IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED:12.04.2011 Coram: THE HONOURABLE MR.JUSTICE G.RAJASURIA S.A.No.462 of 2010 and M.P.No.1 of 2010 S.Nallthambi ... Appellant / 1st Defendant vs. 1.Jaya 2.Saraswathy 3.Thamarai Shankar ... Respondents / Plaintiff & Defendants 2 & 3 This second appeal is filed against the judgement and decree in AS.No.22/07 dated 31.12.2008 passed by the Principal District Judge, Namakkal, confirming the judgment and decree dated 26.9.2006 passed by the Subordinate Judge, Namakkal, in O.S.No.322 of 1998. For Appellants : Mr.D.Nellaiappan For Respondents : Ms.P.T.Asha M/s.Sarvabhauman Associates for R1 JUDGMENT This second appeal is filed by D1, inveighing the judgement and decree dated 31.12.2008 passed by the Principal District Judge, Namakkal, confirming the judgment and decree dated 26.9.2006 passed by the Subordinate Judge, Namakkal, in O.S.No.322 of 1998, which was filed for recovery of money. 2. The parties, for the sake of convenience, are referred to here under according to their litigative status and ranking before the trial Court. 3. A summation and summarisation of the relevant facts absolutely necessary and germane for the disposal of this second appeal would run thus: (i) The first respondent herein, as plaintiff, filed the suit for recovery of a sum of Rs.4,02,131/-. https://hcservices.ecourts.gov.in/hcservices/ (ii) Written statement was filed by the defendant resisting the suit. (iii) Whereupon issues were framed by the trial Court. On the plaintiff's side, the plaintiff examined herself as P.W.1 and marked Exs.A1 to A5. The first defendant examined himself as D.W.1 along with the second defendant as D.W.2 and Exs.B1 to B7 were marked. (iv) Ultimately, the trial Court decreed the suit mandating the defendant to pay the suit amount with 12% interest per annum from the date of suit till the date of decree and 6% per annum from the date of decree till the date of realization. (v) As against the said judgement and decree of the trial Court, appeal was filed for nothing but to be dismissed by the first appellate Court, confirming the judgement and decree of the trial Court. 4. Challenging and impugning the judgements and decrees of the Courts below relating to the awarding of 12% interest pendente lite, so to say, from the date of suit till the date of decree, this second appeal has been focussed by the first defendant on various grounds and also suggesting the following substantial question of law: "1. Whether the Courts below by granting interest (@ 18% p.a.) to the advance prior to the filing of the suit contrary to Section 13(d) of the Specific Relief Act. 2. Whether the Courts below committed an error of law by granting interest @ 12% p.a. from the date of the suit till the date of the decree, in the absence of any contract." 5. On hearing both sides, I am of the view that the following substantial question of law would arise for consideration: "Whether, in the absence of both the Courts below placing reliance on any strong reasons, the awarding of 12% interest per annum, pendente lite, so to say from the date of suit till the date of decree, is tenable? 6. A bare perusal of the judgements and decrees of the Courts below would demonstrate and dispslay that they simply felt as though awarding of 12% interest per annum from the date of suit till the date of decree was quite reasonable, but they did not cite any legal authority for awarding so. 7. I would like to take a cue from the following decisions of the Honourable Apex Court reported in 2009 (2) CTC 381 (C.K.Sasankan vs. The Dhanalakshmi Bank Ltd.). Certain excerpts from it would run thus: https://hcservices.ecourts.gov.in/hcservices/ "3. The appellant is the son of late C.V.Kunjikuttan, who was carrying on business as a civil contractor. Said C.V.Kunjikuttan carried on business of contracts in his individual capacity. He died on 8th September, 1989 and on his demise, the business was taken over by his legal heirs. While C.V.Kunjikuttan was alive he had availed of certain facilities from Dhanalakshmi Bank Ltd., Cherthala Branch, Alappuzha District – respondent herein (for short the "Bank"). The respondent is a scheduled Bank and has its principal place of business at Thrissur in Kerala and Branches in various other places. C.V.Kunjikuttan approached the respondent- Bank in 1973 for sanction of an over draft financial facility. The Bank sanctioned him an overdraft facility of Rs.3 lakh. The overdraft facility allowed to C.V.Kunjikuttan was secured by security of immovable property, which was collateral security. On 30.10.1980, the Bank granted an enhanced overdraft facility of Rs.9 lakh which was secured by late C.V.Kunjikuttan and his children including the appellant herein. 