In a money recovery suit under Order XXXVII CPC dismissed for default, the court reviewed the applicability of interest under a disputed Memorandum of Understanding entered during bail proceedings.
Principals sum of Rs. 3,07,28,136/- and interest at 6% p.a. granted; arrears of rent without interest decreed.
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
Through: Mr. Naman Joshi, Ms. Ritika Vohra and Mr. Amber Tickoo, Advs.
versus
MOHD RAFIQ MIR & ORS. .....Defendants
Through: Mr. Susheel Tomar, Mr. Vishnu Kant and Ms. Shailja Singh, Advs. for defendants
CORAM: HON'BLE MR. JUSTICE VIKAS MAHAJAN
JUDGMENT
VIKAS MAHAJAN, J. (ORAL)
Signature Not Verified
Digitally Signed By:NARENDRA SINGH ASWAL Signing Date: 19.1 1.2024 10:58:55
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defendant no.5 firm. Between the years 2016 to 2020, the defendants had approached the plaintiff for grant of loan on multiple occasions. It is alleged in the plaint that the defendants were supposed to return the said amount to the plaintiff by March 2019, however, the same was never done.
Signature Not Verified
Digitally Signed By:NARENDRA SINGH ASWAL Signing Date: 19.1 1.2024 10:58:55
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stipulated inter alia that the defendants would be liable to pay an interest @12% per month in case of default in the repayment and also pay house rent of the plaintiff to the tune of Rs.39,000/- per month till all the dues are cleared. In such circumstances, eleven post-dated cheques were issued by the defendants in favour of the plaintiff which were later dishonoured again. 6. Subsequent to the crystallisation of the defendants’ obligations vide Memorandum of Understanding dated 26.10.2020, an application under Order VI Rule 17 CPC was filed by the plaintiff in CS No.274/2020 seeking to amend the plaint in accordance with the said Memorandum of Understanding, thereby bringing the suit under the purview of Order XXXVII and revise the recovery amount to Rs.4,69,82,587/-. The said application was allowed and the plaint was returned vide order dated 20.09.2021 owing to the suit exceeding the pecuniary jurisdiction of the learned Additional District Judge. Thus, the present suit under Order XXXVII was filed and summons were issued vide order dated 16.11.2021. 7. The defendants entered appearance for the first time on 21.02.2022 and an application (i.e. I.A. 13665/2022) seeking leave to defend was filed by them, however, the same was returned under objection. The said application remained under objection for two dates. Subsequently, the said application seeking leave to defend was re-filed along with an application (i.e. I.A. 13666/2022) seeking condonation of delay of 78 days in re-filing the application for leave to defend. Vide order dated 05.01.2023, the application (I.A. 13666/2022) seeking condonation of delay in re-filing was dismissed for non-prosecution.
Signature Not Verified
Digitally Signed By:NARENDRA SINGH ASWAL Signing Date: 19.1 1.2024 10:58:55
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9366/2023 seeking restoration of the application i.e. I.A. 13666/2022 whereby condonation of delay in refiling the leave to defend application was sought. Since there was delay in filing the said application (IA 9366/2023), another application being I.A. 9367/2023 was also filed seeking condonation of delay of 95 days in filing I.A. 9366/2023. This Court issued notice in I.A. 9366/2023, however, again none appeared for the defendants on 09.10.2023 or 13.05.2024 when the I.A. 9366/2023 was listed for hearing. Accordingly, the said application (I.A. 9366/2023) was also dismissed in default for nonprosecution.
Signature Not Verified
Digitally Signed By:NARENDRA SINGH ASWAL Signing Date: 19.1 1.2024 10:58:55
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“(6) At the hearing of such summons for judgment,–
Signature Not Verified
Digitally Signed By:NARENDRA SINGH ASWAL Signing Date: 19.1 1.2024 10:58:55
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defendant no.1 was in Jammu & Kashmir while the defendants no.2 to 4 were in Judicial Custody. It is also stated in the said application that the erstwhile counsel had been re-engaged by the defendants. The grounds for delay in filing the restoration application are limited to the fact that the defendants were unaware of the order dated 05.01.2023.
Signature Not Verified
Digitally Signed By:NARENDRA SINGH ASWAL Signing Date: 19.1 1.2024 10:58:55
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not been pursuing their own applications with due diligence and the grounds offered for condonation of delay in refiling an application for leave to defendant, as well as, delay in filing restoration application do not reveal sufficient cause to excuse the delay.
Signature Not Verified
Digitally Signed By:NARENDRA SINGH ASWAL Signing Date: 19.1 1.2024 10:58:55
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present case. It has become imperative to address this question as the plaintiff has claimed exorbitant pre-suit, pendente-lite and future interest @ 12% per month.
