Sri M Nagaraju vs Joint Registrar Of Co Operative
2022 Latest Caselaw 1629 Kant

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     IN THE HIGH COURT OF KARNATAKA AT BENGALURU

       DATED THIS THE 3RD DAY OF FEBRUARY, 2022

                       BEFORE

          THE HON' BLE MR.JUSTICE R. DEVDAS

        WRIT PETITION NO.17366 OF 2018 (CS-RES)

BETWEEN

SRI M NAGARAJU
S/O. LATE. MUDDASHETTY,
AGED 59 YEARS,
R/AT. 68/119, 2ND MAIN ROAD,
THIPPASANDRA, 80 FEET ROAD,
INDIRA NAGARA,
BENGALURU - 560008.                   ...PETITIONER

(BY SRI. V. RANGA RAMU, ADVOCATE)

AND

1.     JOINT REGISTRAR OF CO OPERATIVE
       KARNATAKA STATE URBAN
       CO-OPERATIVE FEDERATION
       OFFICE NO. 132, 2ND FLOOR
       K.H. ROAD, BENGALURU-560027

2.     SHREE SUBRAMANYASHWARA
       CO-OPERATVIE BANK LTD.
       REP. BY ITS GENERAL MANAGER,
       HEAD OFFICE, RAJATHA BHAVAN,
       NO.106, R.V. ROAD,
       VISHWESWARA PURAM,
       BENGALURU - 560004.
                              2




3.   SRI. G. RAMESH
     S/O. NOT KNOWN,
     AGED 50 YEARS,
     R/AT. NO.59, 14TH MAIN,
     INDUSTRIAL AND COMMERCE EXTENSION,
     VIJAYANAGARA, BENGALURU - 560040.

5.   SRI. M.G. ANANDA
     S/O. NOT KNOWN,
     AGED 50 YEARS,
     R/AT. NO.1472, 14TH CROSS,
     NEAR KRISHNA BAKERY,
     KALYANA NAGARA, "T" DHASARAHALLI,
     BENGALURU - 560058.        ...RESPONDENTS

(BY SRI.A.R.SRINIVASA, AGA FOR R1;
    SRI. K.S. VENKATARAMANA, ADVOCATE FOR R2;
    R3 & R4 ARE SERVED)

     THIS WRIT PETITION IS FILED UNDER ARTICLES
226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING
TO SET ASIDE THE IMPUGNED ORDER PASSED BY
KARNATAKA APPELLATE TRIBUNAL IN CO-OPERATIVE
APPEAL NO. 311/2014 DATED 28.3.2018 VIDE ANNEX-A;
AND ETC.,

     THIS WRIT PETITION COMING ON FOR HEARING
THIS DAY, THE COURT MADE THE FOLLOWING:

                        ORDER

R. DEVDAS J., (ORAL):

Although the prayer in this writ petition is to

quash and set aside the impugned order dated

28.03.2018 passed by the Karnataka Appellate

Tribunal in Co-operative Appeal No.311/2014, at the

outset, learned Counsel for the petitioner submits that

the petitioner would restrict his prayer for appropriate

direction in the matter of payment of interest to the

second respondent-Co-operative Bank, having regard

to the provisions of Section 34 of the Code of Civil

Procedure, 1908.

2. Learned Counsel submits that it is clear from

Section 34 that in a suit for money recovery, the

Court is empowered to pass a decree ordering

payment of interest at the said rate, as the Court

deems reasonable to be paid on the principal sum

from the date of the suit to the date of the decree, in

addition to any interest adjudged on such principal

amount for any period prior to the institution of the

suit. Further, Section 34 also provides that the rate of

interest shall not exceed 6 per cent per annum 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.

3. However, learned Counsel for the second

respondent-Bank contends that where there is an

agreed rate of interest, the Court is required to decree

the suit along with interest as agreed upon.

4. Learned Counsel for the petitioner seeks to

rely upon the decision in the cases of Union Bank of

India, Dharwad Vs. Parasuram reported in ILR

2003 KAR 2236 and S.Kotrabasappa Vs. The

Indian Bank reported in AIR 1987 KAR 236.

5. Section 34 of the Code of Civil Procedure,

1908 reads as follows:

"34. Interest.-(1) Where and in so far as a decree is for the payment of money, the Court may, in the decree, Order interest at such rate as the Court deems reasonable to be paid on the principal sum adjudged,

from the date of the suit to the date of the decree, in addition to any interest adjudged on such principal sum for any period prior to the institution of the suit, 2[with further interest at such rate not exceeding six per cent per annum as the Court deems reasonable on such principal sum], from the date of the decree to the date of payment, or to such earlier date as the Court thinks fit:

[Provided that where the liability in relation to the sum so adjudged had arisen out of a commercial transaction, the rate of such further interest may exceed six per cent.

per annum, but shall not exceed the contractual rate of interest or where there is no contractual rate, the rate at which moneys are lent or advanced by nationalised banks in relation to commercial transactions.

