Vijaya Bank Vs. Art. Tend Exports and Peerless Plastics Industries - Court Judgment

SooperKanoon Citationsooperkanoon.com/857830
SubjectBanking
CourtKolkata High Court
Decided OnFeb-28-1990
Case NumberAppeal Nos. 225, 341, 343 and 366 of 1986, 877 of 1987 and 18 and 900 of 1988
JudgeBimal Chandra Basak and ;Amarabha Sengupta, JJ.
Reported in[1992]74CompCas304(Cal)
ActsInterest Act, 1839; ;Interest Act, 1978; ;Banking Regulation Act, 1949 - Section 21 and 21A; ;Usury Laws Repeal Act, 1855; ;Code of Civil Procedure (CPC) , 1908 - Section 34 and 34(1) - Order 4 - Order 20, Rule 11
AppellantVijaya Bank;state Bank of India;dena Bank;united Bank of India;bank of Madura Ltd.
RespondentArt. Tend Exports and Peerless Plastics Industries;suresh Kumar Rajgharia and Das Consultants;joy Ir
Cases ReferredCentral Bank of India v. P. R. Garments Industries Pvt. Ltd.
Excerpt:
Notice (8): Undefined variable: kword [APP/View/Case/amp.ctp, line 120]
Notice (8): Undefined variable: query [APP/View/Case/amp.ctp, line 120]
- 
Notice (8): Undefined variable: kword [APP/View/Case/amp.ctp, line 123]
Notice (8): Undefined variable: query [APP/View/Case/amp.ctp, line 123]
bimal chandra basak, j. 1. these appeals are directed against a decree passed in favour of various banks, mostly nationalised banks, in various suits instituted by them for money decrees on account of amounts lent or advanced by them and for other reliefs.2. some important questions of law are raised before us in connection with these suits which also arise in various other proceedings of this nature from time to time. the questions involved relate to (a) the interest for the period prior to the institution of the suit ; (b) interim interest, that is, interest from the date of the institution of the suit till the date of the decree ; (c) further interest, i.e., interest on judgment ; and (d) instalments to be granted, if any, for payment of the decretal amount.3. various suits were.....
Judgment:

Bimal Chandra Basak, J.

1. These appeals are directed against a decree passed in favour of various banks, mostly nationalised banks, in various suits instituted by them for money decrees on account of amounts lent or advanced by them and for other reliefs.

2. Some important questions of law are raised before us in connection with these suits which also arise in various other proceedings of this nature from time to time. The questions involved relate to (a) the interest for the period prior to the institution of the suit ; (b) interim interest, that is, interest from the date of the institution of the suit till the date of the decree ; (c) further interest, i.e., interest on judgment ; and (d) instalments to be granted, if any, for payment of the decretal amount.

3. Various suits were instituted in this court by different nationalised banks for recovery of huge amounts due from their constituents on account of moneys lent and/or advanced by the banks. In these cases, money decrees were passed. The court also directed interest to be paid under three headings as specified above. The courts have also granted instalments. In all these cases, it is the banks who have preferred appeals, though the decrees have been passed in their favour, being aggrieved by the court's directions regarding interest and also the instalments granted for payment of the decretal dues. All these appeals involve such common questions of law relating to the same.

4. At the request of learned advocates for the parties, all these appeals were set down for hearing together and learned advocates appearing for different parties in different appeals have made submissions before us on these points very thoroughly. It was agreed that we should first lay down the general principles applicable in respect of the aforesaid questions after hearing the interested parties, as a form of guideline which would be common to all these cases and, thereafter, we shall deal with each and every individual case depending on the facts and circumstances of each case. Accordingly, these appeals were heard together for a considerable time and judgment was reserved.

5. We may, however, make one thing clear. We are dealing with general principles applicable to money suits relating to all these questions where, in some cases, there are also prayers for declaration of charge relating to movables with a prayer for sale of the same. We are not, in this judgment, dealing with mortgage suits where a preliminary decree is passed or redemption suits. We are not also dealing with these questions in respect of other proceedings, e.g., arbitration proceedings.

Arguments :

6. The main submission on behalf of the appellant-banks was made by learned advocate, Mr. Pratap Chatterjee. His submission was to the following effect. He has submitted at first that, so far as interest for the period prior to the suit is concerned, it must be directed to be paid at the agreed rate and the court has no option or discretion in the matter. So far as interim interest is concerned, our attention has been drawn to the relevant provisions of Section 34 of the Civil Procedure Code (hereinafter referred to as 'the Code'), the Usury Laws Repeat Act, 1855 (hereinafter referred to as 'the 1855 Act') and Section 21A of the Banking Regulation Act, 1949. At the first instance, it was submitted by Mr. Chatterjee that the court must grant interim interest at the agreed rate in view of the provisions of the 1855 Act. It was submitted that Section 34 of the Civil Procedure Code applies only when there is no rate of interest agreed upon. He has admitted that the proviso to Section 34 applies only in respect of interest on judgment and that it is not attracted in the case of interim interest. He has submitted that if there is any agreement regarding interest, the 1855 Act would apply and not Section 34 but if there is no such agreement, Section 34 of the Code would apply. It was conceded that Section 3 of the 1855 Act is in conflict with Section 34 of the Civil Procedure Code. We may point out that, at a later stage, Mr. Chatterjee has, very fairly, expressed that he was not relying upon the provisions of the 1855 Act on the question of interim interest in view of a Full Bench decision of this court in Mangniram Marwari v. Dhowtal Roy [1886] ILR 12 Cal 569, but he did not expressly give up this point. He has submitted that, in any event, though it may be said that interim interest is a matter of discretion, the court should award such interest at the agreed rate if there is any agreed rate. He has made a similar submission regarding interest on judgment. He has further submitted that so far as the instalment is concerned, it can be so granted provided the same can be justified but not as a matter of course. In support of his contentions, Mr. Chatterjee has relied on the following cases : State Bank of India v. B. Gupta (Tea), Pvt. Ltd., : AIR1987Cal64 , S. K. Engineering Works, Batata v. New Bank of India, , Central Bank of India v. P.R. Garments Industries P. Ltd., : AIR1986Guj113 , Jagannath Pigments and Chemicals v. Bank of Baroda [1989] 65 Comp Cas 393 (Bom), K. Appa Rao v. V.L Varadaraj AIR 1981 Mad 94, United Bank of India v. New Glencoe TeaCo. Ltd., : AIR1987Cal143 , United Bank of India v. Rashyan Udyog [1989] 1 Cal LT 367 ; [1992] 73 Comp Cas 482, Jagadish Chandra Chakravarti v. Brojendra Mohan Maitra AIR 1949 Cal 427 and Bandary Swamy Naidu v. Atchayamma [1881] ILR 3 Mad 125.

7. Mr. Bimal Chatterjee, learned advocate appearing for the Dena Bank, has referred to the arguments of Mr. Pratap Chatterjee relating to the Usury Laws Repeal Act. He has, however, submitted that Section 2 of the 1855 Act relates to interest before the suit. So far as Section 3 is concerned, the first part relates to interim interest. In this context, he has also referred to Mulla's Civil Procedure Code, volume 1, 14th edition, page 253. Regarding the decision in United Bank of India v. New Glencoe Tea Co. Ltd., : AIR1987Cal143 , he has submitted that the decision is erroneous. Order 20, Rule 11, does not apply to mortgage suits. He has further submitted that the reasons given for the decision are not in conformity with the decision itself. He has drawn our attention to paragraph 6 thereof and submitted that the learned judge has followed the Bombay decision and not the Calcutta decision. He has submitted that the learned judge even observed that Order 20, Rule 11, would apply. In support of his contentions, he has relied upon Bidhu Sekhar Bandhopadhya v. Sudhury Mahatabuddin [1911] 15 CWN 1083 and submitted that the same was not considered. He has further drawn our attention to Order 20, Rule 11. Referring to the expression 'in so far as' therein, he has submitted that this was not limited only to a money decree, He has submitted that the question of interest is a matter of discretion--whether it is interim interest or interest on judgment. He has also relied upon the decision in Dena Bank v. Victory Engineering Works [1984] 2 Cal HCN 271 (paras 64, 71, 94 and 95).

8. Mr. Jayanta Mitra, learned advocate, who spearheaded the case of the constituents, admitted that so far as the pre-suit interest is concerned, the court has no discretion. Regarding interim interest, with reference to the 1855 Act, he has submitted that Section 2 of the said Act relates to the pre-suit interest. Interest 'recoverable' means when the interest is recoverable as a matter of right and not under court's discretionary power. He has submitted that it cannot be said that Section 2 applies in the case of interim interest. He has submitted that, in any event, it has been repealed by necessary implication by Section 34 of the Civil Procedure Code. In this connection, he has also drawn our attention to Section 21A of the Banking Regulation Act, 1949. He has submitted that the interim interest and interest on judgment are matters of discretion and are not governed by an agreed rate of interest. He has submitted that this is now well-settled particularly having regard to the following decisions : Mahabir Prasad Rungta v. Durga Datta, : [1961]3SCR639 and State of Madhya Pradesh v. Nathabhai Desaibhai Patel, : AIR1972SC1545 . In this connection, he has relied upon the decisions in West Bengal Financial Corporation v. Bertram Scott (I.) Ltd., : AIR1983Cal381 and State Bank of India v. B. Gupta (Tea) Pvt. Ltd., : AIR1987Cal64 , LIC of India v. Kumar Purnendu Nath Tagore, : AIR1988Cal311 , United Bank of India v. Rashyan Udyog [1989] 1 Cal LT 367 (para 5). He has submitted that there is an implied repeal of the 1855 Act by the 1908 Act. He has also drawn our attention to United Bank of India v. Hind Hosiery Mill [1988] 1 Cal LJ 69.

9. Mr. P.K. Mullick, appearing on behalf of one of the constituents, has referred to Order 20, Rule 11 of the Civil Procedure Code, regarding instalments. He has submitted that it is not confined to simple money decrees. He has submitted further that the appeal court should not interfere with the rate of interest granted by the trial court in its discretion.

Relevant Acts :

10. Before we deal with the respective submissions, we shall set out the different provisions of different Acts relied upon before us.

11. Section 34, Code of Civil Procedure :

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 therefor shall not lie.

12. Order 20, Rule 11 :

Decree may direct payment by instalments.--(1) Where and in so far as a decree is for the payment of money, the Court may for any sufficient reason incorporate in the decree, after hearing such of the parties who had appeared personally or by pleader at the last hearing, before judgment, an order that payment of the amount decreed shall be postponed or shall be made by instalments, with or without interest, notwithstanding anything contained in the contract under which the money is payable.

(2) Order, after decree, for payment by instalments.--After the passing of any such decree the court may, on the application of the judgment-debtor and with the consent of the decree-holder, order that payment of the amount decreed shall be postponed or shall be made by instalments on such terms as to the payment of interest, the attachment of the property of the judgment-debtor or the taking of security from him, or otherwise, as it thinks fit.

13. Section 21A of the Banking Regulation Act, 1949 :

14. Rates of interest charged by banking companies not to be subject to scrutiny by courts.--Notwithstanding anything contained in the Usurious Loans Act, 1918 (10 of 1918), or any other law relating to indebtedness in force in any State, a transaction between a banking company and a debtor shall not be reopened by any court on the ground that the rate of interest charged by the banking company in respect of such transaction is excessive.

Decision :

15. Interest for the period prior to the suit.

16. We shall first take up the question of interest for the period prior to the institution of the suit. We shall first refer to the relevant decisions on this point. In the case of Bengal Nagpur Railway Co. Ltd. v. Ruttanji Ramji , the Judicial Committee held as follows (headnote) :

''Interest for the period prior to the date of the suit may be awarded, if there is an agreement for the payment of interest at a fixed rate, or it is payable by the usage of trade having the force of law, or under the provision of any substantive law entitling the plaintiff to recover interest as, for instance, the court may award interest at the rate of 6 per cent. per annum, when no rate of interest is specified in a promissory note or bill of exchange under Section 80, Negotiable Instruments Act.'

17. In that, case, it was held as follows (headnote) :

'The proviso to Section 1 applies to a case in which the court of equity exercises jurisdiction to allow interest. But in order to invoke a rule of equity, it is necessary in the first instance to establish the existence of a state of circumstances which attracts the equitable jurisdiction.'

