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State Bank of India Vs. Gujarat Oil Engines Pvt. Ltd. and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtGujarat High Court
Decided On
Judge
Reported in(1983)2GLR1019
AppellantState Bank of India
RespondentGujarat Oil Engines Pvt. Ltd. and ors.
Cases ReferredGordhandas Madhavji and Ors. v. Mfs. Valamji Khetsi
Excerpt:
.....interest at 4 per cent per annum on the various amounts mentioned in exhibits 31 and 33 from the date of the suit till the decree was fully satisfied. shaikhali alibhoy air 1953 bombay 445 has considered the question of interest in a mortgage suit as early as 1953. in has considered the position that obtained prior to 1929 as well as the position that existed subsequent to 1929. the division bench has observed in the aforesaid decision as under: justice sulaiman clearly stated at page 23 that 'it is no longer absolutely obligatory on the courts to decree interest at the contractual rate up to the date of redemption in all circumstances'.it was therefore concluded in the said decision that it was in the discretion of the court whether to allow or not to allow the contractual rate of..........preliminary decree against them and had also prayed that interest be awarded at the rate of 3 per cent per annum from the date of the suit till realisation. on the said purshis, the learned advocate for the remaining respondents had also endorsed stating that the remaining respondents supported the say of respondents nos. 1, 4 and 5. the learned advocate for the appellant had strongly objected to the same. it appears that the trial court had heard the matter and had passed an order on december 16, 1980. thereafter, at the instance of the learned advocate for the appellant a further order was passed by the trial court on december 18, 1980. vide the said orders, the trial court had negatived the contentions advanced on behalf of the appellant and had ordered payment of interest at 4 per.....
Judgment:

R.J. Shah, J.

1. This appeal has arisen at the instance of the original plaintiff as appellant against the original defendants as respondents. The only question to be determined in this appeal is regarding the rate of interest that could be awarded in a mortgage suit from its institution till the ultimate realisation of the entire dues.

2. A few facts require to be stated to appreciate the rival contentions of the parties.

3. For the purpose of this judgment, original plaintiff will be referred to as the appellant and the original defendants will be referred to as respondents.

4. The appellant had filed Civil Suit No. 3894 of 1976 against the respondents. In the said suit, a purshis had been filed by respondents 1, 4 and 5 at Exhibit 30 wherein they had invited a preliminary decree against them and had also prayed that interest be awarded at the rate of 3 per cent per annum from the date of the suit till realisation. On the said purshis, the learned advocate for the remaining respondents had also endorsed stating that the remaining respondents supported the say of respondents Nos. 1, 4 and 5. The learned advocate for the appellant had strongly objected to the same. It appears that the trial Court had heard the matter and had passed an order on December 16, 1980. Thereafter, at the instance of the learned advocate for the appellant a further order was passed by the trial Court on December 18, 1980. Vide the said orders, the trial Court had negatived the contentions advanced on behalf of the appellant and had ordered payment of interest at 4 per cent per annum on the various amounts mentioned in Exhibits 31 and 33 from the date of the suit till the decree was fully satisfied. Being aggrieved by the said orders of the trial Court, the appellant has come in appeal contending that a reasonable rate of interest ought to have been awarded to the appellant and further that interest at the rate of 4 per cent per annum could not be regarded as reasonable.

5. It appears that the appellant in the above connection is not treading on maiden ground. A Division Bench of the High Court of Bombay in Dawoodbhai Kasamji Matiwalla and Anr. v. Shaikhali Alibhoy AIR 1953 Bombay 445 has considered the question of interest in a mortgage suit as early as 1953. In has considered the position that obtained prior to 1929 as well as the position that existed subsequent to 1929. The Division Bench has observed in the aforesaid decision as under:

With regard to the question of interest, the position in law was very different prior to 1929 when Order 34 was amended and Rule 11 was for the first lime inserted. Prior to 1929 we had Order 34, Rule 2 which provided that in a suit for foreclosure, (and the provision also applies to a suit for sale or redemption), if the plaintiff succeeds, the Court shall pass a decree ordering that an account be taken of what would be due to the plaintiff for principal and interest on the mortgage, and for his costs of the suit awarded to him on the day next hereinafter referred to, and it was held that under this provision the court could not deprive the mortgagee of the interest agreed upon till the date fixed for redemption. This decision was based on the principle that up to the date of the preliminary mortgage decree and also up to the further period of grace which the Court gave to the mortgagor for redeeming the mortgage, interest was in the domain of contract and not in the domain of judgment and the Court had no discretion to vary the rate of interest and award to the mortgagee interest less than what the mortgagor had agreed to pay.

