Vimladevi vs Mandsaur Electric Supply Co.

S.B. Sen, J.—The Appellant has obtained a decree on the basis of four fixed deposit receipts, each valued at Rs. 5,500 payable within three months from 1-10-54. The money was deposited with the Defendant-Respondent Company with the agreed rate of interest at 10% per annum. The Court however allowed interest 9% from the date of filing suit till the date of decree and at 4% per annum on Rs. 22,000 from the date of decree till final payment.

It is against the latter part of the decree viz., the grant of interest at 4% per annum from the date of suit till realisation that the Appellant-Plaintiff has come up in appeal. There is also a cross-objection filed by the Defendant-Respondent to the effect that the amount of Rs. 22,000 included interest of Rs. 2,000. The Court has therefore allowed interest on interest which is illegal.

We dispose off the cross-objection first as we do not find any substance in the same. The contention is that the fixed deposit receipts each of which consists of Rs. 5500 contain Rs. 5,000 as principal and Rs. 500 as interest. The fixed deposit receipts are revival of the old receipts which were for Rs. 5,000 with the interest it became Rs. 5,500.

It is true that Rs. 5,000 was the original amount on which Rs. 500 was earned as interest but the transaction cannot be said to be a continuous one. A fixed deposit receipt is issued when money is deposited for a fixed term with a fixed rate of interest. After the period is over, the amount be comes payable and the receipt matures. On presentation of the receipt, the holder is entitled to get the amount stipulated. If he takes the amount and purchases another receipt, one cannot say that the account is continuous. The previous accounts are closed and the transaction is over as soon as the fixed deposit receipt is returned back. The subsequent transaction is a new transaction. If instead of taking the money in his own hand, the depositor after returning the old receipt as discharged, asks issue of a fresh receipt for the amount payable to him, the nature of the transaction does not change. There is no special significance in taking the money in one hand and paying on the other. We therefore do not think that this is a case of charging interest on interest. Cross-objection is therefore dismissed with costs

There is however some force in the Appellant''s contention that the rate of interest should have been at the same rate till the date of decree in particular, as we find in this case the delay that has been caused is on account of Defendant''s deliberate attempt in protracting litigation. We find from the evidence on record that the receipts were in the name of Vimlabai and there cannot be any doubt about her right to take the money. Before the filing of the suit the Defendant put up many frivolous objections which forced the Plaintiff to go to the Court Such frivolous objections are not expected of any public limited Company. It is true that all those frivolous objections were taken before the date of filing the suit and therefore rate of interest at 9% was allowed till the date of filing the suit.

But in this case what we find is even during the course of proceedings the Defendant has taken up an attitude which clearly show a deliberate attempt to delay the justice. The previous conduct therefore is relevant to throw light on his subsequent conduct.

S. 35-A. C. P. Code allows compensatory costs in respect of filing vexatious defences but that does not mean that filing vexatious defences cannot be taken into account in awarding interest.

In a case reported in ILR 1955 Nag. 413 (Panmal v. Rameshpuri) it has been held that "unless there are circumstances disentitling a party to future interest, the party is entitled to interest at the contract rate from the date of the suit till the date of the decree"

It will therefore be clear that circumstances should exist which would disentitle the party to future interest. The learned Counsel for the Respondent has not been able to point out any circumstance which would go against the granting of future interest. His only argument was that the future interest has been allowed and that too at the rate of 4 per cent which is the rate the Court thought reasonable.

His argument in short is that u/s 34, C. P. Code the Court has discretion to grant interest and the Court has granted the same at the rate of 4% which discretion cannot be interfered with in appeal. For the purpose of appreciating his argument it is necessary to quote S 34(a) C. P. Code which reads as udder:

Where and in so far as a decree is for the payment of money, the Court may in the decree order interest at such rate as the Court deems reasonable to be paid on the principal sum adjudged, from the date of the suit to the date of decree, in addition to any interest adjudged on such principal sum for any period............... prior to the institution of the suit, with further interest at such rate not exceeding six percent per annum as the Court deems reasonable on such principal sum, from the date of the decree to the date of payment, or to such earlier date as the Court thinks fit.

There are two parts of the section One is about the rate of interest till the pendency of the suit and the other about rate of interest after the passing of the decree. So far as granting interest after the passing of the decree is concerned maximum has been put. The Court cannot exceed 6%. But so far as the other part is concerned no limit has been put. It is therefore clear that the two parts conceive of different considerations in fixing interest.

As we have seen, the view of the Nagpur High Court is that unless there are circumstances which disentitles the Plaintiff to the contract rate, the rate of interest should remain unchanged. It is therefore clear that if the Court wanted to give interest other than the contract rate it should have given reasons, so that we would be in a position to state whether the Court has exercised proper discretion or not. In the absence of any grounds which have induced the Court to grant less interest the discretion cannot be such as would not call for any interference.