18. In the case of Mahabir Prasad Rungta v. Durga Datta, : [1961]3SCR639 , the Supreme Court held as follows (at p. 993) :

'There remains the question of interest. Interest for a period prior to the commencement of suit is claimable either under an agreement or usage of trade or under a statutory provision or under the Interest Act, for a sum certain where notice is given. Interest is also awarded in some cases by the Courts of Equity (Bengal Nagpur Railway Co. Ltd. v. Ruttanji Raniji . In the present case, no agreement about interest was made nor was it implied. The notice which was given did not specify the sum which was demanded, and, therefore, the Interest Act does not apply. The present case also docs not fall within those cases in which Courts of Equity grant interest. Learned counsel for Durga Datta claimed interest as damages ; but it is well-settled that interest as damages cannot be awarded. Interest up to date of suit, therefore, was not claimable, and a deduction shall be made of such interest from the amount decreed. As regards interest pendente lite until the date of realisation, such interest was within the discretion of the court. The rate fixed is 6 per cent. which, in the circumstances and according to the practice of courts, appears high. Interest shall be calculated at 4% per annum instead of at 6% and the decree shall be modified accordingly.'

19. In the case of Executive Engineer, Irrigation, Galimala v. Abnaduta Jena, : [1988]1SCR253 , a special leave application was granted on the question of award of interest for the period prior to the reference and during the pendency of award of interest for the period prior to reference and during the pendency of arbitration proceedings. Special leave was not granted in regard to the award of interest subsequent to the date of the arbitrator's award. The Supreme Court proceeded on the basis that, in the notice of demand made by the contractors before the disputes were referred to the arbitrator, interest was claimed. The Supreme Court referred to the provisions of the Interest Act, 1839, and the Interest Act, 1978, which repealed the 1839 Act. After referring to the Statement of Objects and Reasons, the Supreme Court pointed out the main features of the 1978 Act. It was pointed out that the 1978 Act had introduced some important changes. The expression 'court' includes Tribunal. In this context it was observed as follows (at pages 1522-23) :

'The new Act has made some important changes. One of the important changes is that the expression 'court' is defined to include a tribunal and an arbitrator. Debt is defined as meaning any liability for an ascertained sum of money including a debt payable in kind, but not including a judgment debt. Section 3(1) enables the court, if it so thinks fit, to award interest, in any proceedings for the recovery of any debt or damages or in any proceeding in which a claim for interest in respect of any debt or damages already paid is made to the person entitled to the debt or damages or to the person making such claim, for the whole or part of the following period : (a) if the proceeding relates to a debt payable by virtue of a written instrument at a certain time, then, from the date when the debt is payable to the date of institution of the proceedings ; (b) if the proceeding does not relate to any such debt, then from the date mentioned in this regard in a written notice given by the person entitled or the person making the claim to the person liable that interest will be claimed, to the date of institution of the proceeding. Section 3(3) provides that nothing in the section shall apply in relation to (i) any debt or damages upon which interest is payable as of right, by virtue of any agreement ; or (ii) any debt or damages upon which payment of interest is barred by virtue of an express agreement. Section 3(3)(c) provides that nothing in the section shall empower the court to award interest upon interest. Section 4(1) provides, 'notwithstanding anything contained in Section 3 interest shall be payable in all cases in which it is payable, by virtue of any enactment or other rule of law or usage having the force of law'. Section 4(2) further provides that, notwithstanding anything as aforesaid, the court shall allow interest in the class of cases specified in Section 4(2) from the dates stipulated to the dates stipulated in the provision. Section 5 provides that nothing in the Act shall affect the provisions of Section 34 of the Civil Procedure Code, 1908.

It is important to notice at this stage that both the Interest Act of 1839 and the Interest Act of 1978 provide for the award of interest upto the date of the institution of the proceedings. Neither the Interest Act of 1839 nor the Interest Act of 1978 provides for the award of pendente lite interest. We must look elsewhere for the law relating to the award of interest pendente lite. This, we find, is provided for in Section 34 of the Civil Procedure Code in the case of courts. Section 34, however, applies to arbitrations in suits for the simple reason that where a matter is referred to arbitration in a suit, the arbitrator will have all the powers of the court in deciding the dispute ; Section 34 does not otherwise apply to arbitrations as arbitrators are not courts within the meaning of Section 34, Civil Procedure Code. Again, we must look elsewhere to discover the right of the arbitrator to award interest before the institution of the proceedings in cases where the proceedings had concluded before the commencement of the Interest Act of 1978. While under the Interest Act of 1978, the expression 'court' was defined to include an arbitrator, under the Interest Act of 1839, it was not so defined. The result is that while in cases arising after the commencement of the Interest Act of 1978 an arbitrator has the same power as the court to award interest up to the date of institution of the proceedings, in cases which arose prior to the commencement of the 1978 Act, the arbitrator had no such power under the Interest Act of 1839. It is, therefore, necessary as we said, to look elsewhere for the power of the arbitrator to award interest up to the date of institution of the proceedings. Since the arbitrator is required to conduct himself and make the award in accordance with law we must look to the substantive law for the power of the arbitrator to award interest before the commencement of the proceedings. If the agreement between the parties entitled the arbitrator to award interest, no further question arises and the arbitrator may award interest. Similarly if there is a usage of trade having the force of law the arbitrator may award interest. Again if there are any other provisions of the substantive law enabling the award of interest, the arbitrator may award interest. By way of an illustration, we may mention Section 80 of the Negotiable Instruments Act as a provision of the substantive law under which the court may award interest even in a case where no rate of interest is specified in the promissory note or bill of exchange. We may also refer to Section 61(2) of the Sale of Goods Act which provides for the award of interest to the seller or the buyer as the case may be under certain circumstances in suits filed by them. We may further cite the instance of the non-performance of a contract of which equity could give specific performance and to award interest. We may also cite a case where one of the parties is forced to pay interest to a third party to the contract say, on an overdraft, consequent on the failure of the other party not fulfilling the obligation of paying the amount due to them. In such a case also equity may compel the payment of interest. Loss of interest in the place of the right to remain in possession may be rightfully claimed in equity by the owner of a property who has been dispossessed from it.'

20. In the case of Dinesh Chandra Shaha v. Safer Ali Mondal AIR 1920 Cal 881, a Division Bench of this court held that a mere finding that the rate of interest in a mortgage bond is excessive is not a sufficient reason for refusing the plaintiff interest at the rate embodied in the contract. The Division Bench took into consideration the two Privy Council decisions in Aziz Khan v. Duni-Chand AIR 1918 PC 48 and Balla Mal v. Ahad Shah AIR 1918 PC 249, and also the judgment of the Calcutta High Court in Bejoy Kumar Adhya v. Satish Chandra Ghose AIR 1920 Cal 529, in this connection and did not follow the earlier decision in Krishna Chandra Barman v. Sanat Kumar Das AIR 1917 Cal 162.

21. In the case of State Bank of India v. B. Gupta (Tea) Pvt. Ltd., : AIR1987Cal64 , a Division Bench of this court considered the question ofdiscretion regarding grant of interest. In that case, the learned judge hadnot awarded interest in respect of a short period prior to the institutionof the suit. It was submitted in the appeal on behalf of the bank thatthe learned judge had erred in law in awarding interest at a rate lowerthan the agreed rate for the period prior to the institution of the suit.It was submitted that the appellant was entitled to interest at the agreedrate for the period prior to the institution of the suit. It was submittedthat the appellant was entitled to interest at the agreed rate for thatperiod and that the court had no discretion in the matter. The appealcourt held that if there is a stipulation for the payment of interest at afixed rate in awarding interest antecedent to the suit, the court has nodiscretion to award interest, at any rate other than the contractual rate.It was held that Section 34 had no application in respect of interest priorto the date of the suit. It was further held that the interest accrued dueprior to the institution of the suit on the principal sum adjudged is nota matter of procedure but of substantive law. The court modified thedecree accordingly.

22. In our opinion, the question of payment of interest, in respect of the period prior to the institution of the suit, does not require much deliberation inasmuch as the law regarding the same is, in our opinion, now well-settled. If there is any agreement to that effect, such interest is to be governed by such agreement. Where there is no such agreement, it is to be paid according to the statutory provision governing the same, if any. Both the Interest Act of 1839 and 1978 provide for the award of interest in some cases referred to therein up to the date of the institution of the proceedings. The Interest Act, 1978, applies in respect of proceedings commenced after the said Act came into force, whereas the Interest Act, 1839, applies for the period prior thereto. Section 3(3) of the Interest Act, 1978, provides that nothing in Section 3 shall apply in relation to any debt or damages upon which interest is payable as of right by virtue of any agreement. Apart from that, interest is also payable under various other Acts, e.g., the Negotiable Instruments Act, the Sale of Goods Act, etc. Section 4(1) of the Interest Act makes it clear that interest shall be payable in all cases in which it is payable by virtue of any enactment or other rule of law or usage having the force of law. The court has also power to grant interest on the basis of implied agreement or on equitable grounds. If there is any agreed rate of interest, that is a part of the claim of the plaintiff. The plaintiff is entitled to the same under the substantive law. The question of exercise of any discretion by the court in this regard cannot and does not arise in such a case. The court has no power to deviate from the agreement by totally disallowing interest or allowing interest at a lower rate or at a rate other than the agreed rate.

23. There is another aspect of the matter. So far as banking companies are concerned, in view of Section 21A of the Banking Regulation Act, 1949, which we have quoted hereinabove, a transaction between a banking company and its debtor cannot be reopened by any court on the ground that the rate of interest charged by the company in respect of such transaction is excessive. Therefore, it follows that, in the case of a banking company, a fortiori, its claim to interest at the agreed rate for the period prior to the suit cannot be ignored and the court is bound to grant interest at that rate. The court has no discretion in the matter.

Interim interest :

24. The next point to be considered is the question of interim interest, i.e., the interest from the date of institution of the suit till the date of the decree. The following questions are involved in respect of grant of such interest :

(a) Whether the provisions of the 1855 Act would apply in respect of interim interest ;

(b) If not, which provision of law would govern the grant of such interest ;

(c) Whether the court has a discretion regarding grant of such interest. If so, whether, such discretion of the court extends not only to the question of the rate or amount of interest but also to the question as to whether any interest is to be granted at all ;

(d) If the grant of interest is a matter of discretion of the court, how is such discretion is to be exercised by the court; what matters are to be taken into consideration by the court while granting such interest ;

(e) When there is an agreed rate of interest, whether the decree-holder is entitled to claim such interest at the agreed rate ;

(f) Is the court required to give reasons regarding grant of such interest?

25. Before dealing with such questions, we shall first deal with the decisions relevant to this point. We may point out that the question of interim interest and interest on judgment have been argued and considered together and not separately in most of these decisions. However, it may be pointed out that there is at least one distinction between interim interest and interest on judgment (which is described as 'further interest') as would be clear from the proviso to Section 34 of the Code itself.

26. We shall first consider the Privy Council and the Supreme Court decisions on this point.

27. In the case of Pannalal v. Nihai Chand AIR 1922 PC 46, a contention was raised before their Lordships regarding the rate of interest from the date of the proceeding until judgment. In this context, their Lordships observed that there is a discretion in the judges under the Code and both courts have said that interest should be at 8 per cent. and their Lordships have adhered to the same view.

28. In the case of Jatindra Nath Chowdhury v. Uday Kumar Das , on the question of interest, their Lordships held that the amount to be allowed was very largely a matter of judicial discretion and their Lordships did not see any reason for interference with the discretion exercised by the Subordinate Judge.

29. In the case of Lala Hakim Rai v. Lala Ganga Ram AIR 1942 PC 61, the Privy Council observed that the rate of interest to be allowed after the institution of the suit is entirely a matter within the discretion of the court.

30. In the case of Thawardas Pherumal v. Union of India, : [1955]2SCR48 , it was held that, but for Section 34 of the Code, even a court would not have the power to grant interest after the suit.

31. In the case of Mahabir Prasad Rungta v. Durga Datta, : [1961]3SCR639 , the Supreme Court observed as follows (at page 993) :

'As regards interest pendente lite until the date of realisation, such interest was within the discretion of the court.'

