R. S. A. No. 1838 of 2009 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. Case No. : R. S. A. No. 1838 of 2009 Date of Decision : October 07, 2010 Smt. Raj Bala Dalal .... Appellant Vs. Life Insurance Corporation of India and others .... Respondents CORAM : HON'BLE MR. JUSTICE L. N. MITTAL * * * Present : Mr. Sharan Sethi, Advocate for the appellant. Mr. B. R. Mahajan, Advocate for respondent no.1. * * * L. N. MITTAL, J. (Oral) : Respondent no.1 – plaintiff Life Insurance Corporation of India filed suit against Preet Singh Dalal, already dead before filing of the suit, through his legal representatives i.e. Raj Bala Dalal – appellant (wife) and Priya and Preeti – proforma respondents no.2 and 3 herein (daughters). Appellant Raj Bala Dalal was also impleaded as defendant no.2 in her individual capacity. The plaintiff alleged that Preet Singh Dalal (since deceased) had raised loan of Rs.1,90,000/- from the plaintiff and agreed to R. S. A. No. 1838 of 2009 2 pay the same with interest @ 14% per annum compounded monthly and in the event of default, additional interest @ 3% per annum was payable. Defendant no.1 created equitable mortgage of his House No.2137, Sector 37, Faridabad. Defendant no.2 – appellant stood guarantor for the said loan. Some LIC policies were also deposited as collateral security by the loanee. Ultimately, a sum of Rs.2,32,168/- remained due from the defendants to the plaintiff as on 01.04.2003. Making these averments, respondent no.1 filed suit for recovery of the said amount. The defendants pleaded ignorance about raising of loan by Preet Singh Dalal and also about terms and conditions thereof and also regarding creation of mortgage. Defendants also pleaded that recovery of loan from the defendants was unjust and unfair. It was also alleged that the amount has not been calculated correctly. Defendants, as legal heirs of the loanee, are not liable to pay the suit amount. Various other pleas were also raised. Learned Civil Judge (Senior Division), Faridabad, vide judgment and decree dated 10.08.2007, dismissed the suit as time barred, although it was held that otherwise, the plaintiff is entitled to recover the suit amount from the defendants. First appeal preferred by the plaintiff has been allowed by learned Additional District Judge, Faridabad, vide judgment and decree dated 07.03.2009 and thereby, suit filed by the plaintiff has been decreed for recovery of Rs.2,32,168/- with interest @ R. S. A. No. 1838 of 2009 3 14% per annum compounded monthly from the date of institution of suit till recovery. Defendants were granted six months' time to satisfy the decree, failing which the plaintiff was held entitled to recover the decretal amount by sale of mortgaged property. Feeling aggrieved, defendant no.2, who is also defendant no.1 (a), has filed the instant second appeal. I have heard learned counsel for the parties and perused the case file. Learned counsel for the appellant, at the outset, contended that defendants are ready to pay the due amount, but disputed the right of the plaintiff to claim compound interest and that too, compounded every month. Rate of interest was also alleged to be exorbitant. Learned counsel for the appellant, at the outset, referred to calculation Annexure A-1 and contended that interest has been calculated @ 17% per annum w.e.f. 01.04.2003 onwards. However, this calculation has not been accepted by the lower appellate court. On the other hand, lower appellate court has awarded interest @ 14% per annum only from the date of filing of suit till recovery. Consequently, the aforesaid contention is completely misconceived and irrelevant. Learned counsel for the appellant next contended that interest could not be compounded monthly and rate of interest @ 14% is also excessive. Reliance in support of this contention has been placed on various judgments namely : N. M. Veerappa vs. Canara Bank reported R. S. A. No. 1838 of 2009 4 as AIR 1998 Supreme Court 1101, Central Bank of India vs. Ravindra and others reported as AIR 2001 Supreme Court 3095, Punjab National Bank vs. Prem De Vastra and others reported as AIR 2001 Delhi 172 and Samadh Baba Narain Dass Ba Ihaman Swami Ram Tirath vs. Surta and others reported as AIR 2002 Punjab and Haryana 108. On the other hand, learned counsel for the plaintiff contended that agreed rate of interest was 17% per annum compounded monthly inasmuch as defendants have committed fault in repayment of the loan amount and therefore, in addition to basic agreed interest @ 14% per annum, defendants are also liable to pay 3% per annum additional interest as penalty. It was also contended that since it was a suit for recovery of mortgage money on the basis of equitable mortgage, defendants are liable to pay interest at the agreed rate. I have carefully considered the rival contentions. Section 34 of the Code of Civil Procedure (in short – CPC) is not applicable to the instant suit, as it is based on mortgage. However, Order 34 Rule 11 CPC is applicable. It provides that interest at the agreed rate can be allowed up to the date on or before which payment of the amount declared due is ordered to be made by the mortgagor – judgment- debtor, whereas subsequent interest up to date of recovery has been left to the discretion of the Court i.e. at such rate as the Court deems reasonable. R. S. A. No. 1838 of 2009 5 Consequently, in the instant case, agreed rate of interest being 14% per annum compounded monthly, as granted by the trial court, shall be applicable till six months after the date of decree of the lower appellate court i.e. the time, up to which defendants have been asked to pay the decretal amount. However, thereafter, rate of interest is the discretion of the Court and has to be awarded at such rate as the Court deems reasonable. Now, interest rates have considerably decreased. In the years 1988 and 1990, when the loan was raised, interest rates were very high. However, since the year 2000 or so, the rate of interest started falling. In this view of the matter, I am of the considered opinion that in the instant case, reasonable rate of interest since six months after the date of decree of the lower appellate court shall be 12% per annum compounded annually. Judgment and decree of the lower appellate court require to be modified accordingly and it is ordered accordingly. With modification in the judgment and decree of the lower appellate court as aforesaid, the instant appeal stands disposed of. October 07, 2010 ( L. N. MITTAL ) monika JUDGE