ORDER
Dr. B. P. Saraf, J.
1. This case has been referred to the Full Bench at the instance of brother Dhanuka J. The controversy that arose for determination relates to interpretation of the expression 'principal sum adjudged' as used in S. 34 of the Code of Civil Procedure, 1908 (hereinafter 'C.P.C.').
2. The suit in relation to which this controversy arose was filed by the Union Bank of India for recovery of a sum of Rs. 5,55,259-35 with further interest thereon at the rate of 16.5% per annum with quarterly rests from the date of the suit till payment. The plaintiffs relied on various documents in support of its contention that the defendant had agreed to pay the amount of interest to it with quarterly rests. In ex parte decree against the defendant was prayed for with interest pendente lite and post-decretal. The controversy arose as to the amount on which pendente lite or post-decretal interest can be granted. The amount of Rs. 5,55,259-35 for which the suit had been filed was admittedly inclusive of interest due till the filing of the suit. S. 34 of C.P.C. empowers the Court to award pendente Site and post-decretal interest at such rate as it may deem reasonable on the 'principal sum adjuged'. The question for determination was whether 'the principal sum adjudged' would mean the amount of original sum lent or the aggregate amount found due and payable on the date of the suit inclusive of the amount of interest added to the principal amount with or without periodical rests in accordance with the agreement between the parties. Similar expression has also been used in 0. 34, R. 2 and 0. 34, R. 11. The learned single Judge, trying the suit, noticed that there was a clear conflict of opinion between the Division Bench judgments of this Court in Kaluram v. Chimniram, AIR 1934 Bom 86, and the later unreported judgments in F.A. No. 364 of 1986, M/s. Jagannath Pigments & Chemicals v. Bank of Baroda, decided on 19th November, 1986 and F.A. No. 999 of 1987, Central Bank. of India v. Haribhau Kakade, decided on 16th March, 1988 The learned Judge also noticed conflict of opinion between the view expressed by this Court in the later unreported judgments and the views of different High Courts. It is in this background, more particularly in view of the fact that similar question often arises for consideration in number of cases especially in Bank-suits, the learned single Judge recommended reference of the following questions to a larger beach :--
a) Whether the expression 'the principal sum adjudged' used in S. 34 of the Code of Civil Procedure means only the original amount lent or the amount of original principal without addition of any interest whatsoever thereto and interest pendente lite or post decretal interest can be awarded by the Court only on such original amount?
b) When interest becomes part of the principal or gets merged with the principal within the meaning of S. 34 of the Code when the agreement provides for addition of interest to the principal at certain intervals with periodical rests?
c) Whether the expression 'principal sum adjudged' includes the aggregate amount found due and payable on the date of the suit inclusive of amount of interest added to the principal with or without periodical rests in accordance with the agreement between the parties, express or implied, or the practice followed?
d) What is the meaning of the expression 'principal' used in O. 34, R. 2 and O.34, R. 11 of the Code?
On the recommendation of the learned single Judge this case has been placed before us for hearing under the orders of the Hon'ble the Chief Justice.
3. We have heard at length Shri Tulza-purkar, learned counsel for the plaintiffs--Bank. In view of the importance of the controversy we also allowed the Indian Banks Association to intervene and heard its learned counsel Shri Kapadia. At our request learned counsel Shri R. A. Dada argued the case on behalf of the defendant who was unrepresented before us. We have carefully considered the various submissions.
4. The first question relates to the interpretation of the expression 'principal sum adjudged' used in S. 34 of the C.P.C. The other two are in effect the different shades or facets thereof. We shall, therefore, first deal with the expression 'principal sum adjudged' used in S. 34 of the C.P.C. S. 34 reads :
'34. Interest.-- (I) 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.
(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 therefor shall not lie.
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 fate 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.'
5. It is clear from the plain reading of section 34 that it deals with powers of the Court to award interest (i) from the date of the suit to the date of the decree and (ii) from the date of the decree to the date of payment.
6. The award of interest for the two periods mentioned above can only be on the principal sum adjudged. There is no dispute in that regard. The only controversy is in regard to the true meaning of this expression viz., 'principal sum adjudged'. The question that fails for determination is whether this expression means simply the principal amount lent or advanced by the plaintiffs to the defendant which remains unpaid on the date of the suit or it includes also any interest adjudged on such unpaid principal for any period prior to the institution of the suit. The controversy, in other words, is whether the interest accrued till the date of the filing of the suit will partake the character of principal and lose its identity as interest depending on the agreement between the parties, express or implied or prevailing Banking or Trade practice.
