ivil Appeal No 1446 of 1987
From the Judgment and Order dated 211985 of the Guja rat High Court in LPA No 94 of 1984
KN Bhatt PH Parekh and MKS Menon for the Appellants
SC Patel for the Respondent
The Judgment of the Court was delivered by VENKATARAMIAH J
The short question which arises for consideration in this case is whether the rate of interest chargeable on the amount payable under an order passed under section 32 of the  195 1 63 of 195 1 hereinafter referred to as the Act  from the date of the said order is governed by section 34 of the Code of Civil Procedure 1908 hereinafter referred to as the Code  or whether it is payable at the contractual rate
The Appellant No1 Ms
Everest Industrial Corporation Private Limited Baroda and its Directors had borrowed from the Gujarat State Financial Corporation hereinafter re ferred to as the Corporation  a sum of Rs6 lakhs for the acquisition of fixed assets namely land bearing original Survey No 163 and now bearing Survey No 949 of Baroda measuring 1 acre and 3 gunthas and the factory building to be constructed thereupon and for purchasing plant and addi tional machinery under a deed of hypothecation dated April 24 1970 hypothecating all machinery and equipment situated at the factory premises situated on Survey No 949
They also created an equitable mortgage mortgaging the said land and factory building by depositing the original title deeds of the properties with the Corporation by signing the letter evidencing the said deposit of title deeds
Under the said transaction the loan of Rs 6 lakhs had to be repaid within a period of 8 years by half yearly instalments such first half yearly instalment of 113th of the loan being payable at the end of 24 months of the disbursement of the first instalment of the loan and subsequent half yearly instal ments of 113th of the loan to be paid
each half year and 610 the last half yearly instalment of 113th of the loan to be paid on 2441978
According to the said agreement the first instalment of Rs46153 was to be paid on 2741972 and second instalment of Rs46153 was to be paid on 27101972
The appellants were liable to pay interest at 85 per cent per annum and that was to be calculated and charged at the end of every half year and was payable on the 31st of March and 30th September in each year
The appellants committed default in payment of instalments and interest due to the Corporation
Hence the Corporation filed an application on 9th August 1973 under section 31 of the Act before the District Judge Baroda in Civil Miscellaneous Application No 123 of 1973 claiming that in view of the default the entire outstanding loan interest and commitment charges amounting to Rs67339042 paise had become due and pay able
In the said proceedings the appellants having admitted the claim of the Corporation a compromise was arrived at under which the 1st Appellant Ms
Everest Industrial Corporation undertook to pay a sum of Rs15000 every month towards the claim of the Corporation and further agreed that if there was a default in payment of any two instalments at a time then the Corporation could recover the entire out standing amount then due forthwith
On the basis of the above compromise an order was passed on 2941977 by the learned Joint Judge Baroda before whom the case was pending at that time
The operative portion of the order read as follows ORDER Claim of the applicant is decreed
Opponent No 1 to pay the amount of Rs15000 fifteen thousand per month through the Bank of Maharashtra to the applicant towards his claim
If two instalments of Rs15000 each at a time are not paid by Opponent No 1 then the applicant shall be entitled to recover the remaining amount then due at a time
Decree to be drawn on payment of Court fees by the applicant
23 of the Court fee amount be refunded to the applicant advocate
Costs to be borne by Opponent No 1
Costs to be assessed after deducting the amount of court fees refundable to the applicant
 Because the 1st Appellant failed to pay the amount as ordered by the Court an application was filed by the Corpo ration under section 328 of the Act before the District Judge Baroda requesting that the property hypothecated in favour of the Corporation be directed to be sold by the Commissioner appointed by the Court and the amount so 611 realised might be appropriated towards the dues of the Corporation
Accordingly an order directing the sale of the properties was passed on 821980
Before the property could be sold the appellants raised an objection regarding the actual amount which could be realised by the Corporation by the sale of the properties mortgaged in its favour
The objection which related to the amount of interest payable by the appellants was formulated thus
Since under the order dated 2941977 which was described as a decree the Court had not expressly directed payment of any interest on the decretal amount the Corporation was not entitled to recover any amount by way of interest due on the principal amount for the period subsequent to the date of the order
It was further submitted that since the question of payment of interest on the amount due for the period subsequent to the date of the decision of the Court is governed by section 34 of the Code the appellants were not liable to pay any inter est because the Court had not ordered payment of any amount by way of interest to be paid as required by that section
In other words the contention of the appellants was that when the decree was silent about the payment of interest for the period between the date of the decree and the date of payment the Corporation was not entitled to recover it
It may be mentioned that the Corporation had claimed inter est at the rate agreed upon under the transaction ie 85 per cent per annum and that had not been disputed by the borrowers
The said objection was overruled by the Joint Judge by his Order dated February 25 1983
He determined that Rs93554784 paise was due as on February 8 1983 and that thereafter interest at the rate of Rs17860 paise per day would be accruing
Aggrieved by the order of the Joint Judge the appellants filed an appeal in First Appeal No 1474 of 1983 before the High Court of Gujarat