32. In the case of Soli Pestonji Majoo v. Ganga Dhar Khemka, : [1969]3SCR33 , one of the contentions raised on behalf of the appellants was that even if the respondent is entited to institute a second mortgage suit, the High Court ought not to have granted interest to the respondent at the rate of 12 per cent. per annum with monthly rests even after the date of the suit and the maximum interest which should have been allowed was not more than 6 per cent. per annum simple on the principal sum adjudged. The High Court observed that this argument was well-founded and there was no justification for the High Court to allow interest at the contractual rate from the date of the suit on the amount adjudged. In this context, the Supreme Court held as follows (at page 603) :

'Prior to 1929, the legal position was that under Section 34 of the Civil Procedure Code in granting a decree for payment of money the court had full discretion to order interest at such rate as it deemed reasonable to be paid on the principal sum adjudged from the date of the suit onwards. But Order 34, Rules 2 and 4, which applied to a mortgage suit, enjoined the court to order an account to be taken of what was due to the plaintiff at the date of such decree for principal and 'interest on the mortgage'. The special provision in Order 34 had, therefore, to be applied in preference to the general provision in Section 34. Till the period for redemption expired, therefore, the matter was considered to remain in the domain of contract and interest had to be paid at the rate and with the rests specified in the contract of mortgage but after the period for redemption had expired the matter passed, from the domain of contract to that of judgment. The right of the mortgagee would henceforth depend not on the contents of his bond but on the directions of the decree (see the decision in Jagannath Prosad Singh Chowdhury v. Surajmal Jalal .'

33. Thereafter, the Supreme Court observed that by Act 21 of 1929, Order 34 of the Civil Procedure Code was amended and a new Rule 11 was inserted which specifically deals with interest. After quoting the said rule, the Supreme Court observed as follows (at page 604) :

'This rule was further amended by the Code of Civil Procedure Amendment Act, 1956, but we are not concerned with this further amendment in the present case. It is apparent that the new Rule 11 as inserted by the Amending Act 21 of 1929 provides that the court 'may' order payment of interest to the mortgagee up to the date fixed for payment at the rate payable on the principal. It was held by the Federal Court in Jaigobind Singh v. Lachmi Narain Ram, AIR 1940 FC 20, that the language of the rule gives a certain amount of discretion to the court so far as interest pendente lite and subsequent interest is concerned and it was no longer absolutely obligatory on the courts to decree interest at the contractual rates up to the date of redemption in all circumstances even if there is no question of the rate being penal, excessive or substantially unfair within the meaning of the Usurious Loans Act, 1918. In view of the principle laid down by the Federal Court in this decision, we are of the opinion that in the circumstances of the present case the respondent should be granted interest on the principal sum due at the contractual rate till the date of the suit and simple interest at 6 per cent. per annum on the principal sum adjudged from the date of the suit till the date of the preliminary decree and also at the same rate till the date of realisation'.

34. In the case of State of Madhya Pradesh v. Nathabhai Desaibhai Patel, : AIR1972SC1545 , while dealing with the contention of the appellant-defendant, it was held as follows (at page 1545) : .

'The only contention urged by him was that the High Court erred in awarding interest on the principal amount claimed from the date of the suit. The question whether interest should be awarded on the principal amount claimed from the date of the suit was within the discretion of the court. In our opinion, the High Court rightly exercised that discretion. It disallowed the interest claimed by the plaintiff-respondent uptill the date of the suit. Coming to the question of interest subsequent to the date of the institution of the suit, it was found that the appellant had unlawfully withheld the amount due to the respondent even after coming Jo know that the collection made was an illegal one. Before instituting the suit, the respondent had issued a notice to the appellant, calling upon the appellant to pay the money illegally collected from it ; but, despite that notice, the appellant failed to pay back the amount illegally collected from the respondent. That being so, in our opinion, the High Court was justified in awarding interest on the principal amount from the date of the suit.'

35. In the case of State of Rajasthan v. Raghubir Singh AIR 1979 SC 952, while awarding interest pendente lite, the trial court gave no reason for doing so. The High Court considered the matter in some detail and having regard to various continuous defaults committed by the defendant and its officers, the High Court enhanced the rate of interest to 6 per cent. The Supreme Court held that the High Court was justified in doing so and found no reason to interfere with the discretion exercised by the High Court.

36. In the case of Everest Industrial Corporation P. Ltd. v. Gujarat State Financial Corporation : [1987]3SCR607 , the question involved was whether the rate of interest chargeable on the amount payable under an order passed under Section 32 of the State Financial Corporations Act, 1951, from the date of the said order is governed by Section 34 of the Code or whether it is payable at the contractual rate. The Supreme Court referred to the decision in the case of Gujarat State Financial Corporation v. Natson Mfg. Co. (P.) Ltd., : [1979]1SCR372 . It was pointed out that it was held, in that case, that an application for any of the reliefs that can be granted under the said Act was not certainly a plaint in a suit for recovery of a mortgage loan and that was not even akin to a suit by a mortgagee to recover the mortgage money by sale of the mortgaged property. It was further pointed out in the said decision that the appellant in such a case could not pray for a preliminary decree for the payment of the money nor could it seek to enforce any personal liability even if such a liability had been incurred under the contract of mortgage as the law stood then. It was further pointed out that, in that case, the form of the relief to be granted under the Act did not attract the provision which required payment of court-fees on ad valorem basis on any plaint or application in the nature of a plaint instituted for recovery of the mortgaged amount. In this context, it was observed as follows (at page 518) :

'It may also be mentioned here that it was held that even under the Code the question of interest payable on mortgage suits filed in civil courts is governed by Order 34, Rule 11 of the Code and not by Section 34 of the Code which may be applicable only to cases of personal decrees passed under Order 34, Rule 6 of the Code. The High Court was right in holding that the interest would be payable on the principal amount due in accordance with the terms of the agreement between the parties till the entire amount due was paid as per the order passed under Section 32 of the Act. We hold that the decision of the High Court, which has applied Section 34 of the Code to a proceeding instituted under Section 31(1) of the Act, was not correctly decided.'

37. In the case of Executive Engineer, Irrigation Galimala v. Abnaduta Jena, : [1988]1SCR253 , which we have discussed above, the Supreme Court held that the law relating to the award of interest pendente lite is provided for in Section 34 of the Code in the case of courts.

38. In Maganlal v. Jaiswal Industries : [1989]3SCR696 , the Supreme Court reiterated the law laid down in Gujarat State Financial Corporation v. Natson ., : [1979]1SCR372 and Everest Industrial Corporation P. Ltd. v. Gujarat State Financial Corporation, : [1987]3SCR607 .

39. We shall now consider the Calcutta decisions. In a Full Bench decision of this High Court in the case of Mangniram Marwari v. Dhowtal Roy [1886] ILR 12 Cal 569, with reference to Section 209 of the Civil Procedure Code of 1882, it was held that interest after the date of the suit is in the discretion of the court notwithstanding that a fixed rate of interest is mentioned as payable up to realisation in the bond sued upon.

40. In the case of J. W. Crewddon v. Ganesh Das Hari Bux AIR 1920 Cal 737, while considering the question of allowing interest during the pendency of the suit, a Division Bench of this court observed as follows :

'The only statutory provision which authorises the court to allow interest, in its discretion, in such a case, is that contained in Section 34 of the Civil Procedure Code, 1908.'

41. In the case of Shivaprasad Singh v. Prayagkumari Debee : AIR1935Cal39 , a Division Bench of this court held as follows (headnote) :

'One important principle under which running of interest may be suspended is where the delay in the payment of the principal debt is caused by some improper act or omission of the creditor. So, if a creditor, by his own act, puts it beyond the power of the debtor to make payment, no interest should be recoverable for the period during which the creditor was thus prevented. But the appointment of a receiver to relieve the executor from execution or an ad interim injunction obtained by the beneficiary restraining the executor from transferring any part of the properties in the suit is no ground for cessation of interest.'

'The allowing of interest up to date of decree and compounding it with the principal on the date of the decree and allowing of interest thereon at the court rate, is justified by Section 34. The matter is purely one of discretion. In the case of a mere detention of a debt, where there is no contract, express or implied, to pay interest or no statute or mercantile usage allowing it, interest, if it cannot be awarded as interest, may be awarded by way of damages. A creditor cannot claim, as of right, interest at the contract rate, pendente lite or after decree although the courts generally adhere to that rate unless it is inequitable to do so. Where there is no contract, express or implied, to pay interest, and interest has been allowed, ante lite and pendente lite, at such rate as the court considered fair, there is no point in compounding the principal and the interest due up to the date of the decree and making to run on the aggregate sum at the same rate. Section 34 or its principle was never intended to be used as a means for providing for compound interest but to relieve the debtor of a harder rate of interest.'

42. In the case of State of West Bengal v. Ajit Kumar Mukherjee, : AIR1977Cal273 , the trial court awarded interest pendente lite at 3 per cent. This was challenged before the appeal court. The Division Bench held that the learned Subordinate Judge, in exercise of his judicial discretion under Section 54 of the Civil Procedure Code, was right in holding that award of interest at 3 per cent. on the principal amount adjudged payable to the plaintiff was reasonable and the Division Bench did not find any reason either to differ from him in his estimation or to hold that such estimation was not reasonable or fair.

43. In the case of West Bengal Financial Corporation v. Bertram Scott (I.) Ltd., : AIR1983Cal381 , with reference to Section 34 of the Civil Procedure Code, a Division Bench of this court held that the court had no discretion as to whether pendente lite interest should be granted or not. The court is bound to grant such interest. The court has discretion only as to the rate of interest.

44. In the case of the State Bank of India v. B. Gupta (Tea) Pvt. Ltd., : AIR1987Cal64 , it was a decision of Division Bench of this court. In that case, it was submitted on behalf of the bank that the plaintiff-bank was entitled to interest from the date of the suit to the date of the decree as well as from the date of the decree to the date of the payment at the agreed rate. It was submitted that, in the event the court refuses to grant interest at the agreed rate, the court should give reasons therefor. It was farther submitted that even assuming that the court has discretion regarding the award of interest at any particular rate for the period from the date of the suit to the decree and from the date of the decree to the date of payment, such discretion had not been properly and judicially exercised. On the other hand, on behalf of the respondents, lit was submitted that the rate of interest was solely at the discretion of the court. It was further submitted that it was not necessary for the court to give reasons why interest was allowed at a particular rate. In any event, it was submitted that, in the facts and circumstances of the case, the learned trial judge had duly considered the relevant facts in awarding interest. Upon consideration of the same, the court held as follows (at page 67):

'The rate of interest from the dale of the suit to the date of the decree is solely in the discretion of the court and this discretion is not taken away even if there is agreement for payment of interest at a fixed rate up to the date of realisation. The contention of Dr. Banerjee that the court in the exercise of discretion should award interest at the agreed rate cannot be accepted. If the court has to award interest at the agreed rate, in that event no discretion remains with the court. It has been held by the Division Bench of this court in West Bengal Financial Corporation v. Bertram Scott (I.) Ltd., : AIR1983Cal381 , that the court has no discretion as to whether pendente lite interest should be granted or not. The court has discretion only as to the rate of interest. There the appeal court was directed to pay interest at 1/2% per annum having regard to the fact that the assets of the company were not sufficient to meet the full claim of the secured creditors and only a small fraction of the claim of another secured creditor, a nationalised bank, should be met. We are, therefore, unable to accept the contention of Dr. Banerjee that the pendente lite interest should be awarded at the contractual rate. Only question that may be considered is whether the discretion has been exercised on sound principles or not.'

45. In the case of United Bank of India v. New Glencoe Tea Co. Ltd. : AIR1987Cal143 , a Division Bench of this court was hearing an appeal preferred by the plaintiff, United Bank of India, against the judgment and decree passed by the trial court arising out of a suit filed on the original side of this court. That decree had been passed partly in favour of the plaintiff, but the plaintiff felt aggrieved by the reduced interest--both interim and on judgment and by the instalments granted by the learned judge in decreeing the plaintiff's claim. In that case, the plaintiff-appellant had lent and advanced various amounts to defendant No. 1 on hypothecation of movables including the plant, machinery, stores, raw materials, etc. In 1983, the plaintiff instituted the suit against the defendants for a decree for Rs. 58,41,677.25, interim interest on judgment at the rate of 18 per cent. for a declaration that the movables specified in the schedule stand charged and/or mortgaged in favour of the plaintiff and a decree for sale thereof.

