Derby Tea And Industries Ltd v. Uco Bank — 1993 DIGILAW 290 (CAL)

JUDGMENT 1. THIS appeal is directed against the judgment and decree dated April 22, 1993 passed by the Court of the first instance on the basis of admission contained tin the Balance Sheet of the company, being the first appellant. 2. SHORTLY stated the facts are that on or about 22nd September 1992 the instant suit was instituted by the respondent UCO Bank for various reliefs. In the said suit an interlocutory application was made, inter alia, praying for the following reliefs:- (a) Receiver be appointed over the suit properties mentioned in annexure 'k' to the plaint with direction to take possession and make inventory there of; (b) The Receiver be directed to sell the teas in stock and those that might be grown and processed and if necessary take the assistance of the respondents No. 2 and 3, and make over the net proceeds thereof to the petitioner; (c) The Receiver be directed to sell the other movable assets after advertisement and make over the net proceeds to the petitioner; (d) The Receiver be appointed to receive the compensation money payable by the Government of Assam and receivable by the first respondent for acquisition by or surrender to the State of Assam 12. 78 hectares of land of the first respondent being the mortgaged property and security of the petitioner- and the Receiver be directed to make over the realisation to the petitioner; (e) Injunction restraining the respondents, their agents and servants and assigns from depleting, dissipating, transferring, encumbering or dealing with the suit properties in any manner whatsoever including the compensation amount and the mortgaged properties without first paying the claims of the petitioner; (f) Ad-interim Orders in terms of the prayers made herein above ; (g) Judgment upon admission for Rs. 9,32,70,081/- with interest from march 31, 1990 till realisation at 19. 5 percent per annum; (h) Costs of this application in relation to the Receiver and realisation of securities be added to be claims of the petitioner." On 22nd September 1932 an interim order was made in terms of prayer (a) of the said interlocutory motion. However, on the returnable date, i.e. on 24th September 1992 the said interim order was modified by giving liberty to the first appellant to carry on the day-to-day business. 3. AFTER completion of the affidavits the said application came up for hearing before the learned Interlocutory judge. However, on the returnable date, i.e. on 24th September 1992 the said interim order was modified by giving liberty to the first appellant to carry on the day-to-day business. 3. AFTER completion of the affidavits the said application came up for hearing before the learned Interlocutory judge. After hearing the submissions of the Counsel, the learned Judge allowed prayers (a), (d) and (g) of the said interlocutory motion. The order of the learned Judge is as follows:- "after hearing the submission made on behalf of the petitioner and on behalf of the respondents this Court is of the view that the plaintiff Bank is entitled to an order in terms of prayer (a). The petitioner is also entitled to an order in terms of prayer (d). There will also be an order in terms of prayer (e). In view of the clear unequivocal admission made in the Balance Sheet, this Court is of the view that the plaintiff is entitled to an order in terms of prayer (g). However, Mr. Banerjee appearing on behalf of the defendants prayed for payment by way of instalments. This Court directs the defendant company to pay monthly instalments of Rs. 10,00,000/-each. The decretal amount carry interest at the agreed rate. In default of payment of any two consecutive instalments the plaintiff would be entitled to execute the decree. The plaintiff Bank's prayer for sale of the goods hypothecated in favour of the plaintiff Bank could only be considered when there is any default in payment of such instalments. Mr. Shambhu Dutt is appointed Receiver. Initial remuneration of the receiver is fixed at 300 Gms. payable by the Bank at the first instance and to be added to its claim." this appeal is directed against the said judgment, decree and order. 4. MR. Somnath chatterjee, learned Senior Counsel appearing for the appellants has submitted that there was no clear or unequivocal admission in respect of the entire claim on which the decree had been passed. It is his contention that the appellants have disputed the calculations of interest, particularly the interest payable on NABARD loans. He has also submitted that the decree for payment of interim interest at the agreed rate of 19. 5 per cent is too excessive having regard to the fact that as against the claim of the Bank for Rs. 11,05,843/- a sum of Rs. 9,67,68,843/- represents interest. He has also submitted that the decree for payment of interim interest at the agreed rate of 19. 5 per cent is too excessive having regard to the fact that as against the claim of the Bank for Rs. 11,05,843/- a sum of Rs. 9,67,68,843/- represents interest. Relying on a Full Bench decision of the Bombay High Court in the case of Union Bank of India v. Dalpat Gourishankar Upadhyay, reported in air 1992 Bombay 482, he has contended that the expression "principal sum adjudged" appearing in Section 34 of the Civil Procedure Code means the original amount lent without the addition thereto of any interest whatsoever. If this is taken into consideration, in that event, the appellants will be liable to pay only approximately Rs. 2,00,00,000/ -. He has also submitted, relying on a Division Bench decision of this Court in United bank of India v. Rashyan Udyog and Ors. reported in AIR 1990 Cal 146 , that award of interim interest and interest on judgment is not obligatory but only discretionary and the Court may or not award such interest. Mr. Chatterjee has further submitted that Receiver ought not to have been appointed for taking possession of the assets as the company had been paying regularly to the Bank. He has fairly submitted that the appellants are, however, prepared to submit to a decree for the admitted amount, and the disputed amount representing interest should stand to trial. He has further submitted that the Count should also consider the payment of the decretal dues by reasonable instalments. 5. MR. Gupta, learned counsel appearing for the respondent Bank has submitted that the Full Bench decision of the Bombay High Court in Union bank of India (supra) is not binding on this Court. On the contrary, a division Bench of this Court in The Bank of Rajasthan Ltd. v. S. K. Trading co. and Ors. reported in 1990 (1) Cal L. T. (HC) 139. has held that the interest which would accrue on the outstanding amount for the quarter concerned becomes a part of the principal at "quarterly rests" and it means that the interest calculated up to the end of a quarter is thereafter added to the principal amount and it becomes part of the principal amount. Mr. has held that the interest which would accrue on the outstanding amount for the quarter concerned becomes a part of the principal at "quarterly rests" and it means that the interest calculated up to the end of a quarter is thereafter added to the principal amount and it becomes part of the principal amount. Mr. Gupta has, therefore, submitted that the principal amount adjudged is what has been claimed in that plaint taking into account the interest accrued thereon In accordance with the terms of the contract. The rate of interim interest and Interest on judgment on that amount may be discretionary as laid down in State Bank of India v. B. Gupta (Tea) Private Ltd. and Ors. reported in AIR 1987 Cal 64 but having regard to the fact that the Bank is a public institution for doing public good, unless circumstances demand, the contractual rate of interest should be allowed as has been done by the court of the first Instance. He has also drawn our attention to other decisions to which we shall presently refer. We have considered the rival contentions. 