JUDGMENT - D.R. DHANUKA, J.:---The plaintiff Bank has filed this suit against the defendant for recovery of a sum of Rs. 5,55,259.35 with further interest thereon at the rate of 16.5 per cent per annum with quarterly rests from the date of the suit till payment and for enforcement of the securities created by the defendant in favour of the plaintiff referred to in the plaint. The plaintiff has relied upon several documents, including a promissory note dated 9th July, 1984 (Exhibit ' A' to the plaint) in support of its plea that the defendant had agreed to pay the amount of interest to the plaintiff "with quarterly rests".

2. The plaintiff applies for ex-parte decree against the defendant and prays for award of interest pendente lite and post-decretal on the amount due and payable by the defendant to the plaintiff as on the day of the suit.

3. Section 34 of the Code of Civil Procedure empowers the Court to award post-decretal interest and interest pendente lite "on the principal sum adjudged" at such rate as it deems fit within the framework of the said section. It is necessary to consider the question as to what is the correct legal interpretation of the expression "principal sum adjudged" as used in section 34 of the Code. This question has arisen for consideration of the Court very often and particularly in Bank suits whether addition of interest to the principal at certain intervals with prescribed rests is the part of normal Banking practice. In some of the judicial pronouncements it has been held by some of the High Courts that the expression "principal sum adjudged" means the original amount lent or the original principal amount without adding any amount on account of interest thereto. In several other decisions it has been held that the expression "the principal sum adjudged" means and includes aggregate amount found due and payable by the Court on the date of filing of the suit i.e., the amount inclusive of amount of interest which has been capitalised with or without rests by virtue of an agreement between the parties.

4. In Halsbury's Laws of England, Volume 3. Paragraph 160, reference is made to the universal custom of bankers charging interest to their customers at periodical rates. The relevant paragraph from the above standard work reads as under:---

"It is the practice of Bankers to debit the accrued interest to the borrower's current account at regular periods (usually half-yearly); where the current account is overdrawn or becomes overdrawn as the result of the debit the effect is to add the interest to toe principal, in which case it loses its quality of interest and becomes capital". (Emphasis supplied)

5. In (Paton (Fenton's Trustee) v. I.R.C.)1, (1938)1 All England Reporter, 786, the House of Lords observed that the accrued interest which the Bank has, with the customer's assent, added to the principal loan ceases to be due or recoverable as interest but becomes merged in the principal. Lord Atkin as well as Lord Macmillan have made clear observations to the above effect in the abovereferred judgment. The said observations are duly extracted in paragraph 11 of the judgment of the High Court of Delhi in the case of (Syndicate Bank v. M/s. W.B.. Cements Ltd)2, A.I.R. 1989 Delhi 107.

6. I shall first refer to the three Division Bench judgments of our High Court on the subject which appear to be directly relevant. In the case of (Kaluram v. Chimniram)3, A.I.R. 1934 Bombay 86, Beaumont, CJ., observed as under:---

"Mr. Setalvad for the defendants has suggested that on the words of that section (section 34 of the Civil Procedure Code), which allows us to give interest on the principal sum adjudged at the date of the suit, we cannot give compound interest. But I think we clearly have jurisdiction to give compound interest; and in this case, having, regard to the practice which existed between the parties, and to the very long time during which the defendants have been in possession of the plaintiffs' go

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