Bombay High Court
Abhinav vs Pradeep on 29 November, 2013
Bench: S.B. Shukre
sa583.12
1
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH, NAGPUR.
SECOND APPEAL No. 583 OF 2012
Abhinav s/o Gopal Agrawal,
aged 29 years, Occ.: Business,
r/o Manohar Chowk, Gondia. .... APPELLANT.
(Deft.)
VERSUS
Pradeep s/o Parasram Thakre,
aged 47 years, Occ.: Cultivator,
r/o Kudwa, at Post Kuwa,
Tah. & Distt. Gondia. .... RESPONDENT
.
(Plff.)
....
Mr. A. Shelat Advocate for the Appellant.
None for the Respondent, though duly served.
....
CORAM : S.B. SHUKRE, J.
DATE : NOVEMBER 29, 2013.
ORAL JUDGMENT.
This appeal is preferred against the judgment and decree passed in
Regular Civil Appeal No. 29 of 2010 by the Principal District Judge, Gondia, on
16.8.2012, partly modifying the judgment and decree rendered on 30.1.2010 in
Special Civil Suit No. 22 of 2007 by Civil Judge, Sr.Dn., Gondia.
sa583.12
2. Appellant is the original defendant and respondent is the original
plaintiff. Respondent had filed a suit for specific performance of the contract, or in
the alternative, for refund of Rs. one lac, the earnest money, together with interest
at 18% per annum. The suit was partly decreed, while specific performance of
contract was refused. The trial Court granted a decree for refund of earnest money
of Rs. one lac along with interest at the rate of 18% per annum from the date of
agreement, i.e. 12.3.2004, till realisation of the amount. In the First Appeal filed
against this judgment and decree challenging the direction regarding refund of
amount of Rs. one lac together with interest at the rate of 18% per annum from the
date of suit transaction, the first appellate Court after hearing the parties, found that
the respondent was entitled to recover the amount of Rs. one lac and accordingly
partly allowed the Appeal and directed that the appellant shall pay the said amount
together with interest at the rate of 12% per annum from 12.3.2004 till realisation of
the decretal amount. Dissatisfied with the same, the appellant is now before this
Court in the second appeal.
3. The appeal came to be admitted by this Court on 11.12.2012 on the
following substantial question of law :
"Whether the Courts below were right in awarding the interest
from the date of transaction i.e. on 12.3.2004 on the principal
sum adjudged by Rs. one lakh?"
4. As the substantial question of law involved in the matter was very short,
this Court fixed the matter for final hearing. During the course of the hearing, it
sa583.12
turned out that the appeal also involved additional substantial question of law and,
therefore, by the order passed today, i.e. 29.11.2013, this Court formulated
additional substantial question of law in the following terms :
"Whether the first appellate Court was right in awarding interest
from the date of transaction on the principal sum adjudged at
the rate of 12% in the absence of any pleading and evidence that
it was a commercial transaction?"
5. I have heard Shri Shelat, learned counsel for the appellant. None appears
for the respondent, although he has been duly served.
6. It has been submitted on behalf of the appellant that there has been no
pleading and no evidence adduced by the respondent to show and establish that
the suit transaction regarding sale of the suit property was commercial, and that it
was agreed between the parties that in case the transaction did not materialise, the
earnest money of Rs. one lac admittedly received by the appellant from the
respondent would be refunded to the latter with interest at the commercial rate.
Therefore, the learned counsel for the appellant submits that the findings recorded
by both the Courts below that the respondent was entitled to receive the earnest
money with interest and by the first appellate Court with interest at the rate
modified by it from the date of suit transaction, i.e. 12.3.2004, are absolutely
perverse, not based on any pleading and any evidence on record and also
inconsistent with the clear provisions of law.
7. I must say it here that the language of Section 34 of Code of Civil
sa583.12
Procedure is absolutely clear. It limits the discretion of the Court in granting future
interest when the decree is for the payment of money. It lays down that the Court
may order interest at the rate not exceeding 6% per annum on the principal sum
adjudged from the date of the suit to the date of the decree. This provision of law
does not permit the Court to grant any pre-suit interest and at the rate exceeding 6%
per annum. The proviso to this Section carves out one exception to the general rule
contained in sub-section (1) of Section 34. It provides that where the liability in
relation to the sum adjudged had arisen out of a commercial transaction, the Court
may in its discretion, award interest at a rate exceeding 6% but this rate, so being
awarded, should not exceed the contractual rate of interest, or in the absence of any
contractual rate, should not exceed the rate at which interest is given by the
nationalised banks on the moneys lent.
