DRT - India

C.K. Sasankan vs The Dhanalakshmi Bank Ltd
n 27 February, 2009

Cites 7 docs -
Section 34 in The Indian Penal Code, 1860

H.S.Ahammed Hussain & Anr vs Irfan Ahammed & Anr
 on 9 July, 2002

The Indian Penal Code, 1860

Citedby 2 docs

Corporation Bank vs D.S. Godwa
on 20 June, 1994

Corporation Bank vs D.S. Gowda And Anr
on 20 June, 1994



Supreme Court of India


Bench: M Sharma], Sinha]

IN THE SUPREME COURT OF INDIA


CIVIL APPELLATE JURISDICTION

CIVIL APPEAL No. 1317 OF 2009


(Arising out of SLP (C) No. 30832 of 2008)

C.K. Sasankan ...Appellant Versus


The Dhanalakshmi Bank Ltd. ...Respondent JUDGMENT
Mukundakam Sharma, J.




1. Leave granted.


2. This appeal arises out of the judgment and order dated 17.07.2008 passed by

the Division Bench of the High Court of Judicature at Madras in Writ Petition

(civil) No. 28664 of 2003 dismissing the writ petitions filed by the appellant

and confirming the judgment passed by the Debt Recovery Appellate Tribunal,

Chennai (hereinafter referred to as the `Appellate Tribunal').


3. The appellant is the son of late C.V. Kunjikuttan, who was carrying on

business as a civil contractor. Said C.V. Kunjikuttan carried on business of

contracts in his individual capacity. He died on 8th September, 1989 and on his

demise, the business was taken over by his legal heirs. While C.V. Kunjikuttan

was alive he had availed of certain facilities from Dhanalakshmi Bank Ltd.,

Cherthala Branch, Alappuzha District - Respondent herein (for short the

`Bank'). The respondent is a scheduled bank and has its principal place of

business at Thrissur in Kerala and Branches in various other places. C.V.

Kunjikuttan approached the respondent - bank in 1973 for sanction of an over

draft financial facility. The Bank sanctioned him an overdraft facility of Rs.

3 lakh. The overdraft facility allowed to C.V. Kunjikuttan was secured by

security of immovable property, which was collateral security. On 30.10.1980,

the Bank granted an enhanced overdraft facility of Rs. 9 lakh which was secured

by late C.V. Kunjikuttan and his children including the appellant herein.

4. As the said amount was not repaid the bank filed a suit being O.S. No. 176

of 1991 on the file of sub-court, Cherthala. Subsequently the proceedings were

transferred to Debts Recovery Tribunal (for short "DRT") on its

formation under the Recovery of Debts Due to Banks and Financial Institutions

Act, 1993. The relief prayed by the Bank was to Page 2 of 7


realize a sum of Rs. 28,50,707.03 from the appellants, if necessary, by sale

of the suit / scheduled properties. The DRT vide Judgment dated 10.08.2001

allowed the proceedings initiated by the Bank and accordingly declared that the

debts due to the bank is Rs. 28,50,707.03 together with interest @ 25% per

annum compounding with quarterly rests from 17.7.1991 i.e. from the date of

filing of the suit till the date of the Judgment with a simple interest at the

rate of 19.4% per annum from 11.08.2001 till realisation. The appeal from the

said order was dismissed by the Appellate Tribunal as also by the Division

Bench of the High Court of Madras.


5. The learned counsel appearing for the appellant contended before us that the

grant of interest @ 25% from the date of filing of the suit till the date of

judgment and at 19.4%, thereafter till its realisation is exorbitant and

contrary to the provisions of Section 34 of the Code of Civil Procedure (for

short the `Code'). It was further submitted that as per the said section the

interest has to be reasonable and at prevalent bank rate of interest.


