Money recovery suit for Rs. 4.76 crore based on loans advanced at 12% interest with an acknowledgement letter, part payments and a ledger e-mailed by the defendant's employee. Defendant proceeded ex parte. Court held suit within limitation and decreed the amount with 12% pendente lite and future interest.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
*** IN THE HIGH COURT OF DELHI AT NEW DELHI**
% Reserved on:13th February 2025
Pronounced on:12th March 2025.
CHARANJIT SINGH .....Plaintiff
Through: Mr. Aniket Bhattacharya, Mr. Karan, Advocates
versus
V.K. CHABRA & ANR. .....Defendants
Through:
CORAM: HON'BLE MR. JUSTICE ANISH DAYAL
JUDGMENT
CS(OS) 69/2023
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Submissions on behalf of the plaintiff
The plaintiff submits in his plaint, as under:
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The amounts advanced by the plaintiff to defendant no. 2, were tabulated as under, in the aforesaid acknowledgement letter:
| Date | Cheque No. | Bank | Branch | Amount |
|---|---|---|---|---|
| 28.9.2015 | ___________ | HDFC | Rajouri Garden |
1,00,00,000/- |
| 5.1.2016 | ___________ | ___________ | 25,00,000/- | |
| 5.1.2016 | ___________ | ___________ | 25,00,000/- | |
| 5.1.2016 | ___________ | ___________ | 25,00,000/- | |
| 5.1.2016 | ___________ | ___________ | 25,00,000/- | |
| 4.7.2017 | RTGS | Allahabad Bank | 1,50,00,000/- |
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Findings and Analysis
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period between 28th June 2017 to 10th August 2017- Ex. PW1/B .
| MONIE |
S TRANSFERRED BY PLAI |
NTIFF TO THE D |
EFENDANT |
|---|---|---|---|
| Date | Account No./ Bank | Chq./ Ref. No. | Transaction Amount |
| 5thJanuary 2016 |
02921930021695/HDFC Bank |
000000000172 000000000173 |
Rs. 25,00,000/- Rs. 25,00,000/- |
| 000000000174 | Rs. 25,00,000/- | ||
| 000000000175 | Rs. 25,00,000/- | ||
| 4thJuly 2017 | 20378090406/Allahabad Bank(now Indian Bank) |
- | Rs. 1,50,00,060/- |
| MONI |
ES RECEIVED BY P |
LAINTIFF FROM THE DEF |
ENDANT |
|---|---|---|---|
| Date | Account No./ Bank | Chq./ Ref. No. | Transaction Amount |
| 12thOctober 2015 |
02921930021695/ HDFC Bank |
CBINR52015101210008174 | Rs. 03,86,301/- |
| 8thJanuary 2016 |
CBINR52016010810003651 | Rs. 07,25,410/- | |
| 19thApril 2016 |
CBINH16109297663 | Rs. 07,47,945/- |
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| 18thJuly 2016 | CBINR52016071810004860 | Rs. 07,56,164/- |
|---|---|---|
| 31stMarch 2017 |
CBINR52017033110001903 | Rs. 07,39,726/- |
| 4thJuly 2017 | CBINH17185140677 | Rs. 5,98,356/- |
| 12thJuly 2017 | CBINR52017071210000208 | Rs. 10,43,836/- |
| 16th November 2017 |
CBINR52017111610006393 | Rs. 10,58,631/- |
| 5thMay 2018 | CBINR52018050510008822 | Rs, 10,35,617/- |
| 1stJune 2018 | CBINR52018060110015309 | Rs. 10,47.123/- |
| 10thJuly 2018 | CBINR52018071010007334 | Rs. 10,58,630/- |
| 15thJanuary 2019 |
CBINR52019011510009083 | Rs. 10,58,630/- |
| 11thApril 2019 |
CBINR52019041110001690 | Rs. 10,35,616/- |
| 18thApril 2019 |
CBINR520190418100D6131 | Rs. 3,45,205/- |
| 17thJune 2019 |
CBINR52019061710001546 | Rs. 3,56,712/- |
| 7thAugust 2019 |
CBINR52019080710000232 | Rs. 14,03,835/- |
| 24thJanuary 2020 |
CBINR20024335878 | Rs. 10,58,630/- |
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maintained and issued by the defendant and exhibited as PW-1/E , shows the following transactions to have taken place:
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Limitation
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January 2020, the defendant, thereafter defaulted in repayment of remaining amount. The letter of acknowledgement of liability ( PW-1A/C ) is dated 20th November 2019. The ledger maintained by defendant no.1 for the amounts received from and paid to the plaintiff, was e-mailed by defendant no. 1’s employee, on 6th September 2022 ( PW-1/E ).