6. THE first question which calls for determination is whether the interest can be capitalised so that interest itself yields interest. In other words, the question is whether interest when compounded at half-yearly or quarterly rests merges into the principal amount. Our attention has been drawn to a decision of a learned Single judge of the Delhi High Court in Syndicate Bank v. West Bengal Cements ltd., reported in AIR 1989 Delhi 107, where it has been held that where the statement of account of the bank showed that the bank computed interest with quarterly rests and after the quarter the interest was added, to the last balance and that amount was treated as "principal sum" for computidng interest for the next quarter and so on and so forth and no contract was either pleaded or proved by borrower showing that amount inclusive of interest could not be treated as "principal sum" and the borrower acknowledged liability for the sum arrived at by the bank in the aforesaid manner, the amount so arrived at would be the principal sum for purpose of interest under Section 34. The plea that the interest under Section 34 can be awarded only on the original sum advanced would be misconceived as such interpretation would run counter to the normal banking practice and act as a premium for those not paying the amount of interest when it is due at the cost of those making payment of interest when it is due. 7. A Division Bench of the Gauhati High Court in United Bank of India v. Jorhat Fuel Briquetting Industry and Ors., reported in AIR 1992 Gauhati 116. following the decision of the Privy Council in Muthu v. Meenakshisundaram, reported in AIR 1920 PC 35, held that as the interest was payable at monthly resists, when default was once made by the defendant on the occasion of the first rest, the interest has sunk into the principal, and the aggregate amount (principal plus interest) was to be treated as a principal for the next month and so on and so forth, and the interest was to be paid on the composite sum and the defendant also had lost all its rights to have the interest separated from the principal. The Gauhati High Court also relied on the decision of the Delhi High Court in syndicate Bank (supra) where the bank advanced loan with interest at quarterly rests. The bank computed interest at the last balance and treated that as a principal sum for the next quarter for computing interest. There, it has been held that the principal sum advanced would be sum total of the original advance and unpaid interest. 8. A Division Bench of this Court in The Bank of Rajasthan v. S. K. Trading Co., reported in (1990) 1 Calcutta Law Times HC 139, held that where the clauses in the agreement between the bank and the customer clearly provide for interest to be compounded and added to principal as part thereof at quarterly rests, such interest loses its character as interest and becomes the principal amount and, therefore, the principal amount for the purposes of award of Interest under section 34 Civil Procedure Code would be the compounded dues claimed in the suit and interest pendente lite shall accrue on the compounded principal. It is the business of the bank to lend money on certain terms and conditions and the Court shall be tardy to interfere with such terms and conditions. It is the business of the bank to lend money on certain terms and conditions and the Court shall be tardy to interfere with such terms and conditions. The Division Bench at paragraph 17 observed as follows:- There cannot be any doubt that the interest under Section 34 after amendment can be granted on the principal sum only, but what is the principal, sum depends on the facts and circumstances of each case. It may be that in the case of an ordinary loan which provides for interest the principal amount would be the amount lent and there cannot be an interest on interest in the sense that the amount claimed as interest upon the date of the suit can be decreed; but while granting interest under Section 34 no further interest on such interest can be granted. This is generally the law after the amendment of Section 34. There cannot be any dispute so far as that principle is concerned, but the whole question is what is a principal amount in the facts and circumstances of this case, we have referred to the clauses mentioned above. These clauses make it clear that the interest which would accrue on the outstanding amount for the quarter concerned becomes a part of the principal "quarterly rests" means that this is being capitalised. It means that the interest calculated upto the end of particular quarter is thereafter added to the principal amount and since then it becomes part of the principal amount. This practice is well-known and it has been so recognised in the case of Commissioner of Inland Revenue v. Sir H. C. Holder (1931)2 K. B. D. 81." the Division Bench concluded thus:- "accordingly, we are of the opinion that in view of such clauses in the agreement between the parties which provides for quarterly rests, the interest calculated by the Bank was merged with the principal and for the purpose of Section 34 of the said Act principal sum would be Rs. 11,88,706.91 P. for which decree was claimed and for which the decree was passed." ******************************* In coming to the aforesaid conclusion, the Division Bench relied on the English decision in Commissioner of Inland Revenue v. Sir H. C. Holder and Anr. reported in (1931) 2 KBD 81. which is a taxation case. In that case. 11,88,706.91 P. for which decree was claimed and for which the decree was passed." ******************************* In coming to the aforesaid conclusion, the Division Bench relied on the English decision in Commissioner of Inland Revenue v. Sir H. C. Holder and Anr. reported in (1931) 2 KBD 81. which is a taxation case. In that case. it was held by the Court of Apopeal reversing Rowlatt J's decision that the interest due each half year, which upon the failure of the borrower to pay it, was according to 'the regular practice of bankers, added to the capital sum advanced and was thereby capitalized and could not be treated as interest paid. Upon the said case going to the House of Lords, it was decided upon a different point It may be mentioned that Romer L. J., in his separate but concurring judgment: noted with approval the following, observations of Lord Cowan in Reddie v Williamson (1 Macph 228) :-The true view is that the periodical interest at the end of each year is a debt to be then paid, and which must be held to have been paid when placed to the debit of the account as an additional advance by the bank. " 9. IN Paton v. I. R. C., reported in (1938) 1 All E. R 786,i. R. C. v Holder (Supra) came under review before the House of Lords. House of Lords disapproved the Scottish decision in Reddie v. Williamson (Supra ). Lord atkin said : "a misfortune in the case is that Lord Cowan, misinterpreting, as I venture to think, the analogy adopted by the Lord Justice Clerk goes further, and says in a passage cited to Holder's case by Romer L. J. that the true, view is that the periodical interest must be held to have been paid when placed to be debit of the account as an additional advance by the bank for the convenience of the obligants. This seems to me contrary to what was said by the Lord Justice Clerk and to be wrong. The simple fact is that the amount of interest accruing during the half-year is ascertained at the end of the half-year, and is added to the account as a debt in precisely the same position as the other debit items, whether for money lent the price of securities bought, commission, or other source of debt. The simple fact is that the amount of interest accruing during the half-year is ascertained at the end of the half-year, and is added to the account as a debt in precisely the same position as the other debit items, whether for money lent the price of securities bought, commission, or other source of debt. It takes its position as part of the whole debt due to the bank, and, as part of the whole debt, is in the next half-year chargeable with interest. It is no more paid that are other items of the total debt. " 10. LORD Maugham in Paton v. I. R. C. (Supra) said that 'holder's case cannot be supported so far as it deckled that the customer must be taken to have paid the interest on the advance due by him by means of further periodical advance made for that purpose. The Division Bench in The Bank of Rajasthan Ltd. (supra), however, did not consider the impact of the decision in Paton (Supra) on the theory that when the creditor compounds the interest, it constructively advances further money to the debtor wherewith the debtor pays the interest. 11. THE aforesaid decision of the Division Bench of this Court has been examined by a Full Bench of the Bombay High Court in Union Bank of india v. Dalpat Gaurishankar Upadyay, reported in AIR 1992 BOM. 482 FB. The Full Bench reference arose in view of the conflict of opinion between the Division Bench judgments of the Bombay High Court. One of the questions that was referred to the Full Bench was :- "whether interest becomes part of the principal or gets merged with the principal within the meaning of Section 34 of the Code when the agreement provides for addition of interest to the principal at certain intervals with preiodical rests ?" 12. THE Full Bench of the Bombay High Court held that interest, whether simple or compound will remain "interest for the purpose of section 34 and shall never merge in the principal." Thus the Full Bench of the Bombay High Court did not agree with the view of the Division Bench of this Court in The Bank of Rajasthan Ltd. (supra ). The Bombay High Court held that interest, even when compounded as part of the money claimed, retains its character as interest and there cannot be any contemplation in Section 34 to award interest on interest. 