1998 (1) TMI 525 - SC - Indian Laws

Supreme Court Restores Trial Court's Decision on Interest Rate in Mortgage Suit

N.M. VEERAPPA Versus CANARA BANK

The Supreme Court allowed the appeal, restoring the trial court's decision to award 6% interest from the date of the suit. The Court held that Order 34, ... - Issues Involved:1. Applicability of Section 34, CPC vs. Order 34, Rule 11, CPC for pendente lite interest.2. Discretionary power of the court under Order 34, Rule 11, CPC.3. Impact of Section 21-A of the Banking Regulation Act, 1949 on Order 34, Rule 11, CPC.Issue-Wise Detailed Analysis:1. Applicability of Section 34, CPC vs. Order 34, Rule 11, CPC for pendente lite interest:The primary issue was whether the trial court was correct in applying Order 34, Rule 11, CPC, instead of Section 34, CPC, for determining the pendente lite interest in a mortgage suit. The trial court had awarded 6% interest from the date of the suit, exercising its discretion under Order 34, Rule 11, CPC, while the High Court applied Section 34, CPC, and awarded interest at the contractual rate of 16.5%.The Supreme Court clarified that Section 34, CPC, applies to simple money decrees and payment of interest pending such suits, whereas Order 34, Rule 11, CPC, specifically deals with mortgage suits. The Court emphasized that the special provision in Order 34, Rule 11 alone is applicable to mortgage suits and not Section 34, CPC. This has been consistently laid down in several decisions, including the Karnataka High Court in Thulasi Bai's case.2. Discretionary power of the court under Order 34, Rule 11, CPC:Order 34, Rule 11, CPC, as amended in 1929 and 1956, provides the court with discretionary power to award interest. The word 'may' in the main part of Order 34, Rule 11, confers discretion on the court regarding the rate of interest to be awarded from the date of suit till the date fixed for payment in the preliminary decree and subsequently till the date of realization.The Supreme Court cited several precedents, including Soli Pestonji Majoo v. Gangadhar Khemka and Jaigobind Singh v. Lachmi Narain Ram, which affirmed that the court has discretion to award interest at a rate lower than the contractual rate from the date of suit. The court noted that the trial court had exercised this discretion appropriately by awarding 6% interest, considering the facts and circumstances of the case.3. Impact of Section 21-A of the Banking Regulation Act, 1949 on Order 34, Rule 11, CPC:The respondent-Bank contended that Section 21-A of the Banking Regulation Act, 1949, which states that the rate of interest charged by banking companies shall not be subjected to scrutiny by courts, should override Order 34, Rule 11, CPC. The Supreme Court rejected this argument, stating that Section 21-A does not expressly override the CPC, particularly Order 34, Rule 11, CPC.The Court explained that the non-obstante clause in Section 21-A is intended to override the Usurious Loans Act, 1918, and any State laws relating to indebtedness, but not the CPC. The discretionary power conferred on the court under Order 34, Rule 11, CPC, is independent and not traceable to the Usurious Loans Act or any other State statutes.The Court further clarified that the decision in Corporation Bank v. D. S. Gowda, which dealt with the power of courts to reopen transactions between banks and debtors, did not affect the discretionary power under Order 34, Rule 11, CPC.Conclusion:The Supreme Court allowed the appeal, restoring the trial court's decision to award 6% interest from the date of the suit. The Court held that Order 34, Rule 11, CPC, applies to mortgage suits, and the trial court had correctly exercised its discretion in awarding a lower rate of interest. Section 21-A of the Banking Regulation Act, 1949, does not override the provisions of Order 34, Rule 11, CPC. The appeal was allowed with no order as to costs.