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Madhya Pradesh High Court · body

2008 DIGILAW 922 (MP)

CHITRAREKHA v. VIRENDRA KUMAR SHARMA

2008-07-28

S.K.GANGELE

body2008
Judgment ( 1. ) HEARD on 1a. No. 10288/08 for taking certain documents on record. The application is allowed. ( 2. ) BECAUSE the petitioner has challenged the order passed in execution proceedings hence with the consent of parties the case is disposed of finally. ( 3. ) PLAINTIFF-RESPONDENT No. 1, Virendra Kumar Sharma, filed a civil suit against the petitioner-defendant No. 1 for recovery of an amount of Rupees two Lakhs with interest at the rate of 18% per annum. He pleaded that the defendants had taken a loan for their personal use on 01 -11 -1999. In consequence thereof a promissory note was executed. Defendants also agreed to pay interest at the rate of 18% per annum on the loan amount. However, in spite of that the defendants did not pay the aforesaid amount. Defendants denied the execution of promissory note and taking loan. They pleaded that plaintiff authored a forged document. The Trial Court after recording the finding that defendants had taken a loan of Rupees Two Lakhs passed a decree of an amount of Rupees Two Lakhs with interest at the rate of 18 % per annum from the date of institution of the suit i. e. , 08-08-2002. Plaintiff filed an execution proceedings for execution of the aforesaid decree. During execution proceedings the petitioner-defendant no. 1 deposited an amount of Rs. 40,000/- on 24-03-2006 and Rs. 2,36,000/- on 01-07-2006 calculating the interest at the rate of 6% per annum. The Executing court did not satisfy with the amount and issued notification for auction of the property of the petitioner on the ground that petitioner did not deposit the amount as per the rate of interest of 18% per annum. ( 4. ) LEARNED Counsel for the petitioner and Amicus Curiae, Mr. P. C. Chandil, appointed by the Court have submitted that the Trial Court committed an error of law and jurisdiction in awarding interest at the rate of 18 % per annum. As per the provisions of Section 34 of the Code of Civil Procedure the Court had no jurisdiction to award interest more than 6% per annum and to that extent judgment and decree are nullity and the Executing Court has power to refuse execution of the decree upto that extent. Contrary to this, learned Counsel for respondent No. 1 has submitted that a decree has been passed. Contrary to this, learned Counsel for respondent No. 1 has submitted that a decree has been passed. The petitioner did not file any appeal against the judgment and decree, hence it became final and the Trial Court has no power to go beyond the decree. ( 5. ) UNDISPUTED facts of the case are that the Trial Court passed a decree in favour of the plaintiff of Rupees Two Lakh with interest at the rate of 18% per annum from the date of filing of the suit i. e. , 08-08-2002. The decree has been passed in Civil Suit No. 3-B/2002 by Third Additional District Judge, gwalior, copy of the judgment has been filed by the petitioner alongwith an application for taking documents on record. It is clear from the judgment of the trial Court, as stated above in this order that the case of the plaintiff before the trial Court was that defendants had taken loan for their own personal purpose and business of Rupees Two Lakhs and executed a promissory note of Rupees two Lakhs with a condition to pay interest at the rate of 18% per annum. ( 6. ) THE plaintiff, Virendra Kumar Sharma, in his deposition clearly stated that defendants had taken a loan of Rupees Two Lakhs. He stated that there was need for the money. Same facts have been stated by mr. K. C. Jain (P. W. 2), plaintiffs witness. The Trial Court in Para 12 of its judgment has recorded a finding that the defendants had taken a loan of Rs. Two lakhs on 01-11-1999 and executed a promissory note. It was a condition in the promissory note to pay interest at the rate of 18 % per annum but defendants did not pay the loan. There is no finding of the Trial Court that the loan was taken for business purpose. Contrary to this, the pleadings of the plaintiff was that the loan was taken by the defendants for their personal and business purpose. The Plaintiff did not discharge the burden of proof that the loan was for business purpose neither there is a finding to this effect by the Trial Court that defendant had taken a loan for business purpose. ( 7. The Plaintiff did not discharge the burden of proof that the loan was for business purpose neither there is a finding to this effect by the Trial Court that defendant had taken a loan for business purpose. ( 7. ) SECTION 34 of the Code of Civil Procedure gives power to the court for awarding interest at the rate as has been fixed in this Section, which reads as under :- "34. Interest.