7. Before we proceed to examine the controversy, it may be expedient to observe that interest for period prior to the institution of the suit is not governed by the provisions of S. 34, that being the matter of substantive law, usage of trade or agreement. (Sec Secretary, Irrigation Department, Government of Orissa v. G.C. Roy, (1992) 1 SCO 508. Section 34 only governs award of interest from the date of the suit till the date of the decree and from the date of decree to the date of payment which is payable only on the 'principal sum adjudged'. While providing for such interest, this section also takes note of the fact that in addition to the principal sum interest might also be due or adjudged due to the plaintiff on such principal for period prior to the filing of the suit and makes it clear that interest pendente lite and post decretal governed by this section is in addition to such interest adjudged for period prior to the filing of the suit. In other words, this section clearly recognises interest for the period prior to the institution of the suit as 'interest' in contradistinction to 'principal' and provides for award of additional interest for the period from the date of the suit to the date of the decree and further interest from the date of the decree to the date of payment only on the 'principal sum' not on the aggregate amount due on the date of the filing of the suit including interest due if any up to that date.
8. The learned counsel for the plaintiffs fairly stated that it is not his case that in all cases interest for period prior to the institution of the suit would form part of the 'principal sum adjudged'. There are cases where such interest would retain its identity as such. He however submits that there are cases where interest will merge in principal and form part thereof. One such case being where an agreement provides for addition of interest in the principal at certain intervals with periodical rests. In such case, interest will become part of the principal and get merged in it and in that event 'principal sum adjudged' as used in S. 34 shall include such interest also. The learned counsel tried to draw a distinction between the 'simple interest' and 'compound interest'. According to him, different consequences will flow in case of compound interest charged by the bank on the basis of an agreement or prevailing banking practice. Interest in such a case gets added to the principal at certain intervals. It sheds its character as interest and gets capitalised.
9. A reference was made in this connection to the Halsbury's Laws of England, Volume 3, paragraph 160, where such banking practice has been acknowledged in the following terms:--
'It is the practice of Bankers to debit the accrued interest to the borrower's current account at regular periods (usually half-yearly), where the current account is overdrawn or becomes overdrawn as a result of the debit the effect is to add the interest to the principal, in which case it loses its quality of interest and becomes capital.'
10. Reliance was also placed on the decision of the House of Lords in Paton (Panton's Trustees) v. I.R.C. (1938) 1 All ER 786, where it was observed that the accrued interest which the Bank has, with the customer's assent, added to the principal loan ceases to be due or recoverable as interest but becomes merged in the principal. Learned Counsel referred to a decision of the Calcutta High Court in The Bank of Rajasthan Ltd. v., S. K. Trading Co., reported in 1990 B J .677, particularly the following passages, in paras 15, 16 and 17 :
'The contention of Mr. Sarkar with regard to S. 34 of C.P.C. is that in view of the agreement between the parties the interest with quarterly rests becomes part of the principal and, therefore, this Rs. 11,88,000/-and odd which includes interest will be the principal amount within the meaning of S. 34 of the C.P.C.'..... On behalf of the respondents defendants Mr. Das has contended that in view of the amendment made in S. 34 at present such interest u/S. 34 can be granted only on the principal sum which in the present case is Rs. 9,00,000/- and not on the sum of Rs. 11,88,000/- and odd which includes interest..... There cannot be any doubt that the interest under S. 34 after amendment can he granted on the principal sum only, but what is the principal sum depends on the facts and circumstance of each case...... While granting interest v S. 34 no further interest on such interest can be granted. This is generally the law after the amendment of S. 34. There cannot be any dispute..... It means that the interest calculated up to the end of a particular quarter is thereafter added to the principal amount and since then it becomes part of the principal amount. This practice is well known and it has been so recognized.....'
The conclusion it paragraph 27 was also referred to, which is in the following terms:
'Accordingly, we are of the opinion that in view of such clauses in the agreement between the parties which provides for quarterly rests, the interest calculated by the Bank was merged with the principal and for the purpose of S. 34 of the said Act principal sum would be Rs. 11,88,706-91 for which decree was claimed and for which the decree was passed.'