46. When the suit came up for hearing before the learned trial judge, it was found that, pending the suit, a sum of Rs. 26,28,647.60 has been paid by defendant No. 1 leaving a balance of Rs. 32,13,029.65. Accordingly, the learned trial judge decreed the suit against defendant No. 1 for a sum of Rs. 32,14,000 together with a sum of Rs. 5,50,000 towards interim interest and interest on judgment at the rate of 7 1/2 per cent. He further directed payment of the decretal amount on instalments extending over seven years and, only on default of payment of three consecutive instalments, there would be a decree for sale. The plaintiff-bank had felt aggrieved by the fact that, while the contractual rate of interest was 18 per cent., the interim interest and interest on judgments had been decreed at a rate not exceeding 7 1/2 per cent. and further by the fact that the decree providing for payment on instalments had deferred sale of the movables indefinitely beyond seven years.

47. Regarding the grant of interim interest and interest on judgment, it was held as follows (at page 146 of AIR 1987 Cal) :

'In our opinion, Section 34 of the Code leaves it to the discretion of the court as to what interest is to be decreed by way of interim interest and so far as interest on judgment is concerned, that too is also left entirely to the discretion of the court but subject to a limit of 6 per cent. The added proviso only removed the limit imposed by the main provisions to the interest on judgment in a case arising out of a commercial transaction. But the proviso does not take away the discretion left with the court nor does it limit the scope of exercise of such discretion.

Indeed, in our opinion, like all discretions, discretion in this regard must depend upon consideration of all the attendant facts and circumstances including the circumstance that the amount decreed was in respect of a liability arising out of a commercial transaction. Exercise of such discretion must necessarily be judicial and hence reasonable.'

48. In the case of United Bank of India v. Hind Hosiery Mill (P.) Ltd. [1988] 1 Cal LJ 69, a single judge of this court followed the decision in State Bank of India v. B. Gupta (Tea) Pvt. Ltd., : AIR1987Cal64 , on this point while holding that the court had no discretion in so far as the interest antecedent to the suit is concerned and that it must be at the contractual rate. On the question as to the rate of interim interest and interest on judgment, the learned judge observed as follows :

''There cannot be any strait-jacket formula for determining the rate of interest. In a suit like this, the object of awarding interim interest and interest on judgment at a reasonable rate is to encourage the constituent of the bank to pay off the decretal dues. The court has to strike a balance between the competing needs. The bank has already charged interest with quarterly rests up to the date of the suit. The recalling of the loss by the bank puts the constituent into hardship. The ultimate remedy of the bank is to sell the hypothecated assets and to realise the dues, if the constituent fails to pay. But it is common knowledge that the bank does not realise even 5 to 10% of the total claim by the sale of the assets. If the constituent pays off the decretal dues by instalments, the bank realises its money and at the same time the constituent gets breathing time to survive so also the workmen employed by the constituent. The court has to approach this problem from a practical and realistic point of view. A rigid or inflexible view based on misconception or ignorance of the nature of commercial transactions will neither solve the problem of the bank nor of the constituent.'

49. In the case of Life Insurance Corporation of India v. Kumar Purnendu Nath Tagore, : AIR1988Cal311 , a Division Bench of this court was considering the scope of Section 34 of the Civil Procedure Code regarding grant of interim interest. Following the Division Bench judgments of this court in the case of West Bengal Financial Corporation v. Bertram Scott (I.) Ltd., : AIR1983Cal381 and State Bank of India v. B. Gupta (Tea) Private Ltd., : AIR1987Cal64 , it was held that so far as the interim interest is concerned, the learned judge should have allowed such interest and there was no question of any discretion in the matter. On the question as to what rate of interest should be allowed, it was held that the court was not bound by the contractual rate of interest.

50. In the case of United Bank of India v. Rashyan Udyog [1989] 1 Cal LT 367 ; [1992] 73 Comp Cas 482, there were two appeals the subject-matter of which were two suits instituted by the bank wherein the trial court passed decrees but did not allow interest either pendente lite or post-decree. The bank preferred appeals and the only question involved was whether the trial court was wrong in not granting pendente lite and post-decree interest. The Division Bench held that such interest was in the nature of compensation or damages which the court may award to the plaintiff for being kept out of the money due to him. In that context, it was observed that whether the general provisions of Section 34 of the Code of Civil Procedure or those of Rule 11 of Order 34 which is specifically applicable to mortgage suits are looked into, the relevant provisions are patently governed and controlled by the expression 'may' and, accordingly, the award of such interest was not obligatory but only discretionary and the court may or may not award such interest. Reference was also made to a number of Division Bench decisions of this court holding that the expression 'may' in Section 34 as well as Order 34, Rule 11 of the Code of Civil Procedure does not vest the court with any discretion at all to grant or not to grant interest and the grant of interest, notwithstanding the expression 'may', is a 'must', while only the rate or the amount of interest to be awarded is left to the discretion of the court. The Division Bench observed that this catena of Division Bench decisions would have been otherwise binding on the Division Bench concerned but the court expressed doubts as to whether, in view of the decision of the Supreme Court in Soli Pestonji v. Ganga Dhar, : [1969]3SCR33 , Mahabir Prasad v. Durga Datta, : [1961]3SCR639 and State of Madhya Pradesh v. Nathabhai Desaibhai, : AIR1972SC1545 , certain other earlier and later decisions of the Supreme Court, the aforesaid Division Bench decisions could still bind the court to hold that the award of interest is a 'must'. In this context, the Division Bench held as follows (at page 486 of 73 Comp Cas) :

'We do not, as we need not, go to that length as to hold in this case that the Division Bench decisions of this court, noted hereinbefore, have been wrongly decided in view of the Supreme Court decisions in Mahabir Prasad, : [1961]3SCR639 and Soli Pestonji, : [1969]3SCR33 and Nathabhai Desaibhai Patel, : AIR1972SC1545 . For our present purpose, it would be sufficient to note that the view that the award of pendente lite or post-decree interest is merely discretionary and never obligatory is also, to say the least, a reasonable view even if not the only view that would bind us. And that would be good enough for our present purpose.'

51. In the case of United Bank of India v. Eshani Rubber Industries [1990] 1 CLJ 8, the plaintiff-appellant instituted a title suit for sale of the mortgaged properties for non-payment of the dues of the appellant. The learned trial judge decreed the claim of the plaintiff-appellant and also gave certain directions for payment of the decretal amount by instalments and also deferred the payment of interest. Although the suit was decreed, but being dissatisfied and aggrieved by the aforesaid direction about instalments and for deferring the payment of interest, the instant appeal was preferred by the plaintiff-appellant. In this context, the Division Bench observed as follows (at page 490 of [1990] 1 BC 484) :

'So far as the dispute as to the rate of interest to be allowed in favour of the plaintiff-bank is concerned, it also appears to us that, till the period of redemption, the rate of interest as specified in the contract of mortgage should be allowed. In any event, the contractual rate of 13% has not been found by the learned trial judge as unjustified and excessive and there is also no finding that the conduct of the plaintiff-bank was such as may disentitle the bank to claim the contractual rate. Accordingly, even if it is assumed that such contractual rate could be varied, there was no occasion to vary the contractual rate in the facts and circumstances of the case. The mere submission by the defendants that the concern of the defendants, is a small one and that they will suffer hardship will not be sufficient to disallow the contractual rate and to grant interest at the rate of 6% per annum.

In our view, there is no material sufficient to warrant that such rate of interest was very high or excessive and above the prevalent market rate. Accordingly, the claim of the plaintiff-appellant for allowing interest at the rate of 13% and not at the rate of 6% should be allowed.'

52. We shall now consider several decisions of other High Courts.

53. In the case of Bandary Swamy Naidu v. Atchayamma [1881] ILR 3 Mad 125, it was held that the contractual rate of interest must be allowed up to the date of the decree in accordance with Act 28 of 1855, Section 2.

54. In the case of Thakur Umed Singh v. Amolakchand, , a learned single judge of the Rajasthan High Court was dealing with a second appeal in a suit for recovery of price for goods sold by the plaintiff to the defendant. The question before the High Court in appeal was whether the courts below have properly exercised their judicial discretion in disallowing pendente lite and future interest to the plaintiff in all the circumstances of the case. The trial court did not give any reason whatsoever for disallowing the interest claimed apart from saying that it did not consider it necessary to award any such interest. When the matter came before the first appellate court, it did recognise that the trial court had not given any reason for the conclusion to which it came. In this context, it was held as follows (page 95) :

'All the same, that court repeated the error into which the court of first instance had fallen when it merely observed that the first court had exercised its discretion and it would not be proper to interfere with it. This, in my opinion, was not a satisfactory way of dealing with the case. It was held in Gheesalal v. Moolia , that a creditor would be entitled to pendente lite and future interest unless there were reasons why he should be deprived of it. I should further like to point out that where the courts below disallow such interest, they must indicate the reasons for the conclusion to which they have come so that this court may be assured that the discretion which undoubtedly vests in the courts below in this regard has been exercised judicially and on correct principles. This has not been done in the present case.'

55. In the case of K. Appa Rao v. V.L Varadaraj AIR 1981 Mad 94, a Division Bench of the Madras High Court considered, amongst others, the question of award of interest pendente lite. In considering the cross-objection preferred by the respondents in the appeal, who were the plaintiffs brought on record in the suit on the demise of the original plaintiff, the court was of the opinion that the learned trial judge was not right in denying interest to the plaintiffs at the contractual rate from the date of suit till the date of decree. It was observed that no reasons had been given by the trial court for awarding interest for the said period at a rate lower than the contractual rate of interest. It was observed that it was not as if the appellant had put forth any factor or circumstances justifying such a denial. In this context, it was observed that the general rule is that the rate of interest pendente lite should be at the contractual rate unless there are circumstances which would disentitle the plaintiff to the same. The burden was on the appellants to show such circumstances. It was further observed that nothing has been spelt out before the appeal court so as to decline the award of interest at the contract rate from the date of suit till the date of decree. Accordingly, the appeal court directed the decree to be modified.

56. In the case of Central Bank of India v. P. R. Garments Industries Pvt. Ltd., : AIR1986Guj113 , a Division Bench of the Gujarat High Court was considering the appeal preferred by the Central Bank of India against the judgment and decree, in so far as the trial court had refused to decree the interest at the contractual rate of 16 per cent. per annum and also against the quarterly instalment of Rs. 5,000. On the question of interest, it was pointed out that there was no dispute that the contractual rate of interest is 16.5 per cent. per annum. But the same was not allowed because, according to the trial court, the plaintiff-bank did not pay its costs. The Division Bench went into this question on merits and held that the reasons given by the learned trial judge for awarding the contractual rate of interest was erroneous and without any basis. It was observed that the reasons have been stretched to give an unduly low rate of 6 per cent. interest only as against the contractual rate of 16.5 per cent. interest.

57. In the case of Jagannath Pigments and Chemicals v. Bank of Baroda [1989] 65 Comp Cas 393 (Bom), it was an appeal by the judgment debtors from the decree passed by the trial court whereby interest was awarded at the rate of 13.5 per cent. per annum on the decretal amount from the date of the suit till payment to, or realisation by, the plaintiff. The appeal court made a reference to the amended Section 34 of the Code of Civil Procedure. The court observed that there was no reason why the rate of interest should not be at the agreed rate of 13.5 per cent., though it was made clear that, from and after the date of the suit, interest would be calculated on simple interest basis and not on the basis of rests, annual, six-monthly or quarterly. The next question was whether the decree-holder was entitled to interest on the full amount decreed. The question was what was the principal sum. Referring to the question of quarterly rests, it was observed that the agreement may provide in appropriate cases for capitalisation of the interest. The court considered whether such an agreement which may be in accordance with the banking practice both in the United Kingdom and in India still merges this interest with the principal sum. Accordingly, the court granted interest at the lower rate.

58. In our opinion, on the first question, that is, on the question of applicability of the 1855 Act, we are of the opinion that the same has no application so far as the grant of interim interest is concerned. In our opinion, the expression 'at a rate (if any) agreed upon by the parties' in Section 2 of the 1855 Act applied, even when it was applicable, only in respect of the interest for the period prior to the institution of the suit and not for the period after the institution of the suit. In our opinion, Bandary Swamy Naidu v. Atchayamma [1881] ILR 3 Mad 125, was not correctly decided. In any event, so far as interim interest is concerned, the only provision applicable at present is Section 34 of the Code. We may make it clear, however, that, in the present appeals, we are not dealing with mortgage suits. All these appeals are against money decrees and not preliminary mortgage decrees. In the case of a mortgage suit, Order 34 of the Code would apply and not Section 34 (Soli Pestonji Majoo v. Ganga Dhar Khemka, : [1969]3SCR33 , Gujarat State Financial Corporation v. Natson Mfg. Co. (P.) Ltd. [1979] 49 Comp Cas 187 (SC), Everest Industrial Corporation v. Gujarat State Financial Corporation [1987] 62 Comp Cas 513 (SC) and Maganlal v. Jaiswal Industries : [1989]3SCR696 ).

