P.R.Raman &T.R. Ramachandran Nair v. BhagavathiAmma (1991 (2) KLT 522), the court below took the view that

P.R.Raman &T.R. Ramachandran Nair, JJ. - - - - - - - - - - - - - - - - - - - - - - - -A.S.No.51 of 1994 - - - - -- - - - - - - - - - - - - - - - - - - - - Dated this the 25th day of June, 2008.JUDGMENTRaman, J.This appeal arises out of the final judgment and decree passed by the Principal Sub Court, Kollam in O.S.No.211/1988. The suit was one for saleof the mortgaged property for the realisation of the mortgage amount. Apreliminary decree was passed on 21.11.1990 in favour of theplaintiff/appellant directing the defendants to pay a sum of Rs.1,37,567.80with interest thereon at the rate of 16.5% per annum from the date of the suittill realisation plus the plaintiff's costs of the suit within two months fromthe date of the preliminary decree and allowed the plaintiff to recover thesame by sale of the plaint schedule property and balance, if any, from thedefendants personally in the event of failure of the defendants to pay theamount as directed. True, a composite decree could have been passed, however only a prelimianry decree was passed. This necessitated passing ofa final decree in terms of the preliminary decree and hence the plaintiffapplied, as per I.A.No.1714/1991, to pass a final decree.

The court below, while passing the final decree, even reopened the AS 54/1994-2-preliminary decree passed in the matter of interest awarded. After referringto the decision in Divisional Manager, L.I.C. of India v. BhagavathiAmma (1991 (2) KLT 522), the court below took the view that themaximum rate of interest that is awardable is only 6% and thereforeaccording to the court below, a mistake crept in while passing thepreliminary decree which was corrected while passing the final decree andby the judgment under appeal a final decree was passed directing thedefendants to pay a sum of Rs.1,37,567.80 with interest at 6% per annumfrom the date of suit till realisation plus cost, etc. Aggrieved thereby, thisappeal is preferred.

We have heard both sides.

Order XXXIV of the C.P.C. was substituted by the KeralaAmendment with effect from 20.11.1990 which does not contain a provisionsimilar to Rule 11(b). Hence, the only provision regarding the interest to beawarded is governed by Section 34 C.P.C. Though a learned Single Judgeof this court in 1991 (2) KLT 522 (supra) held that the maximum rate ofinterest that is awardable by virtue of the main provision contained in Section 34 is only 6%, we find that the proviso to Section 34 was notobviously brought to the notice of the court at that time. In the subsequent AS 54/1994-3-Division Bench decisions of this court in Rosy George v. S.B.I. (19993 (1)KLT 151) and also in Veluswamy Goundar v. S.B.I. ( ILR 2001 (3) Ker.227) it has been held that by virtue of the proviso to Section 34, the rate ofinterest that is awardable in a commercial transaction could be more than6%, upto the contract rate of interest. In other words, the bar under the mainprovision limiting the rate of interest to 6% is not applicable to acommercial transaction in the light of the proviso to Section 34. Therefore, the judgment and decree passed by the court below limiting the interest to6% without exercising any discretion, is liable to be set aside and we do so.

There is no dispute that the transaction in question is a commercialtransaction and the agreed rate of interest, according to the plaintiff is16.5% and according to the defendant is only 15%. This dispute has notbeen adverted to. Though in the preliminary decree the court below hasawarded interest at the rate of 16.5%, in the absence of any appealtherefrom, the plaintiff is right in contending that the court below ought nothave interfered with the rate of interest already awarded as per thepreliminary decree. However, we consider that even though it may bepermissible to award interest at the agreed rate in a commercial transaction, it is not an invariable rule of law. The proviso confers a discretion on thecourt to award interest upto the agreed rate in the case of a commercial AS 54/1994-4-transaction. So, the court should consider in each case whether the interestshould be awarded between 6% to the agreed rate and if so, what is theinterest to be awarded in a particular case. Having considered the entirematter, we find that the interest that could be awarded is at the rate of 12%in the present case.