13. AT this stage, we may refer to the definitions of interest, simple interest and compound interest: black's Law Dictionary (Sixth Edition) defines interest as well as compounded interest as follows :- "interest - Interest is the compensation allowed by law or fixed by the parties for the use or forbearance of borrowed money. . . . . . Payments a borrower pays a lender for the use of the money. Simple Interest - That which is paid for the principal or sum lent at a certain rate or allowance, made by tew or agreement of parties. Interest calculated on principal where interest earned during periods before maturity of the loan is neither added to the principal nor paid to the lender. That paid on the principal lent as distinguished from compound interest which is interest paid on unpaid interest. 'compound Interest' - Interest upon interest, that is, interest paid on principal plus accrued interest. Exists where accrued interest is added to the principal sum, and the whole treated as a new principal for the calculation of the interest far the next period. Interest added to principal as interest becomes due and thereafter made to bear interest. " Corpus Juris Secondum (Vol. 47) defines compound interest as interest on interest. . . . . . . . . . . . . . Accrued interest added to the principal and the whole treated as a new principal for the calculation of interest for the next period. 14. THE compounding of interest is the capitalisation of interest so that interest itself yields interest. The plan of capitalizing interest at the end of each half-year was adopted by bankers in order to enable them in effect to secure what is usually termed compound interest, which could not have otherwise been claimed by reason of the usury laws in England. Lord Justice Lloyd in National Bank of Greece S. A. vs. Pinios Shipping co. No. 1 and Anr. reported in (1988) 2 Lloyd's Law Reports 126 traced the history in England of charging of the compound interest. Lord Justice Lloyd in National Bank of Greece S. A. vs. Pinios Shipping co. No. 1 and Anr. reported in (1988) 2 Lloyd's Law Reports 126 traced the history in England of charging of the compound interest. He said : "by the begining of the 19th century the maximum lawful rate of interest stood at 5 per cent per annum. Any contract reserving a higher rate of interest was 'utterly void'. If therefore a contract between banker and customer provided for compound interest at 5 per cent per annum with half-yearly rests, the contract was void for the true rate of interest would be more than 5 per cent. But bankers found a way round this difficulty. At the end of six months the parties were presumed to settle their account, without any previous agreement. Instead of the customer paying the amount of interest then due, it was added to the principal. The banker forbore to sue for principal and interest, since he was content to charge interest on the hew principal over the next six months. This practice was upheld as lawful by Lord Eldon in Ex parte Bevan, (1803) 9 Ves. Jun. 223. . . . . . . . . . . . . . . . . So this is legal between merchants; where there is no agreement to lend to either; but they stipulate for mutual transactions; each making advances; and that, if at the end of six months the balance is with A., he will lend to B. ;' and vice versa. The principle was re-stated by the House of Lords in Fergusson v. Fyfe. (1814) 8 Cl. and Fin 121 as follows generally the contract or promise for compound interest is not available in England, as was decided in Ex parte Bevan except perhaps as to mercantile accounts current for mutual transactions" 15. THEREAFTER, Lord Justice Lloyd referred to the decision of a Court of appeal in Deutsche Bank v. Banque des Marchands de Moscou, (1931) Vol. 4, Legal Decisions Affecting Bankers, p. 293 and observed thus : "lord Justice Scrutton clearly regarded Fergusson v. Fyfe as being good law when he said the House of Lords in Fergusson v. Fyfe treated compound interest as not payable except perhaps on mercantile accounts current for mutual transaction. 4, Legal Decisions Affecting Bankers, p. 293 and observed thus : "lord Justice Scrutton clearly regarded Fergusson v. Fyfe as being good law when he said the House of Lords in Fergusson v. Fyfe treated compound interest as not payable except perhaps on mercantile accounts current for mutual transaction. " lord Justice Greer in Deutsche Bank (Surpa) said : "i regard the law as stated in Ex parte Bevan and Fergusson v. Fyfe as laying down two propositions, first, that there can be no title to compound interest without a contract expressed or implied between the debtor and creditor; and, secondly, that it is never implied except as to mercantile accounts current for mutual transaction. " 16. LORD Justice Lloyd observed that since the repeal of the Usury Acts there has been nothing to stop the bank from charging compound interest. But according to him the explanation of not doing so in that case is to be found in the mordant observation of Lord Atkins in Paton v. I. R. C. (Surpa):- "it is obvious that the system adopted by banks, which seems to have been common practice in the time of Lord Eldon, L. C. is for the purpose of giving them compound interest without perhaps flaunting that fact before their customers. " Lord Justice Nicholls in National Bank of Greece S. A. (supra) observed as follows :- "I turn to the authorities. These establish clearly that the practice relied on by the bank in this case is one of long standing. To facilitate the use of compound interest by banks despite the usury laws, which were not finally repealed until the Usury Laws Repeal Act, 1854, the Courts resorted to the fiction that a fresh agreement for the payment of interest was made on the occasion of each rest in customer's account. An agreement, express or implied, to pay compound interest made when a customer opened an account with a bank would have been unlawful. But if on each occasion when a bank charged or credited interest to an account the parties were to enter into a new agreement that the balance then struck would bear interest, that agreement would be lawful because it would provide only for the payment of simple interest on an agreed sum. But if on each occasion when a bank charged or credited interest to an account the parties were to enter into a new agreement that the balance then struck would bear interest, that agreement would be lawful because it would provide only for the payment of simple interest on an agreed sum. Thus, on this analysis, over a period of years there would be a series of separate agreements between banker and customer, made at intervals of one year or six months or whenever, depending on the manner in which the bank kept its accounts. That notion, of each debiting or crediting of interest being the subject of a separate, fresh agreement was fundamental to the lawfulness of this, practice. There was a succession of agreements, implied from the customers acquiescene in the practice of the bank regarding the debiting and crediting of interest. " Thus, Lord Eldon L. C. in Ex P. Sevan, (1803) 9 Ves. at 224, 32 E. R 588 said:- "it is clear, you cannot a priori agree to let a man have money for twelve months, settling the balance at the end of six months and that all the interest shall carry interest for the subsequent six months; ' that is, you cannot contract for more than 5 per cent; agreeing to forbear for six months. But, if you agree to settle accounts at the end of six months, that not being part of the prior contract, and then stipulate, that you will forbear for six months upon those terms, that is legal. " Nicholls L. J. proceeded to observe "in Paton v. I. R.C., (supra) Lord Macmillan commented on that principle and its survival despite the repeal of the usury laws "on this principle it was held in (Eaton V. Bell), (1821) 5 B and Ald. 34: 106 E. R 1106 that the bankers who, with the knowledge of, and without objection by, their customers, debited them with interest with half-yearly rests in accordance with their general practice did not offend against the usury laws. This method of delaing with loan accounts which became common from among bankers, survived the abolition of the usury laws and is well established as the ordinary usage prevailing between bankers and customers who barrow from them and do not pay the interest as it accrues. " 17. This method of delaing with loan accounts which became common from among bankers, survived the abolition of the usury laws and is well established as the ordinary usage prevailing between bankers and customers who barrow from them and do not pay the interest as it accrues. " 17. IT may be mentioned that the following observation of Lord Macmillan was also quoted with approval by the Division Bench in The Bank of rajasthan Ltd. (supra) :- "it may well be that, as between a bank and its customer this method of dealing may have the result that the accrued interest which the bank has, with the customer's assent, added to the principal loan thereby ceases to be due or recoverable as interest, but becomes merged in the principal loan. " 18. THE Division Bench in the Bank of Rajasthan Ltd. (surpa) referred tc the following