2001 (10) TMI 1065 - SUPREME COURT

What is the meaning to be assigned to the phrases ‘the principal sum adjudged’ and ‘such principal sum’ as occurring in section 34 of the Code of Civil Procedure, 1908 (‘the Code’) [as amended by the Code of Civil Procedure (Amendment) Act (66 of 1956) with effect from 1-1-1957]?

Whether the interest in question which was capitalised could be said to have been in fact paid by the borrower so as to attract applicability to him of certain beneficial provision of the Income-tax Act, 1918?

Held that:- Subject to a binding stipulation contained in a voluntary contract between the parties and/or an established practice or usage interest on loans and advances may be charged on periodical rests and also capitalised on remaining unpaid. The principal sum actually advanced coupled with the interest on periodical rests so capitalised is capable of being adjudged as principal sum on the date of the suit.

The principal sum so adjudged is ‘such principal sum’ within the meaning of section 34 on which interest pendente lite and future interest i.e. post-decree interest, at such rate and for such period which the Court may deem fit, may be awarded by the Court.

Let all these appeals and SLPs be now placed before appropriate Bench for decision.