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2013 Supreme(J&K) 609
HIGH COURT OF JAMMU AND KASHMIR AT JAMMU
Janak Raj Kotwal, J.
State Of J&K & Ors. -Appellant
Versus
Jagdish Gupta -Resopndent
C. Rev. No. 06-2013 & CMA No. 06-2013
Decided On : 04-11-2013
Sachin Dogra, V. Bhushan Gupta.
The main legal point established in the judgment is that the interest payable under a decree is governed by Section 34 of the Code of Civil Procedure, and the court has the discretion to award simple interest at a reasonable rate, but compounding of interest is not permissible unless specifically provided for in the decree or authorized by statute.
Headnote:
Bank Rate - Interest Calculation - Section 34 of the Code of Civil Procedure - Summary
Fact of the Case:
The case involved a dispute over the interest rate chargeable under a decree for recovery of a loan amount. The decree-holder sought to recover the principal amount along with interest 'as per Bank rate' from the date of institution of the suit till final realization of the decreetal amount. The rate of interest allowed by the trial court became the bone of contention between the parties, leading to protracted litigation in execution proceedings.
Finding of the Court:
The court found that the interest payable under the decree was simple interest at the rate of 21 per cent per annum, and the impugned order providing for compounding of interest with quarterly rests was held to be bad in law and not sustainable.
Issues: The key issues included whether interest at bank rate could have been awarded in the decree, the determination of the rate of interest as per the bank rate, and whether the interest, if to be paid at the rate of 21 per cent, shall be compounded with quarterly rests.
Ratio Decidendi: The court interpreted Section 34 of the Code of Civil Procedure and held that the interest payable under the decree was simple interest at the rate of 21 per cent per annum, and the impugned order providing for compounding of interest with quarterly rests was beyond the decree and not permissible under the law.
Final Decision: The impugned order was modified by setting aside the provision for compounding of interest with quarterly rests, and the respondent under the decree was held entitled to 21 per cent simple interest on the decreetal amount.
2. Heard. I have perused the record.
3. For back in the year, 1984, the Respondent/decree-holder had filed a suit against petitioners/judgment-debtors for recovery of Rs. 12,349.78/ on account of the supply of one Allwyn Refrigerator by him to petitioner No. 3. The suit amount sought to be recovered comprised of Rs. 7016.92/ as the principal and Rs. 5332.86/ as interest calculated by the decree holder at the rate of Rs. 24 per cent up to the date of suit. The suit was decreed by the Court of learned Sub-Judge (CJM), Jammu vide judgment and decree dated 29.02.2000. The decree provided for recovery of Rs. 12,349.78 along with costs and interest `as per Bank rate' from the date of institution of suit till final realization of the decreetal amount. The rate of interest allowed by the learned trial court became the bone of contention between the parties resulting into protracted litigation in execution proceedings commenced by the decree-holder leading to this Revision Petition by the judgment-debtors.
4. Learned trial court/executing court during currency of the execution proceedings seems to have entertained a review petition moved by the judgment-debtors and vide order dated 24.08.2002 modified the decree and fixed the rate of interest at 9 per cent instead of the Bank rate prevalent at the relevant time. This order, however, was set aside by this court vide order dated 30.04.2008 in Civil Revision No. 39/2004 holding that the decree could not have been modified in exercise of the review power otherwise than in removal of defects or mistakes apparent on the face of record or as a result of consideration of some fresh materials not available to interested party despite diligence. While setting aside the order dated 24.08.2002 this Court, however, had made an observation that judgment-debtors would not be prevented from seeking reduction in decreetal rate of interest through proper medium, if so advised. Thereafter the learned executing court passed an order dated 11.04.2009, thereby, holding that applicable rate of interest was 12.24 per cent per annum with quarterly rests. While passing this order, the learned executing court had taken into consideration the statement of one Raman Kachroo, Assistant, Advances of the State Bank of India, Branch, Kachi Chowni, Jammu produced by the decree-holder for determination of the Bank rate of interest prevalent at the relevant time and had, while rejecting his evidence, found that the rate of interest applicable was 12.24 per cent per annum.
5. Both the decree holder as well judgment-debtors questioned this order in separate revisions before this court and this court vide order dated 11.10.2010 allowed both the revision petitions observing that the question as to what was the prevalent rate of interest chargeable by the Banks at the relevant time vis a vis type of loan availed by the judgment-debtors had not been correctly addressed. This court also observed that it shall be quite appropriate if both the parties are given chance to clearly establish before the executing court as to what was the requisite bank rate of interest applicable and thereafter based on that rate of interest calculations are made and amount as shall be found recoverable is recovered from the judgment-debtors. This court had, therefore, while allowing the revision petitions, directed the executing court to ensure that the question of bank rate of interest as was prevalent at the relevant point of time is finalized within a period of four weeks.
6. Learned executing court took up the matter and this time vide order dated 21.05.2011 came to conclusion that rate of interest chargeable by the banks at the relevant date, that is, at the time of institution of the suit was 15 per cent per annum and the decree
