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1995 Supreme(All) 1277
ALLAHABAD HIGH COURT
D.C. Srivastava, J.
KRISHNA SWARUP SINGHAL AND ANOTHER - APPELLANTS
v.
MAHESH CHANDRA BANSAL AND ANOTHER - RESPONDENTS.
Second Appeal No. 802 of 1995
Decided on : December 14, 1995.
Advocate Appeared:
Sh. Madhav Jain, Advocate, for the Appellants.
Sh. Niraj Upadhyay, Advocate, for the Respondents.
The rate of pendente lite and future interest under Section 34 of the CPC cannot exceed 6% per annum unless the liability arises out of a commercial transaction.
Headnote:
INTEREST - SECTION 34 CPC - SECTION 3 INTEREST ACT - PENDENTE LITE AND FUTURE INTEREST - AWARD OF INTEREST AT ENHANCED RATE WITH QUARTERLY RESTS - LEGALITY.
Fact of the Case:
Plaintiff, a retired partner of a firm, sued the firm and its partners for recovery of Rs. 45,000/- being the balance amount due to him as per a written agreement. The trial court decreed the suit with interest at 6% per annum up to the date of the suit and pendente lite and future interest at the same rate. On appeal, the lower appellate court enhanced the interest rate to 12% per annum up to the date of the suit and 19.5% per annum with quarterly rests as pendente lite and future interest.
Finding of the Court:
The court held that the award of interest at 12% per annum up to the date of the suit was justified under Section 3 of the Interest Act, 1978. However, the award of pendente lite and future interest at an enhanced rate with quarterly rests was not justified under Section 34 of the Code of Civil Procedure (CPC) as the transaction between the parties was not of a commercial nature.
Issues: 1. Whether the award of interest at 12% per annum up to the date of the suit was justified under Section 3 of the Interest Act, 1978? 2. Whether the award of pendente lite and future interest at an enhanced rate with quarterly rests was justified under Section 34 of the CPC?
Ratio Decidendi: 1. Section 3(1)(a) of the Interest Act allows interest at a rate not exceeding the current rate of interest from the date when the debt is payable to the date of the institution of the suit. 2. Section 34 of the CPC allows interest on a money decree at a reasonable rate from the date of the suit to the date of the decree, and further interest at a rate not exceeding 6% per annum from the date of the decree to the date of payment. However, in the case of a commercial transaction, the rate of interest may exceed 6% per annum but shall not exceed the contractual rate of interest or the rate at which moneys are lent or advanced by nationalised banks in relation to commercial transactions. 3. The transaction between the parties was not of a commercial nature, therefore, the rate of interest could not have exceeded 6% per annum under Section 34 of the CPC.
Final Decision: The appeal was partly allowed. The judgment and decree of the lower appellate court were modified to award interest at 12% per annum up to the date of the suit and pendente lite and future interest at 6% per annum from the date of the institution of the suit till the realization of the amount.
D. C. Srivastava, J. - This second appeal arises out of the judgment and decree dated 14th March, 1995 of Sri. R. M. Rai VII Additional District Judge, Agra, passing a decree for Rs. 45,000/- together with interest at the rate of 12 per cent up to the date of the suit and there after pendente lite and future interest at the rate of 19.5 per cent with quarterly rests.
2. The dispute involved in this appeal is very short and is confined to the legality of award of pendente lite and future interest at the enhanced rate with quarterly rests.
3. The brief facts are that plaintiff respondent No. 1 and defendants Nos. 1 and 2 were partners of a Firm who were carrying on business in the name of defendant No. 3. Plaintiff Respondent No. 1 remained partner in the said Firm up to 31st March, 1979 and retired on 1st April, 1979. A written deed was executed between the parties on 12th June, 1979 through which, it was agreed that defendants Nos. 1 and 2 shall remain partners of the Firm and the plaintiff on account of his retirement will be entitled to Rs. 90,000/-, out of which Rs. 45,000/- were to be paid within a year and the remaining amount was to remain in deposit with the firm for a period of one year. Rs. 45,000/- were paid but the remaining amount has not paid, hence the suit was filed.
4. The suit was contested only by defendant No. 1, on grounds mentioned in the written statement.
5. The suit was decreed by the trial Court which awarded interest at the rate of 6 per cent per annum up to the date of the suit and pendents lite and future interest also at the same rate.
6. An appeal was preferred against this judgment and decree of the trial Court which was allowed and interest at the rate of 12 per cent was allowed up to the date of the suit and at the rate of 19.5 per cent per annum with quarterly rests as pendente lite and future.
7. Learned counsel for the parties were heard at length. The provisions of Section 34 of the Code of Civil Procedure and Section 3 of Interest Act, 1978 were also referred and considered.
8. I do not find force in the contention, of the learned counsel for the appellants that because the plea of Section 3 of Interest Act was not raised and discussed in the courts below, it cannot be permitted to be raised in this appeal as was attempted to be done from the side of the respondents. The reason is that in paragraph 16 of the grounds of appeal, it is mentioned that the interest was payable according to the discretion of the court under Section 3 of Interest Act. The appellants, therefore, cannot be permitted to say that the aid of Section 3 of Interest Act cannot be taken.
9. Section 2(b) of Interest Act defines current rate of interest as under :
Section 2(b) "current rate of interest" means the highest of the maximum rates at which interest may be paid on different classes of deposits (other than those maintained in savings account or those maintained in charitable or religious institution) by different classes of scheduled banks in accordance with the directions given or issued to banking companies generally by the Reserve Bank of India under the Banking Regulation Act, 1949.
Explanation : In this clause, "scheduled bank" means a bank, not being a co-operative bank, transacting any business authorised by the Banking Regulation Act, 1949.
Section 2(c) of the Act defines as under :
(c) "debt" means any liability for an ascertained sum of money and includes a debt payable in kind, but does not include a judgment debt."
10. It was not disputed that in the nature of the transaction between the parties the plaintiff respondent No. 1's was in the nature of Creditor against the Firm and the Firm will be treated to be debtor of the plaintiff.
11. Section 3(1) of the Interest Act reads as under :
"In any proceedings for the recovery of any debt or damages or in any proceedings in which a claim interest in respect of any debt or damages already paid is made, the court may, if it think fit, allow interest t