Signature Not Verified
Digitally Signed By:NARENDRA SINGH ASWAL Signing Date: 19.1 1.2024 10:58:55
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award the interest and the rate at which to award. The relevant extract from the said decision reads as under:
“38. However “penal interest” has to be distinguished from “interest”. Penal interest is an extraordinary liability incurred by a debtor on account of his being a wrongdoer by having committed the wrong of not making the payment when it should have been made, in favour of the person wronged and it is neither related with nor limited to the damages suffered. Thus, while liability to pay interest is founded on the doctrine of compensation, penal interest is a penalty founded on the doctrine of penal action. Penal interest can be charged only once for one period of default and therefore cannot be permitted to be capitalised.
39. Mulla on the Code of Civil Procedure (1995 Edn.) sets out three divisions of interest as dealt in Section 34 CPC. The division is according to the period for which interest is allowed by the court, namely,— (1) interest accrued due prior to the institution of the suit on the principal sum adjudged; (2) additional interest on the principal sum adjudged, from the date of the suit to the date of the decree, at such rate as the court deems reasonable; (3) further interest on the principal sum adjudged, from the date of the decree to the date of the payment or to such earlier date as the court thinks fit, at a rate not exceeding 6 per cent per annum. Popularly the three interests are called pre-suit interest, interest pendente lite and interest post-decree or future interest. Interest for the period anterior to institution of suit is not a matter of procedure; interest pendente lite is not a matter of substantive law (see Secy., Irrigation Deptt., Govt. of Orissa v. G.C. Roy SCC para 44-iv). Pre-suit interest is referable to substantive law and can be subdivided into two sub-heads: (i) where there is a stipulation for the payment of interest at a fixed rate; and (ii) where there is no such stipulation. If there is a stipulation for the rate of interest, the court must allow that rate up to the date of the suit subject to three exceptions: (i) any provision of law applicable to moneylending transactions, or usury laws or any
Signature Not Verified
Digitally Signed By:NARENDRA SINGH ASWAL Signing Date: 19.1 1.2024 10:58:55
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other debt law governing the parties and having an overriding effect on any stipulation for payment of interest voluntarily entered into between the parties; (ii) if the rate is penal, the court must award at such rate as it deems reasonable; (iii) even if the rate is not penal the court may reduce it if the interest is excessive and the transaction was substantially unfair. If there is no express stipulation for payment of interest the plaintiff is not entitled to interest except on proof of mercantile usage, statutory right to interest, or an implied agreement. Interest from the date of suit to the date of decree is in the discretion of the court. Interest from the date of the decree to the date of payment or any other earlier date appointed by the court is again in the discretion of the court — to award or not to award as also the rate at which to award. These principles are well established and are not disputed by learned counsel for the parties. We have stated the same only by way of introduction to the main controversy before us which has a colour little different and somewhat complex. The learned counsel appearing before us are agreed that pre-suit interest is a matter of substantive law and a voluntary stipulation entered into between the parties for payment of interest would bind the parties as also the court excepting in any case out of the three exceptions set out hereinbefore.”
(emphasis supplied)
Signature Not Verified
Digitally Signed By:NARENDRA SINGH ASWAL Signing Date: 19.1 1.2024 10:58:55
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“4. The FIRST PARTY has no objection if the SECOND PARTY may be granted bail in Crime Number 312/2020 registered at P.S. Naujhil Mathura, however in case of default repayment of non-fulfilment of the present MOU, the bail shall be cancelled.”
Signature Not Verified
Digitally Signed By:NARENDRA SINGH ASWAL Signing Date: 19.1 1.2024 10:58:55
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“2. The SECOND PARTY has also agreed to settle the dispute for amount of Rupees Three Crore Forty One Lacs, Forty seven thousand, One Hundred and Thirty Six Rupees only. The SECOND PARTY had agreed to pay the interest @12% per month in case of default repayments.
11. The Second party has also agreed to pay First party’s house rent 39,000/- every month till the time they will not clear all payment to First party”
VIKAS MAHAJAN, J
OCTOBER 9, 2024/dss
Signature Not Verified
Digitally Signed By:NARENDRA SINGH ASWAL Signing Date: 19.1 1.2024 10:58:55
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3 issues framed by the court
Whether judgment in default may be passed forthwith when the application for leave to defend was refused due to multiple defaults and non-prosecution.
Whether the stipulated interest of 12% per annum in the Memorandum of Understanding is penal and requires reduction.
Whether interest is applicable on the monthly rent component of the decree.
Colour shows how this judgement treated each authority
Central Bank of India v. Ravindra & Ors.Explained¶28
Central Bank of India v. Ravindra & Ors., (2002) 1 SCC 367 · Who else cites this
1 provisions across 1 enactments
MS. SHEFALI KOUL
MOHD RAFIQ MIR & ORS.
VIKAS MAHAJAN
As recorded by the court registry
A civil suit filed on the original side of a High Court exercising ordinary original civil jurisdiction.
Judgements on the same questions, provisions and authorities, from every court