i. Section 25, Indian Contract Act, 1872:
“ 25. Agreement without consideration void, unless it is in writing and registered, or is a promise to compensate for something done, or is a promise to pay a debt barred by limitation law.—An agreement made without consideration is void, unless—
(1) it is expressed in writing and registered under the law for the time being in force for registration of [documents], and is made on account of natural love and affection between parties standing in a near relation to each other; or unless
(2) it is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do; or unless
(3) it is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorised in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits.
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In any of these cases, such an agreement is a contract. Explanation 1.—Nothing in this section shall affect the validity, as between the donor and donee, of any gift actually made.
Explanation 2.—An agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate; but the inadequacy of the consideration may be taken into account by the Court in determining the question whether the consent to the promisor was freely given. ”
(emphasis supplied)
ii. Section 18, Limitation Act, 1963:
“ 18. Effect of acknowledgment in writing.—
(1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgment of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed.
(2) Where the writing containing the acknowledgment is undated, oral evidence may be given of the time when it was signed; but subject to the provisions of the Indian Evidence Act, 1872 (1 of 1872), oral evidence of its contents shall not be received.
Explanation.—For the purposes of this section,—
(a) an acknowledgment may be sufficient though it omits to specify the exact nature of the property or right, or avers that the time for payment, delivery, performance or enjoyment has not yet come or is accompanied by refusal
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to pay, deliver, perform or permit to enjoy, or is coupled with a claim to set off, or is addressed to a person other than a person entitled to the property or right,
(b) the word “signed” means signed either personally or by an agent duly authorised in this behalf, and
(c) an application for the execution of a decree or order shall not be deemed to be an application in respect of any property or right. ”
(emphasis supplied)
“ 19. Effect of payment on account of debt or of interest on legacy.—
Where payment on account of a debt or of interest on a legacy is made before the expiration of the prescribed period by the person liable to pay the debt or legacy or by his agent duly authorised in this behalf, a fresh period of limitation shall be computed from the time when the payment was made:
Provided that, save in the case of payment of interest made before the 1st day of January, 1928, an acknowledgment of the payment appears in the handwriting of, or in a writing signed by, the person making the payment.
Explanation.—For the purposes of this section,—
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(a) where mortgaged land is in the possession of the mortgagee, the receipt of the rent or produce of such land shall be deemed to be a payment.
(b) “debt” does not include money payable under a decree or order of a court. ”
(emphasis supplied)
ii. The decision of the Supreme Court in Cognizance for Extension of Limitation, In re ( supra ), reads as under:
“ 5. Taking into consideration the arguments advanced by the learned counsel and the impact of the surge of the virus on public health and adversities faced by litigants in the prevailing conditions, we deem it appropriate to dispose of MA No. 21 of 2022 with the following directions:
5.1. The order dated 23-3-2020 [Cognizance for Extension of Limitation, In re, (2020) 19 SCC 10 : (2021) 3 SCC (Cri) 801] is restored and in continuation of the subsequent orders dated 8-3-2021 [Cognizance for Extension of Limitation, In re, (2021) 5 SCC 452 : (2021) 3 SCC (Civ) 40 : (2021) 2 SCC (Cri) 615 : (2021) 2 SCC (L&S) 50] , 27-4-2021 [Cognizance for Extension of Limitation, In re, (2021) 17 SCC 231 : 2021 SCC OnLine SC 373] and 239-2021 [Cognizance for Extension of Limitation, In re, 2021 SCC OnLine SC 947] , it is directed that the period from 15-3-2020 till 28-2-2022 shall stand excluded for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial or quasijudicial proceedings.