The newly added Order 34, Rule 11 of the Civil Procedure Code dealt with the question of payment of interest. Considering Order 34, Rule 2 it was held that it did not deal with the rate of interest that the Court should award at the time of passing the preliminary decree. Order 34, Rule 2 (1)(a)(i) merely indicates one of the heads in respect of which account has to be taken, but with regard to the question of the rate of interest Order 34, Rule 11 is a self-contained rule which deals with payment of interest in a mortgage suit under all circumstances, and Order 34, Rule 11 leaves it to the discretion of the Court what interest should be awarded to the mortgagee in a mortgage suit from the date of the suit till the date fixed for redemption. It has also been noticed in the said decision that the effect of the amendment of Order 34 in 1929 came up for consideration before the Federal Court in Jaigobind Singh v. Lachmi Narain and Mr. Justice Sulaiman clearly stated at page 23 that 'It is no longer absolutely obligatory on the Courts to decree interest at the contractual rate up to the date of redemption in all circumstances'. It was therefore concluded in the said decision that it was in the discretion of the Court whether to allow or not to allow the contractual rate of interest in a mortgage suit from the date of the institution of the suit till the period fixed for redemption.

6. The scope of Order 34, Rules 2, 4 and 11 has also been considered by the Supreme Court in Soli Pestonji Majoo v. Ganga Dhar Khemka AIR 1960 Supreme Court 600. Accepting the ratio of the aforesaid Federal Court decision, the Supreme Court has held in the aforesaid decision that 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. The Supreme Court in terms has held as under:

It was held by the Federal Court in Jaigobind Singh v. Laxini Narain Ram that the language of the rule gives a certain amount of discretion to the Court so far as interest pendente We 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 realisation.

It is also noteworthy that the Supreme Court in Soli Pestonji's case (supra) in terms has held that the special provision in order 34 has to be applied in preference to the general provisions in Section 34 of the Code of Civil Procedure.

7. Appreciating the aforesaid legal position, the learned Counsel for the appellant has submitted that even though Section 34 C.P.C. cannot be applied in the present case the spirit behind amended Section 34 C.P.C. should be taken into consideration in deciding as to what would be the reasonable rate of interest under the provisions of Order 34 C.P.C. It seems that the same cannot be done firstly because order 34 being a self-contained code excludes the application of Section 34 and secondly because Section 34 has not even been made applicable to pending suits. (See Section 96 of the Amendment Act, 1976). Besides, even when Section 34 was amended by the aforesaid Amendment Act Order 34 has not been correspondingly amended which is therefore a clear indication of the legislative intent in this connection.

8. Order 34 of the Code of Civil Procedure imports the concept of reasonable award of interest. In 5. Raghbir Singh Sandhawalia v. The Commissioner of Income Tax it has been observed that the expression 'reasonable' means 'rational according to the dictates of reason and not excessive, or immoderate'. An act is reasonable when it is conformable or agreeable to reason, having regard to the facts of the particular controversy. In the said case, the question was whether a particular gift made by a Hindu father was within reasonable limits and while dealing with the same the aforesaid observations were made by the Division Bench of the said Court. The aforesaid would mean that the facts and circumstances of the particular case in question will need to be examined before making any award of interest in a case such as the present.

9. In the present case, the appellant bank in its plaint has accepted the fact that the manufacturing business of respondent No. I company had been discontinued. In the aforesaid purshis Exhibit 30 respondents 1,4 and 5 had stated that the manufacturing and trade business was closed since about 5 years. It has further been stated that if the appellant bank had not restrained the respondents by an injunction the remaining goods of the respondent could have been sold and the realisation could have been applied for payment of the debt in question. It has further been stated in the said purshis that the directors of respondent No. 1 had been divided into two groups and because of that also business of the company had ceased. It was in the aforesaid circumstances, that respondents Nos. 1, 4 and 5 had prayed that interest be ordered to be paid at 3 per cent per annum. As stated above, the remaining respondents have also joined in the said request. In the endorsement made by the appellant bank on the said purshis, the appellant bank had not disputed the aforesaid facts. In fact, no specific endorsement was made by the appellant bank with respect to the aforesaid statements of facts. When one peruses the orders passed by the learned trial Judge pursuant to the said purshis, one finds that the trial Court had not appreciated that in the schedule 'A' to the plaint three separate parcels of land belonging to respondents had been mentioned. The said parcels of land were respectively measuring 1320, 2170 and 1577 sq. yds. Considering the description given in the said schedule, the said parcels of land are situated in industrial areas. The said parcels of land can therefore bring about good realisation if sold at the prevailing market price. The trial Court has also not taken into consideration the fact that no voluntary liquidation proceedings have been taken as against respondent No. 1 company. If the financial position of respondent No. 1 company was such that all its assets could not have met with all its liabilities then respondent No. 1 company could have been taken in voluntary liquidation. Apart from that, so far as respondents Nos. 2 to 5 are concerned, there are no affidavits on record to show about their financial position. The decree passed in the present case shows that a personal decree had also been ordered as shown in the decree. None of respondents Nos. 2 to 5 had offered to give evidence on oath regarding the financial position of respondent No. 1 as well as regarding financial position of the remaining respondents. Except the facts stated in the said purshis, it appears that the trial Court before making an award of 4 per cent interest per annum has not taken into consideration the aforesaid and other relevant aspects of the matter.

