13. I find merit in the submissions advanced by Mr. Godbole. The
Supreme Court in Central Bank of India (supra) was considering
whether interest capitalized upon periodical rests assumes the
character of principal. Although the opening portion of the judgment
is in the context of Section 34 of the CPC, the discussion on the
capitalization of interest is founded on first principles and is
provision-neutral. It therefore applies to all provisions where the
expression "principal" is employed, including those contained in
Order XXXIV.
In view of the above legal position, the reliance placed by the
Defendants on Dawoodbhai Kassamji Matiwalla (supra) is
misconceived. Any approach that seeks to justify reduction of
interest solely on the basis of the value of the security would lead to
anomalous results, benefitting borrowers with high-value security
while prejudicing lenders in cases where the security is of lesser
value.