Syndicate Bank vs Swadesamitran Ltd.

Ratnam, J.—The successful plaintiff in C.S. No. 472 of 1984 has preferred this appeal feeling aggrieved by the Judgment and decree of the learned Judge determining the rate of interest payable by the first defendant, the respondent herein, at 13% p.a. from the date of plaint till the date of payment.

The plaintiff instituted the suit C.S. No. 472 of 1984 praying for the recovery of a sum of Rs. 15,94,294.60 with interest thereon at the rate of 18% p.a. with quarterly rests from the date of plaint till the date of payment. On 1.9.1972, the appellant advanced to the respondent herein a loan of Rs. 6,00,000 carrying interest at 5% over the bank rate with a minimum of 11% p.a. to be calculated with quarterly rests and as security for the due repayment of the amount so advanced, the respondent deposited its title deeds relating to "A" schedule properties in the plaint, in addition to offering the "B" Schedule assets also as such security.

Several defences were raised by the respondent herein. Having regard to the limited dispute in this appeal, viz, the rate of interest payable by the respondent between the date of suit and the date of decree, it would suffice to note the defence raised by the respondent in that regard, according to which, the appellant was not entitled to claim interest at 18% p.a. as per the contract. After the trial of the suit commenced and P.W. 1 and D.W. 1 had been examined, on 29.11.1989, the respondent through its counsel, made an endorsement to the effect that the plaint suit claim is agreed to and that the interest rate alone is disputed, Pursuant to the endorsement so made, the respondent also expressed its readiness to pay the entire amount due under the decree that may be passed with such rate of interest as may be fixed by court as payable from the date of plaint till the date of payment. Inasmuch as the amount claimed in the plaint included interest on the amount advanced at 18% p.a. with quarterly rests till the date of plaint and that liability was accepted by the respondent herein under the endorsement referred to above, the Court proceeded to determine the rate of interest payable by the respondent to the appellant from the date of plaint till the date of payment. While doing so, the Court, took into account the payment of a sum of Rs. 5,00,000 made to the appellant by the respondent on 10.4.1987 and also the expression of readiness and willingness to pay the balance of the amount that may be worked out after fixing the rate of interest by Court to the appellant, the Court fixed the rate of interest at 13% p.a. from the date of plaint till the date of payment. The respondent was also directed to file a calculation memo and also bring the amount as per the calculation memo before Court the next day, i.e., 30.11.1989. Likewise, the appellant was also directed to bring the documents of title deposited with it by the respondent so that on receipt of the amount from the respondent, the documents could be handed over by the appellant to the respondent Ultimately, the Court directed the respondent to pay the appellant the amount claimed in the plaint with interest at 13% p.a. from the date of plaint till the date of payment as well as costs and the matter was directed to be posted on 30.11.1989. On that day, the respondent filed a memo of calculation, according to which, the total amount payable as per the order of the Court dated 29.11.1989 was shown as Rs. 21,31,747 and for that amount, a cheque was also handed over by the counsel for the respondent to the counsel for the appellant.

Thereupon, the Court directed the appellant to hand over the documents of title deposited by the respondent on or before 2.12.1989 and the respondent was also directed to get back the documents of title from the counsel for the appellant. Yet another direction that a Fixed Deposit Receipt for Rs. 15,00,000 handed over by the respondent to the appellant should also be returned to the counsel for the appellant was also recorded as part of that order. While matters stood thus, the appellant preferred this appeal questioning the rate of interest awarded by the Court at 13% p.a. from the date of plaint till the date of payment and claiming that interest at 18% p.a. with quarterly rests between the date of suit and date of decree should have been directed to be paid by the respondent.

Learned Counsel for the appellant Mr. S. Kannan first contended referring to Section 34 (1), C.P.C. that the transaction entered into by the respondent was a commercial transaction with a nationalised bank and, therefore, under the proviso to that section, the Court should have awarded interest at the contractual rate and not at a reduced rate. Reliance in this connection was also placed by learned Counsel upon the decisions in Central Bank of India, Kutch Vs. P.R. Garments Industries Pvt. Ltd., Surendranagar and Others, , Syndicate Bank v. West Bengal Cements Ltd. AIR 1989 Del. 107 and State Bank of Travancore, Tirupur Branch Vs. K. Vinayachandran and Another, . On the other hand, Mr.

G. Subramaniam, learned Counsel for the respondent, submitted that the suit was instituted on the foot of a mortgage for the recovery of the amounts due thereunder and in view of the special provisions under Order 34, Rule 11, C.P.C., the Proviso to Section 34 (1), C.P.C. could not be pressed into service to claim that interest should be paid at the contractual rate, viz., 18% p.a. Reference in this connection was made to the decisions in Jaganath Prasad Singh Chowdhhury v. Surajmul Jalal 52 M.L.J. 373, AIR 1940 20 (Federal Court) and Pentala Githavardhana Rao and Others Vs. The Andhra Bank Ltd. and Others, .

