1996 JTR(SC) 922
1996 2 AllCJ 1437 ; 1997 BankJ 127 ; 1997 1 BomCR(SC) 508 ; 1996 3 CCC(SC) 97 ; 1996 3 CLT(SC) 8901 ; 1996 87 CompCas 289 ; 1996 2 CTC 528 ; 1996 3 CurCC(SC) 97 ; 1996 DNJ 459 ; 1996 ISJ(Banking) 557 ; 1996 5 JT 589 ; 1996 2 RRR 659 ; 1996 5 Scale 13 ; 1996 5 SCC 279 ; 1996 Supp2 SCR 520 ; 1996 5 Supreme 284
1996(5) Supreme 284
SUPREME COURT OF INDIA
K. Ramaswamy, Faizan Uddin and G.B. Pattanaik, JJ.
Central Bank of India -Petitioner
versus
Ravindra & Ors. -Respondents
Special Leave Petition (C) No. 2421 of 1993
With
Special Leave Petition (C) Nos. 3954/94, 9082 and 9088/1995
And
Civil Appeal Nos. 3964, 3967 of 1992
All Decided on 7-5-1996
IMPORTANT POINT
Interpretation of the liability of the borrower to pay interest on the principal sum to include interest that became merged with the princpal sum adjudged or principal sum as lent, is required to be authoritatively laid down by a Constitution Bench.
Act Referred :CIVIL PROCEDURE CODE : S.34
A) The Civil Procedure Code, Section 34, as amended by Amendment Act 66 of 1956, governs the calculation of interest on the principal sum adjudged in decrees. The amendment replaced the pre-existing phrase 'aggregate sum so adjudged' with 'the principal sum adjudged' to clarify that interest accrues on the principal amount determined up to the date of the decree, with further interest permitted on that principal sum from the date of the suit until the decree, based on a reasonable interval. This case specifically requires the interpretation of the phrase 'the principal sum adjudged' and its implications for the borrowers liability to pay interest, including interest that may have merged into the principal sum.
B) The core legal principles involve the distinction between the aggregate sum adjudged and the principal sum, the application of interest on the principal sum both up to the decree and from the suits filing, and the need for authoritative clarification on whether merged interest forms part of the principal sum for subsequent interest calculations.
Facts of the case:
A dispute regarding the interpretation of Section 34 of the Civil Procedure Code, CPC, arose concerning the calculation of interest on the principal sum adjudged, particularly whether interest should be payable on interest or on the principal sum inclusive of previously accrued interest.
Findings of Court:
The Court observed that prior judgments did not clearly distinguish between the aggregate sum adjudged and the principal sum, and noted that no specific argument was presented on this interpretation. Consequently, the matter requires authoritative determination by a Constitution Bench.
Issues:
Whether the principal sum adjudged and the principal sum on which interest is calculated are the same, and whether interest can be charged on interest that has merged with the principal sum adjudged.
Ratio Decidendi:
The Court determined that the interpretation of the liability of the borrower to pay interest on the principal sum, including interest merged within it, necessitates clarification by a Constitution Bench, directing the Registry to place the matter before the Chief Justice for constitution of the Bench.
Result:
The matter is referred to a Constitution Bench for authoritative adjudication on the interpretation of Section 34, CPC, concerning the principal sum adjudged and the calculation of interest.
A) The Civil Procedure Code, Section 34, as amended by Amendment Act 66 of 1956, governs the calculation of interest on the principal sum adjudged in decrees. The amendment replaced the pre-existing phrase 'aggregate sum so adjudged' with 'the principal sum adjudged' to clarify that interest accrues on the principal amount determined up to the date of the decree, with further interest permitted on that principal sum from the date of the suit until the decree, based on a reasonable interval. This case specifically requires the interpretation of the phrase 'the principal sum adjudged' and its implications for the borrowers liability to pay interest, including interest that may have merged into the principal sum.
B) The core legal principles involve the distinction between the aggregate sum adjudged and the principal sum, the application of interest on the principal sum both up to the decree and from the suits filing, and the need for authoritative clarification on whether merged interest forms part of the principal sum for subsequent interest calculations.
Facts of the case:
A dispute regarding the interpretation of Section 34 of the Civil Procedure Code, CPC, arose concerning the calculation of interest on the principal sum adjudged, particularly whether interest should be payable on interest or on the principal sum inclusive of previously accrued interest.
Findings of Court:
The Court observed that prior judgments did not clearly distinguish between the aggregate sum adjudged and the principal sum, and noted that no specific argument was presented on this interpretation. Consequently, the matter requires authoritative determination by a Constitution Bench.
Issues:
Whether the principal sum adjudged and the principal sum on which interest is calculated are the same, and whether interest can be charged on interest that has merged with the principal sum adjudged.
Ratio Decidendi:
The Court determined that the interpretation of the liability of the borrower to pay interest on the principal sum, including interest merged within it, necessitates clarification by a Constitution Bench, directing the Registry to place the matter before the Chief Justice for constitution of the Bench.
Result:
The matter is referred to a Constitution Bench for authoritative adjudication on the interpretation of Section 34, CPC, concerning the principal sum adjudged and the calculation of interest.
ORDER
After hearing learned Attorney General and amicus curiae S/Shri A. Subba Rao, Ranjit Kumar and K.M.K. Nair on (the interpretation of the provisions of Section 34, CPC on "the principal sum adjudged" the matter is required to be considered by a Constitution Bench. The learned Attorney General has drawn our attention to the Judgments of this Court in Corporation Bank v. D.S. Gouda & Ors.1 and Bank of Baroda v. Jagannatha2 wherein he sought to draw the deduction that the principal sum adjudged and the principal sum mentioned later would be the same. He seeks to take support from the word "such" in support of his contention. Preceding Amendment Act 66 of 1956, the words were "aggregate sum so adjudged" and after Amendment, were substituted with the words "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 on such date as the court deems reasonable on the "principal sum"). The distinction, therefore, was not drawn to the attention of this Court in the aforesaid two judgments in particular later one. As a fact no argument in this behalf appears to have been canvassed. Interpretation of the liability of the borrower to pay interest on the principal sum to include interest that became merged with the principal sum adjudged or principal sum as lent, is required to be authoritatively laid down by a Bench of five Judges.
2. The Registry is directed to place the matter before Hon ble Chief Justice for constituting the Constitution Bench.
Ordered accordingly.
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