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of <h1>Appellate Court Caps Future Interest Rates for Service-Oriented Loans</h1> <h3>Dena Bank Versus Prakash Birbhan Kataria and Ors.</h3> The appellate court upheld the trial court's decision in favor of the plaintiff-bank for the recovery of a loan advanced for hospital construction, with ... - Issues:Recovery of loan advanced for commercial or professional purpose, entitlement of plaintiff-bank for future interest exceeding 6% per annum, interpretation of Section 34 of CPC regarding commercial transactions.Analysis:The judgment pertains to a first appeal concerning the recovery of a loan advanced to defendants for construction of a hospital, with defendants 2 and 3 as guarantors. The trial court decreed the suit in favor of the plaintiff-bank, directing defendants to pay the amount due in installments with future interest at 6% per annum. The plaintiff-bank, aggrieved by the interest rate, challenged the decree, arguing for a higher rate of 15% per annum based on Section 34 of CPC for commercial loans. The central issue was whether the plaintiff-bank was entitled to future interest exceeding 6% per annum.The trial judge found that as per Section 34 of CPC, future interest exceeding 6% can only be granted in commercial transactions, not professional loans. The plaintiff contended that the loan was for a commercial purpose, citing a precedent where a factory loan was considered commercial. However, the court distinguished the present case, emphasizing the hospital construction nature of the loan. The court analyzed the definitions of 'commercial,' 'industry,' 'trade,' and 'business,' concluding that a hospital construction loan is service-oriented, not profit-oriented.The court delved into the meanings of 'profession' and 'professional,' distinguishing them from industry, trade, and business. It highlighted that the Legislature did not include 'profession' in the context of commercial transactions under Section 34 of CPC. Therefore, the court concluded that a professional loan like one for hospital construction does not fall under commercial transactions warranting interest exceeding 6% per annum. Consequently, the appeal was dismissed, upholding the trial court's decision to award future interest at 6% per annum.
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