6. The learned counsel appearing for the respondent on the other hand supported

the judgments of the courts below and submitted that the courts Main Search Forums Advanced Search Disclaimer


C.K. Sasankan vs The Dhanalakshmi Bank Ltd on 27 February, 2009

Cites 7 docs - [View All]

Section 34 in The Indian Penal Code, 1860

H.S.Ahammed Hussain & Anr vs Irfan Ahammed & Anr on 9 July, 2002

The Indian Penal Code, 1860

Citedby 2 docs

Corporation Bank vs D.S. Godwa on 20 June, 1994

Corporation Bank vs D.S. Gowda And Anr on 20 June, 1994




Bench: M Sharma], Sinha]

IN THE SUPREME COURT OF INDIA



CIVIL APPELLATE JURISDICTION



CIVIL APPEAL No. 1317 OF 2009



(Arising out of SLP (C) No. 30832 of 2008)



C.K. Sasankan ...Appellant Versus



The Dhanalakshmi Bank Ltd. ...Respondent JUDGMENT



Dr. Mukundakam Sharma, J.







1. Leave granted.



2. This appeal arises out of the judgment and order dated 17.07.2008 passed by

the Division Bench of the High Court of Judicature at Madras in Writ Petition

(civil) No. 28664 of 2003 dismissing the writ petitions filed by the appellant

and confirming the judgment passed by the Debt Recovery Appellate Tribunal,

Chennai (hereinafter referred to as the `Appellate Tribunal').


3. The appellant is the son of late C.V. Kunjikuttan, who was carrying on

business as a civil contractor. Said C.V. Kunjikuttan carried on business of

contracts in his individual capacity. He died on 8th September, 1989 and on his

demise, the business was taken over by his legal heirs. While C.V. Kunjikuttan

was alive he had availed of certain facilities from Dhanalakshmi Bank Ltd.,

Cherthala Branch, Alappuzha District - Respondent herein (for short the

`Bank'). The respondent is a scheduled bank and has its principal place of

business at Thrissur in Kerala and Branches in various other places. C.V.

Kunjikuttan approached the respondent - bank in 1973 for sanction of an over

draft financial facility. The Bank sanctioned him an overdraft facility of Rs.

3 lakh. The overdraft facility allowed to C.V. Kunjikuttan was secured by

security of immovable property, which was collateral security. On 30.10.1980,

the Bank granted an enhanced overdraft facility of Rs. 9 lakh which was secured

by late C.V. Kunjikuttan and his children including the appellant herein.



4. As the said amount was not repaid the bank filed a suit being O.S. No. 176

of 1991 on the file of sub-court, Cherthala. Subsequently the proceedings were

transferred to Debts Recovery Tribunal (for short "DRT") on its

formation under the Recovery of Debts Due to Banks and Financial Institutions

Act, 1993. The relief prayed by the Bank was to

realize a sum of Rs. 28,50,707.03 from the appellants, if necessary, by sale

of the suit / scheduled properties. The DRT vide Judgment dated 10.08.2001

allowed the proceedings initiated by the Bank and accordingly declared that the

debts due to the bank is Rs. 28,50,707.03 together with interest @ 25% per

annum compounding with quarterly rests from 17.7.1991 i.e. from the date of

filing of the suit till the date of the Judgment with a simple interest at the

rate of 19.4% per annum from 11.08.2001 till realisation. The appeal from the

said order was dismissed by the Appellate Tribunal as also by the Division

Bench of the High Court of Madras.


5. The learned counsel appearing for the appellant contended before us that the

grant of interest @ 25% from the date of filing of the suit till the date of

judgment and at 19.4%, thereafter till its realisation is exorbitant and

contrary to the provisions of Section 34 of the Code of Civil Procedure (for

short the `Code'). It was further submitted that as per the said section the

interest has to be reasonable and at prevalent bank rate of interest.



6. The learned counsel appearing for the respondent on the other hand supported

the judgments of the courts below and submitted that the courts


below were justified in granting the said rate of interest as the appellants

have failed to re-pay the amount which was obtained by them under the overdraft

facility.

