must be supported by good consideration, and it may be express or implied.
Drawing a cheque or accepting a bill payable at the bankers where there are not funds sufficient to meet it, amounts to a request for an overdraft.'
8. In Cuthbert v. Robarts, Lubbock and Co.  2 Ch 226, Cozens-Hardy M. R. (at page 233 of the report) has observed as follows :
'If a customer draws a cheque for a sum in excess of the amount standing to the credit of his current account, it is really a request for a loan, and if the cheque is honoured the customer has borrowed money.'
9. Further observations go on to show that it was held that such borrowing would be a simple transaction of borrowing and would not amount to borrowing upon security. But we are not concerned with that question here. paged in his classic treatise on the Law of Banking (1972 edition) at page 132 has observed as follows :
'A banker is not obliged to let his customer overdraw unless he has agreed to do so or such agreement can be inferred from course of business; borrowing and lending are a matter of contract not necessarily premeditated but, possibly, spontaneous, as where a customer, without previous arrangement, draws a cheque, payment of which overdrawn his account.'
10. Unfortunately, the aforesaid decision and the aforesaid books were not shown to the learned trial judge. If the legal position set out in the same is taken into account there is no doubt that where a customer, namely, an account-holder in bank, even without any express grant of an overdraft facility overdraws on his account and the cheque issued by him is honoured, the transaction amounts to a loan and the customer is bound to make good the loan to the bank with reasonable interest. As far as Mr. Sayed, learned counsel for the respondents, is concerned, he did not point out any decision or text-book where a view contrary to the above has been propounded. He merely stated that he supported the decision of the trial court and had nothing more to say.
11. We are, therefore, of the view that the learned trial judge was, with respect, in error in dismissing the suit of the plaintiff on the ground that there was no express oral agreement regarding the grant of overdraft as alleged by the plaintiff. Even in the absence of such an express agreement, in our view, in the circumstances of the case, there was an implied agreement for grant of overdraft or loan facility and the customer, namely, defendant No. 1 was liable to make good to the bank the amount overdrawn in its aforesaid current account with reasonable interest.
12. As far as the question of interest is concerned, we may point out that we agree with the learned judge that there does not seem to have been any express agreement as such to grant any overdraft facility nor any agreement that the interest would be paid at a particular rate in respect of the amounts overdrawn in the said account. In our view, looking to all facts and circumstances, the only reasonable rate of interest which can be granted in a case like this is at 12%. Mr. Tulzapurkar drew our attention to the Reserve Bank circular stating that the banks must charge interest at 17% per annum or any other rate as prescribed by the Reserve Bank in respect of amounts which are due in an overdraft account. We are unable to see how this circular is of any assistance to the case before us. The circular governs the relations between the Reserve Bank and the banks subject to its control. We fail to see how that circular could bind defendant No. 1 or its partners. If Mr. Sathe was conscious of that circular and wanted to see that it was complied with, it was for him to have made it clear to defendant No. 3 that interest would be charged at 17% per annum or such other rate as might be prescribed by the Reserved Bank of India on the amounts overdrawn. Here, as we have pointed out, there is no satisfactory evidence at all that there was any express agreement for the grant of overdraft, written or oral. We may point out further that in the extracts of the said account which are at exhibit 'C', there are certain amounts of interest shown as due to the plaintiff. We presume that those must have been calculated at the rate of 17%. However, as far as these items are concerned, we do not propose to disturb the same because defendant No. 3 has not chosen to dispute the correctness of these accounts. As per the said account, the debit balance, as it stood on March 31, 1976, in the said account was Rs. 69,149.26, and in our view, the plaintiff would be entitled to interest on that amount at the rate of only 12% per annum from April 1, 1976, till judgment, viz., today, and 6% per annum hereafter till payment.
13. In view of what we have observed above, the impugned judgment is set aside. There will be a decree for the plaintiff against the defendants for a sum of Rs. 69,149.26 with interest thereon at the rate of 12% per annum from April 1, 1976, till today and at 6% per annum hereafter till payment or realisation, whichever is earlier. No order as to costs.
14. Appeal allowed.