UNION BANK OF INDIA Vs. SHOKHILAL GUPTA

JUDGEMENT

(1.) THE submission of the learned counsel for the appellant is that the sum adjudged against the respondents arises out of a commercial transaction and, therefore, the learned trial Judge had no discretion to award the interest at the rate of Rs. 6% per annum under sub -section (1) of section 34 of the C.P.C. and according to the proviso, the interest should have been awarded at the contractual, rate i.e. 12.50% per annum. There is much substance in this submission. Prior to the Amendment Act of 1976 the Court had the discretion to award interest not exceeding 6% per annum from the date of the decree to the date of payment. The Court had the discretion to award interest at such rate as the Court deemed reasonable to be paid on the principal sum adjudged against the debtor from the date of the suit to the date of decree in addition to any interest adjudged on such principal sum for any period prior to the institution of the suit with a further interest at such rate not exceeding 6% per annum from the date of the decree to the date of payment. But by the Amending Act of 1976 a proviso with two explanations has been inserted in section 34 (1) of the C.P.C. The said proviso contemplates 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 6% per annum but shall not exceed the contractual rate of interest, where there is no

(2.) CONTRACTUAL rate, the rate at which moneys or land are advanced by the Nationalised Banks in relation to commercial transactions. In the present case, admittedly there is a contractual rate of interest i.e. 12.50% per annum, the transaction also arises out of a commercial transaction inasmuch as admittedly the loan was obtained by the defendant No.1 for the purpose of purchasing a Jeep for using the same as a taxi. According to the explanation (2) attached to the proviso, a transaction is a commercial transaction, if it is connected with the industry, trade or business of the party incurring the liability. As said above, the transaction is a commercial transaction connected with trade and business of the debtor, the defendant/respondent No.1. Thus, the rate of interest should have been awarded at the contractual rate and not 6% per annum.