- (1) Where and in so far as 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 adjudged, 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 rate not exceeding six per cent per annum, as the Court deems reasonable on such principal 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 six per cent per annum, but shall not exceed the contractual rate of interest or where there is no contractual rate, the rate at which moneys are lent or advanced by nationalised banks in relation to commercial transactions. Explanation I.- In this sub-section, nationalised bank means a corresponding new bank as defined in the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 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 therefor shall not lie. " ( 8. " ( 8. ) IT is clear from the aforesaid section that the Court has no jurisdiction to award further interest at the rate not exceeding 6% per annum on principal sum, if the loan is not for business purpose. However, as per the proviso of Section 34, CPC the Court can award further interest more than six per cent per annum or at the agreed rate at the contractual rate or at the rate fixed by the nationalised banks for commercial transactions if the transaction is commercial one. ( 9. ) IN awarding interest at the rate of 18% per annum as has been awarded by the Trial Court from the date of institution of the suit upto the date of decree and thereafter future it was obligatory on the part of the Court to record a finding that the transaction was a commercial one because the Trial Court has no jurisdiction to award interest after pronouncement of decree more than 6% per annum if the transaction is not a commercial one. In the present case, there is no finding recorded by the Trial Court that the transaction is a commercial one. ( 10. ) A Division Bench of High Court of Punjab and Haryana Jagdish chander Vs. Punjab National Bank, AIR 1994 Punjab and Haryana 98 has held as under, with regard to power of the Court in awarding interest if transaction is not a commercial transaction :- "4. In view of the authoritative pronouncement it is no more open to exception that under Section 34 of the Code future interest exceeding 6 per cent per annum can be granted if liability adjudged has arisen out of commercial transaction and in no event it shall exceed the contractual rate of interest, and if the contractual rate of interest is not established the Court can grant interest at a rate allowed by the nationalised bank in relation to commercial transactions. The Court seized of the suit has to come to a conclusion that the money was advanced in a commercial transaction and once it so holds the case will be squarely covered under I st proviso to Section 34 of the Code. The Court seized of the suit has to come to a conclusion that the money was advanced in a commercial transaction and once it so holds the case will be squarely covered under I st proviso to Section 34 of the Code. If the liability sought to be imposed does not arise out of a commercial transaction where the loan was advanced to an agriculturist for purpose of mechanising cart or somewhat identical purposes, it cannot be said that the loan was connected with commercial transaction. In krishan Lal Vs. State Bank of Patiala, 1990 (I) 97 Pun. LR 132 while interpreting the proviso read with Explanation II of section 34 of the Code observed thus :-"the proviso, read with Explanation (II); of Section 34 as reproduced above, would not apply to the facts of the case in hand. The loan of Rs. 5000/- for the purchase of a mechanised cart, cannot be remotely connected with a commercial transaction, connected with the industry, trade or business of the party incurring liability. As ruled in Siri chands case [1988 (I) 93 Pun. LR 473] (supra), it is the jurisdiction of the Court to pass an order for grant of future interest at the time of passing the decree and if such an order is passed which is beyond the jurisdiction of the court, same could be nullity and objection to that effect can be taken in execution proceedings. To the extent, as stated above, the decree of the Civil Court cannot be executed against the judgment-debtor (petitioner ). " a Division Bench of Bombay High Court has held, as under, with regard to commercial transaction :-"there is a clear distinction between the profession on one hand and industry, trade and business on the other. While dealing with the commercial transaction for the purpose of Section 34, CPC the Legislature has not used the word profession along with the words, industry, trade, or business. The commercial transaction which are strictly connected with the industry, trade, or business alone are included for the purpose of Section 34, CPC as provided in Expln. 2. Though the commercial transaction is inclusive of industry, trade and business, but it is exclusive of profession. The fact that the Legislature has not included the word profession along with the words "industry, trade and business" to specify the commercial transaction cannot be ignored. 