11. Counsel also referred to the decision of the Division Bench of this Court in Kaluram v. Chammiram, AIR 1934 Bombay, 86, where repelling the contention that under S. 34 of the C.P.C. which allowed the' Court to give interest on the principal sum adjudged at the date of the suit the Court cannot give compound interest, Beaumont, C. J., observed:
'.....I think we clearly have jurisdiction to give compound interest.....'
It was also observed in the same judgment by Blackwel J. at pages 90 and 91 of the report that S. 34 of the C.P.C. did not prevent the Court from allowing compound interest since the obligation to pay such compound interest was impliedly agreed upon between the parties. These observations were made in the context of award of interest pendente lite and post-decretal interest.
12. At this stage it may be pertinent to observe that this decision was rendered on the interpretation of S. 34 of the C.P.C. as it stood at the relevant time. Subsequent to the aforesaid judgment this section was amended by Code of Civil Procedure (Amendment) Act 1956 (Act LXVI of 1956) and the words 'With further interest at such rate not exceeding six per cent per annum as the Court deems reasonable on such principal sum' were substituted for the words 'with further interest at such rate as the Court deems reasonable on the aggregate sum so adjudged', and the words 'on such principal sum' were substituted for the then existing words 'such aggregate sum'. The object of the aforesaid amendment to S. 34 is evident from the Report of the Joint Committee on the Bill as published in the Gazette of India, Extraordinary Part II, Section 2, dated December 13, 1955. The relevant part of the Report reads as under:--
'Section 34 of the Code empowers a Court to award further interest from the date of the decree up to the date of payment on the aggregate sum which comprises principal sum with interest accrued thereon. The Committee are of the opinion that interest should not be awarded on interest but only on the principal sum. Suitable amendment has accordingly been incorporated in this clause'.
The aforesaid observations of the Joint Committee make it abundantly clear that the intention of the legislature was not to allow the award of compound interest by the Courts and to give effect to that intention the expression 'principal sum' was introduced which fundamentally means the 'principal sum' only without addition of amount of interest, if any, accrued thereon till the date of filing of the suit. We shall revert to this aspect a little later. Before that we may refer to some other decisions of this Court where a view contrary to the one taken by the Division Bench in Kaluram v. Chimniram (supra) had been taken. We may refer in this connection to the decision of the Division Bench in F. At No. 364 of 1986, M/ s. Jagannath Pigments & Chemicals v. Bank of Baroda, decided on 19th November 1986 (S. K. Desai and A. D. Tated JJ.). This appeal arose out of a suit filed by the Bank wherein interest was claimed on the sum of Rs. 1,66,759-29 which was inclusive of the amount of interest up to the date of the suit added to the principal amount of Rs. 1,20,675-59. The trial Court had awarded interest pendente lite on the aforesaid sum of Rs. 1,66,759-29. On appeal, the Division Bench of this Court modified the decree and awarded the interest pendente lite only on the principal amount of Rs. 1,20,675.89. Evidently, that was done on the interpretation of expression 'principal sum adjudged' to mean principal sum only and not the aggregate amount including interest due and payable on the date of the suit.
13. Same view was taken by the another Division Bench comprising of S. C. Pratap, as he then was, and A.D. Tated JJ. in F.A. No. 999 of 1987, Central Bank of India v. Haribhau Kakade, decided on 16th March 1988. This appeal arose out of the decree in a suit based on promissory note for a sum of Rs. 1,49,318/-. The amount claimed by the Bank due from the date of the filing of the suit including the interest up to that date was Rs. 2,45,162.74. The interest pendente lite etc., was claimed on the aggregate amount including interest. This Court allowed interest only on the amount of promissory note and not on the aggregate amount which was found due and payable on the date of the suit.
14. It is this inconsistency between the decision of this Court in Kaluram v. Chimniram (supra) and the later two decisions of the two Division Benches of this Court dated November 19, 1986 and March 16, 1988 which persuaded the learned single Judge to recommend reference of the controversy to the Full Bench.