passage in Paget's Law of Banking, 9th Edition, at p. 117, which also appears at pp. 183-184 of 10th Edition :- "the customer is liable for interest on an overdraft from the moment it accurues and probably whether the interest is in effect compound or not. The effect of the practice of bankers in debiting interest to an overdrawn current account periodically and thereby increasing the capital sum was considered in Yourell v. Hibermian bank Ltd. (1918) AC 372. " The said observation was made by Paget in the context of Current account. Yourell v. Hibermain Bank Ltd. (surpa) was considered in National bank of Greece S. A. (surpa) by Lord Justice Lloyd thus : "Mr. Pickering relied on certain tax cases which are the decision of the House of Lords in an Irish case Yourell v. Hibermian Bank Ltd. (1918) 372. That decision appeared, at first sight, to lend some assistance to his argument. The case is complicated on the facts. But the key to understanding the case is that the account remained, in the words of Lord Atkinson at P. 389, a living mercantile account" right down to and, indeed, beyond the issue of the writ in 1913." Having carefully considered the principles laid down in the decisions referred to above, we are of the view that the bank has the right to capitalise interest; in other words, to charge compound interest, but this is not an unqualified right. There can be no title to compound interest without a contract, express or implied, between banker and customer. Such compound interest is payable only on 'mercantile account current for mutual transactions'. Once the account has been closed and the relationship of banker and customer brought to an end, the bank is entitled to simple interest only. Once a banker or customer has unequvocally demanded immediate payment of what is due to him from the other, with the Intention of being paid in full and ending their relationship, compound interest will cease to be payable after an account current for mutual transaction is closed, the relation between the parties become merely that of creditor and debtor. 19. A term loan or mortgage loan stands on a different footing. None of these is a current account for mutual transactions and as such no compound interest will be payable. The mortgage continues as the Bank's security, but it does not make the mortgage as a current account for mutual transactions. In such cases the bank is not entitled to compound interest. 20. THE next question pertains to the meaning of the expression principal sum adjudged as appearing in Section 34 of the Code of Civil procedure. At this stage, it is necessary to set out the precise words of section 34 :- "section 34. Interest.- (1) Where and in so far a decree is for the payment of money, the Court may, in the decree, order interest at such rate as the Court deems reasonable to be paid on the principal sum adjuged, from the date of the suit to the date of the decree, in addition to any interest adjudged on such principal sum for any period, prior to the institution of the suit. (with further interest at such rale not exceeding 6% per annum as the Court deems reasonable on such principle sum) from the date of the decree to the date of payment, or to such earlier date as the Court thinks fit : provided that where the liability in relation to the sum so adjudged had arisen out of a commercial transaction, the rate of such further interest may exceed 6% per annum but shall not exceed the contractual rate, the rate at which moneys are lent or advanced by nationalised banks in relation to commercial transactions. Explanation. Explanation. I In this sub-Section 'nationalised bank means a corresponding new bank as defined in the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970. Explanation.- II. For the purpose of this Section, a transaction is a commercial transaction, if it is connected with the industry, trade or business of the party incurring the liability. (2) Where such a decree is silent with respect to the payment of further interest (on such principal sum) from the date of the decree to the date of payment or other earlier date, the Court shall be deemed to have refused such interest and a separate suit, therefore, shall not lie. It is manifest from a plain readiong of Section 34 that it deals with the powers of the Court to award interest from the date of the suit to the date of the decree and from the date of the decree to the date of payment. It is also clear that interest for period prior to the institution of the suit is not governed by the provision of Section 34, but the award of interest from the date of the suit to the date of the decree and from the date of decree from the date of payment can only be on the principal sum adjudged. Therefore, the Court while passing a decree in the suit has to adjudge, firstly, the principal sum and any interest on such principal sum prior to the date of the institution of the suit. The 'principal sum adjudged, therefore, can only mean the amount which the Court determines after adjudicating upon the rights of the parties. The court has to determine the principal sum as advanced as well as interest on such principal sum for any period prior to the institution of the suit. At the trial of a suit question may arise as to whether the payments made by the debtor have been adjusted by the bank or not, whether rate of interest was in accordance with the agreement or not or rate of interest is excessive or not whether the relationship of the banker and the customer has been brought to an end if so at what stage. All these questions have to be determined by the Court in passing a decree and thereupon the principal sum and interest are determined. There can not be any dispute that in accordance with Section 34. All these questions have to be determined by the Court in passing a decree and thereupon the principal sum and interest are determined. There can not be any dispute that in accordance with Section 34. the Court has to determine the principal sum as well as the interest prior to the institution of the suit. The Bombay High Court however observed as follows:- "the legislature while using the expression in addition to any interest adjudged on such principal for any period prior to the institution of the suit in Section 34 in contra-distinction to the expression 'principal sum has not made any distinction between the interest computed by way of simple interest or compound interest. The legislative scheme and intent being so clear, there is no scope for doubt that the expression principal sum adjudged would mean only the 'principal sum'. It will never include the interest whatever be the agreement between the parties. Interest under Section 34, before can be allowed only on the principal sum and not on the principal sum plus interest accrued thereon till the filing of the suit. In new of foregoing discussion, we hold that the principal sum adjudged used in Section 34 of the CPC means the original amount lent without the addition thereto any interest Whatsoever. This will be the position notwithstanding any agreement between the parties or any prevailing banking or trade practice to the contrary." The Full Bench considered the amendment made in 1956 in Section 34. By the said amendment of 1956, the words 'with further interest at such rate not exceeding six per cent per annum as the Court deems reasonable on such principal sum' were substituted for the words 'with further interest at such rate as the Court deems reasonable on the agregate sum so adjudged' and the words 'on such principal sum' were substituted for the then existing words 'such aggregate sum'. The object of the aforesaid amendment to Section 34 is evident from the Report of the joint Committee on the Bill as published in the Gazette of India extraordinary part II, Section 2, dated December 13, 1955. The relevant part of the Report reads as under:- "section 34 of the Code empowers a Court to award further interest from the date of the decree up to the date of payment on the 'aggregate sum' which comprises principal sum with interest accrued thereon. The relevant part of the Report reads as under:- "section 34 of the Code empowers a Court to award further interest from the date of the decree up to the date of payment on the 'aggregate sum' which comprises principal sum with interest accrued thereon. The Committee are of the opinion that interest should not be awarded on interest but only on the principal sum. Suitable amendment has accordingly been incorporated in this clause'. " 21. THE Full Bench of the Bombay High Court observed as follows : the aforesaid observations of the Joint Committee make it abundantly clear that the intention of the legislature was not to allow the award of compound interest by the Courts and to give effect to that intention the expression 'principal sum' was introduced which fundamentally means the 'principal sum' only without addition of amount of interest if any, accrued thereon till the date of filing of the suit. ' 22. IN our view, the Full Bench of the