1. Instant First Appeal filed by the plaintiff under Section 96 of CPC is directed against the judgment and decree dated 30.09.1997, passed by the District Judge, Rajnandgaon, in Civil Suit No. 1-B/1991.

2. Plaintiff-Bank sanctioned and granted loan/credit facilities to defendant No.1 to the limit of Rs.75,000/-. The defendant No.1 submitted all the necessary documents with the Bank on 23.05.1987. Because of certain reasons, the Murmura industry started by the defendant No. 1 suffered setback and closed in the year 1988. On 03.01.1989 an amount of Rs.1,46,108.35/- was due in cash credit account of defendant (Ex. P/11), however, the Bank neither settled the matter with the defendant nor instituted any suit immediately and the suit has been filed only on 02.05.1991 i.e. about 2-3 years after closure of industry.

3. As per plaintiff's case, on the date of suit, Rs.2,06,271.35/- was due in cash credit account of defendant.

4. The trial court, considering financial status of the defendant, the fact that defendant's industry was closed ever-since 1988-89 as well as that the cash credit limit of only Rs.75,000/- has been taken by the defendant, although granted a decree of Rs.2,06,271.35/- but awarded interest @ 6 percent per annum from the date of suit till its realization against the defendant No.1, also granted installment facilities for payment of decretal amount.

5. Feeling aggrieved and dissatisfied with the award of pendente lite and future interest @ 6 percent per annum, instant appeal has been preferred by the plaintiff-Bank.

6. It is contended by the appellant's counsel that in view of the proviso to Section 34(1) CPC, if the liability in relation to the sum adjudged had arisen out of commercial transaction, the rate of such further interest may exceed 6 percent per annum but shall not exceed the contractual rate of interest and the Bank is entitled to claim interest as per the contract.

7. On the other hand, learned counsel appearing for the respondent supported the judgment and decree impugned and submitted: the trial Court has rightly exercised its discretion in awarding interest @ 6% per annum from the date of the suit till its realization and no fault can be found in it. It was further contended that the defendant had already paid the entire decretal amount.

8. I have heard the counsel appearing for the parties and perused the judgment and decree impugned including record of court below.

9. The trial court, considering the facts that loan of Rs.75,000/- was sanctioned in the year 1987, immediately thereafter defendant's industry was closed in the year, 1988-89, suit was filed in the year 1991, and also considering the financial conditions of defendant, in its discretion has awarded pendente lite and future interest @ 6 percent per annum.

10. A bare reading of provision including its proviso, it would be clear as crystal that pendente lite as well as future interest on judgment rests entirely in the discretion of the court. The discretion, however, like all other discretions must be exercised judicially, reasonably and on sound legal principles. No rule of universal application can be laid down and each case will be decided on its own merits.

11. Constitution Bench of Supreme Court in the case of Central Bank of India Vs. Ravindra, 2002 (1) SCC 367, formulated the following principles:

"(1) Though interest can be capitalised on the analogy that the interest falling due on the accrued date and remaining unpaid, partakes the character of amount advanced on that date, yet penal interest, which is charged by way of penalty for non-payment, cannot be capitalised. Further interest i.e. interest on interest, whether simple, compound or penal, cannot be claimed on the amount of penal interest. Penal interest cannot be capitalised. It will be opposed to public policy.

(2) Novation, that is, a debtor entering into a fresh agreement with a creditor undertaking payment of previously borrowed principal amount coupled with interest by tr