2. Though the commercial transaction is inclusive of industry, trade and business, but it is exclusive of profession. The fact that the Legislature has not included the word profession along with the words "industry, trade and business" to specify the commercial transaction cannot be ignored. The proviso to Section 34, CPC will, therefore not govern the cases where the loan is advanced for the profession or for "professional transaction". The construction of hospital cannot be said to be profit-oriented, unless there is evidence to hold it so. The construction of a hospital can be service-oriented and not necessarily profit-oriented. The loan advanced by Bank for construction of hospital is therefore not a commercial transaction. Awarding future interest at the rate of 6% P. A. cannot be said to be in contravention of the provisions of Section 34, CPC. " ( 11. ) HENCE, as per the provisions of Section 34 of the Code of Civil procedure and the law laid down by the various High Courts stated above the decree passed by the Trial Court awarding interest at the rate of 18% per annum upto the date of realisation of the amount is without jurisdiction. Honble the Supreme Court in Kiran Singh and others Vs. Chaman paswan and others, AIR 1954 SC 340 (Para 6) has held as under with regard to the decree and judgment passed by the Court without jurisdiction :- " (6) The answer to these contentions must depend on what the position in law is when a Court entertains a suit or an appeal over which it has no jurisdiction, and what the effect of Section 11 of the Suits Valuation Act is on that position. It is a fundamental principle well-established that a decree passed by a Court without jurisdiction is a nullity, and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the subject-matter of the action, strikes at the very authority of the Court to pass any decree, and such a defect cannot be cured even by consent of parties. A defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the subject-matter of the action, strikes at the very authority of the Court to pass any decree, and such a defect cannot be cured even by consent of parties. If the question now under consideration fell to be determined only on the application of general principles governing the matter, there can be no doubt that the District Court of Monghyr was coram non judice, and that its judgment and decree would be nullities. The question is what is the effect of Section 11 of the Suits Valuation act on this position. " The Honble Supreme Court in Vasudev Dhanjibhai Modi Vs. Rajabhai abdul Rehman and others, AIR 1970 SC 1475 (Para 7) has held as under :- "7. When a decree which is a nullity, for instance, where it is passed without bringing the legal representatives on the record of a person who was dead at the date of decree, or against a ruling prince without a certificate, is sought to be executed an objection in that behalf may be raised in a proceeding for execution. Again, when the decree is made by a Court which has no inherent jurisdiction to make it, objection as to its validity may be raised in an execution proceeding if the objection appears on the face of the record: where the objection as to the jurisdiction of the Court to pass the decree does not appear on the face of the record and; requires examination of the questions raised and decided at the trial or which could have been but have not been raised, the executing Court will have no jurisdiction to entertain an objection as to the validity of the decree even on the ground of absence of jurisdiction. In Jnanendra Mohan Bhaduri Vs. Rabindra Nath chakravarti, 60 Ind App 71 = AIR 1933 PC 61 the Judicial committee held that where a decree was passed upon an award made under the provisions of the Indian Arbitration Act, 1899, an objection in the course of the execution proceeding that the decree was made without jurisdiction, since under the Indian Arbitration act, 1899, there is no provision for making a decree upon an award, was competent. That was a case in which the decree was on the face of the record without jurisdiction. " ( 12. That was a case in which the decree was on the face of the record without jurisdiction. " ( 12. ) HENCE, in my opinion, the Trial Court had no jurisdiction to award interest at the rate of 18% per annum after the judgment and decree upto the realisation of the amount. Up to that extent the decree passed by the Trial Court is a nullity and this objection can be entertained in the execution proceedings and also proceedings under Article 227 of the Constitution because if a decree is a nullity upto that extent the decree cannot be executed. Hence, the Executing court has committed an error of jurisdiction in issuing the auction-proceedings with regard to attachment of house of the petitioner. It is an admitted fact that the petitioner has already deposited an amount of Rs. 2,76,000/- and that is prima facie sufficient with regard to realisation of the loan amount. ( 13. ) CONSEQUENTLY, petition of the petitioner is allowed. Impugned order, Annexure P-1, dated 01-11-2006 is hereby quashed. The Executing Court may proceed as per observations made by this Court above. ( 14. ) THIS Court appreciates the Assistance provided by learned Amicus curiae. ( 15. ) NO order as to cost.