M.S. Liberhan, J.@mdashThis judgment of mine will dispose of R.S.A. 1005 of 1986 and R.S.A. No. 1006 of 1986.
2. The only question raised in these appeals is whether the interest on the amount is due after filing of suit in accordance with section 34 of the CPC or Section 79 of the Negotiable Instruments Act, 1881. The above controversy revolves round the following facts:-
3. In R.S.A. No. 1005 of 1986, the plaintiff filed a suit on 28.11.1979 for recovery of Rs. 28812.30 with future interest at the rate of 18% per annum till realization on the basis of a pronote executed by the defendant.
4. In R.S.A. No. 1006 of 1986, the plaintiff sought recovery of Rs. 16173.69 with future interest at rate of 18% per annum till realization on the basis of the pronote executed by the defendant.
5. The defendant respondent controverted the said allegations.
6. The trial Court granted the decree with contractual rate of interest (at the rate of 15% per annum in R.S.A. No. 1005 of 1986 and 16 1/2% per annum in R.S.A. No. 1006 of 1986) till the date of realization. The lower appellate Court modified the judgment and decree of the trial Court and reduced the rate of interest from the contractual rate to (sic) per annum on the principal sum from the date of suit to the date of decree and 6%, interest and the principal sum, from the date of decree to the date of realization.
7. The learned counsel for the appellant has challenged the said finding and contends that the rate of interest cannot be reduced from the contractual rate. He contends that u/s 79 of the Negotiable Instruments Act, 1881, when a specified rate of interest is given in the negotiable instrument than interest has to be calculated at the rate specified on the amount of principal money due thereon from the date of the instrument until tender or realization of such amount, or until such date after the institution of a suit to recover such amount as the Court directs. Section 79 of the Negotiable Instruments Act, 1881, reads as under:-
Interest when rate specified: When interest at a specified rate is expressly made payable on a promissory note or bill of exchange, interest shall be calculated at the rate specified, on the amount of the principal money due thereon from the date of the instrument, until tender or realization of such amount until such date after the institution of a suit to recover such amount as the Court directs.
He has further relied on M/s Shri Bharat Laxmi Wool Store and others v. Punjab National Bank (1982) 84 P.L.R. 472, wherein Hon''ble Single Bench of this Court has taken a view that the bank should have been allowed interest at the contractual rate considering the provisions of section 34 of the Code of Civil Procedure. The learned counsel for the appellant further contends that the appellant is also entitled to the contractual rate of interest till the date of realization. He has referred to section 34 of the Code of Civil Procedure, which reads as under:-
34. Interest.-(1) Where and in so far 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.
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.
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.
8. The learned counsel for the appellant further contends that in view of section 21A of the Banking Laws (Amendment) Act, 1983, wherein it has been provided that rate of interest charged by banking company is not subject to the scrutiny by courts, the Court has no jurisdiction to reduce the rate of interest. Section 21-A of the Banking Laws (Amendment) Act, 1983 reads as under:-
Rates of interest charged by banking companies not to be subject to scrutiny, by Courts:- Notwithstanding anything contained in the Usurious Loans Act, 1918 any other law relating to indebtedness in force in any State, a transaction between a banking company and its debtor shall not be reopened by any court on the ground that the rate of interest charged by the banking company in respect of such transaction is excessive.
9. The learned counsel for the respondent has controverted the submission made by the learned counsel for the appellant. The learned counsel for the respondent contends that u/s 79 of the Negotiable Instruments Act, 1981, the Court is to fix the date upto which the contractual rate of interest is payable from the date of instrument. The said date, in the Court''s discretion is to be fixed taking into consideration the rate of interest, the principal amount, the amount of interest accumulated etc. Here admittedly no date has been fixed by the Courts below. The learned counsel for the respondent in support of his contention relies on the judgment of this Court in Ram Singh Narain Singh v. F. Dewan Chand Nand Kishore AIR 1960 P&H. 287, wherein it has been observed as under:-
It will be clear from the language of section 79 that in a suit filed on the basis of Negotiable Instruments Act, no option is left with the Court to cut down the contractual rate of interest unless the Court comes to the conclusion that the rate of interest is penal or exorbitant (xx xx xx). If the rate is proper, the Court has to allow the contractual rate from the date of the instrument to the date to be fixed by it.
If no date is fixed by the Court then in view of section 107 and Order 41 Rule 33 of the CPC and the fact that the appeal is rehearing of the suit, it is open to the appellate Court to fix any date after the suit up to which the interest at the contractual rate is to be allowed in a suit on the basis of a negotiable instrument.
It was further observed:-
In case of a suit based on a negotiable instrument, the Court has to allow the contractual rate of interest from the date of instrument to the date to be fixed by it after the suit. But after that date the grant of interest is regulated by section 34 of the CPC and not section 79 of the Negotiable Instruments Act.
10. u/s 34 of the Code of Civil Procedure, it is within the discretion of the Court to grant future interest. He further relies on Piara Lal Khanna v. S. Herchand Singh Jaiji AIR 1961 P&H . 442, which is again a Division Bench judgment of this Court. I am in full agreement with the proposition laid down by the Division Benches of this Court. Admittedly no date was fixed by the Courts below u/s 79 of the Negotiable Instruments Act. However, keeping in view that in R.S.A. No. 1005 of 1986, the principal amount was only Rs. 6000/- and after adding interest in it another pronote of Rs. 11,000/- was executed in 1976 and again in 1979 adding again interest, about Rs. 16000/- were claimed which is much more even than double the principal amount, and the rate of interest is 16 1/2%. I fix the date as 1.12.1979 in R.S.A. No. 1005 of 1986. Similar being the factual position in R.S.A. No. 1006 of 1986. I fix 15.11.1979 as the date up to which the plaintiff will be entitled to the interest according to the contractual rate and thereafter, the plaintiff shall be entitled to the interest at the rate of 12% per annum till the date of decree and 6% per annum from the date of decree till realisation. This interest shall be calculated on the principal amount due.
11. In my view ratio laid down in M/s Bharat Laxmi Wool Store''s case (supra) is not relevant to the facts and circumstances of this case inter alia on the ground that therein it was a case of commercial transaction and section 34 of the Code of Civil Procedure, itself provides that in case of commercial transaction, it is contractual rate of interest which has to prevail while in the case in hand, there is no pleading that the transaction was commercial or was business transaction, nor any such issue was raised. There cannot be any presumption with respect to the transaction being commercial. In view of these circumstances, the contractual rate of interest cannot be awarded u/s 34 of the Code of Civil Procedure.
12. Section 21-A of the Banking Laws (Amendment) Act, has no applicability to the facts and circumstance of this case in as much as section 21-A has been inserted only to bar the reopening the transaction of the banking company and its debtor with respect to interest on the ground that he interest charged by the banking company in respect of such transaction is excessive. It is nobody''s case that the interest charged by the banking company was excessive, therefore, it should be reduced. Thus section 21-A has no relevancy to the facts and circumstances of these case.
13. In view of my above observation, the plaintiff shall be entitled to recover he contractual rate of interest upto the dates specified above and thereafter at the rate of 12% per annum till the date of decree and from the decree onward at the rate of 6% per annum till the date of realization. The interest to be calculated on the principal amount. I order accordingly with no order as to costs.
