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2002 DIGILAW 515 (KER)

Catholic Syrian Bank v. Mathai

2002-07-30

K.PADMANABHAN NAIR, S.SANKARASUBBAN

body2002
Judgment :- 1. The above appeal is filed by the Catholic Syrian Bank Ltd. against the judgment and decree in O.S. No. 280 of 1998 of the Additional Sub Court, North Paravur. Appellant is the plaintiff in the suit. The suit was filed by the Bank for recovery of a sum of Rs. 2,00,235/- together with interest from the date of suit till date of realisation at the rate of 15.77% with quarterly rests by sale of the plaint schedule immovable properties and also personally from the defendants. The loan was given to the first respondent for purchasing a motor vehicle on the guarantee of the other respondents for the first respondent's commercial purposes. Interest at the contract rate was claimed pendente lite as well as future on the basis that the liability has arisen out of a commercial transaction. 2. The respondents, even though served, did not contest. They were set ex parte. On the basis of the claim affidavit on behalf of the appellant - Bank and the documents filed, the court found that the Bank was entitled to a decree. However, while passing the decree, the rate of pendente lite interest and future interest have been reduced to just 6%. The learned Sub Judge has also determined the principal amount as Rs. 1,29,000/-. It is against the above judgment and decree that this appeal is filed. 3. Learned counsel for the appellant contended that the court below ought to have granted interest on the principal amount, which was due on the date of filing the suit and not on the amount which was borrowed initially. He further contended that interest should have been at 17%, since it is a commercial transaction. Learned counsel for the respondents however submitted that the lower court has exercised its discretion and hence, it is not proper for this Court to interfere. At any rate, he contended that the interest granted by the court below is reasonable. 4. As already stated, the original amount, which was given as loan was Rs.1,29,000/-. On the date of filing the suit, the amount due from the respondents was Rs. 2,00,235.38. No doubt, even though the learned Sub Judge has given a decree for Rs. 2,00,235.38, but granted interest at 6% on the original amount of Rs. 1,29,000/-. 4. As already stated, the original amount, which was given as loan was Rs.1,29,000/-. On the date of filing the suit, the amount due from the respondents was Rs. 2,00,235.38. No doubt, even though the learned Sub Judge has given a decree for Rs. 2,00,235.38, but granted interest at 6% on the original amount of Rs. 1,29,000/-. Now it is clear by the decisions of this Court as well as the Supreme Court that the principal amount in such cases is the original amount plus interest as on the date of filing the suit. In the decision reported in Central Bank of India v. Ravindra & Ors., 2001 (3) KLT SN 127 P. 98 = AIR 2001 Supreme Court 3095 at page 3119 Para.58(1), the Supreme Court held as follows: "58. Subject to the above we answer the reference in following terms: (1) Subject to a binding stipulation contained in a voluntary contract between the parties and/or an established practice or usage interest on loans and advances may be charged on periodical rests and also capitalised on remaining unpaid. The principal sum actually advanced coupled with the interest on periodical tests so capitalised is capable of being adjudged as principal sum on the date of the suit". Thus, the principal sum is Rs. 2,00,235.38 and not the amount advanced. In this case, the respondents were not able to produce anything to show that there is contract between the parties by which the parties agreed that the principal sum will not be more than the advance. So long as the award on interest is concerned, the interest has to be awarded on the principal sum. As a matter of fact, the principal sum includes interest with quarterly rests. The question is what is the interest that is to be granted on this amount during the pendency of the suit till recovery of the amount. Learned counsel for the Bank submitted that 17% is the interest that was agreed to by the parties and that interest has to be given to the parties. But we cannot agree. When a case comes up before the Court, the court can exercise its discretion under S.34 of the Code of Civil Procedure. No doubt, S.34 also says that for any commercial transaction, the court can grant interest as per the terms agreed to by the parties. 5. But we cannot agree. When a case comes up before the Court, the court can exercise its discretion under S.34 of the Code of Civil Procedure. No doubt, S.34 also says that for any commercial transaction, the court can grant interest as per the terms agreed to by the parties. 5. In this connection, we may refer to Para.55(8) of the above decision. It is stated as follows: "Award of interest pendente lite and post-decree is discretionary with the court as it is essentially governed by S.34 of the CPC dehors the contract between the parties. In a given case if the court finds that in the principal sum adjudged on the date of the suit the component of interest is disproportionate with the component of the principal sum actually advanced the Court may exercise its discretion in awarding interest pendente lite and post-decree interest at a lower rate or may even decline awarding such interest". We are of the view that the awarding of interest at 17% for the principal sum during the pendency of the suit and till date of recovery will cause great hardship to the defendants and hence, we grant interest at 9% on the principal sum of Rs. 2,00,235.38. 6. In the result, the judgment and decree of the court below is modified as follows: The plaintiff is given a decree for Rs. 2,00,235.38 and interest thereon at 9% per annum from the date of suit till date of payment. Appeal is disposed of as above. No costs.