59. We are of the opinion that, under Section 34 of the Code, the question of interim interest is entirely a matter of discretion of the court. Further as the question of interest is a matter of discretion of the court, such discretion is not and cannot be limited to the question of rate or amount of interest only, but it applies also to the question as to whether any interest is at all to be granted. It cannot be said, that as far as the rate or the amount of interest is concerned, it is a matter of discretion whereas, on the question whether interest is to be granted at all, the court has no discretion but it must grant some interest.

60. This view is supported by the Privy Council, the Supreme Court and also the Full Bench decisions of this court referred to above. This is also followed in the later decisions of this court except West Bengal Financial Corporation v. Bertram Scott (I.) Ltd., : AIR1983Cal381 , wherein it was held that some interest must be granted and that the court has no discretion in the matter. In our opinion, the views expressed in the said decision to that effect are not correct. This judgment did not take into consideration but goes contrary to the aforesaid decisions of the Privy Council, the Supreme Court, the Full Bench and the other and earlier Division Bench decisions of this court. The decision in Life Insurance Corporation v. Kumar Purnendu Nath Tagore, : AIR1988Cal311 , merely followed the aforesaid Division Bench judgment in West Bengal Financial Corporation v. Bertram Scott (I.) Ltd., : AIR1983Cal381 . In this context, reference may be made to the Division Bench judgment of this court in United Bank of India v. Rashyan Udyog [1989] 1 Cal LT 367.

61. The next question is what matters are to be taken into consideration by the court in exercise of its discretion regarding grant of interim interest. The question of such interest may, no doubt, be a matter of discretion, but the discretion in question, like all other discretions of the court, must be exercised judicially. The discretion must be exercised on sound principles. It must be reasonable and fair. The matters to be taken into consideration in exercise of such discretion cannot be of universal application. It will depend on the facts and circumstances of each case including the conduct of the parties before and after the suit. It all depends on what is considered to be reasonable in the facts of each case. Certain matters have been taken into consideration by the courts in individual cases in the exercise of such discretion but the same must be treated merely as illustrative. Such considerations, cannot be applied automatically in each and every case. As and by way of an illustration, it may be pointed out that, in the case of State of Madhya Pradesh v. Nathabhai Desaibhai Patel, : AIR1972SC1545 , such interest was awarded when, the applicant had unlawfuly withheld the amount due to the respondent even after coming to know that the collection made was an illegal one.

62. The next question is whether the claimant is entitled to such interest at the agreed rate. A party is not entitled to claim such interest at such agreed rate for the period subsequent to the filing of the suit as a matter of right and the court is not bound to grant such interest at such rate, even if it is mentioned in the agreement that interest is to be paid at the agreed rate till realisation. Reference may be made in this connection to Mangniram Marwari v. Dhowtal Roy [1886] ILR 12 Cal 569 [FB]. However, in our opinion, the court is not entitled to ignore the same totally merely because it is a matter of discretion. While considering the question as to the amount or rate of such interest, though it is a matter of discretion of the court, inasmuch as such discretion is to be exercised judicially, not only is the court entitled to take into consideration the agreement of the parties in this respect but it must take the same into consideration. The courts should generally adhere to the interest at the contract rate unless it is not considered to be equitable to do so. Reference may be made in this connection to Shivaprasad Singh v. Prayagkumari Debee : AIR1935Cal39 . It is to be remembered that when a person has entered into an agreement for advancing some amount which provides for payment of interest at an agreed rate, merely because he has to file a suit to recover the money, the court should not ordinarily deprive him of the interim interest at such rate. Otherwise, the situation would be that a person who is diligently making payments under and in accordance with the agreement between the parties, will be paying the interest at the agreed rate whereas a person who deliberately fails to make payment of his dues and against whom a suit for recovery of the same has to be filed, will get away with paying interest at a lower rate. Where the debtor is diligent and the creditor does not have to file a suit, the debtor pays interest at the agreed rate. However, where the debtor is a defaulter and the creditor is compelled to file a suit, there is no reason why such institution of the suit should deprive the creditor of interest at the agreed rate. However, we make it clear that we are not of the view that, in all cases, the interim interest must be granted at the agreed rate. What we are merely pointing out is that certainly the conduct of the parties must be taken into consideration. There may be various reasons which may be considered by the trial judge to justify a lower rate of interest. Reference may be made in this connection to the following cases also. K. Appa Rao v. V.L. Varadaraj AIR 1981 Mad 94, United Bank of India v. P. R. Garments Industries Pvt. Ltd. [1986] 62 Comp Cas 669 (Guj) and Jagannath Pigments and Chemicals v. Bank of Baroda [1989] 65 Comp Cas 393 (Bom).

63. This question assumes special importance where the plaintiff is a bank. It is a question of realisation of money advanced by a bank which is a public institution ; it is a question of public money ; it is a question of a bank carrying on the business of accepting deposits and lending money. It is the business of the bank to lend money on payment of interest. The rate of interest charged by a banking company depends on directions by the Reserve Bank of India. In this context, it may be pointed out that every banking company shall be bound to comply with any direction given to it under Section 21 of the Banking Regulation Act, 1949, as to, inter alia, the rate of interest and other terms and conditions on which advances or other financial accommodation may be made or guarantees may be given. In this context, reference may be made to a Division Bench judgment of this court in Bank of Rajasthan Ltd. v. S.K. Trading Co. [1990] 1 Cal LT 139, 148 (para 29) (to which I was a party) which is set out hereinbelow (at page 148) :

'We should remember that this is a banking institution. It is the business of the bank to lend money on payment of interest. The rate of interest has got a connection with the rate of interest provided by the Reserve Bank of India as we have already mentioned. It is the business of the bank to lend money and it is lent and advanced on certain terms and conditions.'

64. The next question is whether the court has to give reasons for granting interim interest at a particular rate. We are of the opinion that, when the court grants interest at the agreed rate or when no specific prayer is made for grant of such interest at the agreed or at any particular rate or when the grant of such interest at a rate lower than the agreed rate is not objected to, it is not necessary for the court to give reasons. However, when a specific claim is made for such interest at the agreed rate or at a particular rate which is rejected by the court or if the court allows interest at a rate lower than the agreed rate, then and in that case, in our opinion, the court should give reasons. Otherwise, such award of interest at a lower rate may be challenged as arbitrary. As already said, while considering the question of grant of such interest, it is the duty of the court to take relevant factors into consideration as may be placed before the court by the parties particularly when such interest is sought to be awarded at a lower rate. This would include the conduct of the parties, both the plaintiff and the defendant, both before and after the suit, the nature of the securities, etc. Accordingly, when such a discretion is exercised by granting interest at a lower rate, it should not be arbitrary but must be a judicial rate. Unless reasons are given, it is difficult to ascertain whether the trial court was justified in granting interest at a lower rate and whether the discretion has been exercised judicially or arbitrarily. It is now well-settled that, in respect of orders which are subject to appeal or revision, reasons must be given. If the court grants interest at a rate other than the contractual rate, and if that discretion has been exercised judicially, there is no difficulty in the court giving its reasons. The court's power to grant interest at a lower rate is not in question. The question is whether the court has acted arbitrarily or judicially in the matter of granting a lower rate of interest. We make it clear that, if the parties do not raise any objection to the grant of a lesser rate, the question of giving any reason does not arise. But if the prayer is made for an agreed rate of interest or if the grant of a lesser rate of interest is opposed, the reasons for granting interest at a lesser rate must be given so that when the same is challenged, the higher court can consider as to whether discretion has been exercised properly or not.

65. There is another aspect of the matter. It is now well-settled that the appeal court should not normally interfere with the discretion exercised by the trial court merely because it may be of the opinion that, had the matter come up before it at the first instance, it would have exercised its discretion in a different manner. The appeal court can interfere with the discretion exercised by the trial court only if the trial court has committed an error either in fact or in law. Reference may be made in this connection to Printers Mysore (P.) Ltd. v. Pothan Joseph, : [1960]3SCR713 ; Bimal Singh Kothari v. Muir Mills Co. Ltd. : AIR1952Cal645 and Hriday Kanta Koyal v. Jogesh Chandra Mandal, : AIR1959Cal150 . If a claim for an agreed rate of interest is rejected in the exercise of judicial discretion, then, until and unless reasons are given, it is not possible for the appeal court to consider whether such discretion has been exercised erroneously either in law or in fact. Therefore, it is fit and proper that when the claim for interim interest at the agreed rate is rejected and a lower rate is granted, the trial court should give its reasons.

66. It is true that, in the case of State Bonk of India v. B. Gupta (Tea) Pvt. Ltd., : AIR1987Cal64 , the court has rejected the contention made on behalf of the bank that the learned trial judge, in awarding or refusing interest at the contractual rate, should give reasons. It is to be pointed out that the court, while considering this question, referred to Section 34(2) which relates to 'further interest', that is, interest on judgment and not interim interest. We do not see why, merely because of Section 34(2), on a 'parity of reasoning', where the interest is allowed at a particular rate, no reasons are to be recorded. Further, it may be pointed out that in this context, the court observed that the question is whether, in awarding interest pendente lite and future interest, the court has exercised its discretion on sound principles or not. In our opinion, unless reasons are given, it cannot be ascertained whether the discretion has been exercised by the learned judge on sound principles or not. The court further held that whether the discretion has been judicially or properly exercised will have to be determined in the context of the facts of the particular case. Unless reasons are given, whether it has determined in the context of the facts of the case cannot be ascertained. In our opinion, this decision has not taken into consideration various Supreme Court decisions regarding giving reasons.

67. We are of the opinion that the observation of the Madras High Court in K. Appa Rao v. V.L Varadaraj AIR 1981 Mad 94, was correct when it held that such interest should generally be granted at the agreed rate unless there are circumstances which would disentitle the plaintiff to have the same. The burden is on the debtor to show such circumstances. The decision in S. K. Engineering Works, Batala v. New Bank of India, , also supports our view. In the case of Central Bank of India v. P. R. Garments Industries P. Ltd., : AIR1986Guj113 , the court held that the reasons given by the trial court for not awarding the contractual rate of interest were erroneous and without any basis. The decision in Jagannath Pigments and Chemicals v. Bank of Baroda [1989] 65 Comp Cas 393 (Bom) supports the view that there must be some reason why such interest is not to be granted at the agreed rate.

68. However, with reference to the observation of the court in the last case mentioned above, so far as quarterly or other 'rest' is concerned, we may refer to a Division Bench decision of our High Court in the case of Bank of Rajasthan v. S. K. Trading Co. [1990] 1 Cal LT 139 (to which I was a party). In that case, the question involved was what is the 'principal amount' within the meaning of Section 34 of the Civil Procedure Code. In this connection, the Division Bench observed as follows (at page 144) :

'There cannot be any doubt that the interest under Section 34 after amendment can be granted on the principal sum only, but what is the principal sum depends on the facts and circumstances of each case. It may be that, in the case of an ordinary loan which provides for interest, the principal amount would be the amount lent and there cannot be an interest on interest in the sense that the amount claimed as interest up to the date of the suit can be decreed, but while granting interest under Section 34, no further interest on such interest can be granted. This is generally the law after the amendment of Section 34. There cannot be any dispute. So far as that principle is concerned, the whole question is what is a principal amount in the facts and circumstances of this case. We have referred to the clauses mentioned above. These clauses make It clear that the interest which would accrue on the outstanding amount for the quarter concerned becomes a part of the principal. 'Quarterly rests' means that this is being capitalised. 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 recognised in the case of IRC v. H.C. Holder [1931] 2 KB 81, at page 94, where it has been held by the Court of Appeal that this recognised the system of bankers in turning interest into capital as usual and binding on the parties who had acquiesced in it. It was further pointed out therein that the plan of capitalizing interest at the end of each half year was adopted by bankers in order to enable them in effect to secure what is usually termed compound interest which could not have otherwise been claimed on the basis of the usury laws which were subsequently repealed. It was further pointed out that there seems no reason to ascribe a different effect in law to a system under which, before the Act repealing the usury laws was passed, unpaid interest was turned into capital even though the reason or necessity for it has passed away or changed. It was pointed out that the terms of the contract remain, whether express or implied. The case before the Court of Appeal was in the form of a case stated under the Finance Act, 1925, on the point as to whether such interest which is added to the principal sum can be treated as a claim made for repayment of income-tax upon sums paid to banks in respect of interest out of taxed profits without deduction of tax. It was pointed out that the system adopted was that, at each half-year, the charges for interest were added to the capital sum advanced and the total sum carried forward into the next half year as one undivided advance. It was pointed out that the interest was thus capitalized and became an integral part of the advance to the company.'