We have already seen that the suit was filed on 1-7-55 whereas the decree was given on 30-4-59. There was no fault on the part of the Plaintiff for taking such a long time. It is only because the Defendant wanted to examine witnesses from different parts of the country for reasons which are not at all clear excepting the intention to protract litigation that such a delay has been caused. The Plaintiff therefore cannot be penalised for this act of the Defendant.

The learned Counsel for the Respondent cited AIR 1942 PC 61 Lata Hakimrai v. Lala Gangaram in order to show that the rate of interest allowed after the institution of the suit is entirely a matter with the discretion of the Court. It is undoubtedly true that granting of interest is at the discretion of the Court, but at the same the discretion must be exercised judicially and in fact in the very said case their Lordships of the Privy Council had to say that "the discretion was wisely exercised." A discretion therefore must not be exercise 1 arbitrarily. No reason has been given for reducing interest from 10% contract rate of 4%. There is always difference between discretion and an arbitrary decision. A discretion has got some reasons behind it. The reasons may not always appeal but, there must be some reasons. In the instant case no reasons have been given for reducing the rate of interest. The High Court therefore can interfere.

In Mahabir Prashad Rungta Vs. Durga Datt, relied on by the Respondent, the facts are quite different. That was a case in which a claim was made for damages. Their Lordships therefore did not allow interest up to the date of the suit. But sub equent to that the Court allowed interest at the rate of 4% There was do agreed rate of interest in that case. Their Lordships have observed:

In the present case no agreement about interest was made nor was it implied. The notice which was given did not specify the sum which was demanded and therefore the Interest Act does not apply The present case also does not fall within those cases in which Courts of equity grant inter est. Learned Counsel for Durgadatta claimed interest as damages; but it is well settled that interest as damages cannot be awarded. Interest up to date of suit, therefore was not claimable and a deduction shall be made of such interest from the amount decreed. As regards interest from the amount decreed As regards interest pendente lite until the date of realisation, such interest was within the discretion of the Court. The rate fixed is 6% which in the circumstances and according to the practice of Courts appears high. Interest shall be calculated at 4 percent per annuam instead of at 6 per cent and the decree shall be modified accordingly.

In the above mentioned case it is clear that the discretion was exercised by the Court under those circumstances. In the instant case the facts are quite different. Here there was a contract and there was a stipulated rate of interest. Moreover the discretion has been exercised arbitrarily without giving any reasons.

In Bhagwant Genuji Girme Vs. Gangabisan Ramgopal, their Lordships only observed:

Courts may allow interest when there has been long delay under vexatious and oppressive circumstances in the payment of what is due under the contract. The mere fact that damages are awarded is no ground for refusing to award interest if the circumstances justify.

These observations certainly do not help the Respondent. The only question which their lordships were considering is whether interest has to be allowed and whether the rate of interest that has been allowed after exercising proper discretion.

Gajadhar Marwari and Others Vs. Baidyanath Mandal and Others, simply followed the Privy Council ruling already cited and there is nothing new which helps the Respondent.

A ruling reported in Bitla Rajalingam and Sons and Another Vs. C.P.V. Kotiah Chetti and Co. and Others, also does not help the Respondent. In that case their Lordships have observed:

S 34 permits the civil Court to award interest on the principal sum adjudged, from the ate of the suit to the date of the decree at such rate as the Court deems reasonable. By an amendment of S 34 the discretion of the Court to grant interest at any reasonable rate for the period subsequent to the date of the decree was limited to six per cent.

Whatever be the position we find that the Privy Council and the Supreme Court do not say that the Court can award interest or curtail interest arbitrarily. Though it is at the discretion of the Court, the discretion has to be exercised judicially. Discretion and arbitrary decision are totally different. We there-fore respectfully agree with the view expresse(sic) in ILR 1955 Nag. 413, and hold that the rate of interest pendente lite should be the contract rate, unless there are circumstances which would disentitle the Plaintiff to have the same. The burden is on the Defendant or the judgment-debtor to show the circumstances. Normally therefore the Plaintiff should be entitled to the interest at the contract rate. In this case however contract rate of 10% is illegal in view of the M. B. Interest Act. The rate of interest Court has allowed therefore is 9%.

As regards the rate subsequent to the granting of decree, the Court has allowed it at 4%. The maximum that can be allowed is 6 percent. As we had already seen that the Defendant in this case was responsible for the delay and for protracting litigation, we are constrained for the delay to award interest after passing of the decree at the rate of 6 p. c. p. a.

Though the Plaintiff is entitled to the interest at the contract rate, yet the maximum rate that can be allowed under the Interest Act is 9%. We therefore do not see any reason why the Appellant should not get interest at the rate of 9% during the pendency of the suit, that is from the date of the suit till the passing of the decree.

The result is the appeal is allowed with costs. The decree under appeal is modified in respect of interest from the date of decree till realisation of the principal amount. The rest of the decree will remain intact. The Defendant shall be liable to pay interest at the rate of 6 p. c. p. a. on Rs. 20,200 from the date of the decree till realisation. The cross-objection is dismissed with costs. Counsel fee according to scale, if certified.