Back
1994 Supreme(SC) 1442
SUPREME COURT OF INDIA
A.M. Ahmadi, R.M. Sahai, K. Jayachandra Reddy, JJ.
Bank of Baroda - Petitioner
Versus
Jagannath Pigment & Chem. and Ors.- Respondent
CA 2785/1987
Decided On : 21-09-1994
Headnote:
Compound Interest - Loan Recovery - The court held that future interest should be calculated on the sum borrowed and not the principal sum adjudged, reversing the decision of the High Court based on the precedent set in Corporation Bank v. D.S. Gowds 1994 (3) SCALE 46.
Fact of the Case:
The appellant-bank filed a suit to recover a sum of Rs. l, 66,759-29p with interest and costs. The suit was decreed for the said amount with proportionate cost. Future interest was awarded at the rate of 131/2 per cent per annum on the said amount from the date of the suit till payment or realization. The borrower appealed, contending that the bank was not entitled to claim compound interest and convert the principal sum claimed as inclusive of interest.
Finding of the Court:
The High Court modified the decree, holding that future interest should be calculated on the sum borrowed and not the principal sum adjudged. The appellant-bank argued that this approach of the High Court ran counter to the decision in Corporation Bank v. D.S. Gowds 1994 (3) SCALE 46. The court found that the decisions of the High Court no longer held in view of the precedent set in Corporation Bank, and therefore reversed the decisions of the High Court and restored the decision of the Trial Court.
Issues: The main issue was whether future interest should be calculated on the principal sum adjudged or the sum borrowed, and whether the High Court's decision was in line with the precedent set in Corporation Bank v. D.S. Gowds 1994 (3) SCALE 46.
Ratio Decidendi: The court held that future interest should be calculated on the sum borrowed, not the principal sum adjudged, based on the precedent set in Corporation Bank v. D.S. Gowds 1994 (3) SCALE 46.
Final Decision: The appeal was allowed, and the decisions of the High Court were reversed, restoring the decision of the Trial Court.
ORDER :
K. Jayachandra Reddy, J.
Intervention applications are dismissed.
2. The appellant-bank had filed a suit to recover a sum of Rs. l, 66,759-29p with interest and costs. The suit was decreed for the said amount with proportionate cost. Future interest was awarded at the rate of 131/2 per cent per annum on the said amount of Rs. l, 66,759-29p from the date of the suit till payment or realisation. Against the said decree the borrower preferred an appeal, First Appeal No. 364/86, in which one of the contentions raised was that the bank was not entitled to claim compound interest and convert the principal sum claimed as inclusive of interest and that the Court was not justified is granting future interest on the said principal sum - adjudged. The High Court accepted the contention and modified the decree in that it held that future interest should be calculated on the sum borrowed, vis., Rs. l,20,675-59p and not the principal sum - adjudged i.e. Rs. l,66,759-29p. Counsel for the appellant-bank states that this approach of the High Court runs counter to this Court's decision in Corporation Bank v. D.S. Gowds 1994 (3) SCALE 46. The respondents though served have not chosen to enter an appearance and contest this appeal.
3. The premise on which the High Court based its impugned decisions no longer holds the field in view of the decisions in Corporation Bank. Therefore, the said decisions of the High Court must be reversed and the decision of the Trial Court restored. The appeal is allowed accordingly with no order as to costs.
