TMI Blog1998 (1) TMI 525X X X X Extracts X X X X X X X X Extracts X X X X ..... 000.00 on 14-11-1985 in all ₹ 1,60,000.00. The trial court passed a preliminary mortgage decree on 4-7-1982 with proportionate costs but the decree-holder Bank was directed to file a fresh memo of calculation calculating the interest on the balance of principal amount due at 16.5% per annum from the date of the equitable mortgage at yearly rests till date of suit. The amounts paid after suit by the defendants were to be deducted as on the respective dates of payment and interest was to be paid as per judgment and these figures were directed to be computed. It was further directed, so far as future interest from date of suit was concerned, as follows :- The plaintiff is entitled to future interest from the date of suit at 6% per annum on the principal amount due from the defendants till date of recovery of full amount . In other words, future interest from date of suit was to be only 6% per annum and not at the contractual rate of 16.5%. 2A. THE plaintiff bank filed an appeal in the High Court as Regular First Appeal No. 1 of 1988 and a learned single Judge of the High Court allowed the appeal and held that the plaintiff was entitled to future interest also at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er hand, the High Court held relying only on Section 34 C.P.C. - and without referring to Order 34, Rule 11, CPC - that the proviso to section 34, CPC enabled the Court to grant interest at more than 6% pending suit where commercial transactions were involved. This conclusion was arrived even after noticing that the trial Court had said in para 11 of its judgment that it had discretion so far as pendente lite interest was concerned because of State Bank of Mysore v. G. P. Thulasi Bai, ILR (1985) Kar 2976. Section 34 does not apply to mortgage suits : (4.) SECTION 34 of the Code of Civil Procedure applies to simple monies decrees and payment of interest pending such suits. Order 34, Rule 11, CPC deals with mortgage suits and payment of interest. It is obvious that so far as mortgage suits are concerned, the special provision in Order 34, Rule11 alone is applicable and not Section 34. This has been laid down in several decisions of this Court and also by the Karnataka High Court in Thulasi Bai's case. Order34, Rule 11, CPC We shall next refer to the provisions of Order 34, Rule 11, CPC, as amended in 1929 and 1956. O. 34, R. 11 : In any decree passed in a suit fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (6.) IN Soli Pestonji Majoo v. Gangadhar Khemka (1969) 3 SCR 33 : (AIR 1969 SC 600), the suit was filed on 5-8-1955 and a preliminary decree was passed on 10-7-1958 for a sum of ₹ 41,172.60 due as on 2-6-1958, and on appeal, the Division Bench fixed the amount at ₹ 38,207 by judgment dated 17-1-1962 and granted interest at 12% per annum with monthly rests even after the date of suit. Before this Court, it was argued for the mortgagor that the High Court ought not to have fixed the rate at 12% p.a. with monthly rests even after the date of suit and that the maximum rate which should have been fixed was 6% simple on the principal sum adjudged. This Court held that before 1929 the position was that till the period for redemption expired, the matter was considered to be in the domain of contract and therefore interest had to be paid at the rates agreed to in the contract and that it was only after the expiry of the redemption period, the matter would pass into the domain of the Court from the domain of the contract. The rights of the mortgagee would thereafter depend not on the contents of the bond but on the directions in the decree. This Court referred to what was stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as said in Jaigobind case (AIR 1940 FC 20) and what this Court has held in Soli Pestonji Majoo's case (AIR 1969 SC 600), it is clear that the word 'may' in the main part of Order 34, Rule 11 governs all sub-clauses of Order 34, Rule 11. (7.) THEREFORE under Order 34, Rule 11, sub-clause (a) the Court may order payment of interest up to the date on or before which payment of the amount found or declared due as per the preliminary decree, in regard to two distinct amounts; firstly under sub-clause (a)(i) interest can in the Court's discretion, be directed to be paid on the principal amount found due on the mortgagee - at the rate payable on the principal or where no such rate is fixed, at such rate as the Court deemed reasonable; secondly under sub-clause (iii) interest can in the Court's discretion, be directed to be paid on costs, charges and expenses at such rate not exceeding 6% per annum as the Court may deem reasonable in both these situations the discretion is to be exercised subject to the above provisions. (B) Interest after date fixed in preliminary decree : clause (b) Then comes sub-clause (b) of Order 34, Rule 11 which deals with interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preliminary decree, from the date of suit till the date fixed for payment as per Order 34, Rule 2(c)(i) or Order 34, Rule 4(1) or Order 34, Rule 7(c)(i), respectively in suits for foreclosure, sale or redemption. (b) But after the 1929 Amendment, because of the words used in the main part of Order 34, Rule 11, namely that the Court may order payment of interest it is no longer obligatory on the part of the Court while passing preliminary decree to require payment at the contract rate of interest from date of suit till the date fixed in the preliminary decree for payment of the amount. It has been so held in Jaigobind's case by the Privy Council, AIR 1940 FC 20 and by this Court in S. P. Majoo's case (1969) 3 SCR 33 : (AIR 1969 SC 600) that the new provision gives a certain amount of discretion to the Court so far as pendente lite interest is concerned and subsequent interest is concerned. (c) It is no longer obligatory to award the contractual rate after date of suit and up-to-date fixed for redemption as above- stated even though there was no question of the contractual rate being penal, excessive or substantially unfair within the meaning of the Usurious Loans Act, 191 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oint out that so far interest prior to suit is concerned, the trial Judge in para 9 of his judgment reduced that rate also following D. S. Gowda v. Corporation Bank, AIR 1983 Karnataka 143. (This aspect we shall refer again when we come to Section 21-A of the Banking Regulation Act, 1949). That part of the judgment has become final. The judgment in the said case has no doubt been since reversed by this Court in Corporation Bank v. D. S. Gowda, (1994) 5 SCC 213 : (1994 AIR SCW 2721) but the trial Court in para 11 of its judgment in the present case did not rely on D. S. Gowda's case so far as future interest was concerned. Hence reversal of D. S. Gowda case has no bearing on this case so far as future interest from date of suit is concerned. The Banking Regulation Act, 1949 : Sections 21, 35 and Section 21-A do not affect Order 34, Rule 11, CPC. (10.) LEARNED counsel for the Bank has contended that if the interest rates from the date of suit could at the discretion of Court he reduced as stated above, serious prejudice would be caused to all Banks particularly because suits are generally pending in Courts for a long number of years. Learned counsel placed strong reliance also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Federal Court in Jaigobind's case AIR 1940 FC 20 and by this Court in Soli Pistonji Majoo's case (1969) 3 SCR 33 : (AIR 1969 SC 600), the discretionary power conferred on the Civil Court under Order 34, Rule 11 to cut down the contract rate of interest for the period from date of suit and even up to the date fixed for redemption by the Court is very much there, even if there was no question of the rate being penal, excessive or substantially unfair within the meaning of the Usurious Loan Act, 1918. This Court observed in Soli Petonji Majoo's case (1969) 3 SCR 33 : (AIR 1969 SC 600) as follows : It is apparent that the new rule as inserted by the Amending Act 21 of 1929 provides that the Court 'may' order payment of interest to the mortgagee up to the date fixed for payment as the rate payable on the principal. It was held by the Federal Court in Jaigobind Singh v. Lachmi Narain, AIR 1940 FC 20 that the language of the rule gives a certain amount of discretion to the Court so far as interest pendente lite and subsequent interest is and it was no longer absolutely obligatory on the Courts to decree interest at the contractual rates up to the date of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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