7. In order to appreciate the aforesaid contention, we are required to consider

the scope and ambit of Section 34 of the Code which gets attracted in the

instant case. The provisions of Section 34 of the Code are reproduced

hereinbelow :



"34. Interest - (1) Where and in so far as a decree is for the 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, with further

interest at such rate not exceeding six per cent, per annum as the Court deems

reasonable on such principal sum from the date of the decree to the date of

payment, or to such earlier date as the Court thinks fit: Provided 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 six per cent, per

annum, but shall not exceed the contractual rate of interest or where there is

no contractual rate, the rate at which moneys are lent or advanced by

nationalised banks in relation to commercial transactions.



Explanation I.-In this sub-section, "nationalised bank"

means a corresponding new bank as defined in the Banking Companies (Acquisition

and Transfer of Undertakings) Act 1970 (5 of 1970)



Explanation II.-For the purposes of this section, a transaction is

a commercial transaction, if it is connected with the industry, trade or

business of the party incurring the liability. (2) Where such a decree is

silent with respect to the payment of further interest on such principal sum

from the date of the decree to the date of payment or other earlier date, the

Court shall be deemed to have refused such interest, and a separate suit

therefore shall not lie."







8. The quantum and rate of interest which the appellant in the present case is

entitled to would be in accordance with the provisions of Section 34 of the

Code. According to the provisions of Section 34 of the Code interest is to be

awarded at a reasonable rate and on the principal amount. It is needless to

point out that although the amount of interest from the date of filing of the

suit till the date of the decree and thereafter till realisation is in the

discretion of the court as is confirmed by the use of the word `may' but such

discretion has to be exercised by the court properly, reasonably and on sound

legal principles and not arbitrarily and while doing so the court is also to

consider the parameter, scope and ambit of Section 34 of Code.




9. The aforesaid scope and ambit of Section 34 of the Code has been the subject

of discussion in many cases of this Court. We are inclined to refer to the

decision in Clariant International Ltd. v. Securities &


Exchange Board of India, (2004) 8 SCC 524, where it was held by this Court

that the interest can be awarded in terms of an agreement or statutory

provisions and it can also be awarded by reason of usage or trade having the

force of law or on equitable considerations but the same cannot be awarded by

way of damages except in cases where money due is wrongfully withheld and there

are equitable grounds therefor, for which a written demand is mandatory. It was

further held that in absence of any agreement or statutory provision or a

mercantile usage, interest payable can be only at the market rate and such

interest is payable upon establishment of totality of circumstances justifying

exercise of such equitable jurisdiction. It was also held that in ascertaining

the rate of interest the courts of law can take judicial notice of both

inflation as also fall in bank rate of interest. The bank rate of interest both

for commercial purposes and other purposes has been the subject-matter of

statutory provisions as also the judge-made laws. In the said case reference

was made to the decisions in Kaushnuma Begum v. New India Assurance Co. Ltd.

(2001) 2 SCC 9, H.S. Ahammed Hussain v. Irfan Ahammed (2002) 6 SCC 52 and

United India Insurance Co. Ltd. v. Patricia Jean Mahajan (2002) 6 SCC 281 and

it was observed that even in cases of victims of motor vehicle accidents, the

courts have upon taking note of the fall in the


rate of interest held 9% interest to be reasonable. Direction to pay such rate

of interest is also found to be reasonable and fair as the plaintiff was

deprived to utilize and roll its money in commercial transaction and kept out

of it due to wrongful withholding of the same by the defendant.


10. Considering the facts and circumstances of the present case, we find that

the rate of interest as awarded for pendente lite and future interest is

exorbitant and thus we direct that pendente lite and future interest at the

rate of 9% shall be paid which is found to be just, proper and reasonable.



11. The appeal stands allowed to the aforesaid extent.

..............................J.



[S.B. Sinha]



................................J.



[Dr. Mukundakam Sharma]



New Delhi,



February 27, 2009



have failed to re-pay the amount which was obtained by them under the overdraft

facility.