We find on a consideration of the basis on which the suit had been laid that it is a suit on an equitable mortgage for the realisation of the amounts due under such a mortgage. In other words, the suit is not one for recovery of money simpliciter. The opening words in Section 34 (1), C.P.C. clearly state that the rate of interest as provided thereunder and in the proviso could be awarded, if the decree is one for payment of money. On the other hand, Order 34, Rule 11, C.P.C. is a special provision relating to the payment of interest in actions on a mortgage by the institution of suits for foreclosure, sale or redemption. While, Section 34 (1), C.P.C. and the proviso thereunder provide for payment of interest in respect of money decrees, Order 34, Rule 11, C.P.C. makes a similar provision for payment of interest in mortgage suits. This, Section 34 (1), C.P.C. is in the nature of a general provision in respect of money-decrees, while Order 34, Rule 11, C.P.C. is a special provision relating to the payment of interest in mortgage actions. Which of the two provisions should be applied to the instant case is the question? It-is in this connection that the decision of the Privy Council in Jagannath Prasad Singh Chowdhury v. Surajmul Jalal 52 M.L.J. 373 is relevant. It was pointed out by the Privy Council that Order 34, C.P.C. determines the question of the rate of interest, whether it be simple or compound, in the particular case of mortgages and differs from the general provisions of Section 34, C.P.C. and so the particular avoids the general. Though this decision of the Privy Council was rendered prior to the amendment of Order 34, Rule 11, C.P.C. by the amending Act 21 of 1929 that does not in any manner affect Order 34, Rule 11, C.P.C. being a special provision relating to mortgages and thus, excluding the applicability of Section 34 (1), C.P.C. Again, in AIR 1940 20 (Federal Court) , the Federal Court pointed out, referring to the general provision u/s 34, C.P.C, and the special provisions under Order 34, Rules 2 and 4, C.P.C. prior to and after the amendment in 1929, that the special provision under Order 34, C.P.C. had to be applied in preference to the general provision u/s 34, C.P.C. To similar effect is the decision reported in Pentala Githavardhana Rao and Others Vs. The Andhra Bank Ltd. and Others, where, it has been pointed out that the provisions of Section 34, C.P.C. are not applicable to cases of mortgages and the award of interest is governed in such cases by the provisions of Order 34, Rule 11, C.P.C. We, therefore, hold that having regard to the nature of the suit instituted by the appellant in C.S. No. 472 of 1984, viz. on the foot of a mortgage for the recovery of the amounts due thereunder, the provision that would govern the award of interest would only be Order 34, Rule 11, C.P.C. and not Section 34, C.P.C. We may now refer to the decisions relied on by learned Counsel for the appellant. In Central Bank of India, Kutch Vs. P.R. Garments Industries Pvt. Ltd., Surendranagar and Others, , the Court considered the rate of interest with reference to Section 34, C.P.C. and not Order 34, Rule 11, C.P.C.

Likewise, in the other decisions in Syndicate Bank v. West Bengal Cements Ltd. AIR 1989 Del 107 and State Bank of Travancore, Tirupur Branch Vs. K. Vinayachandran and Another, , the Court considered the rate of interest awardable under the decree in a case falling u/s 34, C.P.C. Thus, none of the decisions relied on by learned Counsel for the appellant can have any application in this case. We, therefore, hold that the instant case would be governed by the provisions of Order 34, Rule 11, C.P.C. in the matter of the award of interest from the date of plaint till the date of decree and not by Section 34, C.P.C. and there is, therefore, no question of the applicant being entitled to claim interest at the contractual rate on the basis of the proviso to Section 34 (1), C.P.C. labelling the transaction as a commercial one with a nationalised bank.

Learned Counsel for the appellant next contended that even if the provisions of Order 34, Rule 11, C.P.C. would apply, the Court is bound to allow interest between the date of plaint and the date of decree as agreed to between the parties. In answer to this, learned Counsel for the respondent contended that under Order 34, Rule 11, C.P.C. a discretion is vested in the Court to award such rate of interest as the Court may fix having regard to all the circumstances of the case and that it is not obligatory that the Court should award interest at the contractual rate even in cases falling under Order 34, Rule 11, C.P.C. Strong emphasis was laid upon the use of the expression "may" occurring in Order 34, Rule 11, C.P.C. Our attention in this connection was also drawn to the decisions in AIR 1940 20 (Federal Court) , Soli Pestonji Majoo and Others Vs.

Gangadhar Khomka, , Pentala Githavardhana Rao and Others Vs. The Andhra Bank Ltd. and Others, and Punjab National Bank Ltd. Vs. Udyog Silpa Pvt. Ltd. and Others, .

