Canara Bank vs K.S. Kushalappa and others

Chandrakantharaj Urs, J.—The short question that has fallen for determination by us in this appeal by the Canara Bank is whether the ad item interest given from the date of suit to the date of decree and from date of decree to the date of realisation at 6% p.a. is in conformity with S. 34 of the CPC (in short the Code) or opposed to it?

In the trial Court the suit filed for recovery of money advanced to the respondents-defendants for development of their coffee estate has been decreed. But ad item interest as noticed by us has been granted at 6% p.a. i.e., maximum permissible under sub-sec. (1) of S. 34 of the Code. It was submitted by the learned counsel that the loan advanced for the development of coffee estate should be treated as a commercial loan and the discretion should have been exercised by the trial Judge in accordance with the proviso to sub-sec. (1) of S. 34 of the Code to come nearer the contractual rate so far as it related to ad item interest and therefore, this Court should interfere.

We do not think there is any force in that contention. By no means can it be said that development of coffee estate is either business or trade or commerce or industry for the purpose of S. 34. We find force in the contention that it is more within the area agricultural or horticultural operation and not any other. Therefore, the 6%p.a. awarded as interest ad item 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.

It is pointed out in Division Bench ruling of this Court in a case of Canara Bank v. B. Seshagiri Prabhu (1984) 1 Kar LJ 121, which is as under :

"The grant of current or dependent-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 S. 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 S. 34(1), should not exceed 6 percent 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 percent 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."

We find no merit in this appeal. Therefore, it is rejected having regard to explanation to sub-sec. (1) of S. 34 of the Code as to what constitutes commercial transaction.

Appeal rejected.