UNION OF INDIA Vs. K KUMARANUNNI NAIR

JUDGEMENT

(1.) Plaintiff is the appellant. The challenge against the decree is that the Sub-Judge did not grant interest at the contractual rate and awarded interest only at 11% per annum.

(2.) The learned sub-Judge held that notification of the Government of Kerala dated 22-5-1979 is incapable of debarring the defendants from claiming the benefits of the Usurious Loans Act 1918 in respect of transaction which commenced in 1973. The above conclusion is not sustainable in view of the Division Bench ruling of this Court in Canara Bank v. Mohammed, AIR 1989 Ker. 239 : ( 1988 (2) KLT 267 ). In the above decision this Court held that the contention that the notification will have no application to past transactions is not tenable.

(3.) Still it has to be considered as to whether the Trial Court went wrong in granting interest only at 11% per annum and not at the contractual rate of 18% per annum. Under S.34, C.P.C. the Court has wide discretion in the matter of granting pendente lite interest and future interest. S.34 envisages three periods from which in the case of a decree for payment of money interest may be allowed. These are (1) interest prior to suit, (2) interest pendente lite and (3) future interest. Prior to the Amendment by Act 104 of 1976 Court could grant interest at 6% per annum on the principal sum in all cases. The lower rate of interest was exploited by several scheming judgment debtors who could get a higher interest by investing money in fixed deposit account in banks. To obviate the malady the Civil Procedure Code as it now stands empowers the Court to award interest for post decretal period at a rate exceeding 6% per annum where the liability in relation to the decree had arisen out of a commercial transaction. Proviso to S.34 empowers the Court to grant interest which may exceed 6% per annum but not exceeding the contractual rate of interest. The proviso makes it clear that where there is no contractual rate, interest may be awarded at the rate at which moneys are lent or advanced by nationalised banks in relation to commercial transactions. Rate of interest depends upon Court's discretion taking into account the entire circumstances of the case.