1991 JTR(SC) 672
1992 AIR(SC) 521 ; 1992 AIR(SCW) 173 ; 1992 19 AllLR 167 ; 1992 1 APLJ 33 ; 1992 BankJ 369 ; 1992 BankJ 508 ; 1992 1 BC 210 ; 1991 3 CurCC(SC) 747 ; 1992 ISJ(Banking) 111 ; 1991 6 JT 543 ; 1991 2 Scale 1170 ; 1992 1 SCC 204 ; 1991 Supp3 SCR 27 ; 1992 1 UJ 191 ; 1992 KHC 746
SUPREME COURT OF INDIA
SHREE BHARAT LAXMI WOOL STORE, panipat
versus
PUNJAB NATIONAL BANK
Decide on November 28, 1991
Act Referred :CIVIL PROCEDURE CODE : S.34
(A) Section 34 of the Civil Procedure Code, as amended by the CPC (Amendment) Act 104 of 1976, governs the award of interest on decrees. The amendment, effective 1-2-1977, permits contractual rates exceeding six per cent for commercial transactions. However, Section 97(c) of the Amending Act ensures that suits instituted before the amendment continue to be governed by the pre-amendment provisions. In this case, the suit was instituted on 20-4-1972, pre-dating the amendment, and thus the unamended Section 34 applies, limiting interest from the date of decree to 6 per cent.
(B) The key legal principle is that amendments to interest provisions under Section 34 do not apply retrospectively to suits filed prior to the amendment. The rate of interest from the date of decree to the date of payment is capped at 6 per cent unless the amendment is applicable.
Facts of the case:
The respondent-Bank filed a suit seeking recovery of a specified sum. The trial court awarded interest at a contractual rate above 6 per cent from the date of decree, which was modified on appeal to 6 per cent. The High Court restored the original contractual rate, failing to consider the suit's filing date.
Findings of Court:
The High Court erred in not recognizing the inapplicability of the amendment to a suit filed prior to its commencement. The trial court's allowance of interest above 6 per cent post-decree was incorrect under the unamended law.
Issues:
Whether the amendment increasing interest rates for commercial transactions applies to a suit instituted before its effective date.
Ratio Decidendi:
Since the suit was instituted before the amendment, the unamended Section 34 applies, restricting interest from the date of decree to 6 per cent irrespective of contractual terms.
Result:
The decree is modified to allow interest at 6 per cent from the date of decree till payment, with no order on costs.
(A) Section 34 of the Civil Procedure Code, as amended by the CPC (Amendment) Act 104 of 1976, governs the award of interest on decrees. The amendment, effective 1-2-1977, permits contractual rates exceeding six per cent for commercial transactions. However, Section 97(c) of the Amending Act ensures that suits instituted before the amendment continue to be governed by the pre-amendment provisions. In this case, the suit was instituted on 20-4-1972, pre-dating the amendment, and thus the unamended Section 34 applies, limiting interest from the date of decree to 6 per cent.
(B) The key legal principle is that amendments to interest provisions under Section 34 do not apply retrospectively to suits filed prior to the amendment. The rate of interest from the date of decree to the date of payment is capped at 6 per cent unless the amendment is applicable.
Facts of the case:
The respondent-Bank filed a suit seeking recovery of a specified sum. The trial court awarded interest at a contractual rate above 6 per cent from the date of decree, which was modified on appeal to 6 per cent. The High Court restored the original contractual rate, failing to consider the suit's filing date.
Findings of Court:
The High Court erred in not recognizing the inapplicability of the amendment to a suit filed prior to its commencement. The trial court's allowance of interest above 6 per cent post-decree was incorrect under the unamended law.
Issues:
Whether the amendment increasing interest rates for commercial transactions applies to a suit instituted before its effective date.
Ratio Decidendi:
Since the suit was instituted before the amendment, the unamended Section 34 applies, restricting interest from the date of decree to 6 per cent irrespective of contractual terms.
Result:
The decree is modified to allow interest at 6 per cent from the date of decree till payment, with no order on costs.
Judgment
K. JAGANNATHA SHETTY, JJ.
( 1 ) THE respondent-Bank instituted a suit in the Court of Sub-Judge, Panipat, for recovery of Rs. 81,137. 39 against the appellants herein. The Subordinate Judge decreed the suit allowing contractual rate of interest at 10 1/2 Per Cent per annum from the date of suit till the date of realisation. The appeal against the decree was dismissed by modifying the interest payable as follows:
"that the future interest payable on the mount in suit is reduced to 6 Per Cent per annum from the date of suit till realisation. "
THE High Court in second appeal did not agree with the modification made by the District Judge and it restored the rate of interest allowed by the Sub-Judge.
( 2 ) THE award of interest from the date of suit till the date of payment is regulated by Section 34 of the Civil Procedure Code. Section 34 before the 1977 amendment provided that the court may award interest as it deems reasonable on the principal sum adjudged from the date of suit to the date of the decree and further interest at such rate not exceeding 6 Per Cent as the court deems reasonable from the date of decree to the date of payment. Section 34 was amended by CPC (Amendment) Act 104 of 1976 and Section 13 of the Amending Act has added a proviso, which reads as follows:
"provided that where the liability in relation to the sum so adjudged had arisen out of a commerical 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. "
( 3 ) THIS amendment was brought into force with effect from 1-2-1977 and by Section 97 (c) of the Amending Act it has been made clear that the provisions of Section 34 as amended shall not affect the rate at which interest may be allowed on a decree in any suit instituted before the commencement of Section 13 and interest on a decree passed in such suit shall be ordered in accordance with the provisions of Section 34 as they stood before the amendment.
( 4 ) IN the instant case, the suit was filed on 20-4-1972. The amendment of Section 34 referred to above, therefore, clearly is not applicable. The Court is required to allow proper rate of interest under the unamended Section 34. As we have seen earlier, Section 34 has two parts, first part covering the period from the date of suit till the date of decree and second covering the period from the date of decree till the date of payment. We are concerned only with the second part. The trial court has awarded interest more than 6 Per Cent under the unamended provisions for the period from the date of decree till payment. The High Court appears to have not noticed the non-applicability of the amendment to suits filed prior to the amendment.
( 5 ) IN this view of the matter, the decre of the trial court as affirmed by the High Court is modified allowing interest on the decretal sum only at 6 Per Cent from the date of decree till payment. On all other aspects the decree is kept undisturbed.
( 6 ) THE appeal is accordingly disposed of with no order as to costs. Order accordingly.