JUDGMENT - Dr. B.P. SARAF, J.:---This case has been referred to the Full Bench at the instance of brother Dhanuka. J. The controversy that arose for determination relates to interpretation of the expression "principal sum adjudged" as used in section 34 of the Code of Civil Procedure, 1908 (hereinafter "C.P.C.").

2. The suit in relation to which this controversy arose was filed by the Union Bank of India for recovery of a sum of Rs. 5,55,259.35 with further interest thereon at the rate of 16.5% per annum with quarterly rests from the date of the suit till payment. The plaintiffs relied on various documents in support of its contention that the defendant bad agreed to pay the amount of interest to it with quarterly rests. An ex-parte decree against the defendant was prayed for with interest pendents lite and post-decretal. The controversy arose as to the amount on which pendente lite or post-decretal interest can be granted. The amount of Rs. 5,55,259-35 for which the suit had been filed was admittedly inclusive of interest due till the filing of the suit. Section 34 of C.P.C. empowers the Court to award pendente lite and post-decretal interest at such rate as it may deem reasonable on the "principal sum adjudged". The question for determination was whether "the principal sum adjudged" would mean the amount of original sum lent or the aggregate amount found due and payable on the date of the suit inclusive of the amount of interest added to the principal amount with or without periodical rests in accordance with the agreement between the parties. Similar expression has also been used in Order 34, Rule 2 and Order 34, Rule 11. The learned Single Judge, trying the suit, noticed that there was a clear conflict of opinion between the Division Bench Judgments of this Court in (Kaluram v. Chimniram)1, A.I.R. 1934 Bombay, 86 and two later unreported judgments in F.A. No. 364 of 1986 (M/s. Jagannath Pigments Chemicals v. Bank of Baroda), decided on 19th November, 1986 and F.A. No. 999 of 1987 (Central Bank of India v. Haribhau kakade others)3, decided on 16th March, 1988. The learned judge also noticed conflict of opinion between the view expressed by this Court in the later unreported judgments and the views of different High Courts. It is in this background, more particularly in view of the fact that similar question often arises for consideration in number of cases especially in Bank-suits, the leaned Single Judge recommended reference of the following questions to a larger bench:-

a) Whether the expression "the principal sum adjudged" used in section 34 of the Code of Civil Procedure means only the original amount lent or the amount of original principal without addition of any interest whatsoever thereto and interest pendents lite or post decretal interest can be awarded by the Court only on such original amount ?

b) When interest becomes part of the principal or gets merged with the principal within the meaning of section 34 of the Code when the agreement provides for addition of interest to the principal at certain intervals with periodical rests ?

c) Whether the expression "principal sum adjudged" includes the aggregate amount found due and payable on the date of the suit inclusive of amount of interest added to the principal with or without periodical rests in accordance with the agreement between the parties, express or implied, or the practice followed ?

d) What is the meaning of the expression "principal" used in Order 34, Rule 2 and Order 34 Rule 11 of the Code ?

On the recommendation of the learned Single Judge this case has been placed before us for hearing under the orders of the Hon'ble the chief Justice.

3. We have heard at length Shri Tulzapurkar, learned Counsel for the plaintiffs-Bank. In view of the importance of the controversy we also allowed the Indian Banks Association to intervene and heard its learned Counsel Shri Kapadia. At our request learned Counsel Shri R.A. Dada argued the case on behalf of the defend

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