T. N. VALLINAYAGAM, J. ( 1 ) A interesting question raised in this regular second appeal preferred by the Plaintiff Canara Bank is concerning the payment of interest on loan advanced, both prior to the suit and after filing of the suit. ( 2 ) ). The admitted facts are that a loan of Rs. 28,000-00 was granted by the plaintiff/bank to the defendant on 31-5-1985 with a promise to repay the same with interest at 10% per annum compounded quarterly. On 28-5-1985 itself, the defendant deposited the title deed with intention to create equitable mortgage as further security for the due payment. Claiming a sum of Rs. 62,063-00 as due including the interest calculated at the rate of 10% quarterly, the plaintiff sought preliminary decree on mortgage and also prayed for future interest at the rate of 17. 5% per annum with half yearly rests. ( 3 ) RAISING various defence, the defendant contested the rate of interest and also the correctness of the accounts. Ultimately the trial Court granted the decree for the principal for a sum of Rs. 28,000/- and directed the payment of interest @ 10% per annum on the above principal as simple interest from the date of suit till realisation. Not satisfied with the way in which the accounts maintained by the bank, the trial Court fixed the admitted principal at Rs. 28,000/- and directed the payment of that principal sum alone while granting the decree; the first Appellate Court found itself in consonance with the findings rendered by the trial Court and dismissed the appeal preferred by the Bank. ( 4 ) IN this regular second appeal, the Bank raised three questions regarding non grant of decree as per Order-34 Rule-4 of CPC by the Courts below (ii) re-opening the loan account in respect of interest charged prior to the date of filing of the suit is barred under Section 21 (a) of the Banking Regulation Act, 1949, (iii) non-grant of interest with annual rests till the date of suit and from the date of suit till realisation. ( 5 ) FACTUALLY speaking, the Courts below felt that the evidence available is not enough and accounts were not clear as to from which date interest must be calculated. ( 5 ) FACTUALLY speaking, the Courts below felt that the evidence available is not enough and accounts were not clear as to from which date interest must be calculated. In the absence of proper plea as to the date of release of the debt, bit by bit, and lack of evidence on this aspect, they have taken into account only the principal amount of Rs. 28,000/- alone as the amount due on the date of filing of the suit. It is contended by the Bank that Section 21 (a) of the Banking Regulation Act is a bar and the account of the Bank showing the debit entry of Rs. 62,063-00 as on the date of the plaint must have been taken as principal and the decree must have been granted for the said sum. The respondent however contended that there is absolutely no evidence regarding the payment of Rs. 28,000-00 on various dates to enable the calculation of interest. And even otherwise interest cannot be calculated in the way in which the Bank wants without any proper accounts and legal authority. ( 6 ) ON the question of interest under Order 34, Rule 11, C. P. C. the Full Bench of Bombay High Court in Union Bank of India v. Dalpat Gaurishankar Upadyay, AIR 1992 Bombay 482 held :-"under S. 34 of Civil Procedure Code, 1908 the Court while decreeing the suit will adjudge, (i) the principal sum and (ii) any interest on such principal sum prior to the date of institution of the suit. Both amounts adjudged by the Court by way of "principal sum" as well as Interest" thereon for the period prior to the institution of the suit together may be termed as "aggregate amount adjudged" as payable on the date of the suit. But interest under S. 34 not payable on such aggregate amount. It is made payable only on the principal sum adjudged. No interest is payable on the amount of interest adjudged on such principal sum. Interest, whether simple or compound will remain 'interest' for the purpose of S. 34 and shall never merge in the principal. But interest under S. 34 not payable on such aggregate amount. It is made payable only on the principal sum adjudged. No interest is payable on the amount of interest adjudged on such principal sum. Interest, whether simple or compound will remain 'interest' for the purpose of S. 34 and shall never merge in the principal. The legislature while using the expression "in addition to any interest adjudged on such principal for any period to the institution of the suit" in S. 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. Hence the "principal sum adjudged" used in S. 34 of the C. P. C. means the original amount lent without the addition thereto of any interest whatsoever. This will be the position notwithstanding any agreement between the parties or any prevailing banking or trade practice to the contrary. "a Division Bench of Panjab and Haryana High Court in Jagdish Chander v. Punjab National Bank, AIR 1994 Pandh 98 held :-"interest up to the date of suit is a matter of substantive law and the section does not refer to payment of interest under the first head. It applies only to 2nd and 3rd heads. Interest pendente lite is one of the procedure within the discretion of the Court. Interest on the principal amount adjudged from the date of the decree to the date of payment cannot be allowed at a rate higher than 6% per annum under the first proviso to S. 34 of the Code. Future interest exceeding 6% per annum can be granted if the liability adjudged has arisen out of a commercial transaction. The executing Court can examine if the decree was passed by the Court in confirmity with the 1st proviso to S. 34 to the Code. "it is further held that under proviso (to) S. 34 so long as the loan is not a commercial loan and only an agricultural loan, interest exceeding 6% per annum is not proper. The executing Court can examine if the decree was passed by the Court in confirmity with the 1st proviso to S. 34 to the Code. "it is further held that under proviso (to) S. 34 so long as the loan is not a commercial loan and only an agricultural loan, interest exceeding 6% per annum is not proper. In N. M. Veerappa v. Canara Bank, AIR 1998 SC 1101 the Supreme Court while referring to Section 21 (A) of Banking Regulation Act, observed as follows :-"section 21a of the Banking Regulation Act, 1949 does not come to the aid of Banks vis-a-vis, O. 34, R. 11 CPC, the question whether for the period during the pendency of mortgage suits in Courts, the Court's