Madurai City Co-operative Housing Society Limited vs Special Tribunal for Co-operative Cases, Madurai and 3 others

Aggrieved by the award of the Special Tribunal for Co- operative Cases, Madurai, in C.S.No.171 of 1989 in so far as it relates to the rate of

interest awarded in the judgment and decree at 6 per cent per annum from the date of decree, Madurai City Co-operative Housing Society

Limited has filed the present writ petition for quashing the said decree and for direction to the respondents 2 to 4 to pay interest at the rate of 16

per cent per annum on the amount decreed till the date of realisation.

The brief facts leading to the filing of the writ petition are stated hereunder:

Respondents 2 to 4 herein had executed a mortgage deed of their house in favour of the petitioner on 6.6.84 for a sum of Rs. 60,000 and received

only Rs. 42,000 on several dateS agreeing to repay the said sum together with interest at 14 1/2 per cent per annum. The respondents 2 to 4 had

to pay the principal amount of Rs. 42,000 together with interest of Rs. 14.285.54 as on 15.4.87. Since they failed to pay the amount inspite of

repeated demands, proceedings were initiated before the Co-operative Sub Registrar, Madurai in A.R.C.NO. 305/86-87 for recovery of the total

sum of Rs. 56,285.54 as on 15.4.87 together with subsequent interest with costs. The said proceedings were initiated under the Tamil Nadu Co-

operative Societies Act, 1983. The suit claim was admitted by the fourth respondent before the Co-operative Sub Registrar. The Co-operative

Sub Registrar passed a decree on 14.10.87 for a sum of Rs.58, 740.14 together with further interest at 16 per cent per annum payable to the

petitioner.

It is further stated that against the said award, the respondents 2 to 4 herein preferred an appeal in C.M.A. (C.S.) No. 171 of 1989 before the

Special Tribunal for Co-operative Cases, Madurai/first respondent herein. The first respondent by its order dated 28.2.91, partly allowed the

appeal and held that from 14.10.87 the petitioner is entitled to claim interest at 6 per cent per annum on the principal sum of Rs. 42,000 till the

date of realisation. The Tribunal has disallowed (he claim of interest at the contract rate of 16 per cent per annum from the date of decree till the

date of realisation. Aggrieved by the said award, the petitioner Society has preferred the present writ petition.

Heard the learned counsel for the petitioner as well as respondents 2 to 4.

The only point that arises for consideration in this writ petition is whether the award of 6 per cent interest is proper and acceptable.

Inasmuch as the respondents 2 to 4 have not disputed the borrowal of the loan amount, the execution of the mortgage-deed and the admission

before the Co-operative Sub Registrar, it is unnecessary to refer those aspects once again. In other words, now I am concerned with the rate of

interest from the date of decree till the date of realisation. There is no dispute that in the mortgage-deed, the respondents 2 to 4 herein agreed to

repay the principal amount together with interest at 141/2 per cent per annum and if there is any default, the Society is entitled to collect interest at

the rate of 16 per cent per annum till the date of realisation.

Learned counsel for the petitioner apart from pointing out the terms of contract from the mortgage-deed, also brought to my notice Section 90

(8) of the Tamil Nadu Co-operative Societies Act, 1983 which is as follows:

Section 90 (8): Nothing contained in Section 34 of the Code of Civil Procedure, 1908 (Central Act V of 1908) shall apply to any decision passed

or award made under this section.

It is clear from the above provision that Section 34 of the CPC is not applicable to any decision passed or award made u/s 90 of the Act. On the

other hand, learned counsel appearing for the respondents 2 to 4 very much relied on a decision of Ramaprasada Rao, J., (as His Lordship then

was) reported in Gurunathan and another v. Villupuram Co- operative Urban Bank Limited, 1979 T.L.N.J. 448. In that decision, after referring to

a similar award by the Co-operative Sub Registrar and the award of the Co- operative Tribunal, the Hon''ble Judge has observed as follows:

In my view, as it should be on a par with the powers of courts u/s 34 of the Code of Civil Procedure, the arbitrator also necessarily can grant

interest for the post-award period only at the rate of six per cent per annum notwithstanding the contractual rate of interest by which the parties are

bound for the pendente lite period...

The said decision has been rendered in a non-mortgage suit and the interest was awarded in arbitration proceedings. However, the proceedings

against the respondents 2 to 4 herein is to enforce the terms of the mortgage-deed for which Order 34, Rule 11, C.P.C. applies, section 34,

C.P.C. will not be applicable to the proceedings. I have already extracted section 90(8) of the Tamil Nadu Co-operative Societies Act, 1983

which specifically bars section 34, C.P.C., in respect of decision passed or award made u/s 90 of the said Act. Further, in an identical case,

Subramani, J., in a decision reported in M.D.A., H.S.G.6, Thirumangalam Co-op. Housing Society Ltd., v. Principal District Court, Madurai and

others. 1999 W.L.R. 210 has held that in the light of Section 90 (8) of the Act, Section 34 of the CPC has no application. The learned Judge has

also considered the decision of Ramaprasad Rao, J., in Gurunathan and another v. Villupuram Co- operative Urban Bank Limited, 1979 T.L.N.J.

In N.M. Veerappa Vs. Canara Bank and Others, , while considering a similar question, the Supreme Court has held that in a mortgage suit,

section 34 C.P.C., has no application.

In the light of what is stated above, in view of section 90 (8) of the Tamil Nadu Co-operative Societies Act, 1983 the decision rendered in

Gurunathan v. villupuram Co-operative urban bank Ltd., 1979 T.L.N.J. 448 is no more a good law and I am in agreement with the view

expressed by Subramani, J., in M.D.A H.S.G.6, Thirumangalam Co-op. Housing Society Ltd. v. Principal District Court, Madurai and others

1999 W.L.R. 210 . Apart from the above legal position, it is a fact that co-operative institutions are borrowing at heavy interest and awarding

loans to their members. It is also clear from the information furnished in the affidavit filed by the Madurai City Co-operative Housing Society that

the borrowing rate of interest paid by the Society is 13 1/2 per cent per annum and if it is held that the Co- operative Societies are entitled to

collect interest only at 6 per cent per annum from the date of decree till the date of realisation, the functioning of the Societies will be adversely

affected and they will run only at a loss. In that event the house building activities will suffer a set back. Other-wise the Co-operative Societies will

not be in a position to promote the house building activities. The co-operative building Societies are now playing a prominent part in the house

building activities on co-operative basis. If the Co-operative building societies are not able to collect interest at contract rate, their functioning will

come to standstill. In such circumstances, the impugned award of the Special Tribunal for Co-operative Cases, Madurai in so far as it relates to the

rate of interest is set aside and the interest at the rate of 16 per cent per annum for the decree amount till the date of realisation as ordered by the

Co- operative Sub Registrar is hereby confirmed. Net result, the writ petition is allowed. No costs.