THE HON’BLE SRI JUSTICE V. ESWARAIAH AND THE HON’BLE SRI JUSTICE B.N.RAO NALLA A.S.No.647 of 2009 JUDGMENT: (per the Hon’ble Sri Justice V. Eswaraiah) This appeal is taken up for disposal at interlocutory stage, as both the parties advanced arguments for disposal of the main appeal. 2. The appellants herein are the defendants and the respondent herein is the plaintiff. 3. The plaintiff filed the suit in O.S.No.63 of 2005 on the file of the Principal District Judge, East Godavari at Rajahmundry, for recovery of a sum of Rs.10,40,309/- together with subsequent interest on the principal amount of Rs.9,10,344/- @ 30% per annum from the date of suit till the date of realisation along with costs. The said suit was decreed as prayed for vide judgment and decree, dated 31-07-2009. Aggrieved by the same, the defendants-A.P.State Financial Corporation have filed the present appeal. 4. The suit was presented on 23-08-2005. The plaintiff filed the said suit for recovery of a sum of Rs.10,40,309/-, which includes Rs.9,10,344/- towards the amount illegally collected by the defendants from the plaintiff on 03-03- 2005, Rs.1,28,965/- towards interest @ 30% per annum from 03-03-2005 to 23-08-2005 and Rs.1,000/- towards expenses of registered letters and legal notices. The trial court decreed the suit with costs directing the defendants to pay a sum of Rs.10,40,309/- along with subsequent interest on the principal amount of Rs.9,10,344/- @ 30% per annum from the date of suit till the date of realisation. 5. Learned counsel appearing for the appellants submits that the appellants have no grievance with regard to the decree passed for payment of Rs.9,10,344/- in favour of the plaintiff, as the said amount was illegally collected by the defendants from the plaintiff. The only grievance of the appellants is with regard to payment of interest @ 30% per annum prior to filing of the suit and from the date of filing of the suit till the date of realisation. 6. Since the controversy is only with regard to rate of interest @ 30% per annum on the illegally collected amount of Rs.9,10,344/-, the controversy with regard to payment of principal amount of Rs.9,10,344/- need not be considered. 7. The only question that arises for consideration is as to whether the rate of interest @ 30% per annum on the illegally collected amount of Rs.9,10,344/- prior to the filing of the suit and from the date of suit till the date of realization is just and proper and if not, at what rate of interest, the plaintiff is entitled to. 8. Learned counsel appearing for the appellants-defendants submits that the rate of interest payable, under Section 34 of the Code of Civil Procedure, on the principal sum adjudged arising out of commercial transactions, 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 Nationalized Banks in relation to commercial transactions shall be taken into account. In support of the said contention, he has relied upon a judgment of the Hon’ble Supreme Court in C.K.SASANKAN Vs. DHANALAKSHMI BANK LIMITED[1]. It is further stated that no nationalized bank is charging interest more than 13.5% per annum in relation to commercial transactions. 9. Learned counsel appearing for the respondent-plaintiff fairly submits that there is no contract between the parties governing the rate of interest payable by the defendants in respect of the said illegally collected amount and, therefore, the commercial rate of interest charged by the nationalized banks alone has to be taken into account. 10. In the instant case, admittedly, the company transactions relate to the commercial transactions. Therefore, the rate of interest is to be charged at contractual rate and if there is no contract with regard to the rate of interest to be charged, then the maximum rate that can be charged by the nationalized banks in relation to the commercial transactions, at the relevant point of time, shall be taken into account. Admittedly, the rate of interest that was charged in respect of the account in question relating to the plaintiff was only 13.5% as per Ex.A-14, dated 27-01-2005. But, the court below, without any reference to the said contention of the defendants and the actual rate of interest charged by the appellants Corporation, having observed that the defendants failed to produce necessary documents, adverse inference was drawn and held that no dispute is raised with regard to payment of interest, and accordingly, awarded interest @ 30% per annum on the illegally collected amount. 11. The nationalized banks, at the relevant point of time in respect of commercial transactions, are charging interest @ 13.5% per annum and, therefore, the plaintiff is entitled to the interest @ 13.5% per annum alone on the illegally collected amount. 12. In C.K.SASANKAN’s case (supra), the bank claimed the rate of interest @ 25% per annum and considering the facts and circumstances of the case, the Apex Court granted the rate of interest @ 9% per annum alone. 13. I n C.K.SASANKAN’s case (supra), the Hon’ble Supreme Court reproduced the provisions of Section 34 of the Code of Civil Procedure, which reads as follows:- 34. Interest:- (1) Where and insofar 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 percent 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 nationalized banks in relation to commercial transactions. Explanation 1 :- 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.” 14. According to the provisions of Section 34 of the Code of Civil Procedure, the interest has to be awarded at the reasonable rate on the principal amount. The courts are entitled to grant interest at its discretion and if it is not a commercial transaction, the rate of interest from the date of decree till the date of realization is only 6% in normal course, but if the liability in relation to the sum so adjudged had arisen out of the commercial transaction, such rate may exceed 6% per annum but shall not exceed to the contractual rate of interest and where there is no contractual rate, the rate at which moneys are lent or advanced by nationalised banks in relation to commercial transactions shall be taken into account. This being a commercial transaction and the plaintiff has failed to establish the rate of interest charged by any nationalized bank is not more than 13.5% and admittedly, the rate of interest charged by the nationalized bank, at the relevant point of time, was only 13.5% per annum, we are of the opinion that the court below is not justified in awarding rate of interest at 30% per annum on the illegally collected amount. 15. Accordingly, we hold that the plaintiff is entitled for interest @ 13.5% per annum alone on the said illegally collected amount. 16. In view of the aforesaid facts and circumstances of the case, the appeal is allowed in part and the judgment and decree of the court below stands modified holding that the defendants are liable to pay interest @ 13.5% per annum on the illegally collected amount of Rs.9,10,344/- from 03- 03-2005 till the date of realization. There shall be no order as to costs. ________________ V.ESWARAIAH, J _________________ B.N.RAO NALLA, J Dated: 15-03-2010 Prv [1] (2009) 11 Supreme Court Cases 60