15. Before dealing with this conflict, it may be appropriate also to refer to some of the decisions of the other High Courts on this point. The Division Bench of Madras High Court in Sigappiachi v. Palaniappa, : AIR1972Mad463 ; Orissa High Court in Indian Bank. v. Kamalaya Cloth Store, : AIR1991Ori44 ; Allahabad High Court in Jafar Husein v. Bishambhar Nath, AIR 1937 All 442 and Kalyanpur Cold Storage v. Sohanlal Bajpai, : AIR1990All218 , have taken the view that the expression 'principal sum adjudged' in S. 34 of the C.P.C. would mean the amount found due on the date of the suit including interest accrued up to that date. The Allahabad High Court in the last decision in Kalyanpur Cold Storage v. Sohanlal Bajpai (supra) observed that the expression 'principal sum adjudged' was to be distinguished from 'principal sum advanced' and held that 'final amount' which has been determined by the Court after adjudicating upon the rights of the parties to the suit shall be deemed to be the 'principal sum adjudged' and interest shall accrue on such amount and not on the original amount advanced. The Court in other words, held that the 'principal amount' shall include the amount of interest till the date of filing of the suit. No distinction was drawn in this case between simple interest and compound interest. The court in effect, equated 'aggregate sum' with 'principal sum found due'.
16. Reference may be made also to a decision of Delhi High Court in Syndicate, Bank v. W. B. Cements, AIR 1989 Delhi 107. 'The Delhi High Court has taken a view that expression 'principal sum adjudged' would include such amount of interest which had become part of the principal. In this decision also reliance was placed on the banking practice as well as the observations of Lord Macmillan J. in Panton's case (supra), particularly the observations to the effect that accrued interest which is added to the principal with the assent of the customer gets merged in the principal itself. This decision was followed by the Orissa High Court in Indian Bank (supra). It may be pertinent to note that there is also an earlier decision of the Orissa High Court in Food Corporation of India v. Samena Co-operative Marketing Society Ltd. (1987) CLJ 778 wherein it was held that interest under S. 34 of the C.P.C. could be awarded only on the principal due and not on the amount of interest which sum was also adjudged along with the principal. This decision does not appear to have been placed before the Court in the latter case in Indian Bank (supra) wherein a contrary view was taken.
17. A Division Bench of Punjab and Haryana High Court in State of Punjab v. Scheduled Caste Co-op. L.O.S. Ltd , has discussed the provisions of S. 34 of the CPC. In the context of amendment made therein by 1956 Amendment Act and held as follows:--
'Thus the interest awardable from the date of the plaint to the date of the decree under S. 34 as it stands now will be only on the principal sum and not on the whole amount including the interest as claimed.....'
It was further observed :
'.....before the abovementioned amend-ment of S. 34 by Amendment Act 1956. further interest was awardable on the aggregate principal and interest as on the date of the decree.....'
18. There is also an earlier decision of Division Bench of Madras High Court in M.V. Mahalinga Aiyer v. Union Bank Ltd., AIR 1943 Mad 216', where it was held that any interest awardable from the date of the plaint to the date of the decree can be only upon the principal sum due. It was observed (at page 217):
'.....There is, however, one small error in the decree which has been brought to our notice. The learned Subordinate Judge has decreed to the plaintiff a sum of Rs. 9981-1-9 with interest thereon at the rate of eight per cent per annum from 17th August 1938 to the date of the decree. In doing so he has overlooked the fact that the sum of Rs. 9981-1 -9 includes interest calculated up to the date of the plaint and, therefore, that any interest awardable from the date of the plaint to the date of the decree must be only upon the principal sum due. The decree will accordingly be modified by saying 'do pay to the plaintiffs the sum of Rupees 9981-1-9 with interest on Rs. 8500/- at the rate of right per cent per annum from 17th August 1938 to this date.'
This decision also does not seem to have been placed before the Court while considering similar controversy later in Sigappicchi v. Palaniappa (supra) which has been referred in support of the contrary view. Besides, the later decision is clearly distinguishable. It was an account suit and it was in that context that it was held that the principal sum adjudged would be the amount payable by the defendant on the date of the suit.
