The court emphasized the discretion of the court to award interest exceeding 6 percent per annum in commercial transactions and the need to consider the object behind the loan transaction and the condition of the business of the person in exercising this discretion.

K. JAGANNATHA SHETTY, J.

( 1 ) THE appellant is a Financial Corporation. The respondent, Narayana ramachandra Naik, is a businessman and is the proprietor of a hotel called 'nityananada Bhavan' at Ramadurg, dist. Belgaum. In 1970, the Corporation sanctioned a loan of Rs. 2 lakhs for expanding the hotel business, out of which the respondent obtained Rs. 1. 59. 000. The loan was repayable with interest at 9 per cent per annum in twenty half yearly equal instalments and the first of such instalment was payable on 22nd February, 1972. If the instalments were not paid on the due dates, they should carry interest at 11 per cent per annum from the due date upto the date of payment. The respondent committed default in payment of the instalments. The corporation, therefore, moved the district Judge under S. 31 of the state Financial Corporation Act, 1961, for a declaration that the respondent was due in a sum of Rs. 2,00,348-36 and interest at 11 per cent per annum on Rs. 1,59,000 from the date of petition till date of payment. The respondent resisted the claim of the Corporation contending inter alia that the Corporation did not maintain proper accounts and it has not credited to the account all the amounts paid by him from time to time. He also disputed his liability to pay interest at 11 % per annum. On the material placed by the parties, the learned Judge found no difficulty to accede to the claim of the Corporation, in regard to the arrears payable by the respondent, and accordingly he decreed, but while allowing interest during the pendency of the proceedings and further, he awarded only 6 per cent per annum. To be more explicit, he has allowed 11 percent interest in regard to the arrears of instalments from the date of default, but limited the current interest to only 6 percent during the pendency of the proceedings till payment. Aggrieved by that part of the decree relating to the current interest, the corporation has preferred this appeal. It was urged for the Corporation that the loan given to the respondent was a commercial transaction and 11 per cent interest was a contractual rale of interest agreed upon between the parties and the Corporation is entitled to collect it. It was also urged that the learned Judge has not given any reason why that contractual rate of interest should be reduced to 6 per cent when particularly, it was not disputed that the respondent has admittedly defaulted to pay the instalments as and when they became due. There is, in our opinion, considerable force in the submission. The terms of the loan provide that respondent was liable to pay 9 per cent on the amount given to him and if there was a default in payment of the prescribed instalments he should pay an additional 2 per cent interest from the date of default. In other words, the respondent was charged only 9 per cent interest for punctual payments and 2 per cent more for default and delayed payments. The question is. whether the Corporation should be denied of this contractual rate of interest for the period during which the proceedings were pending in the court below till payment of the decretal amount. S. 34 CPC provides for grant of interest as such rate not exceeding 6 percent per annum as the Court thinks fit. The proviso thereunder states:"that where the liability in relation to the sum so adjudged had arisen out of a commercial transaction, the rate of such further interest may exceed 6 per cent per annum but shall not exceed the contractual rate of interest or where there is no contractual rate, the rate at which moneys are lent or advanced by nationalised banks in relation to commercial transactions. ' the proviso provides for awarding the interest at more than 6 per cent per annum when the decree pertains to commercial transactions. The Court, however, shall not give more than the contractual rate, and where there is no contractual rate, the rate of interest to bo decreed should not exceed the prevailing Bank rate. This Court in Venk

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