69. Again at page 147 :

'Accordingly, we are of the opinion that, in view of such clauses in the agreement between the parties which provide for quarterly rests, the interest calculated by the bank was merged with the principal and, for the purpose of Section 34 of the said Act, the principal sum would be Rs. 11,88,706.91 for which the decree was claimed and for which the decree was passed.'

Interest on judgment :

70. So far as the interest on judgment is concerned, we shall first consider the various decisions on this point. We have already considered the decisions relating to the interim interest. Most of the decisions relating to the interim interest also deal with and cover the question of interest on judgment also. We shall shortly indicate the same. We have already considered the Privy Council and the Supreme Court decisions. Reference may be made in this connection to Lala Hakim Rai v. Lala Ganga Ram AIR 1942 PC 61 and Thawardas Pherumal v. Union of India AIR 1955 SC 469. So far as the Calcutta High Court decisions are concerned, in the Full Bench decision in the case of Mangniram Marwari v. Dhowtal Roy [1886] ILR 12 Cal 569, it was held that interest after date of the suit is in the discretion of the court notwithstanding that a fixed rate of interest is mentioned as payable 'up to realisation' in the bond sued upon. Obviously, this applies in respect of interest on judgment also. Reference may also be made in this connection to Shivaprasad Singh v. Prayagkumari Debee : AIR1935Cal39 . In the case of State Bank of India v. B. Gupta (Tea) Pvt. Ltd., : AIR1987Cal64 , it was observed by the Division Bench as follows (at page 68) :

'The rate of interest from the date of the decree to the date of the payment is also in the discretion of the court. The court can award interest on the principal sum adjudged at a rate not exceeding 6 per cent. per annum except in the case of commercial transactions where interest may exceed 6 per cent. but shall not exceed the contract rate of interest. The question is whether, in awarding interest pendente lite and future interest, the court has exercised discretion on sound principles or not. The contention of Dr. Banerjee is that the learned judge in awarding or refusing the interest at the contractual rate should give reasons. We are, however, not impressed by the submissions of Dr. Banerjee. Section 34(2) of the Civil Procedure Code provides that where the decree is silent with respect to the payment of further interest 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. If, for the purpose of refusing any interest, no reasons are required to be given, on a parity of reasoning, where the interest is allowed at a particular rate, no reasons are to be recorded. Whether discretion has been judicially or properly exercised will have to be determined in the context of the facts of the particular case. It cannot be said that, if the interest at the agreed rate is not allowed, it would mean that the court did not exercise the discretion properly. In most of the decisions cited before us, no reasons are found to have been recorded while awarding interest at a particular rate.'

71. Reference may be made in this connection to United Bank of India v. New Glencoe Tea Co. Ltd., : AIR1987Cal143 , United Bank of India v. Hind Hosiery Mill (P.) Ltd. [1988] 1 Cal LJ 69, United Sank of India v. Rashyan Udyog [1989] 1 Cal LT 367 ; [1992] 73 Comp Cas 482, already discussed.

72. So far as the decisions of other High Courts are concerned, we have already referred to Thakur Umed Singh v. Amolakchand, and Jagannath Pigments and Chemicals v. Bank of Baroda [1989] 65 Comp Cas 393 (Bom) which we have discussed in detail hereinabove. In the case of Central Bank of India v. P.R. Garments Industries Pvt. Ltd., : AIR1986Guj113 , reference was made to the proviso to Section 34 of the Code of Civil Procedure. The appeal court observed that it was a commercial transaction and, ordinarily, the rate of interest should be at contractual rate or the rate at which moneys are lent by the nationalised banks in relation to commercial transactions ; otherwise, it will amount to the court granting credit facility on somebody else's money, at a lower rate of interest. It was observed that the bank would not have advanced a commercial loan at a lower rate of interest. It was further observed that because the party had committed default in payment and the bank is required to file a suit against such party, such a defaulting party cannot have the benefit of a lower rate of interest. Accordingly, the court held that, ordinarily, in such transactions, the contractual rate of interest should be the rule and departure a rare exception. In this context, the court further observed that, in such transactions by public financial institutions where money is advanced on security including personal guarantees, the granting of instalments was ruled out because that would frustrate the very purpose of taking security and granting of a lower rate of interest is also ordinarily ruled out.

73. In the case of S. K. Engineering Works v. New Bank of India, , it was contended by the bank in the appeal that the bank was entitled to future interest at the contractual rate agreed between the parties. It was submitted that the future interest at the rate of 12.5 per cent. per annum had been allowed by it arbitrarily. This contention made on behalf of the plaintiff bank was accepted. Referring to the decision of the Gujarat High Court in the case of P. R. Garments Industries Pvt. Ltd. : AIR1986Guj113 and Shree Bharat Laxmi Wool Store's case [1982] 84 Punj LR 472, the court held that the bank was entitled to the contractual rate of interest in view of the proviso to Section 34.

74. In our opinion, the question of interest on judgment stands on the same footing as that regarding interim interest. We have given our reasons already in respect of interim interest and the principles regarding the same should apply equally to interest on judgment also except to the extent indicated below.

75. However, there is one difference regarding the interest on judgment which is contained in Section 34 itself. The main provision of Section 34(1) provides that such 'further interest', i.e., the interest on judgment may be ordered '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. There is a proviso to the said sub-section which provides that where the liability in relation to the sum adjudged had arisen out of a commercial transaction, the rate of such further interest may exceed 6 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. In Explanation I 'nationalised bank' has been defined. In Explanation II, it has been clarified that, for the purpose 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. It is quite clear from the above that so far as interest on judgment is concerned, ordinarily, it should not exceed 6 per cent. per annum. Ordinarily, this should be the maximum rate. However, this maximum rate of 6 per cent. per annum is not applicable in the case of commercial transactions within the meaning of Explanation II. In such a case, it may exceed 6 per cent. per annum but must not exceed the contractual rate. Where there is no contractual rate, it must not exceed the rate at which moneys are lent and advanced by nationalised banks in relation to commercial transactions. In view of the proviso, this is the maximum rate in respect of a commercial transaction. This is an indication that, in the case of a commercial transaction, the agreed rate, and where there is no agreed rate, the rate charged by nationalised banks is to be taken into consideration. A fortiori, when it is a suit filed by a nationalised bank wherein the liability of the defendant-arises out of a commercial transaction, the agreed rate is an important factor and it cannot be ignored. Further, in view of the above, in our opinion, such further interest should, ordinarily, be granted at such agreed rate unless there are reasons for not granting such interest at such rate. When there are cogent reasons for not allowing such interest at such rate, the court may grant such interest at a lower rate but it must record its reasons. We have also dealt with this matter in connection with the question of interim interest and it is not necessary to repeat the same.

Instalments :

76. The last question involved is the question of instalment. We shall first consider the decisions relied upon before us on this point. No decision of the Supreme Court on this point has been placed before us. We shall first deal with some Calcutta decisions on this point.

77. In the case of Bidhu Sekhar Bandhopadhya v. Sudhury Mahatabuddin [1911] 15 CWN 1083, a Division Bench of this court was considering an appeal from an order of the District Judge confirming an order of the munsif. In that case, the appellant applied under Order 34, Rule 6, for a personal decree against the respondent for the balance of a mortgage debt which remained undischarged after the mortgaged properties had been sold in pursuance of a decree for sale obtained on the mortgage. The respondents prayed for an order under Order 20, Rule 11, allowing them to pay the amount by instalments. The munsif having acceded to this prayer, the decree-holder appealed to the District Judge who dismissed the appeal. The decree-holder preferred a second appeal to the High Court. It was urged in the appeal that Order 20, Rule 11, which provides for payment in instalments was not applicable to cases of decrees in mortgage suits and that, in the circumstances of this case, the order for payment in instalments postponing the satisfaction of the decree for about seven years was bad as one not passed in the exercise of proper judicial discretion. The court observed that, in the case involved, there can be no question that the decree passed against the judgment debtor was a personal decree. It was also a decree for payment of money. After referring to Order 20, Rule 11, the court observed that the rule does not say 'where and in so far as the decree is passed in a suit for the recovery of money' ; nor does the contract under which the amount decreed was payable exclude an original mortgage contract. It was held that, in the circumstances of Order 34, Rule 6, the decree was no longer directed against the mortgaged property ; but, by virtue of the contract, it binds the judgment-debtors personally. In this context, it was observed as follows :

'The decree has been passed under Order 34, Rule 6, in accordance with the judgment and the general provisions relating to judgment and decree embodied in Order 20 undoubtedly cover the decree based on an antecedent judgment, which is allowable under Order 34, Rule 6.'

'Furthermore, the decree now passed must be executed under the general provisions of the Code and we cannot regard Order 34 as self-contained. We cannot say that because there are no provisions for payment by instalments in Order 34, the general provisions of Order 20, Rule 11, do not apply. Viewing the decree, as it appears, to be a decree for the payment of a definite sum of money, we think that it was open to the lower appellate court to pass the order it has passed in favour of the judgment-debtor.'

78. In the case of Jagadish Chandra Chakravarti v. Brojendm Mohan Maitro AIR 1949 Cal 427, a Division Bench of this court granted instalments for payment of the decretal amount. The plaintiff withdrew two instalments and, subsequently, preferred an appeal challenging the order. It was held that acceptance of the instalments would be no legal bar to the plaintiff's preferring an appeal on its merits. It was further held that where instalments are prayed for by the debtors, the court should see that the facts relating to means and circumstances of the debtor as also of the creditor are brought in before the court. If a debtor simply says that he would not be able to pay money if a certain number of instalments is not granted to him, that is not sufficient. Strictly speaking, it would be his own opinion and would not be admissible in evidence.

79. The Division Bench judgment of this court in the case of United Bank of India v. New Glencoe Tea Co. Ltd. : AIR1987Cal143 , has been discussed by us in detail while considering the question of interim interest. Regarding instalments, the Division Bench agreed with the appellant bank that, under the Indian law, there could be a valid mortgage of movables though such a mortgage might be different from such mortgage at English common law or under the Bills of Sale Act. The learned judge observed that still the question remains as to whether a suit for enforcement of such a mortgage shall be governed by a procedure similar to the one prescribed by Order 34 of the Code,It was contended by the learned advocate appearing for the appellant-bank that it should be so governed. However, the court pointed out thatjudicial opinion is not uniform. In this context, reference was made toan observation of the Division Bench of this court in the case of Cooperative Hindusthan Bank Ltd. v. Surendra Nath Dey AIR 1952 Cal 524,to the following effect (at page 533) :

'The mortgage no doubt was in respect of movables but the rules of Order 34 of the Code are based on well settled rules of equity which, in the absence of any statutory provision to the contrary, should be applied in suits on mortgages of movables as well.'

80. The Division Bench observed that this observation supports the stand taken by Mr. Bose but that this observation had not been approved but distinguished by other High Courts, vide New Citizen Bank of India Ltd. v. K.B. Burnel and Co., . It was pointed out that in the case of Official Assignee of Bombay v. Chimniram Motilal : AIR1933Bom51 , a Division Bench of the Bombay High Court, on 'more persuasive reasons', had held that Order 34 of the Code is applicable to suits on mortgages in respect of immovable properties only and not to suits on mortgages in respect of movables. On consideration of the legal position, the Division Bench observed that they would prefer to follow the Bombay decision as above to the observations of this court.

