State Bank of India vs Sukumar Ch. Saha and Others

J.N. Sarma, J.—This appeal has been filed against the judgment dated 9.1.98 passed by the learned Single Judge of this Court in F.A. No. 45 of 1992. By the impugned judgment, the learned judge in exercise of the power u/s 34 of the CPC read with Order 34 of the CPC directed the Debtor to pay the interest which will be claculated at 11 % P.A. and accordingly the appeal was allowed.

Being aggrieved by this order, the Bank has come on appeal. The case of the Bank is that the borrower agreed to pay interest 5 1/2% subject to the minimum interest of 11% P.A. The contention of the Bank is that the Court has no power under Order 34 of the CPC to reduce the interest and/or bring it down below the agreed rate/contractual rate and in support of this contention, the learned Advocate for the Bank relies on State Bank of India Vs. Yasangi Venkateswara Rao, Respondent. That particular case arose out of a suit for recovery of money and that was decreed by the Trial Court by passing a preliminary decree and the same was up-held by the District Court. There was a Second Appeal and in that Second Appeal a point was raised regarding the charging of interest by the Appellant-Bank. After the decree of the Trial Court by the Banking (Amendment) Act 1 of 1984 new Section 21-A was inserted in the Banking Regulation Act. Relying upon that provision it was the contention of the Appellant that there would be no occasion for the court to reduce the rate of interest which the borrower had contracted to pay. The High Court came to the finding that Section 21-A is not a valid piece of legislation. On appeal the Supreme Court held that Section 21-A is a valid piece of legislation and that Section applies to all types of loan which were granted by Bank to the person/persons whether they are agriculturist of non-agriculturist. In paragraph-8. The Supreme Court has pointed out as follows:

We also find it difficult to agree with the observation of the High Court that normally when a security is offered in the case of mortgage of property, charging of compound interest would be regarded as excessive. Entering into a mortgage is a matter of contract between the parties. If the parties agree that in respect of the amount advanced against a mortgage compound interest will be paid, we fail to understand as to how the court can possibly interfere and reduce the amount of interest agreed to be paid on the loan so taken. The mortgaging of a property is with a view of secure the loan and has no relation whatsoever with the quantum of interest to be charged.

This case did not consider Section 34. That has been considered by the Division Bench of this Court in Mustt. Jubeda Khatun Vs. Sulaiman Khan, Respondent and the law has been laid down as follows:

On bare perusal of Rule 11 0.34 Code of Civil Procedure, it is clear that the court can award interest "at the rate agreed between the parties" as stipulated in the deed. Therefore, where there is a stipulated rate of interest, the court is ordinarily bound to decree interest at the rate till the date fixed for payment of the decreetal amount, unless it is penal or is excessive and the transaction is substantially unfair or is contrary to any law. In the deed of mortgage (Ex. 6), the rate of interest was fixed at 12 percent per annum and in case of her failure to repay the amount or part thereof within the time stipulated, interest at the aforesaid rate will run thereon. It is not denied by the Appellant that she did not repay the loan or any part thereof till now. Therefore, there is no illegality in awarding interest @ 12% per annum on the loan amount as per stipulated terms in the deed and as decreed by the court below and affirmed by the learned Single Judge of this Court.

That also is the law laid down in N.M. Veerappa Vs. Canara Bank and Others, where the Supreme Court in paragraph 17 has pointed out as follows:

That the new provision gives a certain amount of discretion to the Court so far as pendentelite interest is concerned and subsequent interest is concerned, (c) It is no longer obligatory to award the contractual rate after date of suit and up-to-date fixed for redemption as above stated even though there was no question of the contractual rate being penal, excessive or substantially unfair within the meaning of the Usurious Loans Act, 1918. (d) Even if the court otherwise wants to award interest, the position after the 1929 and 1956 Amendments is that the court has discretion to Fix interest from date of suit under Order 34. Rule 11(a)(i) up-to-date fixed for payment in the preliminary decree, the same rate agreed in the contract, or, if no rate is so fixed, such rate as the court deems reasonable- on the principal amount found or declared due on the mortgager is concerned, (e) The court has also power to award from date of suit under Order 34, Rule 11(a)(iii), a rate of interest of costs, charges and expenses as per the contract rate or failing such rate at a rate not exceeding 6%. This is the position of the discretionary power of the Court, from date of suit up-to-date fixed in the preliminary decree as the date for payment. (f) Again under Order 34, Rule 11(b) so far as the period after the date fixed for payment is concerned, the court, even if it wants to exercise its discretion toaward interest up-to-date of realisation or actual payment, on the aggregate sums specified in Clause (a) of Order 34, Rule 11, could award interest at such rate as it deemed reasonable.

This being the position of law, the provisions contained in Section 34 of the CPC and Order 34 are discretionary. No doubt this discretion must be exercised in a reasonable manner. Accordingly we do not find any infirmity in the judgment of the learned Single Judge. So this appeal shall stand dismissed.

We have heard Shri. S. Deb, learned Advocate for the Appellant and Shri Lodh, learned Counsel for the Respondents.