Madras High Court
Sundaravel Industries vs Sorna Agencies And Anr. on 10 July, 1991
Equivalent citations: (1991)2MLJ472
ORDER Swamidurai, J.
1. C.R.P. No. 1035 of 1989 : The defendant is the petitioner in this civil revision petition. The petitioner has filed this civil revision petition against the judgment and decree made in O.S. No. 354 of 1987, dated 26.12.1988 on the file of the Principal District Munsif, Sattur, challenging the decree for a sum of Rs. 1,260.90 with interest. The respondent which is the plaintiff is the partnership firm with the name and style of M/s. Sundaraval Industries represented by its partner. Admittedly, the petitioner had purchased paper from the respondent for a sum of Rs. 4,174-80. The respondent claimed interest at 24% per annum as per the agreement between the parties. The respondent received the cost of the paper. But he has filed the suit for the recovery of interest with interest at 24% per annum on the suit amount. There is no dispute with regard to the Principal amount in this suit. But the defendant disputed payment of interest at 24% per annum on the suit claim which itself is arrears of interest.
2. C.R.P. No. 1036 of 1989 : The defendant is the petitioner. The respondent filed a suit in O.S. No. 385 of 1987, on the file of the Principal District Munsif, Sattur, for recovery of a sum of Rs. 820-30. Admittedly the petitioner had purchased paper from the respondent and the suit itself is laid for recovery of arrears of interest with interest at 24% per annum. The dispute in this case is that the petitioner is not liable to pay interest on interest.
3. C.R.P. No. 187 of 1991 : The defendant is the petitioner in this petition. He filed this civil revision petition against the judgment made in O.S. No. 386 of 1987, dated 31.10.1980 on the file of the Learned Principal District Munsif, Sattur. The suit is for recovery of a sum of Rs. 1,100 being arrears of interest with interest at 24% per annum. The dispute in this case is that the petitioner is not liable to pay interest on interest.
4. The trial Court found from the evidence oral and documentary in all the above three cases that the defendant is liable to pay interest on this suit claim. The trial Court found from the exhibits filed by the respondent/plaintiff that the defendant agreed to pay interest as per the printed writings in the bills for the purchases and therefore, as a question of fact, the trial court found that the petitioner has agreed to pay the interest.
5. The petitioner in all these three civil revision petitions has raised a common question that he is not liable to pay interest on the suit claim which itself represents interest on the principal amount for which paper was purchased on credit basis by the petitioner. Mr. S. Subbiah, learned Counsel for the petitioner contended that the claim of the respondent for recovery of interest, on the principal sum which itself represents interest is contrary to provisions of Section 3(3)(c) of the Interest Act, 1978. Section 3(3)(c), Interests Act reads as follows:
(3) Nothing in this section:
(a) shall apply in relation to:
(i) any debt or damages upon which interest is payable as of right, by virtue of any agreement;
or
(ii) any debt or damages upon which payment of interest is barred, by virtue of an express agreement;
(b) shall affect-
(i) the compensation recoverable for the dishonour of a bill of exchange promissory note or cheque, as defined in the Negotiable Instruments Act, 1881, or
(ii) the provisions of Rule 2 or Order 2 of the Fifth Schedule to the Code of Civil Procedure, 1908;
(c) shall empower the court to award interest upon interest.
Learned Counsel for the petitioner Mr. S. Subbiah contended that the trial Court has awarded interest erroneously under Section 34, C.P.C., contrary to provisions of Section 3(3)(c) of the Interest Act Section 34(1), C.P.C., reads as follows:
34(1). Where and in so far as a decree is for 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.
(2) Where such a decree is silent with respect of the payment of further interest on such principal sum from the date of the decree to the date of payment of other earlier date, the Court shall be deemed to have refused such interest, and a separate suit, therefor shall not lie.
Provided that there the liability in relation to the sum so adjudged had arisen out of 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.
