P KRISHNAIAH Vs. P KRISHNAIAH

JUDGEMENT

(1.) The appellant-bank lent to the respondents as sum of Rs. 35,000 on the foot of a promissory note, exhibit A-1, dated 18/09/1975, a letter of guarantee, exhibit A-2, of even date executed by the second defendant and an equitable mortgage executed by the first defendant by depositing of title deeds, exhibit A-4, dated 19/07/1967, and J 14/07/1973m respectively. The trial court granted a money decree against both the defendants for Rs.35,000 with 12 per cent. simple interest thereon per annum from the date of the suit till date of realisation. The contracted rate is 16 1/2%. The appellant is aggrieved against the rate of interest scaled down by the trial court from the contractual rate. Sri Harnath, learned counsel for the appellant, has relied on section 79 of the Negotiable Instruments Act, 1881 (26 of 1881) (for short, "the Act"), which postulates thus: "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 realisation of such amount, or until such date after the institution of a suit to recover such amount as the court directs."

(2.) Learned counsel contends that in a suit on a negotiable instrument the court is given power under section 79 of the Act to fix the outer date from which the rate of interest is to be charged but now power to reduce the contractual rate of interest. Till a date after the suit is fixed, the contractual rate of interest shall be chargeable and the appellant is entitled to the contractual rate of interest. Any other contraction would fly in the face of the mandatory language of section 79. He further contends that section 79 of the Act prevails over section 34 of the Code of Civil Procedure, 1908 (for short, "the Code"). The first question, therefore, is whether section 79 of the Act prevails over section 34 of the Code. Both are Central Acts covering the same field, viz., the power or discretion given to the court to fix a date for payment of interest pendent lite. In addition, section 34 of the Code does give power to fix the rate of interest also. Section 34(1) of the Code reads thus:

(3.) A reading thereof clearly indicates that the court is given discretion to award rate of interest: (i) if there is a contractual rate of interest, interest on the principal sum so adjudged as directed between the parties till date of suit; (ii) from the date of the suit till the date of the decree, discretion is given to award interest on the principal sum so adjudged at such rate as the court deems reasonable; and (iii) from the date of the decree till the date of realisation at such rate not exceeding 6% per annum or till such earlier date as the court thinks fit.