That appeal was dismissed by the learned Single Judge on February 2 1984
Under the Letters Patent Appeal No 94 of 1984 filed by the appellants a Division Bench of the High Court af firmed the judgment of the learned Single Judge by its decision dated January 2 1985
This appeal by special leave is filed against the judgment of the Division Bench of the High Court
The main contention urged on behalf of the appellants before this Court is that a proceeding under section 31 of the Act is in the nature of a suit an order made thereon under section 32 thereof is a decree and since by sub sec tion 6 of section 32 of the Act the District Judge is required to investigate the claim of the Corporation in accordance with the provisions of the Code insofar as the said provisions would be applicable thereto section 34 of the Code which governs the question of levy of interest on the amount due from the date of the suit 612 to the date of the decree and from the date of the decree to the date of payment would be attracted to the proceedings instituted under section 31 of the Act also
It is urged that since the decree passed in this case is silent on the question of payment of any interest on the principal sum from the date of the decree to the date of payment the Court should be deemed to have refused such interest by virtue of subsection 2 of section 34 of the Code
In support of the above contention of the appellants reliance is placed on the decision of the High Court of Karnataka in Karnataka State Financial Corporation Bangalore vs Sri Nithyananda Bhavan and another AIR 1982 Karnataka 179 in which the High Court had applied section 34 of the Code to a proceeding instituted under section 31 of the Act
In that case the District Judge had awarded future interest at 6 per cent per annum on the amount payable under a transaction under the Act from the date of the application to the date of payment
The Karnataka State Financial Corporation which was aggrieved by the order of the District Judge filed an appeal against that order before the High Court
In the said appeal the Karnataka State Financial Corporation claimed interest on the principal amount due from the date of the application at the rate of 18 per cent per annum
In decid ing the said case the High Court did not go into the ques tion whether section 34 of the Code would be applicable to a proceeding under the Act
It was assumed on all hands that section 34 of the Code was applicable
Ultimately the High Court increased the rate of interest to 11 per cent per annum which was the contractual rate of interest treating that as a reasonable rate of interest that could be awarded under section 34 of the Code
It may be mentioned here that an earlier decision of this Court in Gujarat State Financial Corporation  vs Ms Natson Manufacturing Co P Ltd  Ors  in which the nature of a proceed ing instituted under section 31 of the Act and of the order passed thereon under section 32 thereof had been considered was not brought to the notice of the High Court
In Gujarat State Financial Corporation vs Ms Natson Manufacturing Co P Ltd  Ors
supra no doubt the question involved was whether court fee was payable on an application made under section 31 of the Act on an ad valorem basis as if the proceeding was a suit or not
But this Court after analysing the provisions of the Act held that an application for any of the reliefs that can be granted under the Act was not certainly a plaint in a suit for recovery of mortgage loan and that it was not even something akin to a suit by a mortgagee to recover mortgage money by sale of the mortgage property
The Court held that the applicant in such a case could not pray 613 for a preliminary decree for sale of the property or a final decree for the payment of the money nor it could seek to enforce any personal liability even if such a liability had been incurred under the contract of mortgage as the law stood then
This Court held that the form of the relief to be granted under the Act did not attract Article 1 or Arti cle 7 of Schedule 1 of the Bombay Court Fees Act 1959 which required payment of court fee on ad valorem basis on any plaint or application in the nature of a plaint instituted for recovery of mortgage amount
Accordingly it held that the demand for payment of ad valorem court fee was unsus tainable
In the course of its judgment the Court rejected the contention based on sub section 6 of section 32 of the Act which required a District Judge to apply the procedure of the Code to applications made under section 31 of the Act and ultimately held that the substantive relief in any claim under section 311 of the Act was something akin to the relief that could be granted on an application for attach ment of property for execution of a decree at a stage poste rior to the passing of the decree
The Court further ob served that we are unable to appreciate the view taken by the High Court that the proceeding is not in the nature of execution of the decree because the question of enforcement of the order of attachment or sale would only arise after the same is made absolute under sub section 7
 Even though in the above decision the question which arose for consideration was whether ad valorem court fee was payable on an application under section 31 of the Act as if it was a suit the Court has decided the said question after deter mining the true nature of a proceeding instituted under section 311 of the Act on a detailed analysis of the provisions of the Act
If as held by this Court the proceeding instituted under section 311 of the Act is something akin to an application for attachment of property in execution of a decree at a stage posterior to the passing of the decree no question of passing any order under section 34 of the Code would arise since section 34 of the Code would be applicable only at the stage of the passing of the decree and not to any stage posterior to the decree
It may also be mentioned here that even under the Code the question of interest payable in mortgage suits filed in civil courts is governed by order 34 rule 11 of the Code and not by section 34 of the Code which may be applicable only to cases of personal decrees passed under order 34 rule 6 of the Code
