Karnataka High Court
Vijaya Bank Ltd. vs Ganapathy Filaments on 16 March, 1993
Equivalent citations: ILR1993KAR1427, 1992(2)KARLJ162
JUDGMENT Shivashankar Bhat, J.
1. The plaintiff-Bank is the appellant before us. It is aggrieved by the rate of interest awarded by the Trial Court on the amount decreed from the date of the filing of the suit. Though the Trial Court accepted the plaintiff's case and decreed the suit as prayed for including the rate of interest upto the date of suit, current interest was awarded at the rate of 6 per cent only.
2. Defendants Nos. 2 to 5 are the partners of defendant No. 1 Firm. The defendants obtained a loan of Rs. 98,500/- from the plaintiff on 29th June, 1975 agreeing to pay interest thereon at 6 per cent per annum over the Reserve Bank of India rate with a minimum of 15 per cent per annum with monthly rests. There was another loan obtained by the defendants referred as "open loan cash credit" in a sum of Rs. 30,000/- with a similar agreement regarding the rate of interest. Since the defendants defaulted in the payment, suit was filed on 29th June, 1978, claiming a sum of Rs. 1,41,148.51 with current interest thereafter. The Trial Court has upheld the plaintiff's claim. However, while awarding the interest, the Trial Court has simply said that the rate of current interest shall be 6 per cent per annum from the date of the suit. The Trial Court has not given any reason for this reduced rate of interest.
3. Section 34 of the Code of Civil Procedure provides for the interest to be awarded by the Court from the date of the suit. Sub-section (1) states that the further interest for the period after the institution of the suit shall not exceed 6 per cent per annum. However, the proviso states that where the liability in relation to the sum adjudged had arisen out of a commercial transaction, the rate of such further interest may exceed 6 per cent per annum, but shall not exceed the contractual rate of interest or where there is no contractual rate, the rate at which monies are lent or advanced by the Nationalised Banks in relation to commercial transactions. Explanation II states that for the purpose of this Section, a transaction is commercial transaction if it is connected with the industry, trade or business of the party incurring the liability.
4. In the instant case, there is ho doubt that the liability was incurred in connection with the business of the defendants. On the face of it defendant No. 1 is a Firm carrying on business at Bangalore. The loan was obtained by the defendants for the purpose of the business of defendant No. 1. It is not the case of the defendants that the liability was incurred by them in respect of any transaction other than the one referred in Explanation II to Section 34. The plaintiff has restricted the claim of interest at the rate of 15 per cent without insisting that it should be at a higher rate having regard to the rate of interest charged by the Reserve Bank of India. The Trial Court has not given any reason as to why the interest should be restricted to 6 per cent only. Obviously the Trial Court was carried away by the language employed by Section 34(1) of the C.P.C. The remaining part of the said Section was omitted to be considered. The Trial Court acted mechanically in awarding the interest at the rate of 6 per cent. By restricting the rate of interest, the Court will be encouraging the borrowers to commit defaults so that the Banks would be constrained to approach the Court for recovery and in that process the borrowers would stand to gain. Obviously to avoid such a situation and to compel the borrowers to pay interest promptly and to reduce the litigation, the Proviso to Section 34 has provided for awarding the contractual rate of interest in the case of commercial transactions. The Courts cannot be unduly generous when the situation does not call for the application of any equitable doctrine. In a simple suit for the recovery of money from an industry or a commercial concern, we fail to understand as to how it will be inequitable to award the interest at the agreed rate.
5. There is a mistake in the decree drawn up by the Trial Court. The decree ought to be for a sum of Rs. 1,41,148.51 paise etc., with current interest. Instead of this, the figure typed is Rs. 1,46,148.51.
6. Consequently, we allow this Appeal and modify the decree under Appeal. The defendants are directed to pay to the plaintiff a sum of Rs. 1,41,148.51 paise together with costs and current and future interest thereon at 15 per cent per annum from the date of the suit till the rate of realisation.