We may observe that under Order 44 Rule 11, C.P.C. the Court may order payment of interest as indicated thereunder. The use of the expression "may" indicates that it is not intended that in all cases, the Court is obliged to decree interest at the contractual rate. A certain amount of discretion in undoubtedly vested in the Court so far as the payment of interest pendente lite and subsequent interest is concerned. If, the Court was bound, as claimed by learned Counsel for the appellant, even under Order 34, Rule 11, C.P.C. to award pendente lite interest at the contractual rate, then, the language employed would have been different and the expression "may" would not at all have been used. The expression "may" used also postulates that the Court is not bound to exercise its powers relating to the award of interest and the language as it is found in Order 34, Rule 11, C.P.C. can only mean that the Court has a discretion to order the payment of interest either at the contractual rate or even at a rate which the Court deems reasonable, having regard to the circumstances of the case. We may in this connection refer to the decisions relied on by learned Counsel for the respondent. In AIR 1940 20 (Federal Court) , interpreting the provisions of Order 34, Rule 11, C.P.C. the Federal Court pointed out that the special provision under Order 34, Rule 11, C.P.C. gives a certain amount of discretion to the Court in so far as interest pendente lite and subsequent interest are concerned and it is no longer absolutely obligatory on the part of the Court to decree interest at the contractual rate in all circumstances, even if there be no question of the rate of interest being penal, excessive of substantially unfair. The principle so laid down by the Federal Court was re-affirmed by the Supreme Court in the decision reported in Soli Pestonji Majoo and Others Vs. Gangadhar Khomka, .

Referring to Order 34, Rule 11, C.P.C. and the decision of the Federal Court in AIR 1940 20 (Federal Court) , the Supreme Court pointed out that the new Rule under Order 34, Rule 11, C.P.C. inserted by the amending Act 21 of 1929 gave a certain amount of discretion to the Court so far as interest pendente lite and subsequent interest are concerned. Again in The Warangal Chamber of Commerce Vs. Director of Marketing, Government of Andhra Pradesh, Hyderabad and Others, , the principle laid down in the decision of the Supreme Court in Soli Pestonji Majoo and Others Vs. Gangadhar Khomka, was applied and it was laid down that there is no obligation cast on the Court to award pendente lite and subsequent interest only at the contractual rates and that Courts have a discretion vested so far as the interest payable subsequent to the date of suit is concerned. To similar effect is the decision reported in Punjab National Bank Ltd. Vs. Udyog Silpa Pvt. Ltd. and Others, , where it has been pointed out that Order 34, Rule 11, C.P.C. is not mandatory in character and it is open to a Court to vary the rate of interest so far as the period between the date of suit and the date fixed for redemption in a preliminary decree is concerned, even in a case where the interest is legally recoverable and the rate of interest is not penal, unconsionable or otherwise excessive. Thus, on a consideration of the language employed in Order 34, Rule 11, C.P.C. and the interpretation thereof in the manner aforesaid by the decisions referred to earlier, we are of the view that even in a case to which the provision under Order 34, Rule 11, C.P.C, stands attracted, the Court has in it, a discretion to award pendente lite and post-decree interest at a rate lesser than the contractual rate.

We now proceed to consider the propriety of the award of interest at the rate of 13% p.a from the date of plaint till the date of decree, as has been done by the trial Judge. We find from the record that the respondent had become a sick unit and had also stopped its business since August,

1977. Towards the amount of Rs. 6,00,000 advanced by the appellant to the respondent on 1.9.1972, even prior to the institution of the suit, more than Rs. 10,00,000 had been paid. Pending the suit, the respondent had paid a further amount of Rs. 5,00,000. Besides, the respondent had accepted the claim as made in the plaint, but had disputed only the rate of interest and after so accepting its liability, it had prayed only for the exercise of the discretion of the Court in the matter of payment of interest between the date of plaint and the date of decree. There is one other circumstance which also establishes that the respondent deserved to be relieved of the payment of interest at the contractual rate of 18% p.a. with quarterly rests and that is the expression of the readiness and willingness of the respondent to pay the entirety of the amount after accepting the amount claimed in the plaint, though the rate of interest was disputed. The respondent had also carried out this expression of its willingness into action by paying the entire amount of Rs. 21,31,747 the very next day after submitting to a decree. Considering the amount of loan advanced by the appellant to the respondent in a sum of Rs. 6,00,000 and the amount repaid by the respondent to the appellant in a total sum of nearly Rs. 36,00,000 we feel that the pendente lite interest was rightly fixed at 13% p.a. from the date of plaint till the date of payment, i.e., 30.11.1989.

We may also observe that the discretion exercised by the trial Judge in the matter of fixing the rate of interest at 13% p.a. cannot in any manner be characterised to be either capricious or arbitrary. We, therefore, hold that no case is made out for interfering with the exercise of discretion by the learned Judge in fixing the rate of interest payable by the respondent to the appellant at 13% p.a. from the date of plaint till the date of payment especially when we find that the entire amount of principal and interest had also been paid on 30.11.1989. Inasmuch as the respondent had paid the entire amount, rightly the learned Judge directed the appellant to return the documents of titled deposited by the respondent and also return the Fixed Deposit Receipt for Rs. 15,00,000 with the Bank of India. Since the time granted by the learned Judge in his order dated 30.11.1989 for doing so had expired, we direct the appellant to return the documents of title and other documents deposited by the respondent and also the Fixed Deposit Receipt for Rs. 15,00,000 to it on or before 31.12.1989 in accordance with the undertaking given by counsel for the appellant before the learned Judge and recorded in the order passed on 30.11.1989. We, therefore, dismiss this appeal with costs.