IMPORTANT POINT
When no interest is provided under loan agreement, creditor-applicant can claim interest at the rate provided under Section 80 of Negotiable Instruments Act only up to date of filing of suit and thereafter liability for interest pendente lite and future is governed by Section 34 CPC.

C.N. Ramachandran Nair, J.—Petitioner is challenging Ext. P2 Judgment of the Debt Recovery Appellate Tribunal, Chennai, partly allowing the appeal filed by the petitioner against Ext. P1 award of the Debt Recovery Tribunal. I heard counsel appearing for the petitioner and standing counsel appearing for the respondent-Bank. The first petitioner availed a loan of Rs. 15 lakhs from the respondent-Bank on 16.3.1998 repayable in 10 monthly instalments and petitioners 2 and 3 stood as sureties for the loan by creating equitable mortgage of immovable properties in favour of the Bank. The first petitioner repaid substantial amounts though not strictly in accordance with schedule of repayment agreed with the Bank. When the default persisted and petitioners refused to settle the liability, the Bank filed O.A. before the DRT under the Recovery of Debts (Due to Bank and Financial Institutions) Act, 1993, hereinafter called the “DRT Act”. Though written statement was filed by the petitioners they did not choose to cross-examine the Manager of the applicant-Bank or file proof affidavit in support of the contentions raised in the written statement. The major objection raised by the petitioners in the written statement against the claim of interest at 26.27 per cent by the Bank is that neither the Pro-note executed by the petitioners, nor the loan agreement, contained rate of interest payable for the loan. The DRT though in principle agreed with the petitioners against the demand of interest at 26.27 per cent by the Bank until filing of the suit, the DRT, in the absence of any rate of interest in the Pro-note or loan agreement applied Section 80 of the Negotiable Instruments Act, 1881, hereinafter called the “NI Act”, and granted interest at 18% per annum till date of filing of the suit. Besides this the DRT decreed interest at 14% pendente lite and 12% post-degree till realization. On appeal by the petitioners, the DRAT confirmed the Order of the DRT granting interest at 18% upto the date of application under Section 80 of the NI Act. However, DRAT reduced the interest pendente lite and post degree to a flat rate of 10%. This W.P. is filed challenging the Order of the DRAT to the extent of award of interest till date of filing of the OA and thereafter.

2. Counsel appearing for the petitioners relied on the decision of the Madras High Court in Syndicate Bank v. Kalyani Raghavan1 and contended that no interest under Section 80 of the NI Act can be decreed by the Court upto the date of filing of the suit. Counsel for the Bank on the other hand contended that the decision of the Madras High Court relied on by the petitioners does not lay down correct law and according to him the rate of interest under Section 80 of the NI Act is a substitute for contract rate of interest and the same is rightly awarded by the DRT and DRAT upto the date of filing of the suit.

3. On going through the decision above referred I find the Madras High Court has granted interest in a similar case at 6% that was the rate provided under Section 80 of the NI Act prior to it’s amendment in 1988 only from the date of the suit and not any period prior to it. The question therefore to be considered is whether Section 80 provides for interest only for the period from the date of filing of the suit, or from due date for payment of loan till date of filing of suit.

4. In Order to appreciate the rival contentions, Section 80 of the NI Act has to be referred to and for easy reference Section 80 is extracted hereunder:

80.Interest when no rate specified—When no rate of interest is specified in the instrument interest on the amount due thereon shall, notwithstanding any agree-ment relating to interest between any parties to the instrument, be calculated at the rate of eighteen per cent per annum, from the date at which the same ought to have been paid by the party charged, until tender or realization of the amount due thereon, or until such date after the institution of a s