( 1 ) LIFE Insurance Corporation of India (hereinafter called, the plaintiff) filed a suit being O. S. No. 574 of 1984 on the file of the court of I Additional Judge, City Civil court, Hyderabad, for recovery of a sum of rs. 37,810. 50 ps. from the defendants. The trial Court by judgment dt. 8-7-1988 decreed the suit for Rs. 34,547. 74 ps. denying interest as well as penal interest claimed by the plaintiff. Therefore this regular appeal filed.

( 2 ) THE facts are not much in dispute except some controversy regarding alleged payment made by the defendants. Briefly stated the facts are as follows. The defendants applied for loan of Rs. 50,000. 00 on 12-4-1971 for construction of a house, repayment of the existing loan and investment in business. The plaintiff sanctioned Rs. 40,000. 00 as loan on 28-6-1971. The defendants executed a registered mortgage deed on 5-9-1971 mortgaging their land and house. The amount was duly disbursed by cheques. An additional loan of rs. 10,000/- was sanctioned and disbursed on 9-2-1972. The defendants executed necessary documents. The loan is payable in half yearly instalments commencing from 1-4-1972 with interest at 10% per annum. If there is default in payment of instalments, the defendants are liable to pay additional interest at the rate of 21/2% over and above the agreed rate of interest. They did not pay the amount and committed default. Therefore, the plaintiff issued a number of notices whereafter the defendants paid only rs. 3,500. The cheques issued by the defendants for an amount of Rs. 2,000. 00 rs. 1,000/- were dishonoured. Hence, the suit was filed.

( 3 ) THE defendants admitted the loan and mortgage bonds as well as rate of interest. They denied the liability to pay compound interest and also right of the plaintiff to call back the entire amount on default. They also contended that whenever the plaintiff issued notices amounts were paid by cash. Even though cheques were dishonoured, the total amount of Rs. 50,000. 00 was paid, but the balance could not be paid due to sudden death of defendants daughter. As only small balance is left over, the plaintiff is not entitled for any future interest. The trial court framed the following issues stemming from the pleadings. (1) Whether the final payment should be made on 1-10-1986? (2) Whether the plaintiff is entitled to claim additional interest? (3) Whether the defendants have committed default in payment of instalments? (4) Whether the plaintiff is entitled to the suit claim? (5) To what relief?

( 4 ) THE plaintiff examined their office assistant as P. W. 1 and marked Exs. A-1 to a-21. Second defendant examined himself as D. W. 1, and no documentary evidence was let in on behalf of the defendants. The trial Court on consideration of oral and documentary evidence came to the conclusion that the defendants defaulted in payment of loan instalments by 5-8-1986, and calculation of the amount due as rs. 34,547. 74 ps. as on the date of the suit by the plaintiff is correct, but as the plaintiff failed to give credit to certain amounts paid by the defendants, who also deposited an amount of Rs. 40,000. 00 during the pendency of the suit to the credit of the suit, the trial court opined that the plaintiff is not entitled to any future interest or penal interest over and above the agreed rate of interest at 10% per annum.

( 5 ) THE learned counsel lor the appellant/ plaintiff Sri. Srinivas representing sri. M. V. S, Suresh Kumar, learned Standing counsel for use Life insurance Corporation of India submits that Section 34 of the Code of Civil Procedure (Hereinafter called cpc ) is not applicable to mortgage suits and therefore the trial Court committed error in applying the principles adumbrated in section 34 of the CPC. He submits That order XXXIV Rule 11 of CPC governs the case and mortgagee is entitled to interest upto the date of redemption at the contractual rate of interest and also reasonable rate of interest after the date o