Goda Raghuram, J.

The A.P. State Co-operative Bank Limited - the petitioner, sanctioned a term loan of Rs. 36.75 lakhs and working capital loan of Rs. 15.31 lakhs comprising Rs. 9.34 lakhs under cash credit limit and Rs. 5.97 lakhs under Bills limit, to the 1st respondent on the acceptance by the 1st respondent of the terms and conditions stipulated in the agreement executed by respondents 2 to 4. The petitioner bank obtained security documents and personal guarantees of respondents 2 to 4. The term loan of Rs. 36.75 lakhs was repayable in ten half yearly equal instalments at the rate of Rs. 3,67,500/- starting from 8-10-1993 to 8-4-1998. The term loan carried an interest of 19% p.a., at half yearly rests and penal interest of 2% p.a., on over dues/ defaults. The validity of the working capital limit expired on 23-1-1996. As payments were not made by the loanee, the petitioner issued notice for repayment of the entire loan amount due. Despite repeated requests and notices by the petitioner, the 2nd respondent did not repay the loan amount due. In the circumstances, the petitioner sought reference to arbitration under Section 61 of the A.P. Co-operative Societies Act, 1964 (for short 'the 1964 Act'), for recovery of Rs. 83,48,917.75 ps, with further interest and penal interest with effect from 1-10-1997. After following due procedure, the 5th respondent - Arbitrator, passed an award dated 22-12-1998 determining the liability of the respondents 2 to 4 herein jointly and severally to the petitioner in a sum of Rs. 83,48,917.75 ps, with further interest at 19% PA on the term loan; at 19.5% PA on working capital loan at half yearly rests and penal interest @ 2% pa....., with effect from 1-10-1997 till the date of payment of the entire loan amount. The 5th respondent by the award also held that respondents 2 to 4 herein are liable to pay the interest completely by the end of January, 1999 and that the principal amount has to be repaid in four quarterly instalments commencing from 31-3-1999 and that in default of payments as aforesaid, the petitioner - Bank is at liberty to realise the awarded amount from respondents 2 to 4 personally or from their properties or both.

2. Aggrieved thereby, the respondents 2 to 4 preferred an appeal to the 1st respondent - Tribunal under Section 76 of the 1964 Act The 1st respondent Tribunal, by the order dated 23.6.2001 in CTA No. 55 of 1999 confirmed the liability of the respondents 2 to 4 herein as determined by the 5th respondent - Arbitrator, but modified the award to the extent of the interest directed to be paid under the Award. Consequently the award was partly modified to the extent of interest which was directed to be payable at 6% p.a., from the date of the award till the date of realisation, on the principal amount due as on the date of the award duly setting aside the order of the Arbitrator awarding interest at 19% p.a.

3. Aggrieved by the order of the 1st respondent - Tribunal, to the extent of scaling down of the interest, the petitioner - Bank is before this Court seeking judicial review of the order in CTA No. 55/99.

4. In support of the decision scaling down of the interest, the 1st respondent -Tribunal relied upon the decision of the Supreme Court in M. Veerappa v. Canara Bank, AIR 1998 SC 1101 and a decision of this Court in 1999 (6) 328.

The Issue:

5. Whether the adjudicator/Arbitrator or the appellate forum - the Co-operative Tribunal under Sections 61 and 76 respectively of the 1964 Act are empowered to invoke or rely upon the provisions of Section 34 CPC, scale down the rate of interest, contrary to the agreement between the parties to a lis.

6. It needs be noted that the 1st respondent - Tribunal in scaling down the rate of interest did not specifically refer to Section 34 CPC. During the course of hearing of the writ petition, however, learned Counsel for the 2nd respondent sought to justify the decision of the Tribunal on the basis of the discretion available to a Court under