Bombay High Court in Union Bonk of India v. Dalpat Gaurishankar Upadhyay (surpa) equated the computation of interest with compounding of interest. We do not agree with the Full bench of the Bombay High Court, that compound interest was only a method of calculation. The interest is compounded at the rate agreed and, if the agreement provides, according to the method of compution specified. If the agreement provides that the interest is to be compounded, certain other consequences will follow. The computing of interest must be distinguished from compounding, which is the capitalisation of interest, so that interest itself yields interest. When simple interest is charged, the interest element is invariably kept separate. The difficulty arises only in. case of compound interest where the interest becomes merged with the principal because of capitalisation. If it becomes a part of the principal, then it cannot be said that the principal sum adjudged is the original amount lent without addition there to of any interest whatsoever. The principal sum for any particular quarter, in the case of quarterly rests, would, at the expiry of the parted, merge with and become the principal sum. If it becomes a part of the principal, then it cannot be said that the principal sum adjudged is the original amount lent without addition there to of any interest whatsoever. The principal sum for any particular quarter, in the case of quarterly rests, would, at the expiry of the parted, merge with and become the principal sum. for the following quarter But, the Bombay High Court, it appears, is of the view that the principal sum adjudged meant only the principal sum advanced and not the interest accuired thereon even if the interest was to be computed in accordance with the agreement. In our view, the principal sum adjudged cannot in all cases be equated with the. principal sum advanced; nor can it be said that in no cases the identity of interest is lost. We may point out that the Bombay High Court has ignored a very important aspect. If the interpretation as laid down by the Bombay high Court is accepted, the borrowers would default in maintaining the accounts in accordance with the conditions of the grant of limit to force the banks to file suits and Section 34 will be pressed Into service to grant relief to such borrowers. But where the, borrowers who maintain the accounts In terms of the limit and make payment of Interest when due would perhaps be without such advantage. The next question is with regard to award of interim interest and interest on judgment. 23. THERE is Judicial consensus that the provisions of Section 34 of the civil Procedure Code confer on the Courts the power to grant pendente lite interest and post-decree interest and the power is discretionary, there is no room for any controversy on this. But a controversy has, however, arisen as to the extent and the direction of the discretion. A view has been advanced that the award of Interest itself is a matter of discretion and the award can be dispensed with. Where the discretion is exercised in favour of an award of interest, the rate again is a matter of further discretion to be exercised by the Court. Thus, the discretion according to one view is two dimensional. A view has been advanced that the award of Interest itself is a matter of discretion and the award can be dispensed with. Where the discretion is exercised in favour of an award of interest, the rate again is a matter of further discretion to be exercised by the Court. Thus, the discretion according to one view is two dimensional. Discretion is to be exercised first as to whether any award has at all to be ordered and next if discretion is found exercisable for such an award, what rate should be just and equitable is only then a further matter of discretion. The Division Bench of this Court presided over by a. M. Bhattacharjee, J. (as he then was) in United Bank of India v. Rashyan udyog, reported in AIR 1990 Cal. 146 subscribes to this view. It holds that discretion is not limited only to the rate of interest but to the grant of interest itself. In the said case, the Trial Court decreed the suits without, however, awarding pendente lite interest or post-decree interest. The non-exercise of the discretion was construed as refusal to award any interest at all. The question was whether the Court can in exercise of the discretion make a straight refusal to award Interest. The Division Bench supported the refusal holding that the phraseology of Section 34 clearly indicates that the entire question of awarding interest is discretionary. Where the award itself is refused, the discretion as to the rate of interest is immaterial. 24. IN Vijaya Bank v. Art Trend Exports, reported in 1990 (2) Cal. LT. HC 55 a Division Bench of this Court considered the decision in Rashyan udyog (surpa) as well as other decisions on the issue as to whether the discretion, of the Court in granting interim interest and interest of judgment extends only to the question of the rate or amount of interest but also to the question as to whether any interest is to be granted at all. After considering the relevant decisions, the Division Bench presided over by bimal Chandra Basak, J. (as he then was) held as follows:- "935. We are of the opinion that under Section 34 of the Code, the question of interim interest is entirely a matter of discretion of the court. After considering the relevant decisions, the Division Bench presided over by bimal Chandra Basak, J. (as he then was) held as follows:- "935. We are of the opinion that under Section 34 of the Code, the question of interim interest is entirely a matter of discretion of the court. Further as the question of interest is a matter of discretion of the Court, such discretion is not and cannot be limited to the question of rate or amount of interest only but it applies also to the question as to whether any interest is at all to be granted. It cannot be said that as far as the rate or the amount of interest is concerned, it is a matter of discretion whereas on the question whether interest is to be granted at all. the Court has no discretion but it must grant some interest. 936. This view is supported by the Privy Council Supreme Court and also the Full Bench decision of this Court referred to above. This is also followed in the later decisions of this Court excepting in West bengal Financial Corporation us. Bertram Scott (I) Ltd. (Surpa) wherein it was held that some interest must be granted and that the Court has no discretion in the matter. In our opinion, the views expressed in the said decision to that effect is not correct. This judgment did not take into consideration and goes contrary to the aforesaid decisions of the Privy Council, Supreme Court, the Full Bench and the other and earlier Division Bench decisions of this Court. Life insurance Corporation vs. Kumar Purnendu Nath Tagore (surpa)merely followed the aforesaid Division Bench judgment in West bengal Financial Corporation vs. Bertram Scott (I) Ltd. (surpa ). In this context, reference may be made to the Division Bench judgment of this Court in United Bank of India vs. Rashyan Udyog (surpa)." In this later decision in Vijaya Bank us. Trend Exports (surpa) the division Bench presided over by Bimal Chandra Basak J. (as he then was)has observed in terms that the views expressed in the earlier decisions of the various Division Benches of this Court to the effect that some interest, has always to be granted, the discretion being limited to the rates on interest, is not correct. Trend Exports (surpa) the division Bench presided over by Bimal Chandra Basak J. (as he then was)has observed in terms that the views expressed in the earlier decisions of the various Division Benches of this Court to the effect that some interest, has always to be granted, the discretion being limited to the rates on interest, is not correct. We have earlier noticed that the Division Bench in united Bank of India vs. Rashyan Udyog (surpa) did not dissent from such earlier view of the Division Benches of this Court, but with respect we note that the basis of the dissent in Vijaya Bank us. Art Trend Exports (surpa) is that the earlier decisions holding that the discretion under Section 34 is only with regard to the rate of interest is contrary to the decisions of the privy Council in Jagannath Prasad Singh Chaudhury us. Surjaml Jalal (AIR 1927 PC 1) and the Supreme Court in Soil Prestonji Majoo us. Congo. Dhar khemka (surpa ). But the premise itself is not correct in Soli Prestonji Majoo (surpa ). The question was whether the Court has to grant interest to the respondent at the rate of 12 per cent per annum with monthly rests in terms of the contract even after the date of the suit in other words, whether the contractual rate of interest binds the discretion of the High Court while exercising its discretion under Order 34, Rules 2 and 4, which apply to a mortgage suit. Thus, it was in the context of that issue and in the context of the provisions of Order 