IN THE HIGH COURT OF JUDICATURE OF ANDHRA PRADESH AT HYDERABAD MONDAY, THE THIRTY FIRST DAY OF JANUARY, TWO THOUSAND AND ELEVEN PRESENT HON’BLE SRI JUSTICE N.R.L.NAGESWARA RAO APPEAL SUIT No. 266 OF 2001 BETWEEN: I.S. Vasu and another …APPELLANTS/DEFENDANTS AND Soora Rajarathnam Naidu …RESPONDENT/PLAINTIFF The Court made the following: HON’BLE SRI JUSTICE N.R.L. NAGESWARA RAO APPEAL SUIT No. 266 OF 2001 JUDGMENT: The defendants in O.S.No.440 of 1997 on the file of the Additional Senior Civil Judge, Tirupathi, are the appellants herein. 2. The suit was filed by the plaintiff for recovery of a sum of Rs.1,60,800/- being the principal and interest basing on the promissory note, dated 02-04-1995 executed by the defendants in favour of the plaintiff with interest at the rate of 24% per annum. 3. The defendants did not deny the liability of the payment of the amount, but however they pleaded that interest claimed is excessive and therefore, it cannot be paid. 4. On the basis of the above pleadings, the following issues were framed, for trial, by the trial court: 1) Whether the suit pronote is true and valid? 2) Whether the interest is usurious? 3) Whether the defendants are entitled for instalments? 4) To what relief? 5. On behalf of the plaintiff, PW.1 was examined and got marked Exs.A-1 to A-3. On behalf of the defendants, no oral or documentary evidence is adduced. 6. After considering the evidence on record, the learned Additional Senior Civil Judge decreed the suit with interest at the rate of 24% per annum on the principal amount of Rs.1,00,000/- till the date of suit and also at the same rate of interest from the date of plaint till the date of the realisation. Questioning the granting of interest at the rate of 24% per annum from the date of suit till the date of realisation, the present appeal is filed. 7. Now the point that arises for consideration is whether the interest granted by the Court at the rate of 24% per annum from the date of suit till the date of realisation is legal and sustainable? 8. POINT: Section 34 of the Code of Civil Procedure (for short “CPC”), is as follows: “34. Interest:- (1) Where and in so far as a decree is for the payment of money, the Court may, in the decree, order interest at such rate as the Court deems reasonable to be paid on the principal sum adjudged, from the date of the suit to the date of the decree, in addition to any interest adjudged on such principal sum for any period prior to the institution of the suit, [with further interest at such rate not exceeding six per cent per annum, as the Court deems reasonable on such principal sum], from the date of the decree to the date of payment, or to such earlier date as the Court thinks fit: [Provided that where the liability in relation to the sum so adjudged had arisen 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. Explanation I. – In this sub-section, “nationalised bank” means a corresponding new bank as defined in the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970). Explanation II.- For the purposes of this section, a transaction is a commercial transaction, if it is connected with the industry, trade or business of the party incurring the liability.] (2) Where such a decree is silent with respect to the payment of further interest [on such principal sum] from the date of the decree to the date of payment or other earlier date, the Court shall be deemed to have refused such interest, and a separate suit therefore shall not lie”. 9. Evidently, the Court has got power to grant interest more than six percent from the date of suit till the date of realisation only if it is a commercial transaction. A commercial transaction is explained under explanation 2 as borrowing for the purpose of industry, trade or business of the party incurring liability. In this case evidently, the money is said to have been borrowed as the defendants incurred losses in film industry and for discharge of those liabilities, the amount was borrowed. Evidently, the money was not borrowed for the purpose of producing any picture whereby any profits made. Borrowing is only for the purpose of discharging of liability arising out of a transaction, which has caused loss to the defendants. 10. Therefore, in view of the above circumstances, borrowing cannot be said to be for the purpose of trade or business and it can only be purpose of discharging the liabilities incurred by the defendants. Therefore, I feel the interest granted at the rate of 24 percent per annum by the lower Court, exercising the discretion against the provisions of Section 34 of the CPC, are not warranted in this case. The counsel for the appellants represents that the defendants are agreeable to pay the interest at the rate of 12% per annum instead of 24% per annum as granted by the lower Court. 11. Therefore, in view of the above circumstances, the decree of the lower Court is modified and the future interest from the date of suit till the date of realisation is reduced to 12% per annum. 12. In the result, the appeal is allowed in part. There shall no order as to costs. Date: 31-01-2011. ________________________ N.R.L.NAGESWARA RAO,J INL HON’BLE SRI JUSTICE N.R.L. NAGESWARA RAO APPEAL SUIT No. 266 OF 2001 31st January, 2011 INL