discretion should continue or whether it should be fettered and if so to what extent and as to what rate of interest and whether there should be any distinction between different kinds of debtors-these are all matters of policy for the legislature and it will be for Parliament to lay down its policies and bring forward such legislation as it may deem fit in accordance with the provision of the Constitution of India. ""section 34 of the Code of Civil Procedure applies to simple monies-decrees and payment of interest pending such suits. Order 34, Rule 11 CPC deals with mortgage suits and payment of interest. It is obvious that so far as mortgage suits are concerned, the special provision in Order 34 Rule-11 alone is applicable and not Section 34. ""but after 1929, a new Rule-11 was introduced, which used the words, "the Court may order payment of interest". The new Rule was explained by the Federal Court in Jaigobind Singh v. Lachmi Narain Ram, AIR 1940 FC 20 and it was held that this provision gave a certain amount of discretion to the Court so far as interest after date of suit was concerned and it was no longer obligatory after the 1929 Amendment on the Courts to direct interest at contractual rates up to 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. Approving the above observations of the Federal Court, this Court held on facts, that the mortgagee should be granted interest on the principal sum at the contractual rate till date of suit and only simple interest at 6% p. a. on the principal sum adjudged from the date of suit till date of preliminary decree and again at same 6% p. a. from the date of preliminary decree till date of realisation. ""the Court has also power to award from date of suit under Order 34 Rule-11 (a) (iii) a rate of interest on costs, charges and expenses as per the contract rate of failing such rate, at a rate not exceeding 6%. This is the position of the discretionary power of the Court, from date of suit up-to-date fixed in the preliminary decree as the date for payment. "ultimately the Supreme Court has granted interest at the rate of 6% per annum from the date of suit till the date of realisation. In the Division Bench of this Court to which I was a party in State Bank of India v. M/s. Bangalore Sheet Metal Associates, it was held :-"on going through the above agreements though there is provision for calculating interest at quarterly rests, we do not find any provision whereby the default had agreed to treat the interest also as part of the principal in case there is default in payment of interest. Such provision is completely absent in the agreement. In that view of the matter, by virtue of Order-34 Rule-11 and following the decision referred to above, we are of the opinion that the plaintiff is entitled to interest only on the principal amount from the date of suit and not on the whole amount claimed in the plaint or decreed by the trial Court. Accordingly, the trial Court was right in restricting the interest from the date of suit on the Principal amount alone and accordingly we do not find any ground to interfere with the decree passed by the trial Court. Accordingly, the trial Court was right in restricting the interest from the date of suit on the Principal amount alone and accordingly we do not find any ground to interfere with the decree passed by the trial Court. " ( 7 ) ANOTHER Division Bench of this Court in Bank of India v. Karnam Ranga Rao, ILR (1985) Karnataka 4282 : (AIR 1986 Kant 242) has held as follows :-"the Courts cannot re-open any account maintained by Banks relating to transaction with its customers on the ground that the rate of interest charged, in the opinion of Courts, is excessive or unreasonable, Section 21a of the Banking Regulation Act is a restraint on such power of Courts. However, in any case, if it is proved that the interest charged by Banks on loans advanced is not in conformity with the rate prescribed by the Reserve Bank, then the Court could disallow such excess interest and give relief to the party notwithstanding the provisions of Section-21a. Banks are bound to follow the directives or circulars issued by the Reserve Bank prescribing the structure of interest to be charged on loans and any interest charged by the Banks in excess of the prescribed limit would be illegal and void. Banks cannot charge compound interest with quarterly rests on agricultural advances. (ii) The circulars/directives of the Reserve Bank direct that agricultural advances should not be treated on part with the commercial loans in the matter of application of the system of compounding interest. The farmers do not have any regular source of income other than sale proceeds of their crops is an acknowledged fact. They get income generally only once a year. They are, therefore, not in a position to pay interest at usual fixed intervals like monthly, quarterly and half yearly. Banks should not compound interest on current dues. Banks should not also charge interest with monthly, quarterly or half yearly rests on overdue loans. Perhaps, it may not be illegal to charge interest with yearly rests. "in the above case the Bench has held that the Courts was justified in re-opening the interest charged from the date of loan and allowed interest only at the Reserve Bank rate of 10% however not compound but only a simple. Perhaps, it may not be illegal to charge interest with yearly rests. "in the above case the Bench has held that the Courts was justified in re-opening the interest charged from the date of loan and allowed interest only at the Reserve Bank rate of 10% however not compound but only a simple. ( 8 ) THE resultant the effect of all the above dicta goes to establish (i) If the loans is not of commercial transaction, then notwithstanding Sec. 21-A of the Banking Regulation Act, the interest has to be charged by the Banks at the rate prescribed by the Reserve Bank of India Circular. But simple interest till the date of suit and subsequently if it be the mortgage the provision of Order-34 will apply. ( 9 ) APPLYING these two principles to the facts of this Case, the principal sum is declared as Rs. 28,000-00 and interest is granted at 10% per annum from the date of loan till the date of filing of the plaint, from 31-5-1985 and granting a preliminary mortgage decree and subsequent interest under Order-34 is granted at the rate of 6% per annum on the Principal sum of Rs. 28,000-00 from the date of suit till the date of realisation. The second appeal is accordingly disposed of. --- *** --- .