-1- IN THE HIGH COURT OF BOMBAY AT GOA SECOND APPEAL NO. 55 of 2010 Mr. Joe Fernandes, Major in age, Proprietor of Kristal Sands Beach Resort, Businessman, Near Subodh Kerkar's Art Galery, Gaurawado, Calangute, Bardez-Goa. ..... Appellant V e r s u s Shri Harshad Jaganath Kunde, S/o late Jagnath Senai Kunde, businessman, of full age, residing at 7-A, Damodar Housing Society, Aquem,Margaqo-Goa. ...... Respondent Mr. J. A. Lobo, Advocate for the Appellant. Mr. J. P. Mulgaonkar, Advocate for the Respondent. CORAM: F. M. REIS, J. DATE : 6 th August, 2010. ORAL JUDGMENT Heard the learned Counsel on the following substantial question of law : 1. Whether the Courts below were justified to award interest at the rate of 6 percent per month from the date of the suit up to actual payment ? -2- 2. Heard finally, by consent of both the Counsel. Respondent waives service. 3. The above Appeal challenged the Judgments passed by the learned District Judge, North Goa, at Panaji, in Regular Civil Appeal no. 9/2009, whereby the Appeal preferred by the Appellant came to be dismissed. 4. The Respondent filed the suit claiming that the Appellant had borrowed from the Respondent a sum of Rs. 50,000/- on 23.05.1997, as a short term loan, which would be repaid within a short period of time. It is further their case that the Appellant had also executed a demand promissory note dated 23.05.1997 before the Notary public. 5. It is further his contention that as security towards repayment of the said sum, the Appellant issued a post dated cheque drawn on State Bank of India, Calangute Branch, dated 20.06.1997, for a sum of Rs.50,000/-. The cheque when presented for payment on 17.09.1997 and on 15.10.1997, the cheque was dishonoured with an endorsement “Payment stopped by the drawer”. It is further his case that when he wanted to present the said cheque again for encashment, the Appellant approached them on 19.06.1997 and requested them not to present the cheque since he had not made the arrangements to effect the said payment. As there was no payment effected by the Appellant, despite of notice issued to him, the suit came to be filed for recovery for a sum of Rs.50,000/- besides interest amounting to Rs.48,000/- at -3- the rate of 8% per month calculated w.e.f. 23.05.97 to 23.05.98 and further interest at the same rate till full and final realization of the said amount. 6. The Appellant filed his written statement and contended that he had applied for a loan of Rs.20,00,000/- which loan was sanctioned and was disbursed to the Appellant. The said loan was obtained for a particular project. It is further his contention that two persons namely Subhash Naik and Rajan Sinari, visited his house and inquired with the Respondent about his difficulty in obtaining the said loan. The said person informed him that in case loan was sanctioned, the Appellant would have to pay commission. It is further his contention that on 22.05.1997, the Appellant was told that the loan would be sanctioned but he should pay another sum of Rs.50,000/-. After discussions, the amount was sought to be paid by a post dated cheque and the amount was secured by executing a Hundi. For the other reasons stated in the written statement, the Appellant claims that the Respondent was not entitled for the amount claimed and prayed that the suit be dismissed. 7. The learned Trial Judge, after framing the issues and recording of evidence, has decreed the suit filed by the Respondent. The learned Judge disbelieved the contention of the Appellant and partly decreed that suit and held that the Respondent was entitled to recover the said amount of Rs.50,000/- along with interest at the rate of 6% per month from the date of the suit i.e. 26.06.1998 till full and final recovery. -4- 8. Being aggrieved by the said Judgment, the Appellant preferred the Regular Civil Appeal no.9/2009 before the learned District Judge, North Goa, at Panaji. The learned District Judge after re-examining the evidence, dismissed the Appeal filed by the Appellant. Being aggrieved by the said Judgments, the Appellant has preferred the present Appeal. 9. The learned Counsel appearing for the Appellant has assailed the impugned Judgment only on one ground to the effect that the interest awarded by the Courts below at the rate of 6% per month is exorbitant and which cannot be sustained. He further submitted that the interest rates prevailing with Nationalised Banks is around 6% to 8% per annum and as such the question of awarding such exorbitant interest by the Courts below does not arise at all. He further submitted that the Court has got a discretion under Section 34 of the Civil Procedure Code to award the rate of interest during the pendency of the suit which has not been considered by the Courts below. 10. On the other hand, the learned Counsel appearing for the Respondent has submitted that the Hundi executed by the Appellant stipulated that the rate of interest was 8% per month. In such circumstances, the learned Counsel submitted that the Courts below were justified to award interest at the rate of 6% per month which cannot be considered to be exorbitant as it was the contractual rate. He further submitted that this contention was not raised by the Appellant before the Courts below. -5- 11. Upon hearing the learned Counsel and on perusal of the record, I find that the Appellant had in fact raised a ground in the Appeal Memo being ground no.15, wherein they disputed the powers of the Courts below in granting such exorbitant interest during the pendency of the suit. The only point for consideration is, what is the power of the Court to award interest during the pendency of the suit. 12. Section 34 of the Civil Procedure Code provides as under : “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 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: 2. 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. -6- 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 therefor shall not lie.” 13. On perusal of the said provisions, it is obvious that the Court has a discretion to award interest during the pendency of the suit. Such discretion has to be exercised in the facts and circumstances of each case. In the present case, there is no evidence on record to establish that the amount which was borrowed was for any commercial purpose. In the background of these facts, I find that the reasonable interest to be awarded in such circumstances is at the rate of 10% per annum from the date of filing of the suit up to actual payment. The Courts below have not considered the provisions of Section 34 of the Civil Procedure Code while passing the impugned Judgments and failed to address itself as to whether interest of 6% per month could be awarded by the Court during the pendency of the suit. In such circumstances, the interest awarded by the Courts below at the rate of -7- 6% per month during the pendency of the suit, cannot be sustained. 14. In view of the above, I pass the following : ORDER (i) The Appeal is partly allowed. (ii) The impugned Judgment and Decree is modified to the extent that the interest payable by the Appellant on the sum of Rs.50,000/- from the date of the suit i.e. 26.06.1998 up to full and final recovery shall be at the rate of 10% per annum. Rest of the reliefs are confirmed. (iii) The Appeal stands disposed of accordingly with no orders as to costs. F. M. REIS, J. arp/*