The High Court was right in holding that interest would be payable on the principal amount due in accordance with the terms of the agreement between the parties till the entire amount due was paid as per the order passed under section 32 of the Act
We hold that the decision of the Karnataka High 614 Court referred to above which has applied section 34 of the Code to a proceeding instituted under section 311 of the Act is not correctly decided
It was lastly urged on behalf of the appellants that the amount due and payable to the Corporation has not been properly calculated by the Joint Judge
We do not have all the material before us to enable us to determine the actual amount due
It is also seen that subsequent to the date of the order passed by the Joint Judge a sufficiently long time has elapsed
In the circumstances we feel that the Joint Judge before whom the proceeding for recovery of the amount by sale of the properties has been instituted should be directed to redetermine the amount due and payable to the Corporation in this case
We accordingly affirm the judgment of the High Court holding that section 34 of the Code of Civil Procedure 1908 is not applicable to this case but remand the matter to the Joint Judge to redetermine the actual amount due and payable to the Corporation in these proceedings calculating the same as per contract between the parties before directing the sale of the properties
We direct the Joint Judge to deter mine the amount payable by the appellants within one month from the date of the receipt of a copy of the order of this Court
Both the parties are directed to file their state ments of accounts before the Joint Judge within one week from the date of receipt of the copy of this order by the Joint Judge to enable him to decide the case as directed above
The appeal is accordingly disposed of
There shall however be no order as to costs
PSS Appeal disposed of


Summary:
The appellants had borrowed from the respondent Corpora tion a certain sum for the acquisition of fixed assets under a deed of hypothecation
They also created an equitable mortgage mortgaging the land and factory building by depos iting the original title deeds of the properties with the Corporation
The loan had to be repaid within a period of 8 years by half yearly instalments
The appellants were liable to pay interest at 85 per cent per annum and that was to be calculated and charged at the end of every half year
The appellants committed default in payment of instal ments and interest due to the Corporation
The Corporation filed an application under section 31 of the before the District Judge claiming the entire outstanding loan interest and commitment charges
The appellants having admitted the claim of the Corporation an order of compromise was passed by the Court under which the appellants undertook to pay a sum of Rs15000 every month towards the claim of the Corporation
The appellants failed to pay the amount as ordered by the Court
The respondent thereupon filed an application under section 328 of the Act requesting that the property hypothecated in favour of the Corporation be directed to be sold by the Commissioner appointed by the Court and the amount so rea lised be appropriated towards the dues
The appellants raised an objection that since the Court had not in 608 its order expressly directed payment of any interest on the amount the Corporation was not entitled to recover any amount by way Of interest due on the principal amount for the period subsequent to the date of the order and since payment of interest subsequent to the date of the decision of the Court was governed by section 34 of the Code of Civil Procedure the appellants were not liable to pay any inter est
The first appeal and the Letters Patent Appeal filed by the appellants were dismissed by the High Court
In this appeal by special leave it was contended for the appellants that a proceeding under section 31 of the Act is in the nature of a suit an order made thereon under section 32 thereof is a decree and since by subs
6 of section 32 of the Act the District Judge was required to investigate the claim of the Corporation in accordance with the provisions of the Code section 34 of the Code would be attracted to the proceeding instituted under section 31 of the Act also and that since the decree passed in this case is silent on the ques tion of payment of any interest on principal sum from the date of the decree to the date of payment the Court should be deemed to have refused such interest by virtue of sub section
2 of section 34 of the code
Disposing of the appeal HELD 1
The High Court was right in holding that inter est would be payable on the principal amount due in accord ance With the terms of the agreement between the parties till the entire amount due was paid as per the order passed under section 32 of the 
613GH 2
Section 34 of the Code of Civil Procedure 1908 is not applicable to this case
A proceeding instituted under section 311 of the Act is something akin to an application for attachment of property in execution of a decree at a stage posterior to the passing of the decree
That being so no question of passing any order under section 34 of the Code would arise since that provision would be applicable only at the stage of the passing of the decree and not to any stage posterior to the decree
Even under the Code the question of interest payable in mortgage suits filed in civil courts is governed by Order 34 rule 11 of the Code and not by section 34 of the Code which may be applicable only to cases of person al decrees passed under Order 34 rule 6 of the Code
614C 613F 3
In the instant case the Joint Judge is to redeter mine the actual amount due and payable to the Corporation as per the contract between the parties before directing sale
614D 609 Karnataka State Financial Corporation Bangalore vs Sri Nithyananda Bhavan  Anr AIR 1982 Karnataka 179 and Gujarat State Financial Corporation vs Ms Natson Manufac turing Co P Ltd  Ors   referred to