Karnataka High Court
Canara Bank vs K.S. Kushalappa And Ors. on 13 February, 1989
Equivalent citations: [1989]66COMPCAS122(KAR), AIR 1990 KARNATAKA 145
JUDGMENT Chandrakantharaj Urs, J.
1. The short question that has fallen for determination by us in this appeal by the Canara Bank is whether the ad litem interest given from the date of suit to the of decree and from date of decree to the date of realisation at 6% per annum is in conformity with section 34 of the Code of Civil Procedure (in short "the Code") or opposed to it?
2. In the trial court, the suit filed for recovery of money advanced to the respondent-defendants for development of their coffee estate has been decreed. But ad litem interest as noticed by us has been granted at 6% per annum, i.e., maximum permissible under sub-section (1) of section 34 of the Code. It was submitted by learned counsel that the loan advanced for the development of the coffee estate should be treated as a commercial loan and discretion should have been exercised by the trial judge in accordance with the proviso to sub-section (1) of section 34 of the Code to come nearer the contractual rate so far as it related to ad litem interest and that therefore, this court should interfere.
3. We do not think there is any force in that contention. By no means can it be said that development of a coffee estate is either business or trade or commerce or industry for the purpose of section 34. We find force in the contention that it is more within the area of agricultural or horticultural operations and not any other. Therefore, interest at 6% per annum awarded ad litem at two stages, i.e., from the date of suit to the date of decree and from date of decree to the date of realisation is at the maximum rate. In other words, if at all there is proper exercise of discretion, it has been against the defendants and not against the plaintiff.
4. It is pointed out in a Division Bench ruling of this court in the case of Canara Bank v. B. Seshagiri Prabhu [1984] 1 KLJ 121, as under:
"The grant of current or pendente-lite interest is also within the discretion of the court, which operates notwithstanding an agreement between the parties stipulating a particular rate of interest till the date of decree. The proviso to section 34 is in relation to `further' interest or interest from the date of decree till the date of realisation which, otherwise, under the terms of section 34(1), should not exceed 6% per annum. The proviso states that where the liability in relation to the sum so adjudged arises 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. The mere fact that the loan was secured by hypothecation also does not make any difference to the question of the current interest being in the area of discretion of the court."
5. We find no merit in this appeal. Therefore, it is rejected having regard to the Explanation to sub-section (1) of section 34 of the Code as to what constitutes a commercial transaction.