34, C.P.C. the Supreme Court made the following observations:- "it is apparent that the new rule 11 as inserted by the Amending Act 21 of 1929 provides that the Court "may" order payment of interest to the mortgages upto the date fixed for payment at the rate payable on the principal. It was held by the Federal Court in Jaigobind Singh vs. Lachmi Narain Ram, AIR 1940 FC 20, that the language of the rule gives a certain amount of discretion to the Court so far as interest pendente lite and subsequent Interest is concerned and it was no longer absolutely obligatory on the Courts to decree interest at the contractual rates upto the date of redemption in all circumstances even if there is no question of the rate being penal, excessive or substantially unfair within the meaning of the Usurious loans Act, 1918. In view of the principle laid down by the Federal court in this decision we are of opinion that in the circumstances of the present case the respondent should be granted interest on the principal sum due at the contractual rate till the date of the suit and simple interest at 6 per cent p. a. on the principal sum adjudged from the date of the suit till the date of the preliminary decree and also at the same rate till the date of realistic" 25. THEREFORE, it cannot said that the decision in West Bengal financial Corpration us. Bertrum Scott (India) Ltd. (surpa) is contradictory or inconsistent either with the decision in Soli Prestonji Majoo (surpa) or jaigobind Singh (surpa ). The: Division Bench in Vijaya Bank (surpa)declined to follow the earlier decisions of this Court including West Bengal financial Corporation (surpa) on the misapprehension that such decisions were in conflict with the decesions of the Supreme Court referred to in vijaya Bank. 26. THEREFORE, Soli Pestonji Majoo (supra) could not be read as authority for the principle that the Court can in exercising the discretion decline to order any interest at all and thus, the Calcutta decision holding the view that discretion under section 34 is only with regard to the rates and it is not for the Court to ignore the claim of interest totally. The decision of the privy Council in Jagnnath Prosad Sing Chowdhury vs. Surajmal Jalal AIR (1927) PCI also propounds that the mortgagee cannot claim under order 34 " CPC that interim interest should be awarded at the rates specified in the contract of mortgage because the right of the mortgagee would depend after judgement, not on the contents of the agreement but on the direction of the decree. So. So. the decision vindicates the view that the Court's discretion is in the matter of fixing the rate of interest in disregard of the contracted rate. From the passage quoted from Soli Pestonji Majoo (supra)it is clear that the Federal Count in Jai Gobind Sing vs. Lachhmi Narayan ram AIR (1940) FC 20 only propounded the principle that the Court has discretion in the matter of interest pendente lite and subsequent interest and there is no obligation on the Court to decree the interest at the contractual rates till redemption. Now, the Full Bench judgement of this Court in Magni Ram Marwari as. Dhowtal Roy reported in ILR 12 (Cal) 569 referred to in Vijaya Bank (supra) does not lay down that the discretion of the court may go to the length of denying interest altogether. It merely says that interest after date of suit is in the discretion of the court not withstanding that a fixed rate of interest is mentioned as payable till realisation. This lends no support to the view that there can be total denial of interest. The observations appearing in those decisions are to be read in the context of the mortgagee's claim of pendente lite interest at the contractual rate which the courts rejected. Therefore, the view taken by the Division Benches of this court in the various cases (supra) to the effect that court is hound to grant interest but the rate is discretionery cannot be said to be in conflict with the decisions of the Privy Council, and the Federal Court and the supreme Court as well as the Full Bench of this Court. 27. IN Mahabir Prosad vs. Durga Dutt AIR (1961) SC 990 referred to in united Bank of India v. Rasayan Uddyog (supra) the subject matter of the suit was the claim for damages for breach of commercial contract. The interest pendente lite was awarded at 4 percent per annum while ordering for the interest the court observed : "as regards interest pendente lite until the date of realisation, such interest was within the jurisdiction of the court. The rate fixed is 6 percent which, in the circumstances and according to the practice of courts appears high. Interest shall be calculated at 4 percent per annum instead of at 6 percent. . . The rate fixed is 6 percent which, in the circumstances and according to the practice of courts appears high. Interest shall be calculated at 4 percent per annum instead of at 6 percent. . . " It was not in controversy in the case whether there could be total denial of interest nor did the court pronounce on it. 28. THEREFORE, reliance on this decision is also misplaced. Again in State of Madhya Pradesh us. Nathabhai Desaibhai Patel reported in AIR 1972 SC 1545 the Supreme Court, while observing that the question whether interest should be awarded on the principal amount claimed from the date of the suit is within the discretion of the court upheld the award of the interest by the High Court at 5 percent per annum, In that case, the appellant was challenging as a whole the interest awarded by the High court on the amount of the decree from the date of institution of the suit and the contention was urged that the High Court erred in awarding interest on the principal amount from the date of the suit. From the facts and the decisions thereon in the aforesaid cases one cannot infer that the ratio decidendi resolves the issue whether the interest on the amount of the decree can be altogether rejected. Therefore, the dissent of the Division bench in Vijaya Bank (supra) from the decision of the other Division Bench in West Bengal Financial Corporation (supra) is not founded on correct appreciation of the precedents relied upon by it. The upshot of the controversy is that the earlier decisions of the division Benches of this High Court including West Bengal Financial corporation are still valid. The only dissenting decision in Vijaya Bank (supra) is based on the promise that the earlier decisions are opposed to the principles laid down by the Supreme Court as well as the Privy Council and the Federal Court but that premise itself is wrong. So the dissent can be of no effect. 29. SUB-SECTION (1) of Section 34 makes it clear that where the decree is for a sum of money the court may order interest at such rate as the court deems reasonable to be paid on the principal sum adjudged. So the dissent can be of no effect. 29. SUB-SECTION (1) of Section 34 makes it clear that where the decree is for a sum of money the court may order interest at such rate as the court deems reasonable to be paid on the principal sum adjudged. According to the view expounded by the Division Bench of this court in the said case the expression 'the court may order interest' shall be read as implying that court may or may not order interest. As a matter of fact, the judgment of the Division Bench in paragraph 5 has observed as follows:- ". . . relevant provisions are patently governed and controlled by the expression 'may' and these provisions, therefore should kad us to conclude that award of such interest is not obligatory but only discretionary and the Court may or may not award such interest." 30. BUT this manner of reading the provision creates one anomaly. It requires one to read the sentence the court may order interest at such rate as the Court deems reasonable to be paid in two parts one completely divorced from its predicate. It is first to be read that the expression the court may order interest is divorced from the adverbial phrase at such rate etc. ' and the latter part shall not run with it. Next, the whole sentence has to be read as one running sentence, if the Court orders for interest, such reading would be doing violence to the syntactic homogenity of the sentence. The reading of 'may' as advocated by the Division Bench seeks to alter the words as the court may not or may in the decree order interest at such rate etc. ' But such reading of the provision would amount to tearing at the very fibre of which the enactment is woven. Such reading does not command itself to the permitted degree of presumption that the language of a legislative enactment may require to iron out the crease in the language. It is an accepted principle of judicial interpretation that it is not left to the interpreter of law either to subtract from or add to the clear words of the enactment. Such reading does not command itself to the permitted degree of presumption that the language of a legislative enactment may require to iron out the crease in the language. It is an accepted principle of judicial interpretation that it is