8. In order to bring the suit transaction in the above exception, it was
necessary for the respondent to have pleaded a specific case that the suit transaction
was in its nature commercial and, therefore, higher rate of interest on the refund of
earnest money from the date of suit transaction was required to be granted. The
respondent was also required to lead evidence on that aspect. In the instant case, on
perusal of the paper-book, which exercise has been carried out by me with the
assistance of learned counsel for the appellant, I find that there are no such
pleadings nor any evidence led in that regard by the respondent. Therefore, the
findings recorded by both the Courts below that the respondent was entitled to claim
refund of earnest money with interest at the rate exceeding 6% and that too from
sa583.12
the date of suit transaction, i.e. 12.3.2004, was absolutely perverse, having been
based on no pleadings and no evidence. Such a finding, therefore, cannot be
sustained in law.
9. In the case of Secretary/General Manager, Chennai, Central Co-
operative Bank Ltd. & anr. v. S. Kamalaveni Sundaram - 2011 (3) Mh.L.J. 38
the Hon'ble Supreme Court had an occasion to deal with the similar issue. The
Hon'ble Supreme Court has held that Section 34, Code of Civil Procedure, does not
empower the Court to award pre-suit interest and awarding of such interest from the
date prior to the date of the suit would ordinarily depend on express or implied
contract between the parties or some statutory provisions or the mercantile usage.
These observations appearing in paragraph 11 (page 41) of the decision of Supreme
Court in the said case are reproduced as under :
" Section 34 of Civil Procedure Code, 1908 empowers the Court to
award interest for the period from the date of the suit to the date of
the decree and from the date of the decree to the date of payment
where the decree is for payment of money. Section 34 of the Civil
Procedure Code does not empower the Court to award pre-suit
interest. The pre-suit interest would ordinarily depend on the
contract (express or implied) between the parties or some statutory
provisions or the mercantile usage....."
10. In the case of Badrinarayan Bansilal Somani v. Vinodkumar K.
Shah - 2008(6) Bom.C.R. 273, the Division Bench of this Court has held that in
sa583.12
the absence of any proof that the agreement was commercial in nature, higher
interest rate and that also from the period covering the date prior to the date of the
suit, would not be permissible in view of mandate of Section 34 of Code of Civil
Procedure.
11. The law, discussed above, would settle the position. It is clear that
under Section 34 of Code of Civil Procedure, the Court has no discretion to grant
interest at the rate exceeding 6% per annum and from any date prior to the date
of filing of suit, unless the transaction between the parties to the suit is commercial
in nature, or there is express or implied agreement between the parties or there is
some statutory provision or there is a mercantile usage duly proved justifying pre-
suit interest and at higher rate.
12. The findings recorded by both the Courts below thus are not in
consonance with the law governing the field. There had been neither any pleading
nor evidence showing that the transaction between the plaintiff and the defendant
was commercial or that there was some agreement or mercantile usage. The trial
Court had committed a serious error of law in awarding interest at the rate of 18%
per annum from the date of suit transaction. This order to some extent was toned
down by the first appellate Court when it reduced the rate of interest to 12% per
annum payable from the date of suit transaction. Such mitigation by the first
appellate Court of severity of error of law committed by the trial Court, however,
did not serve any purpose, for, the error still continued to militate against the law.
Both the substantial questions of law are, therefore, answered as in the negative.
sa583.12
Consequently, interference with the findings recorded by the Courts below with
regard to grant of pre-suit interest and its rate is required and it is necessary that the
directions as given are brought in line with the law of the land. Therefore, the
impugned decrees would have to be modified by directing that the principal sum of
Rs. one lac shall be payable by the appellant to the respondent with interest at the
rate of 6% per annum from the date of suit till realisation of the decretal amount.
13. Both the judgments and decrees are quashed and set aside only to
the extent that they award interest at the rate of 18% per annum and 12% per
annum respectively from the date of suit transaction, i.e. 12.3.2004 till realisation,
and it is directed that the appellant (defendant) shall pay Rs.1,00,000/- together
with interest at the rate of 6% per annum to the respondent (plaintiff) from the date
of suit till realisation of the amount. The impugned judgments and decrees stand
modified in these terms. The costs of this appeal shall be borne by the appellant
and respondent respectively. Decree be drawn up accordingly.
JUDGE
/TA/
sa583.12
