Naunihal and Co. etc. vs Bank of India and Others

Surinder Gupta, J.—The appellants-defendants have preferred this regular second appeal against the judgment and decree dated 8.2.1990 passed by the first appellate court whereby the judgment and decree dated 9.1.1987 passed by the trial court was modified. The appellants-defendants, a partnership firm, had credit facilities with Bank of India Model Town branch Ludhiana. The plaintiff bank-respondent filed a suit or recovery of Rs. 89,757/- on 21.1.1984. During the pendency of the suit, the appellant deposited Rs. 89,760/- and/sought dismissal of the suit. The plaintiff bank admitted that during the pendency of the suit, some payments were made by the defendants, however, the suit continued.

The trial court framed the issues as follows:-

Whether the plaintiff is entitled to future interest and costs? OPP

Relief.

On issue No. 1, the findings were recorded by the trial court as follows:-

It has, however, been argued by ld. counsel for the defendants that the defendants have paid the suit amount before the filing of the written statement in this case. No evidence has been led by the plaintiff to show as to on what date the said payment of the suit amount was made by the defendants. The statement made by Shri Parveen Nayyar, also does not lead any where because he has also not given the date of the payment of suit amount by the defendants to the plaintiff. The plaintiff has already claimed interest up till the date of filing of the suit. In the circumstances of the case I am of the considered opinion that the plaintiff is not entitled to any future interest from the date of the suit till the payment of the suit amount made by the defendants. However, the plaintiff is entitled to the costs of the suit as he was driven to file the present suit against the defendants as the defendants had not paid the loan amount. In view of my foregoing discussion, I am of the mentioned (sic considered) opinion that the plaintiff is not entitled to any future interest, but he is entitled to the costs of the suit. Issue No. 1 is decided accordingly partly in favor of the plaintiff and partly against him.

Not satisfied, the plaintiff bank preferred the appeal. The first appellate court, on the basis of the documents on file calculated the due amount after adjusting the amount paid by the defendants as Rs. 24,915/- and modified the decree of the trial court as follows:-

In the result the appeal is accepted with costs. The decree of the learned trial court is modified and a decree for recovery of Rs. 24,915.82 as pendente lite interest with interest @ 19.5% per annum from 12.9.85 till final realisation, with the entire costs of the suit is passed in favor of the plaintiff-appellant and against the defendants-respondents. The latter shall bear the costs of the plaintiff-appellant throughout.

The appellants-defendants have preferred this regular second appeal.

The facts are not disputed. The outstanding amount recoverable by the bank and the payment made by the appellants-defendants are admitted. As referred in para 7, of the judgment of first appellate court the appellants have also not pointed out any discrepancy or infirmity in the calculations of the due amount i.e. Rs. 24,915.82. Learned counsel representing the appellants has argued that u/s 34 CPC, the future interest after decree till realisation of the decretal amount could be awarded @ 6% per annum. He has placed reliance on the observations made in the case of Kaka Singh Vs. Chand Singh, .

The above contention of the learned counsel for the appellants carries no weight and is to be discarded. Section 34 CPC specifically provides that where the liability has arisen out of the commercial transaction, the rate of interest may exceed 6% per annum and contractual rate of interest can be awarded. In the judgment of the trial court, this fact is specifically mentioned that the defendants are liable to pay interest @ 19,50% per annum and this verdict of the trial court was not challenged by the appellants-defendants. In para No. 6 of the judgment, the first Appellate Court observed as follows:-

.... The findings of the learned trial court in para No. 7 of the impugned judgment hold that the contractual rate of interest is 19.50%. These findings are not seriously challenged by the ld. counsel for the defendants-respondents before me......

The appellants-defendants had paid part of the due amount during the pendency of the case. The appellants are not novice to the field of business, trade and commercial transactions. It is a partnership firm carrying on business at Ludhiana. Being in business, it very well knew the intricacies attached to the payments of the liabilities and was well aware that the suit amount included the interest as well. The general rule of appropriation of the, payment made towards the loan amount is that firstly the paid amount shall be adjusted in payment of interest and costs and thereafter towards the payment of principal amount. In case Gurpreet Singh Vs. Union of India (UOI), the general rule of appropriation has been summed up as follows:-

20.....It was also held that the general rule of appropriation towards a decretal amount was that such an amount was to be adjusted strictly in accordance with the directions contained in the decree and in the absence of such direction, adjustments be made firstly in payment of interest and costs and thereafter in payment of the principal amount, subject of course, to any agreement between the parties.

In the case Bharat Heavy Electricals Ltd. Vs. R.S. Avtar Singh and Company, , the Hon''ble Supreme Court observed as follows:-

From what has been stated in the said decision, the following principles emerge:

(a) The general rule of appropriation towards a decretal amount was that such an amount was to be adjusted strictly in accordance with the directions contained in the decree and in the absence of such directions adjustments be made firstly towards payment of interest and cost and thereafter towards payment of the principal amount subject, of course, to any agreement between the parties.

(b) xx xx xx

(c) If the payment made by the judgment debtor falls short of the decreed amount, the decree holder will be entitled to apply the general rule of appropriation by appropriating the amount deposited towards the interest, then towards cost and finally towards the principal amount due under the decree.

(d) Thereafter, no further interest would run on the sum appropriated towards the principal. In other words if a part of the principal amount has been paid along with interest due thereon as on the date of issuance of notice of deposit interest on that part of the principal sum will cease to run thereafter.

(e) In cases where there is a shortfall in deposit of the principal amount, the decree holder would be entitled to adjust interest and cost first and the balance towards the principal and beyond that the decree holder cannot seek to reopen the entire transaction and proceed to recalculate the interest on the whole of the principal amount and seek for re-appropriation.

In the present case, the payment was made during the pendency of the suit to avoid the decree that may be passed against the appellants defendants. The general rule of appropriation shall, however, remain the same.

The observations in the case of Kaka Singh (supra) are not relevant to the facts of the present case as in that case future interest was allowed as compensation amount. No substantial question of law arises in this case for determination.

No merits.

Dismissed