19. We have carefully gone through various decisions referred to above, more particularly the decisions of this Court in Kaluram v. Chimniram (supra) and in FA No. 364 of 1986 and F.A. No. 999 of 1987 (supra). So far as the decisions of this Court are concerned, we do not find that there is any real inconsistency in the two sets of the decisions. The decision in Kaluram's case (supra) is clearly distinguishable on two grounds. Firstly, it is a decision under S. 34 of the C.P.C. as it stood prior to 1956 Amendment, when the expressions used therein were different. Secondly, the controversy in that case was whether under S. 34 the Court could award compound interest, if obligation to pay such compound interest was impliedly agreed upon between the parties. It was held that the Court could do so in exercise of the powers u/ S. 34. That position has since been completely changed by 1956 Amendment whereby S. 34 was amended and expression 'principal sum' was incorporated in the context of award of interest under that section. The object of the amendment, as is evident from the report of the Joint Committee was to prohibit award of interest on interest and was to restrict it only on the principal sum. Under S. 34, as amended, the interest can be awarded only on the principal sum and not on the aggregate sum comprising of principal and interest accrued thereon. The decision in Kaluram (supra), therefore, has no application to S. 34 as amended by 1956 Amendment. The two later decisions of this Court were delivered on the interpretation of the amended section. We are, therefore, of the opinion that correct law has been laid down in these two decisions.
20. We have also gone through the decisions of the various High Courts, which have taken the view that the principal sum adjudged in S. 34 would mean the amount found due on the date of the suit including the interest up to that date. In our opinion this view is not correct. While rendering these decisions, emphasis was laid on the banking practice than on the clear language of S. 34 and the scheme thereof in the light of the amendment made in 1956 and the object thereof. To say that the 'principal sum adjudged' would include the amount of interest also which had accrued up to the date of filing of the suit clearly goes counter to the very scheme and object of S. 34 which intends to prohibit award of compound interest, i.e. interest on interest.
21. At this stage, it may be expedient to refer to the meaning of the three expressions, 'interest', 'simple interest' and 'compound interest' as given in different authoritative law dictionaries.
West's Legal Thesaurus or Dictionary defines these three expressions as under:
'Interest. -- A charge that is paid to borrow for use of money,
'Simple Interest'.-- Interest paid on the initial amount invested and not on any earnings or interest thereon.
'Compound Interest'.--.Interest on interest; the interest that is earned generates further interest on this earnings.'
Black's Law Dictionary (Fifth Edition) defines these expressions as follows:
'Interest'.-- Interest is the compensation allowed by law or fixed by the parties for the use or forbearance or detention of money.... Payments a borrower pays a lender for the use of the money.'
'Simple Interest'. That which is paid for the principal or sum lent, at a certain rate or allowance made by law or agreement of parties. Interest calculated on principal where interest earned during periods before maturity of loan is neither added to the principal nor paid to the lender. That paid on the principal lent as distinguished compound interest which is interest paid on unpaid interest.'
'Compound Interest'.- Interest upon interest i.e. interest paid on principal plus accrued interest. Exists where accrued interest is added to the principal sum, and the whole treated as new principal for the calculation of the interest for the next period. Interest added to principal as interest becomes due and thereafter made to bear interest.'
In Corpus Juris Secondum (Volume 47) 'interest' has been defined to mean -
'Compensation allowed by law, or fixed by the parties for the use or forbearance of money, or for detention.'
'Simple interest' has been defined as:
'interest computed solely on the principal.' 'Compound interest' has been defined as:
'compound interest is interest on interest .....accrued interest added to the principal sum and the whole treated as new principalfor the calculation of interest for the nextperiod.'
From the aforesaid definition it is clear that the only difference between simple interest and compound interest is that in case of simple interest, the interest is computed only on the principal sum, whereas for computa-.tion of compound interest, the accrued interest is also added to the principal sum. The resultant amount arrived at by the addition of accrued interest in the principal sum is treated as new principal only for the limited purpose of calculation of the interest for the next period. This is also what has been held observed in Halsbury's Laws of England (Vol. 3) para 160, which has been relied upon not only by the counsel for the plaintiffs but by many of the Courts in support of the view taken by them, that the principal sum would include the interest accrued thereon up to the date of the suit. Halsbury's Laws of England also refers to the practice of the bankers to debit accrued interest to the borrowers' regular account for next period and says that the effect of such debit is to add the interest to the principal in which case it loses its quality as interest and becomes the capital.
22. 'Principal' had been distinguished from 'interest' in Corpus Juris Secondum, Volume 47, page 11 in the following words:
'Principal distinguished.-- 'Principal' is used in its commercial sense in distinction from 'interest'. The terms are correlative; each implies and excludes the other, and that which is principal cannot be interest.'
These definitions make it abundantly clear that 'principal' and 'interest' always retain their separate identities no matter by what method the interest is calculated - whether by way of simple interest or compound interest.
