SUPREME COURT OF INDIA

Before:- B.N. Kirpal, Mr. Shivaraj V. Patil and Mr. Bisheshwar Prasad Singh, JJ.

Petition(s) for Special Leave to Appeal (Civil) No. 2479/2000. D/d. 6.3.2002.

Syndicate Bank, Chennai - Petitioners

Versus

M/S. Mohan Brothers & Ors. - Respondents

For the Petitioners :- Mr. K N Raval, ASG, Mr. V Sudeer, Mr. S Balaji, Mr. S Srinivasan, Advocates.

For the Respondents :- Mr. M.A. Krishnamoorthy, Mr. M.A. Chinnasamy, Mr. S Thanjayan, Advocates.

Civil Procedure Code, 1908, Section 34(1) - Interest - Arising out of commercial transaction- Interpretation of Proviso to section 34(1) - Matter referred to Larger Bench.

[Para 5]

Cases Referred :-

Central Bank of India v. Ravindra, 2002 (1) SCC 367.

ORDER

B.N. Kirpal, J. - One of the contentions which arises for consideration is whether the contractual rate of interest should have been awarded in the instant case. Mr. K N Raval contends that the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, has an overriding effect and according to Section 19(20) discretion is given to the Tribunal to award interest and the Tribunal is in no way bound to comply with or apply the provisions of Section 34 of the Civil Procedure Code. He further states, in the alternative, that if Section 34 applies, then by virtue of proviso to Section 34(1) Civil Procedure Code, this being a commercial transaction, the rate of interest can exceed 6 per cent per annum but shall not exceed the contractual rate of interest.

2. Our attention has been invited to a Constitution Bench's decision in Central Bank of India v. Ravindra and Others, 2002 (1) SCC 367. The Court in that case was concerned with Section 34 Civil Procedure Code At page 396 (in paragraph 41), it, inter alia, observed that the "interest pendente lite and future interest (i.e. interest post-decree not exceeding 6 per cent per annum) shall be awarded on such principal sum. ......" This seems to indicate that interest pendente lite and post-decree cannot be awarded in excess of 6 per cent per annum and furthermore in paragraph 55(8) (at page 404) there is also an observation that the "award of interest pendente lite and post-decree is discretionary with the court as it is essentially governed by Section 34 Civil Procedure Code de hors the contract between the parties." (emphasis added). Mr. Raval draws our attention to the fact that at page 378 of the SCC where Section 34 Civil Procedure Code is extracted, perhaps by oversight the proviso to Section 34(1) was omitted. The said proviso reads as follows :

"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 money are lent or advanced by nationalised banks in relation to commercial transaction."

3. A reading of the decision in Central Bank's case shows that no reference has been made to the proviso which specifically deals with the awarding of interest arising out of a commercial transaction.

4. Under the circumstances, we think it appropriate that this case is heard by a larger Bench, inasmuch as the interpretation of proviso to Section 34(1) Civil Procedure Code is clearly involved and there should be no observations made in this case which are in conflict with the decision in Central Bank of India v. Ravindra and Others, 2002 (1) SCC 367.

5. Papers be placed before the Hon'ble the Chief Justice of India for appropriate orders. .