81. The Division Bench then observed that though the court did not accept the contention of Mr. Bose that the principles underlying Order 34 of the Code would govern the suit out of which the said appeal arose, yet the Bench was left to consider two important issues, i.e., (1) whether, in such a suit, there could be an order for payment in instalments, and (2) whether and how far the court in decreeing the interim interest or interest on judgment could reduce it from the contractual rate. It was held by the learned judge that Order 20, Rule 11 of the Code has its application to simple money decrees and not to decrees for sale of property for realisation of money due. It was observed that the provision, on its own terms, can have no application to a mortgage suit, be it a suit on a mortgage in respect of movables. It was also held that a suit for enforcement of such a mortgage will still be a mortgage suit resulting in a mortgage decree though not in terms of Order 34. Such a suit will not result in a simple money decree but in a decree for sale. In this context, it was also observed as follows :

'In the present case, the suit was one for enforcement of a mortgage in respect of movables and if the plaintiff establishes his claim as found by the learned trial judge, the plaintiff is entitled to a decree for sale. The court could not apply Order 20, Rule 11 of the Code to such suit and pass a decree for payment in instalments and then defer the decree for sale only until there arises three consecutive defaults in payment of instalments. Mr. Mookherjee incidentally argued that such instalments could be granted at least in exercise of inherent jurisdiction. There can be no jurisdiction inherent when the jurisdiction has been expressly granted but subject to certain limits and, in any event, exercise of any such jurisdiction to grant instalments in a mortgage decree would be wholly inconsistent with the scheme. Hence, we must uphold the contention of Mr. Bose that the learned trial judge went wrong in granting instalments for paying the decretal amount.'

82. In the case of United Bank of India v. Hind Hosiery Mill P. Ltd. [1988] 1 Cal LJ 69, one of the questions involved was grant of instalments. It was contended that no instalment could be granted in view of the judgment in the case of United Bank of India v. New Glencoe Tea Co. Ltd. : AIR1987Cal143 . On behalf of the defendant, it was contended that instalments could be granted. In this connection, reliance was placed on Bidhu Sekhar Bandhopadhya v. Sudhury Mahatabuddin [1911] 15 CWN 1083 and it was contended, inter alia, that the said decision was not considered in United Bank of India v. New Glencoe Tea Co. Ltd. : AIR1987Cal143 . The learned judge referred to the Division Bench judgment of Bidhu Sekhar Bandhopadhya [1911] 15 CWN 1083 and, in this context, it was observed as follows :

'This decision was not referred to in New Glencoe Tea Co, Ltd. : AIR1987Cal143 '.

'The Division Bench in Bidhu Sekhar Bandhopadhya [1911] 15 CWN 1083 considered the scope of Order 20, Rule 11, in a mortgage suit. In my view, the earlier Bench decision in the case of Bidhu Sekhar Bandhopadhya [1911] 15 CWN 1083 is directly on the point and, having regard to the conflicting opinions, I am inclined to follow the earlier Bench decision. It has to be emphasised that Order 34 deals with suits relating to mortgages of immovable property. Under Order 34, Rule 4, in a suit for sale, the court shall pass a preliminary decree to the effect mentioned, inter alia, in Rule 2(1)(c) of Order 34. No discretion has been left to court in fixing the time for payment under the preliminary decree it is consented to by the decree-holder. The final decree only directs sale in view of the default committed by the judgment-debtor. In a mortgage decree, it is the usual practice not to grant a personal decree until sale has been carried out and the deficiency ascertained. The suit as framed by the bank is for a personal money decree against the hypothecated movable assets. The defendant against whom a money decree is passed can always ask for instalments for payment of the decretal dues. If such instalments are granted by the court then, so long as such instalments are being paid, the question of sale of the hypothecated movable assets would not arise. Otherwise, the grant of instalments would be rendered completely nugatory. On the one hand, the decree-holder obtains a personal decree and, on the other, a decree for sale. These two decrees cannot be executed simultaneously. If it is like a mortgage suit, then a preliminary decree has to be passed and thereafter a decree for sale and if, after the sale, the dues of the bank are not realised, then the bank has to ask for a personal decree. At that time the court will have the jurisdiction to grant instalments under Order 20, Rule 11, to the judgment-debtors. Assuming that in a case where hypothecated assets are non-existent or not available or that the judgment debtor has no title at all in the assets to be sold in that event, the bank has to obtain a personal decree only and there the court could grant the instalments under Order 20, Rule 11. It is, therefore, evident that the decree passed in a bank's suit where movable assets are involved is a decree for payment of a definite sum of money irrespective of the fact whether a declaration of charge or prayer for sale has been made. The ratio of the decision in the case of Bidhu Sekhar Bandhopadhya [1911] 15 CWN 1083 shall apply to the facts of this case. A decree passed may include a decree for money as also a decree for other relief. Order 20, Rule 11, empowers the court to grant relief to the judgment-debtor either by. postponement of payment of decretal dues to a certain period or by granting instalments. This provision should be liberally construed and should not be confined to a decree for money simpliciter. Order 20, Rule 11, opens with the phrase 'in so far as'. It means 'to the extent'. If a narrow view is taken and Order 20, Rule 11, is held to be applicable only to money decrees simpliciter and not to any composite decree as in the case of a bank's suit, in that event, the words 'in so far as' and 'notwithstanding anything contained in the contract under which money is payable' would be nugatory. The legislative intent is quite clear. Where several reliefs have been granted to the decree-holder in so far as the relief is decreed for money, the court will be entitled to give relief to the judgment-debtor by either postponing the payment or granting instalments. In other words, to the extent the decree is for money, the court passing the decree will be at liberty to grant instalments for payment of the amount decreed. I am, therefore, unable to accept the contention of Mr. Chatterjee that the court has no jurisdiction to grant instalment in the suit.'

'Assuming that the court has no power to grant instalments to the judgment-debtor to pay off the decretal dues, but in view of the decision in New Glencoe Tea Co., : AIR1987Cal143 , the court can postpone the payment of the amount decreed for a specified period. In that case, the appeal court, inter alia, directed as follows :

The joint receivers will not interfere with the administration of the tea estate but they would effect sale of all the products and collect all the book debts arid other dues and out of the sale proceeds and collection keeping apart such sum as would be necessary to meet the wages and salaries of employees and other day-to-day expenditure, the rest would be paid to the bank in pro tanto satisfaction of the decretal amount. If the entire decretal amount be not liquidated and or otherwise paid by defendant No. 1 within three years all the hypothecated movables would be sold and the sale proceeds be paid to the plaintiff in proportionate satisfaction of the decretal dues.' 'It, therefore, appears that although the appeal court did not grant monthly instalments to the judgment-debtor, it in fact allowed time of three years to the defendant to pay off the decretal dues and the joint receivers were 'directed to pay the surplus to the bank in pro tanto satisfaction of the decretal amount. Thus, even in such a suit, a time limit may be fixed to enable the defendant to liquidate the decretal dues either at a time or by such instalments as the defendant may choose to avail of. It is a matter of procedure, the substance remaining the same. The court passing a decree has the power to stay the execution of a decree or part thereof for a specified period. In a suit like this where a composite decree for payment of money and decree for sale of the hypothecated assets are made, the court passing the decree can stay execution of the decree for sale for a specified period allowing the judgment-debtors to pay off the amount decreed in the meantime. It is immaterial whether the defendants are directed or are given liberty to liquidate the dues within the specified period by monthly instalments or otherwise. I am, therefore, of the view that the defendants in this case may be allowed time to liquidate the amounts decreed by fixed monthly amounts irrespective of profit or loss of the business and so long such payments will be made, the decree for sale would remain stayed. In default of payment, however, the decree for sale would become executable forthwith. The judgment-debtor, therefore, cannot get the benefit of stay of execution of the decree for sale unless the judgment-debtors go on paying the fixed monthly instalments. On the other hand, so long as the judgment-debtors go on paying the instalments, the decree-holder can realise a part of the decretal amount.'

83. In this connection, we may refer to the decision of a single judge of this court in Dena Bank v. Victory Engineering Works [1984] 2 Cal HCN 271, where the question involved was where, in a suit, the plaintiff claims reliefs other than recovery of debt or liquidated demand in money or other claims as stated in Rule 1 of Chapter XIIIA of the Original Side Rules of this court, whether an application under that rule was maintainable. In all these suits, the plaintiff had claimed reliefs other than recovery of debt or liquidated demand in money and had also made an application for summary judgment under Chapter XIIIA for recovery of debt and interest. It may be pointed out that, in all these cases, the plaintiff-bank prayed for a personal decree, interim interest, interest on judgment followed by prayers for declaration of charge in respect of movable properties and, for sale of the same. Chapter XIIIA, Rule 1, provides as follows :

'1. The provisions of this Chapter shall not be applicable save to suits ;

(A) in which the plaintiff seeks to recover a debt or liquidated demand in money payable by the defendant with or without interest arising-

(i) on a contract express or implied ; or

(ii) on an enactment where the sum sought to be recovered is a fixed sum of money or in the nature of a debt other than a penalty ;

(iii) on a guarantee where the claim against the principal is in respect of a debt or a liquidated demand only ;

(iv) on a trust ; or

(B) for the recovery of immovable property with or without a claim for rent or mesne profits by a landlord against a tenant whose term has expired or has been duly determined by notice to quit or has become liable to forfeiture for non-payment of rent or against persons claiming under such tenant.'

84. The learned judge held as follows :

'As stated earlier, Rule 1 restricts the nature of the suits as also claims where an application for final judgment can be made. Rule 1, in my view, ex facie does not contain any bar for joining claims other than those mentioned therein. It limits the claim in respect whereof an application under Chapter XIIIA can be made. It, however, does not say that claims other than those mentioned in the rule cannot be joined in the suit. For determination of this question, a reference may usefully be made to other rules of Chapter XIIIA and the effect of Rule 1 read and construed in the light and context of other rules may be examined. When other causes of action or claims not coming under Rule 1 of Chapter XIIIA are added in the suit of the nature mentioned in Rule 1, does it change the nature of the suit In my opinion, regarding the claims mentioned in Rules 1(A) and 1(B), the nature of the suit remains the same and so far as other claims are concerned, only another nature of the suit is added to it. The suit retains its existing nature but due to addition of other claims, another nature of the suit is added. The existing nature of the suit remains but with it are added cause of action or claims of different nature depending on the nature of added claims.'

'If Rule 1 is construed in the context of other rules of Chapter XIIIA and in particular Rule 3, it appears that an application for final judgment can be made in respect of claims mentioned in Rules 1(A) and 1(B) but it does not say that such suit shall contain only claims mentioned in Rules 1(A) and 1(B). This is quite clear from the language of Rule 3.'

'Reading Rule 1 in the context of other rules in Chapter XIIIA and in particular Rule 3, it appears to me that an application for a final judgment can be made in the suit of the nature mentioned in Rule 1 and in respect of the claims as mentioned in Rules 1(A) and 1(B) of Chapter XIIIA. Such suit may include other claims or causes of action but that will not debar the plaintiff from adopting summary procedure if the conditions laid down in Rule 1 are satisfied.'

'Applications for final judgment under Chapter XIIIA have been made in the above suits wherein the plaintiffs' claims in the plaint are recovery of debt and interest on the basis of agreement. These claims, in my view, come under Rule 1. The plaintiffs have also claimed a declaration of charge in respect of movable properties hypothecated or pledged by the defendant as security and for sale thereof and payment of sale proceeds to the plaintiff in pro tanto satisfaction of their respective claims. These claims, however, do not come within Rule 1 of Chapter XIIIA'

'For all the reasons mentioned hereinbefore, the applications for final judgment in respect of money due on account of debt and interest are maintainable.'

85. In the case of United Bank of India v. Eshani Rubber Industries (1990] 1 Cal LJ 8 ; [1990] 1 BC 485, a Division Bench of this court held as follows (p. 490) :

'After considering the respective contentions of learned counsel appearing for the parties, it appears to us that, with regard to the decree for sale of mortgage of immovable properties, the provisions of Order 34 are applicable and there is no question of grant of instalments and Mr. Roy is justified in his contention that, in such a case, the outer limit for payment of the decretal dues under mortgage of movable properties is six months. In our view, Mr. Roy is also correct in his contention that for mortgage of movable properties although the provisions of Order 34 in terms do not apply, a suit for recovery of the dues under the mortgage of movable properties is also not a simple suit for a money decree and the principle underlying Order 34 is applicable in such a suit. In the aforesaid circumstances, we are inclined to uphold the contention of the appellant-bank that the learned trial judge was not justified in granting instalments for payment of the decretal amount both under the mortgage of movable and mortgage of immovable properties.'