6. Leaned counsel for the respondent/plaintiff relied upon the judgment reported in Sigappiachi v. Palaniappa A.I.R. 1972 Mad. 463 (D.B.). In the abovesaid case, the Division Bench of this Court held that an account suit is treated as money suit under Order 7, Rule 2, C.P.C., and therefore, the provisions relating to money suit will apply to a suit for taking of accounts. The provisions of Section 34, C.P.C. would be applicable in awarding interest in an account suit. The Division Bench further held that the principal amount that is found payable by the defendant on the date of suit and the Division Bench directed that the Principal sum adjudged would carry further interest at six per cent per annum simple, from the date of the decree till the date of payment another judgment was cited by the Learned Counsel for the respondent reported in Venkanna Chettiar and Sons v. Shaik Muhammad Rowther, (1943) 2 M.L.J. 504, following the judgment reported in Venkataramayya v. Mallikarjunudu (1942) 1 M.L.J. 571, wherein the learned Judge of this Court was observed as follows:
Where although there was no stipulation in advance to pay compound interest with periodical rests yet by subsequent agreement between the parties at each settlement of account there was a sinking of the interest in arrear in the principal debt and the composite sum carried interest till the next settlement, the debtors having lost their right to have the unpaid interest separated from the principal and dealt with independently all the essential features of compound interest are present.
Learned Counsel for the respondent also relied upon the decision reported in Indian Bank v. Kamalalaya Cloth Store , wherein the learned single judge of Orissa High Court held that for commercial loan advanced by Bank, the loanee has to pay interest from the date of loan till date of payment in full with quarterly rest and the interest accrued and added to principal amount on the date of suit is the principal amount for purposes of interest and not amount of loan originally advanced. The last decision relied on by the learned Counsel for the respondent is the decision reported in Syndicate Bank v. W.B. Cements Ltd. A.I.R. 1939 Del. 107. In this case also, learned single Judge of Delhi High Court has held that the Bank commuting interest at quarterly rests and after every quarter adding interest to last balance and treating that as principal sum for next quarter for computing interest and the principal amount would be the sum so arrived at and so the principal sum advanced would be the sum total of original advance and unpaid interest and under Section 34, C.P.C. interest can be awarded on the principal sum so arrived at.
7. Learned Counsel for the petitioner submitted that the decisions reported in Indian Bank case A.I.R. Ori. 44 and Syndicate Bank case A.I.R. 1989 Del. 107, do not apply to the facts of this case, as according to him, the petitioner herein had not agreed to pay interest at quarterly rests if the principal amount was not paid and so according to him, two decisions were rendered in cases where banks had lent loans whereas in the instant cases, the transactions are in respect of purchase of paper made by the petitioner from the respondent during their long transactions.
8. The decision relied upon by the learned Counsel for the respondent in Sigappiachi v. Palaniappa , is not applicable to the facts of this case. The decision rendered in the said judgment was in respect of a suit for money arising out of accounts and the Division Bench found that the provisions of Section 34, I.P.C. would be applicable for awarding interest on accounts suit. The case on hand is not a suit on accounts. But, it is a suit for recovery of money being accrued interest under the Sale of Goods Act for value of goods sold and delivered. According to the petitioner, he has paid the entire principal amount. The other two decisions relied upon by the learned Counsel for the respondent in Syndicate Bank case A.I.R. 1989 Del. 107, referred to above are also not applicable to the facts of the present case. These two decisions were rendered in cases where money was due to the Bank in which the Bank computed interest with quarterly rests and at every quarter adding the interest to the lost balance and treating that as principal sum for next quarter for computing referred to above is also not applicable to the facts of the present case. In the said decision it is observed where although there was no stipulation in advance to pay compound interest with periodical rests, yet by subsequent agreement between the parties at each settlement of account, there was a sinking of the interest in the arrears in the Principal debt and the composite sum carried interest till the next settlement, the debtors having lost their right to have the unpaid interest separated from the principal and dealt with independently, all the essential features of compound interest are present. Here, it is not the case of the respondent that the petitioner has agreed to pay compound interest with periodical rests. I have already extracted the provisions of Section 3(3)(c) of the Interest Act (Central Act 14 of 1978). Section 3(3)(c) reiterates that nothing in the section shall empower the court to award interest upon interest.
9. Therefore, when there is no contract to pay interest on interest as found by me in this case, the respondent is not entitled to pay interest on interest prior to the filing of the suit. But even as per Section 34, C.P.C. the respondent is not entitled to interest subsequent to the date of decree till the date of realisation. Subject to the above modification the civil revision petitions are allowed partly. No costs.