2011 (10) TMI 760 - HC - Indian Laws

High Court clarifies date of cause of action in recovery suit, modifies interest rate

G. Basavaraj Versus H.M. Shivappa Patel

The High Court upheld the Appellate Court's decision, ruling that the cause of action in a recovery suit arose on the date of dishonor of a post-dated ... - Issues Involved:1. Whether the judgment and decree of the Appellate Court is vitiated for not meeting the reasoning given by the Trial CourtRs.2. Whether the Appellate Court was justified in awarding interest @ 18% on the decretal amount in the absence of any contractRs.Summary:Issue 1: Judgment and Decree of Appellate CourtThe plaintiff filed a suit for recovery of Rs. 25,000/- with interest at 18% from 5.3.1992 to 5.3.1995, totaling Rs. 38,500/-. The defendant had borrowed Rs. 25,000/- as a hand loan in November 1991 and issued a post-dated cheque dated 5.2.1992. The cheque was dishonored with the endorsement 'account closed'. The Trial Court found the suit barred by limitation under Article 19 of the Limitation Act, as the time commenced from the date the loan was made. The Appellate Court reversed this, stating the cause of action arose on the date of cheque dishonor. The High Court upheld the Appellate Court's decision, noting the pleadings did not indicate the cheque was issued as security, and the limitation period commenced from the date of dishonor.Issue 2: Awarding Interest @ 18%The Appellate Court awarded interest at 18% from the date of the suit till realization. The defendant contended this was unwarranted as the loan was not a commercial transaction. The High Court agreed, noting the loan was a hand loan between friends, not a commercial transaction. Under Section 34 of the Code of Civil Procedure, interest for non-commercial transactions should not exceed 6% p.a. The High Court modified the interest rate to 8% from the date of the suit till realization, affirming the rest of the Appellate Court's findings.