5.2. Consequently, the balance period of limitation remaining as on 3-10-2021, if any, shall become available with effect from 1-3-2022.
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5.3. In cases where the limitation would have expired during the period between 15-3-2020 till 28-2-2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 1-3-2022. In the event the actual balance period of limitation remaining, with effect from 1-3-2022 is greater than 90 days, that longer period shall apply. ”
(emphasis supplied)
Liability
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Pendente Lite and Future Interest Payable
iii. Pendente Lite and Future interest at the rate of 18 percent per annum.
“ 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, [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
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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 therefor shall not lie. ”
(emphasis supplied)
“ 41. A few points are clear from a bare reading of the provision. While decreeing a suit if the decree be for payment of money, the court would adjudge the principal sum on the date of the suit. The court may also be called upon to adjudge interest due and payable by the defendant to the plaintiff for the pre-suit period which interest would, on the findings arrived at and noted by us hereinabove, obviously be other than such interest as has already stood capitalised and having shed its character as interest, has acquired the colour of the principal and having stood amalgamated in the principal sum would be adjudged so. The principal sum adjudged would be the sum actually loaned plus the amount of interest on periodical rests which according to the contract between the parties or the established banking practice has stood capitalised. Interest pendente lite and future interest
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(i.e. interest post-decree not exceeding 6 per cent per annum) shall be awarded on such principal sum i.e. the principal sum adjudged on the date of the suit.It is well settled that the use of the word “may” in Section 34 confers a discretion on the court to award or not to award interest or to award interest at such rate as it deems fit. Such interest, so far as future interest is concerned may commence from the date of the decree and may be made to stop running either with payment or with such earlier date as the court thinks fit. Shortly hereinafter we propose to give an indication of the circumstances in which the court may decline award of interest or may award interest at a rate lesser than the permissible rate. ”
44. We are of the opinion that the meaning assigned to the expression “the principal sum adjudged” should continue to be assigned to “principal sum” at such other places in Section 34(1) where the expression has been used qualified by the adjective “such”, that is to say, as “such principal sum”. Recognition of the method of capitalisation of interest so as to make it a part of the principal consistently with the contract between the parties or established banking practice does not offend the sense of reason, justice and equity. As we have noticed, such a system has a long-established practice and a series of judicial precedents upholding the same. Secondly, the underlying principle as noticed in several decided cases is that when interest is debited to the account of the borrower on periodical rests, it is debited because of it having fallen due on that day. Nothing prevents the borrower from paying the amount of interest on the date it falls due. If the amount of interest is paid there will be no occasion for capitalising the amount of interest and converting it into principal. If the interest is not paid on the date due, from that date the creditor is deprived of such use of the money which it would have made if the debtor had paid the amount of interest on the date due. The creditor needs to be compensated for deprivation. As held in Pazhaniappa Mudaliar v. Narayana Ayyar [AIR 1943 Mad 157 : (1942) 2 MLJ 753] the fact situation
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is analogous to one as if the creditor has advanced money to the borrower equivalent to the amount of interest debited. We are, therefore, of the opinion that the expression “the principal sum adjudged” may include the amount of interest, charged on periodical rests, and capitalised with the principal sum actually advanced, so as to become an amalgam of principal in such cases where it is permissible or obligatory for the court to hold so. Where the principal sum (on the date of suit) has been so adjudged, the same shall be treated as “principal sum” for the purpose of “such principal sum” — the expression employed later in Section 34 CPC. The expression “principal sum” cannot be given different meanings at different places in the language of same section i.e. Section 34 CPC.