10. In Soli Pestonji's case (supra), the last mortgage transaction mentioned was of the year 1947. Even though the contractual rate of interest was 12 per cent per annum the award was made at the rate of 6 per cent per annum holding as stated hereinabove that there was no justification for the High Court to allow interest at the contractual rate.

11. The learned advocate for the appellant has also invited our attention to K. Manick Chand and Ors. v. Eliai Saleh Mohamed Sait and Ors. : [1969]2SCR1082 in support of his submission. This case was also regarding a mortgage debt. In this case, the date of the decree of the trial Court was 27th March 1952 while the date fixed for payment became 19th March 1959 as a result of the decree of the High Court. It was held that the interest for the said period had to be calculated in accordance with Rule 11(a) (i) of Order 34 C.P.C. on the principal amount of Rs. 37,971.50. As per the rate under the mortgage deeds, the interest was payable at the rate of I per cent per mensem but under the provisions of the Act read with the provisions of the Usurious Loans Act (Mysore Act IX of 1923) the fair interest payable on the loan would be at the rate of 9 per cent per annum and so it was held that the interest at the rate of 9 per cent should be calculated on the aforesaid principal amount for the said period. It was further held as under:

In addition, under Rule 11(a)'ii)of Order 34 C.P.C. interest at the rate of 6 per cent per annum has to be allowed on the amount decreed for costs, charges and expenses incurred by the appellants up to the date of the preliminary decree. A further direction that is necessary is that interest under Rule 11(b) of Order 34 C. P. C. will be payable up to the date of realisation or actual payment on the aggregate of the two principal sums just mentioned at the rate of 6 per cent per annum which must be deemed to be reasonable as interest at that rate is ordinarily awarded in -all decrees in respect of future periods.

Thus in this case even though the contractual rate of interest was 12 per cent per annum the award was partly made at 9 per cent per annum.

12. In this connection, it is apposite to refer to State of Rajasthan v. Raghubir Singh and Ors. : [1979]3SCR6 . This was not a case concerning a mortgage deed but while awarding interest pendente lite the trial Court adopted the rate of 4 1/2 per cent but gave no reason. The High Court considered the matter in some detail and having regard to the various defaults committed by the defendants the High Court enhanced the rate of interest to 6 per cent. It was held that the High Court was justified in doing so and the Supreme Court saw no reason to interfere with the discretion exercised by the High Court. We have referred to the aforesaid decision as a submission was made before us by Mr. Kansara, the learned advocate for the respondents relying on the Life Insurance Corporation of India v. Tada Tirupathayya : AIR1963AP353 that the discretion in awarding interest under Section 34 C.P.C. had to be exercised on sound judicial principles and when so exercised it would not be interfered with in appeal. We are in agreement with the said submission, but when a case is made out for interference, the High Court had not hesitated in doing so in the aforesaid decision and the Supreme Court had found no good reason to interfere with the order of the High Court.

13. The learned Counsel for the appellant has also invited our attention to J. V. Prasada Rao v. District Traffic Superintendent : AIR1959AP618 , Konakalla Venkata Satyanarayana (died) and Ors. v. State Bank of India and Ors. : AIR1975AP113 and Poosarla Sambamurthy and Sons, Chodavaram and Ors. v. Maganti Krishna Rao and Ors. : AIR1981AP77 . So far as the aforesaid Andhra Pradesh decisions are concerned, it is unnecessary to discuss them in detail in view of the clear position in law as per the aforesaid Supreme Court decision. We have also been referred to Gordhandas Madhavji and Ors. v. Mfs. Valamji Khetsi VIII GLR 307. In this case, what has been held was that when the Court passes a decree without anything more, the rate at which the Court can award interest on the principal sum from the date of the decree to the date of payment cannot exceed six per cent per annum under Section 34 of the Civil Procedure Code. But where the Court passes a decree and postpones payment of the decretal amount or makes the decretal amount payable by instalments in exercise of its power under order 20, Rule 11, the provision made in Order 20, Rule 11 would govern the question of interest and not the provision made in Section 34. The facts of the present case being different, the said decision can render no assistance in the matter.

Considering all the aforesaid as well as the circumstances of the present case, it appears to us that the trial Court has exercised its discretion without considering the relevant aspects of the matter as stated hereinabove and also without closely examining the legal position that obtained in such cases. We therefore deem it proper to interfere in the matter so as to substitute the rate of interest of 6 per cent per annum instead of 4 per cent per annum wherever the same occurs in the orders and decree passed by the trial Court in the case in question. We would like to clarify in this connection that there has neither been a cross appeal nor cross objections by all or any of the respondents. We therefore do not disturb the remaining part of the orders and decree in question.

14. In the result, the appeal partly succeeds to the extent mentioned above. The orders and decree in question will stand modified to the extent mentioned above. In the circumstances of the case, there will be no order as to costs.


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