23. Reverting back to S. 34, we may observe that the fact that the 'principal sum adjudged' used in S. 34 of the C.P.C. does not include any interest, is also clear from the use of the expression 'in addition to any interest adjudged on such principal sum for any period prior to the institution of the suit' in contra-distinction to the expression 'principal sum adjudged'. Thus, in addition to 'interest from the date of the suit to the date of the decree' and 'from the date of the decree to the date of the payment', this section also refers to 'interest adjudged on such principal sum for any period prior to institution of the suit'. All these sums are interest as distinguished from 'principal'.
24. A clear picture which emerges from reading of this section is that the Court while decreeing the suit will adjudge, (i) the principal sum and (ii) any interest on such principal sum prior to the date of institution of the suit. Both amounts adjudged by the Court by way of 'principal sum' as well as 'interest' thereon for the period prior to the institution of the suit together may be termed as 'aggregate amount adjudged' as payable on the date of the suit. But interest under S. 34 is hot payable on such aggregate amount. It is made payable only on the principal sum adjudged. No interest is payable on the amount of interest adjudged on such principal sum. Interest, whether simple or compound will remain 'interest' for the purpose of S. 34 and shall never merge in the principal.' Trie legislature while using the expression 'in addition to any interest adjudged on such principal for any period prior to the institu-;ion of the suit' in S. 34 in contra-distinction to the expression 'principal sum' has not made any distinction between the interest computed by way of simple interest or compound interest. The legislative scheme and intent being so clear, there is no scope for doubt that the expression 'principal sum adjudged' would mean only the 'principal sum'. It will never include the interest-whatever be the agreement between the parties. Interest under S. 34, therefore; can be allowed only on the principal sum and not on the principal sum plus interest accrued thereon till the filing of the suit. In view of foregoing discussion, we hold that the 'principal sum adjudged' used in S. 34 of the C.P.C. means the original amount lend without the addition thereto of any interest whatsoever. This will be the position notwithstanding any agreement between the parties or any prevailing banking or trade practice to the contrary. The first three questions are answered accordingly.
25. We may now turn to the fourth and the last question which relates to the interpretation of the expression 'principal' used in Rules 2 and 11 of Order 34 of the C.P.C. Order 34 deals with suits relating to mortgages of immovable property. Rule 2 specifies the powers of the Court to pass a preliminary decree in such suits. Rule 11 deals with the powers of the Court to award interest from the date of the suit up to the date fixed by the Court for payment of the mortgage debt and from the date fixed for payment to the date of realisation or actual payment. Rules 2 and 11 of Order 34, so far as relevant, read as follows:--
'2. Preliminary decree in foreclosure suit -
(1) In a suit for foreclosure, if the plaintiff succeeds, the Court shall pass a preliminary decree -
(a) ordering that an account be taken of what was due to the plaintiff at the date of s'uch decree for -
(i) principal and interest on the mortgage,
(ii) the costs of the suit, if any, awarded to him, and
(iii) other costs, charged and expenses properly incurred by him up to that date in respect of his mortgage-security, together with the interest thereon; or
(b) declaring the amount so due at that date; and
(c) directing
(i) that, if the defendant pays into Court the amount so found or declared due on or before such date as the Court may fix within six months from the date on which the Court confirms and countersigns the account taken under clause (a) or from the date on which such amount is declared in Court under clause (b) as the case may be, and thereafter pays such amount as may be adjudged due in respect of subsequent costs, charges, expenses as provided in rule 10, together with sub-sequent interest on such sums respectively as provided in rule II, the plaintiff shall deliver up to the defendant, or to such person as the defendant appoints, all documents in his possession or power relating to the mortgaged property.....'
'11, Payment of interest.-- In any decree passed in a suit for foreclosure, sale or redemption, where interest is legally recoverable the Court may order payment of interest to the mortgagee as follows, namely -
(a) interest up to the date or before whichpayment of the amount found or declared dueis under the preliminary decree to be made bythe mortgagor or other person redeeming themortgage-
(i) on the principal amount found ordeclared due on the mortgage at the rate.payable on the principal, or where no suchrate is fixed, at such rate as the Court deemsreasonable,
(ii) xx xx xx xx xx xx xx (iii) on the amount adjudged due to the mortgagee for costs, charges and expenses properly incurred by the mortgagee in respect of the mortgage security up to the date of the preliminary decree and added to the mortgage money -- at the rate agreed between the parties, or, failing such rate, at such rate not exceeding 6 per cent per annum as the Court deems reasonable and
(b) subsequent interest up to the date of realisation or actual payment on the aggregate of the principal sums specified in clause (a) as calculated in accordance with the clause at such rate as the Court deems reasonable.'