48. It was also submitted that Section 34 CPC is general in its application to all money suits and if banking practice or banking contracts providing for capitalisation of interest charged on periodical rests were to be recognised it will mean that application of Section 34 would be different in suits filed by banks and in suits filed by creditors other than bankers. In our opinion it is bound to be so. Section 34 is a general procedural provision and whether it would apply or not and if apply then to what extent would obviously depend on the fact situation of each case.
49. We are, therefore, of the opinion that the two-Judge Bench decision of this Court in Corpn. Bank v. D.S. Gowda [(1994) 5 SCC 213] and the three-Judge Bench decision in Bank of Baroda v. Jagannath Pigment & Chemicals [(1996) 5 SCC at p. 280] are correctly decided and are, therefore, affirmed. A creditor can charge interest from his debtor on periodical rests and also capitalise the same so as to make it a part of the principal. Such a course can be justified by stipulation in a contract voluntarily entered into between the parties or by a practice or usage well established in the world to which the parties belong. Such practice is to be found already in vogue in the field of banking business. Such contract or usage or practice
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can stand abrogated by legislation such as usury laws or debt relief laws and so on.
55. ..However, we propose to place on record a few incidental observations, without which, we feel, our answer will not be complete and that we do as under:
(1) Though interest can be capitalised on the analogy that the interest falling due on the accrued date and remaining unpaid, partakes the character of amount advanced on that date, yet penal interest, which is charged by way of penalty for non-payment, cannot be capitalised. Further interest i.e. interest on interest, whether simple, compound or penal, cannot be claimed on the amount of penal interest. Penal interest cannot be capitalised. It will be opposed to public policy.
(2) Novation, that is, a debtor entering into a fresh agreement with a creditor undertaking payment of previously borrowed principal amount coupled with interest by treating the sum total as principal, any contract express or implied and an express acknowledgement of accounts, are the best evidence of capitalisation. Acquiescence in the method of accounting adopted by the creditor and brought to the knowledge of the debtor may also enable interest being converted into principal. A mere failure to protest is not acquiescence.
(3) The prevalence of banking practice legitimatises stipulations as to interest on periodical rests and their capitalisation being incorporated in contracts. Such stipulations incorporated in contracts voluntarily entered into and binding on the parties shall govern the substantive rights and obligations of the parties as to recovery and payment of interest.
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(4) Capitalisation method is founded on the principle that the borrower failed to make payment though he could have made and thereby rendered himself a defaulter. To hold an amount debited to the account of the borrower capitalised it should appear that the borrower had an opportunity of making the payment on the date of entry or within a reasonable time or period of grace from the date of debit entry or the amount falling due and thereby avoiding capitalisation. Any debit entry in the account of the borrower and claimed to have been capitalised so as to form an amalgam of the principal sum may be excluded on being shown to the satisfaction of the court that such debit entry was not brought to the notice of the borrower and/or he did not have the opportunity of making payment before capitalisation and thereby excluding its capitalisation.
(8) Award of interest pendente lite and post-decree is discretionary with the court as it is essentially governed by Section 34 CPC dehors the contract between the parties. In a given case if the court finds that in the principal sum adjudged on the date of the suit the component of interest is disproportionate with the component of the principal sum actually advanced the court may exercise its discretion in awarding interest pendente lite and postdecree interest at a lower rate or may even decline awarding such interest. The discretion shall be exercised fairly, judiciously and for reasons and not in an arbitrary or fanciful manner.
(emphasis supplied)
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Relief
(ANISH DAYAL) JUDGE
MARCH 12, 2025/ kp
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3 issues framed by the court
Whether the ex parte defendant's liability for the loaned amount was established on the plaintiff's uncontroverted evidence.
Whether the suit was within limitation given acknowledgments, part-payment and COVID-19 extension of limitation.
What rate of pendente lite and future interest should be awarded under Section 34 CPC.
Colour shows how this judgement treated each authority
Cognizance for Extension of Limitation, In reApplied¶23
(2022) 3 SCC 117 · Who else cites this
Central Bank of India v. RavindraRelied on¶29
(2002) 1 SCC 367 · Who else cites this
5 provisions across 4 enactments
Anish Dayal
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