Explanation I.-In this sub-section, "nationalised bank" means a corresponding new bank as defined in the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970).

Explanation II.-For the purposes of this section, a transaction is a commercial transaction, if it is connected with the industry, trade or business of the party incurring the liability.]

(2) Where such a decree is silent with respect to the payment of

further interest [on such principal sum] from the date of the decree to the date of payment or other earlier date, the Court shall be deemed to have refused such interest, and a separate suit therefore shall not lie."

6. In Union Bank of India, Dharwad (supra),

this Court noticed that the provision refers to interest

in respect of three stages. One relates to interest

prior to and till the date of the suit; the second stage

is 'current' or pendente-lite interest, from the date of

suit till date of decree; the third stage relates to

interest from the date of decree till recovery or earlier

date to be fixed by the Court, which cannot exceed six

percent per annum unless the liability for the payment

of money arises out of a commercial transaction in

which event, as per the proviso to Section 34(1) of

CPC it may exceed six percent per annum but shall

not exceed the contractual rate of interest and if there

is no contractual rate of interest, the rate at which

moneys are lent or advanced by nationalised Banks in

relation to commercial transactions.

7. Reference was also made to a decision of a

Division Bench of this Court in the case of Canara

Bank Vs. B.Seshagiri Prabhu and Ors., reported in

1984(1) KLJ 121 wherein it was held that so far as

the current or pendente-lite interest is concerned, it is

wholly within the discretionary jurisdiction of the Court

and that discretion operates even though there be an

express agreement between the parties stipulating a

particular rate of interest till the date of decree,

should the matter go to court. It was clearly held that

the contract between the parties will not circumscribe

that discretion of the Court. It was held that Section

34 puts the matter in the area of judgment and takes

it out of the area of contract. Adverting to the

provisions that were inserted by way of amendment

in the year 1976, the Division Bench also held that

'further' interest or interest from the date of decree till

the date of realization which, otherwise under the

terms of Section 34(1), could not exceed 6 per cent

per annum, may exceed 6% only in a commercial

transaction.

8. Having regard to the said decisions, this Court

directed the learned Counsels for the petitioner as well

as the second respondent-Bank to point out to the

type of transaction in the present case. Learned

Counsel for the petitioner draws the attention of this

Court to Ex.P5 which was produced as Annexure 'R1'

along with statement of objections filed by the second

respondent-Bank. This is the document or contract

entered into between the petitioner and the second

respondent-Bank. It clearly shows that a sum of

Rs.1,00,000/- was sanctioned to the petitioner for the

purpose of site purchase.

9. Explanation-II provided under Section 34

makes it clear that a commercial transaction is a

transaction connected with an industry, trade or

business of the party incurring the liability. Therefore,

it is clear from the material on record that the

transaction between the parties is not a commercial

transaction. That being the case, the interest payable

by the petitioner from the date of decree till

realization cannot exceed 6%.

10. Learned Counsel for the petitioner submits

that the petitioner has made payment of a sum of

Rs.1,29,250/- after the suit was filed at the hands of

the second respondent. Learned Counsel further

submits that although the Karnataka Appellate

Tribunal noticed the fact that the petitioner had paid a

sum of Rs.51,000/- as on the date when the order

was passed by the Karnataka Appellate Tribunal on

28.03.2018, however it directed that the same shall

be taken into consideration firstly towards payment of

interest.

11. For the reasons stated above, this Court

proceeds to pass the following:

ORDER

i) The writ petition is allowed in part.

ii)    While   the    impugned         award       dated
       19.09.2013       passed        by    the     first
       respondent-Joint       Registrar       of    Co-
       operative     Societies    and       the    order
       dated         28.03.2018             Karnataka

Appellate Tribunal regarding liability of the petitioner to repay the amount is not interfered with, however, the impugned orders are modified to the extent that from the date of the decree/award dated 19.09.2013, the petitioner will be liable to repay the outstanding loan amount with interest calculated at the rate of 6% p.a. till the date of realization.

iii) The total sum paid by the petitioner till date shall be taken into consideration. The second respondent-Bank shall calculate the amount payable by the petitioner in

terms of the directions issued by this Court and inform the petitioner if there is any outstanding amount to be paid.

iv) The intimation shall be given to the petitioner within a period of two weeks from the date of receipt of a certified copy of this order. The petitioner shall pay the said sum without any further delay and at any rate within a period of four weeks from the date of receiving the intimation from the second respondent-Bank. On the contrary, if the amount paid by the petition is in excess, the excess amount shall be returned to the petitioner along with intimation.

Ordered accordingly.

Sd/-

JUDGE JT/-