26. From a reading of Rule 2 set out above, it is clear that it casts a duty on the Court to order, inter alia, taking of account of what is due to the plaintiff at the date of the preliminary decree for 'principal' and 'interest on the mortgage'. Under clause (b) the Court has to declare the amount so due at that date. A conjoint reading of clauses (a) and (b) of sub-rule (1) of Rule 2 makes it abundantly clear that the 'principal' and 'interest' have to be ascertained separately and declared to be due as such. Rule 2 does not contemplate merger of interest in the principal and determination of the aggregate amount due on account of both. Rule 11 provides for award of interest from the date of the decree up to the date fixed for payment, and in the event of the same being not paid by such date, 'or further interest up to the date of realisation or actual payment. Interest under Rule 11(a)(i) is payable on 'the principal amount found or declared due on the mortgage'. Under sub-clause (iii) such interest is also payable on the amount adjudged due to the mortgagee for costs, charges and expenses up to the date of the preliminary decree and added to the mortgage money. The Court thus has been empowered to award interest under Rule 11 (a) on all the components of the amount found or adjudged due to the plaintiff except on the 'interest'. Similarly, subsequent interest up to the date of realisation or actual payment can also be awarded under Rule 11(b) only on the 'aggregate of the principal sums specified in clause (a)' thereof. Clause (a), as indicated above, specifically excludes interest due on mortgage from its purview. The principal amounts referred to in clause (b) therefore, means only the principal amount found or declared due on the mortgage and the principal amounts adjudged due to the mortgagee for costs, charges and expenses. Interest on any of these amounts, therefore, will not fall within the expression 'aggregate of the principal sums' used in clause (b) of Rule 11. It is thus evident that interest under either of the two clauses of Rule 11 can be awarded only on the principal. Interest accrued due before the suit is not treated as principal. It is also evident from the fact that the amount of interest due to the plaintiff has to be determined separately, (Rule 2(1)(a)(i) of Order 34).
27. This view also gets support from the use of two different expressions in Rule 11 viz., 'amount found or declared due' and 'principal amount found or declared due on the mortgage'. For the purpose of determining the date up to which the interest would be payable under clause (a) of that rule, it refers to the amount found or declared due. In relation to the amount on which interest may be ordered to be paid, the expression used is:
'on the principal amount found or declared due on the mortgage.....'
The use of these two distinct expressions makes it further clear that interest would be payable only on 'the principal' and not on the amount found or declared due which might include both the 'principal' and 'interest' on mortgage. We are, therefore, of the clear opinion that the expressions 'principal' and 'aggregate of the principal sums' specified in clause (a) used in Rules 2 and 11 of Order 34 mean only 'principal' and not 'principal and interest.'
28. This view of ours also gets support from the fact that prior to 1956, under clause (b) of Rule 11, interest from the date fixed for payment till the date of payment could be awarded also on interest in addition to the principal. At that time, clause (b) read as under:
'(b) subsequent interest up to the date of realisation or actual payment at such rate as the Court deems reasonable -
(i) on the aggregate of the principal sums specified in clause (a) and of the interest thereon as calculated in accordance with that clause; and
(ii) on the amount adjudged due to the mortgagee in respect of such further costs, charges and expenses as may be payable under rule 10.'
This clause, in express terms, empowered the Courts to grant subsequent interest on the aggregate of the principal sums specified in clause (a) and on the 'interest'. It was substituted by Act 66 of 1956 by the existing clause (b) and in the substituted clause the words 'and of interest' etc. were omitted. It now refers only to 'the aggregate of the principal sum'. The object of this amendment evidently was not to allow interest on interest. It is clear from the report of the Joint Committee on the Amendment Bill published in the gazette of India dated 13th December 1955 (supra), where it is observed -
'Committee also feel that interest on interest should not be allowed and, therefore clause (b) of rule 11 was re-drafted.....'
Thus after 1956 subsequent interest can be awarded on the principal only. No interest is payable under rule 11 on the amount of interest.
29. The fourth question referred to us is answered accordingly.
30. Certified copy to be furnished expedi-tiously.
31. Order accordingly.