not left to the interpreter of law either to subtract from or add to the clear words of the enactment. If the legislature really intended to mean that the words 'the Court may' should be read as 'the Court may nor or may in the decree order interest at such rate' it would not have left it to anybody's presumption. Discovery of legislative intent in a provision beyond what there is plainly to it is not permissible. If the legislature really intended to make the award for interest discretionary not its quantum alone, it could have very well indicated it by express unambigous words. But the words of section 34 as they cannot justify their construction in the manner they have been construed unless some more words then are there, are supplied. There is one more aspect in this connection to note. Sub section (2)says that where a decree is silent with respect to the payment of further interest for the post-decree period, the Court shall be deemed to have refused such interest and no separate suit, therefore shall lie. If the intention as attributed to sub-Sec. (1) that the award of interest itself is discretionary and may be refused, a similar provision would have been there saying that the silence in the deecree about award of pendentc lite interest would as well be deemed as refulal of the interest. This absence of reference to pendente lite interest in sub-Sec. (2) is very meaningful. Therefore, the silence as to the award of interest pendente lite under sub-Sec. (1) cannot be construed as refusal. As a logical corollary, the legislature does not envisage refusal of pendente lite interest. When both the interest under Sub-sec. (1) and Sub-sec. (2) are on the decretal amount it does not stand to reason why the court should treat silence with regard to only the post-decree interest as refusal. 31. SUB-SEC. (1) gives discretion to award both pendente lite interest as well as post-decree interest. It would be odd to presume both interests can be refused, when sub-sec. (1) and Sub-sec. (2) are on the decretal amount it does not stand to reason why the court should treat silence with regard to only the post-decree interest as refusal. 31. SUB-SEC. (1) gives discretion to award both pendente lite interest as well as post-decree interest. It would be odd to presume both interests can be refused, when sub-sec. (2) authorises to construe silence as refusal only in the case of post-decree interest but not in the case of interest pendente lite. To our mind this solves the riddle, 32. WE have already noticed that the Division Bench in United Bonk us. Roshyan Udyog (Supra) and Vijaya Bank (Supra) however, referred to a few decisions of the Supreme Court where it has been held that the award of interest on the principal amount from the date of the suit is a matter of discretion of the Court. From this the Division Bench has drawn its own inference that the award of interest itself is left to the discretion of the court and not merely the rate of interest. We have also noticed that none of the decisions of the Supreme Court referred to viz. Soli Pestonji vs. Ganga dhar AIR 1969 SC 600 Mahabir Prasad vs. Durga Dutta. AIR 1961 SC 990 , state M. P. us. Nathabhai Desabhai, AIR 1972 SC 1545 , is clearly any authority for the proposition that the discretion in awarding interest pendente lite extends to straightway [refusal. Nor any of the portions quoted from the said judgements gives any clue to the question whether the discretion is exercisable altogether negatively. It has also to be noted that even while faulting the earlier decisions of thiscourt in Nilmoni Sardar us. Baidyanath Das, AIR 1957 Cal. 140 ,w Financial Corporation us. Bertram Scott. AIR 1983 Cal. United Bank of India us. Newglencoe Tea co. Ltd., AIR 1987 Cal. 143. State Bnnk vs. B. Gupta. AIR 1987 Cal 64 and Life Insurance Corporation of India vs. Kumar Purnendu Nath, AIR (1988) Cal. 311 where it has been held that the discretion does not imply the power to refuse but the power to fix the rate of interest, the Division bench in Rashyan Udyog (Supra) did not dissent from them. However in vijaya Bank (Supra) the Division Bench said that the views expressed in bertram Scott (I) Ltd., (Supra) and Kumar Purnendu Tagore (Supra) were not correct. However in vijaya Bank (Supra) the Division Bench said that the views expressed in bertram Scott (I) Ltd., (Supra) and Kumar Purnendu Tagore (Supra) were not correct. But that observation itself is not well founded and based on misreading of the precedents. Therefore, the said decisions are still of full authoritative value without derogation therefrom. Precisely, in the decisions of the Supreme Court referred to by the division Bench in Rashyan Udyog (Supra) the question that falls for determination was whether under Order 34 CPC the Court could allow interest at the contractual rate from the date of the suit on the principal amount adjudged. It was in that context the Supreme Court observed that order 34. Rule 11 gives a certain amount of discretion to the Courts so far as interest pendente lite and subsequent interest are concerned and it is no longer absolutely obligatory on the Courts to decree interest at the contractual rates. No dispute confronts us here on this question. It is also our view that the rate of interest pendente lite and post-decretal is discretionary. These decisions do not answer whether the discretion can go to the length of altogether denying interest to. the litigant creditor. Moreover, the decisions of the Supreme Court were concerned with mortgage loans governed by Order 34. Section 34 came in for consideration in Soli Pestonji Majoo (Supra) only obliquely as would be evident from the following observations: "we pass on to consider the second contention raised on behalf of the appellants, namely that even if the respondent is entitled to institute a second mortgage suit the High Court ought not to have granted interest to the respondent at the rate of 12 percent p. a. with monthly rests even after the date of the suit and the maximum interest which should have been allowed was not more than 6 percent p. a. simple on the principal sum adjudged. In our opinion this argument is well founded and there was no justification for the high Court to allow interest at the contractual rate from the date of the suit on the amount adjudged. Prior to Civil Procedure Code in granting a decree for payment of money the Court had full discretion to order interest at such rate as it deemed reasonable to be, paid on the principal sum adjudged from the date of the suit on wards. Prior to Civil Procedure Code in granting a decree for payment of money the Court had full discretion to order interest at such rate as it deemed reasonable to be, paid on the principal sum adjudged from the date of the suit on wards. But order 34, Rules 2 and 4 which applied to a mortgage suit, enjoined the Court to order an account to be taken of what was due to the plaintiff at the date of such decree for principal and 'interest on the mortgage'. The special provision in Order 34 had, therefore, to be applied in preference to the general provision in Section 34. Till the period for redemption expired. Therefore, the matter was considered to remain in the domain of contract and interest had to be paid at the rate and with the rests specified in the contract of mortgage but after the period for redemption had expired and the matter passed from the domain of contract to that of judgment. The right of the mortgage would henceforth depend not on the contents of his bond but on the directions of the decree. (See the decision in Jagannath prosad Singh Chowdhury vs. Surajmal Jalal AIR 1927 PC 1 ). But Act 21 if 1926, Order 34 of Civil Procedure Code was amended and a new rule 11 was inserted which deals specially with interest. " 33. THE passage gives no suggestion at all that Section 34 CPC can be construed as authorising the Courts to deny interest altogether. As a matter of fact, in Soli Prestonji Majoo [supra), the Supreme Court did not deny such interest, on the contrary awarded simple interest at 6 per cent per annum on the principal sum adjudged from the date of the suit till the date of the decree and also at the same rate till the date of realisation. 34. WE prefer to follow the earlier decisions of this Court for one more vital factor that here we are concerned with the interest of a Bank whose money is the productive capital of the nation and no discretion is exercisable to the detriment of its resources. 