7. In order to appreciate the aforesaid contention, we are required to consider the scope and ambit of Section 34 of the Code which get attracted in the instant case. The provisions of Section 34 of the Code are reproduced here in below" "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 per cent, 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. https://hcservices.ecourts.gov.in/hcservices/ 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". 8. The quantum and rate of interest which the appellant in the present case is entitled to would be in accordance with the provisions of Section 34 of the Code. According to the provisions of Section 34 of the Code interest is to be awarded at a reasonable rate and on the principal amount. It is needless to point out that although the amount of interest from the date of filing of the suit till the date of the decree and thereafter till realisation is in the discretion of the Court as is confirmed by the use of the word "may" but such discretion has to be exercised by the Court properly, reasonably and on sound legal principles and not arbitrarily and while doing so the Court is also to consider the parameter, scope and ambit of Section 34 of Code. 9. The aforesaid scope and ambit of Section 34 of the Code has been the subject of discussion in many cases of this Court. We are inclined to refer to the decision in Clariant International Ltd. V.Securities & Exchange Board of India, 2004 (8) SCC 524, where it was held by this Court that the interest can be awarded in terms of an agreement or statutory provisions and it can also be awarded by reason of usage or trade having the force of law or on equitable considerations but the same cannot be awarded by way of damages except in cases where money due is wrongfully withheld and there are equitable grounds therefore, for which a written demand is mandatory. It was further held that in absence of any agreement or statutory provision or a mercantile usage, interest payable can be only at the market rate and such interest is payable upon establishment of totality of https://hcservices.ecourts.gov.in/hcservices/ circumstances justifying exercise of such equitable equitable jurisdiction. It was also held that in ascertaining the rate of interest the Courts of law can take judicial notice of both inflation as also fall in Bank rate of interest. The bank rate of interest both for commercial purposes and other purposes has been the subject-matter of statutory provisions as also the judge- made laws. In the said case reference was made to the decisions in Kaushnuma Begum v. New India Assurance Co.Ltd., 2001 (3) CTC 170 (SC): 2001 (2) SCC 9; H.S.Ahammed Hussain v. Irfan Ahammed, 2002 (6) SCC 52; and United India Insurance Co.Ltd. v. Patricia Jean Mahajan, 2002 (6) SCC 281, and it was observed that even in cases of victims of motor vehicle accidents, the courts have upon taking note of the fall in the rate of interest held 9% interest to be reasonable. Direction to pay such rate of interest is also found to be reasonable and fair as the plaintiff was deprived to utilize and roll its money in commercial transaction and kept out of it due to wrongful withholding of the same by the defendant. 10. Considering the facts and circumstances of the present case, we find that the rate of interest as awarded for pendente lite and future interest is exorbitant and thus we direct that pendente lite and future interest at the rate of 9% shall be paid which is found to be just, proper and reasonable." 8. The above decision is subsequently followed by this Court in the decision reported in 2009(4) CTC 337 -M.S.Muthukumar vs. M/s.Skyline Financial Services, Madras P.Ltd.,rep.by its Managing Director and another. 9. From a mere perusal of the aforesaid precedents, I am of the view that awarding 9% interest from the date of suit till the date of decree would meet the ends of justice, instead of 12% per annum, and awarding of 6% interest per annum from the date of decree till the date of realisation is incommensurate with Section 34 of C.P.C. 10. In the result, the second appeal stands allowed to the limited extent modifying the judgement and decree of the trial Court to the effect that the first defendant shall pay on the sum of Rs.2,55,000/- with 9% interest per annum from the date of suit till the date of decree and 6% interest per annum from the date of decree till the date of realisation on the suit amount. However there is no order as to costs. Consequently, connected miscellaneous petition is closed. https://hcservices.ecourts.gov.in/hcservices/ 11. The learned counsel for the first defendant would make an extempore submission that three months' time may be granted for payment. 12. I am of the considered view that a months' time could be granted from this date for payment and accordingly it is granted. Msk Sd/- Asst. Registrar //True Copy// Sub Asst. Registrar To 1.The Principal District Judge, Namakkal. 2.The Subordinate Judge, Namakkal. + 1 cc to M/s. Sarvabhuman, Advocate SR No.26832 + 1 cc to Mr. D. Nellaiappan, Advocate SR No.26953 S.A.No.462 of 2010 MBS(CO) SR/25.4.2011 https://hcservices.ecourts.gov.in/hcservices/