86. We shall now consider the decision of other High Courts. The case of Jagannath Pigments and Chemicals v. Bank of Baroda [1989] 65 Comp Cas 393, which was cited before us, was a judgment of the Bombay High Court where the Bombay High Court says that so far as the direction for payment by instalments is concerned, the court was of the opinion that it was on the lower side. However, it was pointed out that the bank had not preferred an appeal in respect of grant of instalments. No questions regarding principle and policy for grant of instalments have been considered in this case and, accordingly, this judgment is of no assistance to us in this context.

87. Central Bank of India v. P. R. Garments Industries Pvt. Ltd., : AIR1986Guj113 , has been noted by us hereinabove. In that case, inter alia, quarterly instalments of Rs. 5,000 was allowed against which an appeal was preferred. The Division Bench observed that it is curiously inexplicable as to why, in the circumstances of the case, the secured loan of the bank had been put to jeopardy for an incredibly long period. After pointing out that it would require 45 years to pay up the dues of the bank if paid in the manner directed by the trial court, it was observed that the learned judge did not seem to have given any serious thought whatsoever to this aspect of the matter while granting a decree for instalments. It was further pointed out that the learned trial judge had also not considered that commercial loans by banks and public financial institutions are given on securities of immovable property or movable property or personal guarantees of other solvent persons. It was pointed out that, apart from the hypothecation of goods, defendants Nos. 2 and 3 had given personal guarantees. It was observed that, while giving such guarantees, they must have professed to be solvent to that extent and induced the bank to accept the personal guarantees and it was impossible to believe that they were in insolvent circumstances. It was pointed out that if instalments were to be granted in such secured commercial transactions with public financial institutions, the whole purpose of securing the advance would be lost. It was pointed out that these securities are taken only with, a view to see that dues can be recovered from all the securities taken. Even when the principal debtor may not be in a position to pay, the liability of such persons as such sureties and guarantors was joint, several and co-extensive and, in such circumstances, the decree for instalments and relief by way of instalments cannot be justified. Accordingly, it was held that that the direction was clearly illegal, unjust and without any valid reason and was required to be quashed and set aside. It was further pointed out that, in such transactions by public financial institutions where money is advanced on security including personal guarantees, the grant of instalments is ruled out because that would frustrate the very purpose of taking security and granting of a lower rate of interest is also ordinarily ruled out.'

88. In our opinion, the court has got the power to grant instalments when a personal decree or a decree for payment of money is passed. Such instalments can be granted even if apart from the prayer for a money decree, there is also a prayer for a declaration of charge in respect of certain movable properties with a prayer for sale of the same. In our opinion, Order 20, Rule 11, applies in that case also. We, respectfully, follow the Division Bench judgment in Bidhu Sekhar Bandkopadhya v. Sudhury Mahatabuddin [1911] 15 CWN 1083 wherein it was held that Order 20, Rule 11, does not say 'where and in so far as the decree is passed in a suit for the recovery of money'. It was also categorically stated therein that it cannot be said that because there are no provisions for payment in instalments in Order 34, the general provisions of Order 20, Rule 11, will not apply.

89. Moreover, as in the decision in Dena Bank v. Victory Iron Works [1984] 2 Cal HCN 271, it cannot be said that Order 20, Rule 11, is not limited to a case where only a personal decree is prayed for. It would apply also to a case where, apart from praying for a personal decree, relief is sought against movables in respect of which a charge was created.

90. It is to be pointed out that in United Bank of India v. New Glencoe Tea Co. Ltd. : AIR1987Cal143 and United Bank of India v. Eshani Rubber Industries [1990] 1 Cal LJ 8 the decision in the earlier Division Bench judgment in Bidhu Sekhar Bandhopadhya v. Sudhury Mahatabuddin [1911] 15 CWN 1083 was not considered. In our opinion, the views expressed in the case of United Bank of India v. Hind Hosiery Mill P. Ltd. [1988] 1 Cal LJ 69 are correct. .

90. However, regarding instalments also, it is a matter of discretion of the court to be judicially exercised upon consideration of all the attending facts and circumstances of a given case. We have considered the principles regarding the exercise of such discretion in the case of interim interest and the same will apply mutatis mutandis in respect of grant of instalments also including the question of giving reasons though here the question of agreed rate does not arise. As pointed out in the case of Jagadish Chandra Chakravarti v. Brojendra Mohan Maitra AIR 1949 Cal 427, where instalments are prayed for by the debtors, the court should see that the facts relating to the means and circumstances of the debtors as also the creditors are brought before the court. If the debtor simply says that he would not be able to pay money, if a certain number of instalments are not granted to him, that is not sufficient. As pointed out, strictly speaking, it would be his own opinion and it would not be admissible in evidence. In this context, we may point out that such order for instalments, may be passed 'for any sufficient reason' as laid down by Order 20, Rule 11 of the Civil Procedure Code. Accordingly, this is also a matter of discretion to be exercised judicially in the facts and circumstances of a particular case and not as a matter of course. There must be some reason and it must be 'sufficient reason'. Further, unless reasons are given, whether it is for sufficient reason cannot be ascertained. Accordingly, the court should give reasons for grant of instalments. We are also in full agreement with the observations made by the Division Bench of the Gujarat High Court in the case of Central Bank of India v. P. R. Garments Industries Pvt. Ltd., : AIR1986Guj113 on this point as referred to above and we follow the same.

91. This disposes of the consideration of the general principles involved regarding the aforesaid questions. Without any intention of summarising the same, we may indicate some of the salient features of our consideration.

92. Interest prior to the institution of the suit.

93. If there is any agreement to that effect, such interest is to be governed by such agreement. Where there is no such agreement, it is to be governed according to the statutory provision, if any, governing the same. Both the Interest Acts of 1839 and 1978 provide for the award of interest in cases referred to therein, up to the date of the institution of the proceedings. The Interest Act, 1978, applies in respect of proceedings commenced after the Act came into force, whereas the Interest Act, 1839, applies for the period prior thereto. If there is any agreed rate of interest, that is a part of the claim of the plaintiff. The plaintiff is entitled to the same under the substantive law. The question of exercise of any discretion by the court cannot and does not arise in such a case. The court has no power to deviate from the agreement by totally disallowing interest or allowing interest at a lower rate or at a rate other than the agreed rate. So far as banking companies are concerned, in view of Section 21A of the Banking Regulation Act, 1949, a fortiori, its claim to interest at the agreed rate for the period prior to the suit cannot be ignored and the court is bound to grant interest at that rate. The court has no discretion in the matter.

Interim interest :

(a) The provisions of the 1855 Act would not apply in respect of interim interest.

(b) Section 34 of the Civil Procedure Code would apply. In the present appeal, we are not dealing with mortgage suits. In the case of a mortgage suit, Order 34 of the Code would apply and not Section 34.

(c) It is entirely a matter of discretion of the court. Such discretion is not and cannot be limited to the question of rate or amount of interest only ; but it applies also to the question as to whether any interest is at all to be granted.

(d) Such discretion is to be exercised judicially upon consideration of the facts and circumstances of each case. This would include the conduct of the parties both before and after the suit. The discretion must be exercised on sound principles. It must be reasonable and fair. No universal rule can be laid down governing all cases. The factors taken into consideration in various cases are merely illustrative.

(e) The claimant is not entitled to such interest at such agreed rate as a matter of right and the court is not bound to grant such interest at such rate, even if it is mentioned in the agreement that interest is to be paid at the agreed rate till realisation. It still remains a matter of discretion of the court. However, the court is not entitled to ignore the same totally. Not only the court entitled to take into consideration the agreement of the parties in this respect, but it must take the same into consideration. The court should generally adhere to the interest at the contract rate unless it is not considered to be equitable to do so.

This question assumes special importance where the claimant is a bank which is bound to comply with any, direction given to it by the Reserve Bank of India under Section 21 of the Banking Regulation Act, 1949, as to, inter alia, the rate of interest and other terms and conditions on which advance or other financial accommodations may be made or guarantees may be given.

(f) When the court grants interest at the agreed rate or when no specific prayer is made for grant of such interest at the agreed rate or any particular rate or when the grant of such interest at a rate lower than the agreed rate is not objected to, it is not necessary for the court to give reasons. However, when a specific claim is made for such interest at the agreed rate or at a particular rate, which is rejected by the court or if the court allows interest at a rate lower than the agreed rate, then and in that case, in our opinion, the court should give reasons. Otherwise, such award of interest at a lower rate may be challenged as arbitrary.

94. While considering the question of grant of such interest, as already said, it is the duty of the court to take such relevant factors into consideration as may be placed before the court by the parties particularly when such interest is sought to be awarded at a lower rate. This would include the conduct of the parties, both the plaintiff and the defendant, both before and after the suit, the nature of the securities, etc. Accordingly, when such a discretion is exercised by granting interest at a lower rate, it should not be arbitrary but must be judicial. Unless reasons are given, it is difficult to ascertain whether discretion has been exercised judicially or arbitrarily. The court's power to grant interest at a lower rate is not in question. The question is whether the court has acted arbitrarily or judicially in the matter of granting a lower rate of interest.

Interest on judgment :

95. In our opinion, the question of interest on judgment stands on the same footing as that regarding interim interest. We have given our reasons already in respect of interim interest, and the principles regarding the same should apply equally in respect of interest on judgment also except to the extent indicated.

96. However, there is one difference regarding interest on judgment which is contained in Section 34 itself. In view of the proviso to Section 34(1) and the Explanations therein, so far as interest on judgment is concerned, ordinarily it should not exceed 6 per cent, per annum. Ordinarily, this should be the maximum rate. However, this maximum rate of 6 per cent. is not applicable in the case of 'commercial transactions' within the meaning of Explanation II. In such a case, it may exceed 6 per cent. but must not exceed the contractual rate. Where there is no contractual rate, it must not exceed the rate at which the moneys are lent and advanced by nationalised banks in relation to commercial transactions. In view of the proviso, this is the maximum rate in respect of commercial transactions. This is an indication that, in the case of a commercial transaction, the agreed rate, and where there is no agreed rate, the rates charged by nationalised banks are to be taken into consideration. A fortiori, when it is a suit filed by a nationalised bank wherein the liability of the defendant arises out of a commercial transaction, the agreed rate is an important factor and it cannot be ignored. Further, in view of the above, in our opinion, such further interest should, ordinarily, be granted at such agreed rate unless there are reasons for not granting such interest at such rate. When there are cogent reasons for not allowing such interest at such rate, the court may grant such interest at a lower rate but it must record its reasons.

Instalments :

97. The court has got the power to grant instalments when a personal decree or a decree for payment of money is passed. Such instalments can be granted even if, apart from the prayer for a money decree, there is also a prayer for a declaration of charge in respect of certain movable properties with a prayer for sale of the same. Order 20, Rule 11, applies in that case also. However, such order for instalments may be passed 'for any sufficient reason' as laid down by Order 20, Rule 11 of the Civil Procedure Code. Accordingly, this is also a matter of discretion to be exercised judicially in the facts and circumstances of a particular case and not as a matter of course. There must be some 'reason' and it must be 'sufficient reason'. Further, unless reasons are given, whether if is granted for any 'sufficient reason' or not cannot be ascertained. Accordingly, the court should give reasons for grant of instalments.

98. This judgment relates to the general principles regarding the different aspects of interest and instalments as indicated above. In view of and in the light of the principles laid down as above, we shall have to consider the different appeals separately depending on the facts of each case. In these cases, it does not appear to us from the records, on what ground the trial court had exercised its discretion regarding interest and instalments. The parties were also not given any opportunity to present their respective cases with regard to the same.

99. Accordingly, it is fit and proper that while exercising our discretion in the light of the general principles laid down above, we shall pass orders in individual cases on proper materials before us. Therefore, we give liberty to the parties to place before us the matters for consideration regarding interest and the instalments. Accordingly, liberty is given to file affidavits. Such affidavit is to be filed by the banks who are the appellants by March 15 and by the respondents by March 31, 1990. This matter will again come up before us on April 2, 1990, for consideration of those questions and for final disposal of the appeals individually upon consideration of the relevant facts relating to each case.

Amarabha Sengupta, J.

100. I agree.