7. In order to appreciate the aforesaid contention, we are required to consider

the scope and ambit of Section 34 of the Code which gets attracted in the

instant case. The provisions of Section 34 of the Code are reproduced

hereinbelow :



"34. Interest - (1) Where and in so far as a decree is for the 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, with further

interest at such rate not exceeding six per cent, per annum as the Court deems

reasonable on such principal sum from the date of the decree to the date of

payment, or to such earlier date as the Court thinks fit: Provided 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 six per cent, per

annum, but shall not exceed the contractual rate of interest or where there is

no contractual rate, the rate at which moneys are lent or advanced by

nationalised banks in relation to commercial transactions.



Explanation I.-In this sub-section, "nationalised bank"

means a corresponding new bank as defined in the Banking Companies (Acquisition

and Transfer of Undertakings) Act 1970 (5 of 1970).



Page 4 of 7



Explanation II.-For the purposes of this section, a transaction is

a commercial transaction, if it is connected with the industry, trade or

business of the party incurring the liability. (2) Where such a decree is

silent with respect to the payment of further interest on such principal sum

from the date of the decree to the date of payment or other earlier date, the

Court shall be deemed to have refused such interest, and a separate suit

therefore shall not lie."







8. The quantum and rate of interest which the appellant in the present case is

entitled to would be in accordance with the provisions of Section 34 of the

Code. According to the provisions of Section 34 of the Code interest is to be

awarded at a reasonable rate and on the principal amount. It is needless to

point out that although the amount of interest from the date of filing of the

suit till the date of the decree and thereafter till realisation is in the

discretion of the court as is confirmed by the use of the word `may' but such

discretion has to be exercised by the court properly, reasonably and on sound

legal principles and not arbitrarily and while doing so the court is also to

consider the parameter, scope and ambit of Section 34 of Code.







9. The aforesaid scope and ambit of Section 34 of the Code has been the subject

of discussion in many cases of this Court. We are inclined to refer to the

decision in Clariant International Ltd. v. Securities & Page 5 of 7



Exchange Board of India, (2004) 8 SCC 524, where it was held by this Court

that the interest can be awarded in terms of an agreement or statutory

provisions and it can also be awarded by reason of usage or trade having the

force of law or on equitable considerations but the same cannot be awarded by

way of damages except in cases where money due is wrongfully withheld and there

are equitable grounds therefor, for which a written demand is mandatory. It was

further held that in absence of any agreement or statutory provision or a

mercantile usage, interest payable can be only at the market rate and such

interest is payable upon establishment of totality of circumstances justifying

exercise of such equitable jurisdiction. It was also held that in ascertaining

the rate of interest the courts of law can take judicial notice of both

inflation as also fall in bank rate of interest. The bank rate of interest both

for commercial purposes and other purposes has been the subject-matter of

statutory provisions as also the judge-made laws. In the said case reference

was made to the decisions in Kaushnuma Begum v. New India Assurance Co. Ltd.

(2001) 2 SCC 9, H.S. Ahammed Hussain v. Irfan Ahammed (2002) 6 SCC 52 and

United India Insurance Co. Ltd. v. Patricia Jean Mahajan (2002) 6 SCC 281 and

it was observed that even in cases of victims of motor vehicle accidents, the

courts have upon taking note of the fall in the Page 6 of 7



rate of interest held 9% interest to be reasonable. Direction to pay such rate

of interest is also found to be reasonable and fair as the plaintiff was

deprived to utilize and roll its money in commercial transaction and kept out

of it due to wrongful withholding of the same by the defendant.



10. Considering the facts and circumstances of the present case, we find that

the rate of interest as awarded for pendente lite and future interest is

exorbitant and thus we direct that pendente lite and future interest at the

rate of 9% shall be paid which is found to be just, proper and reasonable.



11. The appeal stands allowed to the aforesaid extent.

..............................J.



[S.B. Sinha]



................................J.



[Dr. Mukundakam Sharma]



New Delhi,



February 27, 2009