Holding

For suits instituted before the CPC amendment, interest on a decree for the period from decree to payment must be limited to six per cent per annum, irrespective of any contractual rate.

Summary

Punjab National Bank sued Shree Bharat Laxmi Wool Store for Rs.81,137.39. The Sub‑Judge decreed interest at the contractual rate of 10½% from the date of suit to realization. On appeal, the district court reduced the future interest to 6% per annum, but the High Court restored the 10½% rate. The Supreme Court examined whether the CPC (Amendment) Act, 1976, which permits a higher rate for commercial transactions, applies to suits filed before its commencement. It held that Section 97(e) of the amendment bars its application to pre‑amendment suits, so the pre‑amended Section 34 governs, limiting interest from decree to payment to 6% per annum. Consequently, the decree was modified to allow only 6% interest from the date of decree to payment, with all other terms left unchanged.

Issues considered

Does the CPC (Amendment) Act, 1976 apply to a suit instituted before its commencement for determining interest on a decree?
What rate of interest is permissible under Section 34 of the CPC for the period from decree to payment in such a pre‑amendment suit?
Can the contractual rate of interest exceed the statutory ceiling of six per cent per annum in suits filed before the amendment?

Legislation cited

Code of Civil Procedure, 1908s. 34
CPC Amendment Act, 1976s. 13, s. 97(e)

Subjects

interest on decreeSection 34 CPCCPC amendment applicabilitycommercial transactionrate of interestpre‑amendment suitcivil procedurecontractual interest

Judgment

SHREE BHARAT
' :
LAXMI WOOL
.
STORE,PANIPAT
' '
AND
.
ORS. A
v ..
PUNJAB NATIONAL BANK AND ANR.:

NOVEMBER-28, _1991

[K. JAGANNATHA SHETTY AND R.M. SARAI, JJ.] B

Civil Procedure Code, 1908--Section 34-Award ofinierest on decretal
sum-Rate of-Institution of suit prior to coming into force of the C.P.C.
(Amendment) Act, 1976-Amended provisions applicable-Held interest pay-
able at 6% from the date of decree till payment. .
c
The respondent-bank instituted a suit in the Court of S~b-Judge for
recovery of Rs. 81,137.39 against the appellants. The suit was. decreed
allowing contract_ual rate of interest at 10 1/2 per annum from the date ot'
suit till the date of _re~lisation. -

The appeal against the decree ~as dismissed by m_odifying the . D
interest payable~ ·'
- -

. The High Court .ill .second appeal restored _the rate of interest
allowed by the Sub-Judge.
E
Disposlng of the appeal. by special leave .filed by th ti jUdginent-
debtor, this Court, · ·· · · · · · · ·

HELD : 1. The provisions of Section 34 as amended shall not affect
the rate at w~ich inte~est may be allowed on a decree in any suit instituted
before the commencement of the amendment and interest on a. decree F
passeciin such suit shalfbe ordered in accor~ance with the provisions of
Section 34 as they stood before the ameildm~~t.( 29A-B ')
. . - ' ...

2. Section 34 has two parts, first part covering the period f,rom the
date of suit till the date of decree and second covering the period from the -
to
date of decree till the date payment. The second part is applicable the G
case. .[ 29B-C ] ·

3. In the-instant case, the suit was filed on 20.4.1972. The amendmenJ
of' Section _34 is not applicable. [ 29B ] --

4. The decree of the trial court is modified allowing interest on the . H
decretal suni only as 6% from the date of decree ti.ll payment.[29D]
27
28 SUPREME COURT REPORTS [1991) ·SUPP. 3 S. C.R.

A CIVIL APPELLATE JURISDICTION: Civil Appeal No: 2488 of 1982.

· From the Judgment and Order dated 28.1.1982 of the Punjab and
Haryana High Court in Regullil Second Appeal No. 2039 of 1981.

A.K. Goel for the Appellant.
B
S.K. Mehta, Dhruv.Mehta and Aman Vachher for the Respondents.

The Judgment of the Court was delivered by ·

K. JAGANNATHA SHETTY, J. The· respondent bank instituted a suit
C in the Court of Sub-Judge, Panipat, for recovery of Rs. 81,137.39 against the
appellants herein. The Subordinate Judge decreed the suit allowing contractual
rate of interest at 10-1/2 per annum from the date of suit till the date of
realisation. The appeal against the decree was dismissed by modifying the
interest payable as follows : · · · •-

D "That the future interest payable on the .amount in suit is reduced
to 6% per annum from the date of suit till realisation."

The High Court in second appeal did not agree with the modification
made by the District Judge and it restored the rate of interest allowed by the
Sub-Judge.
E
The award ofinterest from the date of suit" till the date of payment is
regulatedby Section 34 of the Civil Procedure:Code.·Section"'.34 before the.
1977 amendment provided that the court' may award interest as it deems
rea~onable on the principal sum adjudged from the date of suit to the date of .
the decree and further interest at such rate not exceeding 6% as the court deems
F
reasonable from the date of decree to the date of payment Section 34 was
affiende·d by CPC (Amendment) Act 194 of 1976 and Section i 3 of the· Amend-
ing Ac~ has a·dded a proviso, which reads as follows :

"Provided that where the liability in relation to the 'sum so ad-
G judged 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 contrac-
tual rate, the rate at which moneys are lent or advanced by
nationalised banks in relation to commercial transactions."

H This amendment was brought into force with effect from 1.2.1977 and by
WOOL STORE v. P. N.B. [SHETIY, J.] 29

Section 97(e) of the A.mending Act it has been made clear that the provisions A
of Section 34 as amended shall not affect the rate at which interest may be
allowed on a decree in any suit instituted before the commencement of Section
13 and interest on a .decree passed in such suit shall be ordered in accordance
with the provisions of Section 34 as they stood before the amendment.
,.
In the instant case, the suit was filed on 20.4.1972. The amendment of B
Section 34 referred to above; therefore, clearly is no~ applicable. The Court is
required to allow proper rate of interest. under the unamended Section 34. ·As
we have seen earlier, Section 34 has two parts, first part covering the period
from .the date of suit till the date of decree and second covering the period from
the date of decree till the date payment. We arc concerned only with the' second
part. The trial court has awarded interest more than 6% under the unamrndcd C
provisions for the period from the date of decree till payment. The High Court
appears to have not noticed the non-applicability of the amendment to suits
filed prior to the amendment.

In this view of the matter, the decree of the trial court as affirmed by the
High Court is modified allowing interest on the dccrctal sum only at 6% from D
the date of decree till· payment On all other aspects the decree is kept
undisturbed.

The appeal is acfordingly disposed of with no order as to costs ..

V.P.R. Appeal disposed of.

...