UCO BANK Vs. BHAGWANT SINGH

JUDGEMENT

(1.) The suit for the recovery of Rs. 82,780 - was decreed by the trial Court with costs and pendente -lite and future interest on the principal amount at the rate of 10 -1/2 percent per annum. The appeal of the bank was dismissed vide the judgment impugned in this second appeal The main contention of the appellants is that the courts below had no jurisdiction to grant lessor rate of interest than the one which was agreed to be paid by the respondents at the time of taking of the loan. It is contended that while granting pendente -lite and future interest, the Court has no jurisdiction, to reduce the rate of interest and is under an obligation to grant the interest at the contracted rate only. It is further submitted that as the suit was based upon Negotiable Instruments Act, 1981, the provisions of Sec. 34 of the Code of Civil Procedure were not applicable.

(2.) The grant or refusal to grant interest pendete lite is governed by the provisions of Sec. 34 of the Code which provides that where and in so far as the decree is for 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. It is well settled proposition of law that interest payable to the date of suit is a matter of substantive law and is outside the scope of Sec. 34 of the C.P.C. The awarding of interest alter the discretion to award or refuse to award the interest after the institution of the suit. Future interest after the institution of the suit is generally granted by the Court according to the agreements of the parties and can be refused if the circumstances of the case so warrant. The plaintiff is not entitled as to claim the contract rate of interest after the institution of the suit and the Court has full discretion in the matter or grating or refusing to grant the contracted rate of interest after the filing of the suit. The Court; is not bound to award interest in all cases at the contract rate. As the awarding of interest from the date of the decree to the date of payment is in exercise of the Courts power conferred by Sec. 34 of the CPC and not under the terms of the contract between the parties, it has to be seen as to whether the discretion exercised is in accordance with the settled propositions of law and based upon the facts of the case or not. Once it Is proved that the discretion has been exercised on sound judicial principles, the same cannot be interfered with in an appeal.

(3.) In a case filed on the basis of Negotiable Instruments Act, 1881 a plea was raised that as the provisions of Sec. 79 of the Act were applicable, the grant of interest would not be governed by the provisions of Sec. 34 of the CPC The matter was considered by a Division Bench of the J and K High Court in United Commercial Bank v/s. Hans Raj Saraf and Ors. which relied upon an earlier Division Bench of that Court in Jammu and Kashmir Bank, Ltd v/s. Bashir Ahmed Qazi, 1987 SL.J. 249 and Piara Lal v/s. Harchand Singh wherein it was held that awarding of interest after the date of the suit was within the discretion of the Court and no party could insist for the grant of the interest at the contracted rate.