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Saraswati Electricals, Bijapur and anr. Vs. Union Bank of India and anr. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtKarnataka High Court
Decided On
Case NumberSecond Appeal No. 20 of 1983
Judge
Reported inAIR1983Kant220
ActsCode of Civil Procedure (CPC), 1908 - Sections 34 and 100 - Order 20, Rule 11
AppellantSaraswati Electricals, Bijapur and anr.
RespondentUnion Bank of India and anr.
Appellant AdvocateD.B. Desai, Adv.
Respondent AdvocateG.M. Shetty, Adv.
Excerpt:
.....circumstances must be taken into consideration, namely, the date when the loan was incurred, the amount of the loan, the amount of the instalments ordered and the number of years in the course of which it is to be satisfied and that an instalment decree spreading the instalments over a large number of years is a thing oppressive to the creditor and the court in passing instalment decrees should be careful to guard also the interest of the creditor......with a view to raise the rate of interest and to make it consistent with the prevailing market rate of interest.3. subsequently, however, section 34 itself is amended in 1976 and the amended section 34(1) reads:'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.....
Judgment:

1. The suit was for recovery of money. The trial Court decreed the suit with costs granting six monthly instalments charring 6% interest per annum as future interest. The lower appellate Court partly allowed the appeal and decreed the suit in following terms:

'Both the appeals are partly allowed. In setting aside the decree of the Trial Court in so far as it relates to future interest, it is hereby decreed that the plaintiff-appellant is entitled to future interest at 12 per cent per annum and defendants Nos. 1 and 2 do pay future interest accordingly on the principal amounts directed to be paid by the trial Court. The trial Court decree in both the suits stand modified accordingly. The appellant is also entitled to proportionate costs of the two appeals.'

2. The learned Counsel for the appellant, however, strenuously urged before me that when the Court exercises its jurisdiction under O. 20 Rule 11 of C. P. C. in granting instalment decree, the provisions of Section 34 would not apply. For that proposition, he relied on a Division Bench decision of this Court in the case of Karnataka Bank Ltd. v. Thriyambak Venkatesh Hebsur (1977 (2) Kant LJ 46) wherein, it is no doubt true that their Lordships have laid down relying upon an earlier decision of this Court rendered in RFA No. 16 of 1974 dated 8-12-1975 that the court is at liberty to give rate of interest in accordance with the prevailing rate of interest in the market, while an instalment decree is granted. In the decision it is stated thus:

'Assuming, without deciding, that provisions of Rule 11 of Order XX are applicable to mortgagee decrees as well the principles guiding the discretion of the Court in the matter of grant of instalments are laid down in a decision of this Court in Madhavarao Laxmanarao v. Tukaramasa Thulajansa Jithuri (R. F. A. No. 16 of 1974 decided on 8-12-75) wherein it is held that in making an order for instalments not only the condition of the debtor and his liability to pay must be considered but also all other circumstances must be taken into consideration, namely, the date when the loan was incurred, the amount of the loan, the amount of the instalments ordered and the number of years in the course of which it is to be satisfied and that an instalment decree spreading the instalments over a large number of years is a thing oppressive to the creditor and the Court in passing instalment decrees should be careful to guard also the interest of the creditor. The Court should also consider the prevailing rate of interest in the market in determining the terms as to the rate of interest on which instalments are granted. It was further held therein that where in the exercise of discretion under R. 11 of O. XX the Court grants instalments, the provision of Section 34 of the Code are not applicable and it is open to the Court to fix appropriate rate of interest. '

(Underlining is mine)

Their Lordships have further observed after quoting the earlier decision thus;

'Tested in the light of these principles it becomes clear that the Court below, in granting the instalments, did not bear in mind the relevant considerations and was not justified in granting instalments.'

Thus, by reading the ruling it becomes clear that in 1975 while granting the decree this Court granted interest at more than 6 per cent to which the interest was then limited u/s. 34, C. P. C. That was, because, the Court observed that the Court should also consider the prevailing rate of interest in the market in determining the terms as to the rate of interest and in that connection the Court observed that even if the interest rate is more than 6 per cent, Section 34 did not come in the way of the Court in awarding higher rate of interest at the prevailing rate while a decree was given granting instalments. Therefore, Section 34 was not to be term into consideration with a view to raise the rate of interest and to make it consistent with the prevailing market rate of interest.

3. Subsequently, however, Section 34 itself is amended in 1976 and the amended Section 34(1) reads:

'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.' Thus, it becomes clear that what was observed by this Court in R. F. A. No. 16 of 1974 by its judgment, has been subsequently incorporated in the C. P. C. itself giving directions that when the loan is a commercial loan the rate of interest should be given at the prevailing market rate not exceeding the bank rate. In this case it is seen that the bank is the plaintiff. Therefore, there is no substance in the argument advanced before me that Section 34 C. P. C. did not apply to the facts of the case and that the rate of interest could not be raised from 6 per cent to 12 1/2 per cent by the learned District in the appeal. Hence, there is no substantial question of law involved in this appeal and the same is dismissed in limine.

4. Appeal dismissed.


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