VIJAYA BANK LTD Vs. GANAPATHY FILAMENTS

JUDGEMENT

(1.) the plaintiff-bank is the appellant before us. It is aggrieved by the rate of interest awarded by the trial court on the amount decreed from the date of the filing of the suit. Though the trial court accepted the plaintiffs case and decreed the suit as prayed for including the rate of interest upto the date of suit, current interest was awarded at the rate of 6 per cent only.

(2.) defendant nos. 2 to 5 are the partners of defendant No. 1 firm. The defendants obtained a loan of Rs. 98,500/- from the plaintiff on 29th june, 1975 agreeing to pay interest thereon at 6 per cent per annum over the reserve bank of India rate with a minimum of 15 per cent per annum with monthly rests. There was another loan obtained by the defendants referred as "open loan cash credit" in a sum of Rs. 30,000/- with a similar agreement regarding the rate of interest. Since the defendants defaulted in the payment, suit was filed on 29th june, 1978, claiming a sum of Rs. 1,41,148.51 with current interest thereafter. The trial court has upheld the plaintiffs claim. However, while awarding the interest, the trial court has simply said that the rate of current interest shall be 6 per cent per annum from the date of the suit. The trial court has not given any reason for this reduced rate of interest.

(3.) Section 34 of the Code of Civil Procedure provides for the interest to be awarded by the court from the date of the suit. Sub-section (1) states that the further interest for the period after the institution of the suit shall not exceed 6 per cent per annum. However, the proviso states that where the liability in relation to the sum adjudged had arisen out of a commercial transaction, the rate of such further interest may exceed 6 per cent per annum, but shall not exceed the contractual rate of interest or where there is no contractual rate, the rate at which monies are lent or advanced by the nationalised banks in relation to commercial transactions. Explanation ii states that for the purpose of this Section, a transaction is commercial transaction if it is connected with the industry, trade or business of the party incurring the liability.