34. WE prefer to follow the earlier decisions of this Court for one more vital factor that here we are concerned with the interest of a Bank whose money is the productive capital of the nation and no discretion is exercisable to the detriment of its resources. A. M. Bhattacharjee, J. (as he then was) while delivering judgment for the Bench in Rashyan Udyog (Supra) has referred to the sayings of the ancient sages like Vasista and narada denouncing exacting of interest as worse sin then destruction of a foetus and has further referred to the Islamic law that forbids taking interest on lending to show that interest is an evil: "though conceded as a necessary evil : "though conceded as a necessary evil in commercial practice, our juristic heritage condemned the practice of exacting interest as something reprehensible and not commendable. ' It is not only in Indian scriptures or in Islam but the world. over interest on borrowing has been decried as a sin against humanity in pre-industrial revolution days. Aristotle said, it was unfair to charge interest on loans. Many sophisticated medieval scholars followed him in this view that interest represents unjustified usury. Indeed, interest was forbidden by canon law throughout the Middle Ages. 35. BEFORE the industrial revolution interest was inseparably linked with consumption loans. Paul A. Samuelson in his - 'economies', Tenth Edition at page 605 has observed The Biblical utterences against interest clearly ref ( r to loans made for consumption rather than invesment purposes". But today's economy runs on interest. It is interest that determines savings and investment in an economy which in turn tends to achieve full employment. Interest is a central part of the complex mechanism of economy of present civilisation. 36. THE decision in Rashyan Udyog (Supra) also projects a disinclination against award of interest pendente lite on the ground of social justice and equality which the judiciary as part of the state must strive to achieve by minimising inequalities of income and eliminating inequalities in status, facilities and opportunities and thus, to pave the way for a social order in which justice, social and economic shall inform all the institutions of national life. The decision has as its grinding spirit the proposition that the debtor is a weaker party in the legal combat. The decision has as its grinding spirit the proposition that the debtor is a weaker party in the legal combat. But, it cannot be, at the same time, lost sight of that the banking sector of the economy which is the principal source of credit should not be made to lose interest which in a modern society represents productivity. If the bank and the credit institutions are deprived of interest that itself has an injurious affectation of the economy. Any depretion of the resources of the bank would mean shrinkage of investment opportunities. When people derounce interest they have in mind occurence of consumption allowing transaction in a highly imperfectly competitive credit market where the poer are at the mercy of the rich lenders' bargaining power. No one is going to favour usurious over-charges that take advantage of the poor man's inadequate access to competitive loan market or his desperate neglect of his own future. 'but economists and phylosophere recognise that the net productivity of capital is the technological fact most basic to modern day interest". When the bank lends money and the borrower neglects to return, the Court while making the borrower to return the money lent shall have a social duty to restore the productivity of the bank's monies which represent the people's savings. If the Court fails the ultimate losers are the people whose savings are the bank's investment pool. Therefore, socio-economic aspect merely on the consideration of economic weakness of the debtor does not necesarily mean that the Court by not awarding interest shall conduce to a social order that strives for justice, social and economic. Therefore, either from the forensic interpretation or from the normative view-point or for the goal or socio-economic justice, it cannot be said that the legislature had in mind the total deprivation of the creditor from his compensation. The compensation can be minimal but cannot be down to zero. 37. WE have indicated our agreement with the view of the Division Bench of this Court in The Bank of Rajasthan Ltd vs. S. K. Trading Co. (Supra)that the interest to be compounded and capitalised merges with the principal and becomes part of the principal But. that legal position does not bind or limit the discretion of the Court in identifying the interest component in such a principal sum adjudged. (Supra)that the interest to be compounded and capitalised merges with the principal and becomes part of the principal But. that legal position does not bind or limit the discretion of the Court in identifying the interest component in such a principal sum adjudged. In this case, it is an admitted position that out of the total claim of Rs. 11. 05. 5o. 843/ -. the sum of Rs. 9. 67. 68. S43/- is identifiable as the capitalised interest transformed into the principal sum by reason of the process of compounding. Therefore the principal originally lent was Rs. 1,37,82,000/ -. Thus, the interest transformed into principal in the process of compounding is about seven times of the actual amount of lending. No doubt, we have accepted that the entire claim has taken on the character of principal amount and on that basis we have adjudged the interest payable for the period prior to the institution of the suit. We consider it Just and proper that the interest component in the compounded principal which is identifiable should be identified in awarding interest for the purpose of Section 34 of CPC. 38. IN our view the discretion of the Court in ordering interest is wide. It is not only that the Court has discretion to adjudge the rate of interest but also to adjust the principal sum and in exercising the discretion in such adjudgement it is open to us to bifurcate the principal sum in mere parts than one for the purpose of awarding interest. There is nothing in the phraseology as can fetter the exercise of the discretion in a manner as the demands of justice on the facts of a particular case may warrant. We, accordingly, adjudge the sum of Rs. 1,37,82. 000/- as the principal sum adjudged for the purpose of awarding interest in exercise of discretion under section 34 of the Code of Civil Procedure. We therefore pass the following decree: the appellants have submitted to a decree for the sum of rs. 9,32,70,081/ -. There win, therefore, be a decree for rs. 9,32,70,081/ -. There will be interim interest and interest on judgment at the rate of 15 per cent per annum on Rs. 1,37,82. 000/- which appears to be the principal sum advanced. It is recorded that a sum of Rs. 9,32,70,081/ -. There win, therefore, be a decree for rs. 9,32,70,081/ -. There will be interim interest and interest on judgment at the rate of 15 per cent per annum on Rs. 1,37,82. 000/- which appears to be the principal sum advanced. It is recorded that a sum of Rs. 10,00,000/- had already been paid by the appellants pursuant to the directions of this Court which shall be adjusted against the decretal principal sum of Rs. 9,32,70,081/ -. At the prayer of Mr. Chatterjee. learned Sr. counsel for the appellants, the appellants are allowed to pay the aforesaid decretal dues with Interest by monthly instalments as follows : (i) Rs. 10. 00. 000/- per month, first of such Instalment shall be payable on or before 30th June 1993 and thereafter on or before the last day of each succeeding month. This rate of monthly instalments will continue upto May 1994. (ii) From June 1994 till May 1995 the rate of monthly instalments will be Rs. 12,50,000/ -. (iii) Thereafter, from June 1995 the rate of monthly instalments will be rs. 15,00,000/- until the entire dues are paid off. (iv) The payment of instalments shall be first adjusted against the interest. The interest shall be calculated on the reducing balance. (v) In default of payment of any two instalments or the last instalment, the Receiver already appointed will take over possession of all the assets hypothecated and/or mortgaged with the bank. The Receiver shall make an inventory of all the hypothecated and/or mortgaged assets, if not already made. But the Receiver shall not interfere with the day-to-day running of the business. The Receiver will only act in the event the appellants make default in terms of this decree and order. (vi) The rest of the claim in the suit will stand to trial. If there be any dispute with regard to the principal sum advanced or the rate of intrest or the quantum of interest till the date of institution of the suit, such disputes shall be resolved by the Court of the first instance and upon such determination, if this decree requires any modification, the Court of the first instance will be at liberty to modify or after this decree accordingly. 39. THE appellants shall pay costs assessed at Rs. 15,000/-, along with the second instalment. 39. THE appellants shall pay costs assessed at Rs. 15,000/-, along with the second instalment. Save as aforesaid all interim orders will stand vacated and the decree and order under appeal will stand modified. Appeal and application both stand disposed of by the foregoing decree and order. Filing of paper book is dispensed with and undertaking is discharged. Receiver and all parties to act on a signed copy of the operative part of this judgment and order upon usual undertaking.