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1983 Supreme(Bom) 173
IN THE HIGH COURT OF BOMBAY
(Nagpur)
Paunikar G.A. J.
Satyanarayan Umkaolal Agrawal .... Appellant.
Versus
State Bank of India .... Respondent.
First Appeal No. 2 of 1984 decided on 5-7-1984.
Advocate Appeared:
For appellant- M. G. Bhangde.
For respondent G. G. Modak.
The amended proviso to Section 34(1) CPC, allowing interest exceeding 6% p.a. in commercial transactions, was not applicable to suits instituted before its commencement on 1-7-1977.
Headnote:
INTEREST - CIVIL PROCEDURE CODE, 1908 - SECTION 34 - FUTURE INTEREST - RATE OF INTEREST - SUIT FILED BEFORE AMENDMENT OF SECTION 34 - APPLICABILITY OF AMENDED PROVISO - COURT'S DISCRETION TO AWARD INTEREST - INTERPRETATION OF SECTION 34(1) - MODIFICATION OF DECREE.
Fact of the Case:
The appellant challenged the grant of future interest at 10% p.a. on the decretal amount from the date of suit till realization, arguing that the suit was filed before the amendment of Section 34 of the Code of Civil Procedure (CPC) and, therefore, the amended proviso allowing interest exceeding 6% p.a. was not applicable.
Finding of the Court:
The court held that the amended proviso to Section 34(1) CPC, which allowed interest exceeding 6% p.a. in commercial transactions, was not applicable to suits instituted before its commencement on 1-7-1977. The court interpreted Section 34(1) CPC as it stood before the amendment and concluded that the trial court could not award future interest exceeding 6% p.a. from the date of decree to the date of payment.
Issues: 1. Whether the amended proviso to Section 34(1) CPC, allowing interest exceeding 6% p.a. in commercial transactions, was applicable to suits instituted before its commencement on 1-7-1977. 2. Whether the trial court had the discretion to award future interest exceeding 6% p.a. from the date of decree to the date of payment under the unamended Section 34(1) CPC.
Ratio Decidendi: 1. The court relied on Section 97(2)(e) of the CPC (Amendment) Act, 1976, which provided that the amended proviso to Section 34(1) CPC would not affect the rates of interest allowed on decrees in suits instituted before its commencement. 2. The court interpreted Section 34(1) CPC as it stood before the amendment and held that the trial court could grant interest at a rate exceeding 6% p.a. from the date of suit to the date of decree but not more than 6% p.a. from the date of decree to the date of payment.
Final Decision: The court allowed the appeal, set aside the trial court's order granting interest at 10% p.a. on the decretal amount, and modified the decree to award future interest at 6% p.a. from the date of suit till full payment.
2. The respondent-original plaintiff Bank filed a suit against the defendant for recovery of Rs. 46,276,51 by sale of mortgaged property of (the defendant. It Appeared that the parties filed a joint pursis Exh. 43 showing the outstanding dues against the defendant inclusive of interest till date of suit at Rs. 37,276.51 and submitted that for this amount decree be passed in favour of the plaintiff and against the defendant. The learned trial Judge passed a decree for this amount against the defendant and in favour of the plaintiff and also awarded interest at 10 p.c.p.a. from the date of suit till realisation along with costs of the suit against the defendant vide judgment and decree dated 31-3-1982. The defendant has challenged in this appeal only the rate at which future interest is granted.
3. The learned counsel for the defendant Shri M. G. Bhangde urged that this suit was filed by the plaintiff on 18-2-1976 and was, therefore, governed by the unamended section 34 of the Code of Civil Procedure. The amended section 34 is applicable only to suits instituted after 1-7-1977. Hence the trial Court had no jurisdiction to grant future interest more than 6 p.c.p.a. from the date of suit till realisation of the decretal amount. There is considerable substance in this contention.
4. Section 34(1) of the Code of Civil Procedure as it stood before Its amendment till 1-7-1977 reads as under:
“34 (1): Where and in so far as a decree is for 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 the 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:”
Thus the section did not permit the Court to award future interest exceed-ing 6 p.c.p.a. from the date of decree to the date of payment or to such earlier date as the Court thinks fit, as the Court had discretion to grant interest at such rate as it deems reasonable to be paid on the principal sum adjudged from the date of suit to the date of decree. Section 34(1) thus put an upper limit of 6 p.c.p.a. on the rate of interest to be granted as future interest on the principal sum from the date of decree to the date of payment.
5. The proviso to sub-section (1) of section 34 has been added by the Code of Civil Procedure (Amendment) Act, 1976 (No. 104 of 1976) under section 13, The proviso reads as under:
“Provided that where the liability in relation to the sum so adjudged had arisen out of the commercial transaction, the rate of such further interest may exceed 6 p.c.p.a. 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.”
It would appear that by addition of this proviso, the upper limit of the rate of future interest from the date of the decree to the date of payment is relaxed in respect of commercial transactions and where the decree is on account of commercial transactions, the Court shall grant interest exceeding 6 p.c.p.a. but not exceeding 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.
6. The suit was filed on 18-2-1976. The decree in the case was passed on 21-3-1982. The proviso to section 34 was brought into force on 1-
