Partly allowed

D S B Sreedevi v. Federal Bank

DRAT15 May 2024REGULAR APPEAL/116/2023

Case brief

AI extract

What is this about?

The Debt Recovery Appellate Tribunal, on an appeal against the DRT awarding interest at 15.48%, held that the discretion under Section 34 CPC must be exercised judicially. Considering the drastic fall in bank rates and inflation, the Tribunal reduced the interest rate from 15.48% to 9% simple per annum by modifying the impugned order.

What did the court decide?

Impugned judgment modified to grant interest at the rate of 9% simple pending realization.

D S B Sreedevi versus Federal Bank — Contract and Commercial Disputes | DRAT (2024)

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Reportable/Non-Reportable

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Appeal No. 116 of 2023-DRAT-Kolkata

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IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT KOLKATA

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THE HON’BLE MR. JUSTICE ANIL KUMAR SRIVASTAVA CHAIRPERSON

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Appeal No. 116 of 2023

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(Arising out of O.A. 3966 of 2017 in DRT-II, Hyderabad)

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Smt. D. Sandhya Bhaskar Sridevi, w/o of D.S Srinivasa Prasad Reddy residing at H no. 8-2-695/R/4, Paradise Shankar Valley, Road No.12, Banjara Hills, Hyderabad - 500 034;

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D. Srinivasa Prasad Reddy, son of Sri V.R.R. Damegunta, residing at H no.8-2-695/R/4, Paradise Shankar Valley, Road No.12, Banjara Hills, Hyderabad - 500 034.

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… Appellants -VersusFederal Bank Limited, 6-2-981, Maruthi Plaza, Khairatabad, Hyderabad – 500 003. … Respondent Counsel for Appellants … Mr. Nemani Srinivas Counsel for Respondents … Ms. Aparajita Rao Ms. Swastika Roy JUDGMENT : 15^th May, 2024

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THE APPELLATE TRIBUNAL :

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Instant appeal has arisen against judgment and order dated 27.02.2020, passed by Learned DRT-II, Hyderabad, allowing O.A. 3966 of 2017 (The Federal Bank Limited -vsSmt. D. Sandhya Bhakar Sridevi & Another). O.A. 3966 of 2017 was filed by the Bank before the Learned DRT for issuance of a Certificate for Rs.53,75,447.27p. The fact of availment of Rs.50.00 lac by the Defendants is not in dispute. However, a part satisfaction of memo for Rs.3,44,664.00 was filed by the Bank. Accordingly, Learned DRT allowed the O.A. for issuance of Certificate for an amount of Rs.50,30,783.27p with future interest at the rate

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Appeal No. 116 of 2023-DRAT-Kolkata of 15.48% per annum simple pendente lite and future till realisation. Feeling aggrieved by the rate of interest, Appellant preferred the appeal.

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I have heard the Learned Counsel for the parties and perused the record.

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2. At the very outset, Learned Counsel for the Appellant submits that he is pressing the appeal on the point of interest only. It is submitted that the rate of interest as agreed between the parties was 14.05% with variable rate of interest. However, Learned DRT granted interest at the rate of 15.48% per annum simple. Learned Counsel submits that Section 34 C.P.C. provides for granting interest at the rate of 6%.

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3. Learned Counsel for the Respondent submits that it is discretion of the Learned DRT to grant pendente lite and future interest which is duly exercised by the Learned DRT. Section 34 of the C.P.C. reads as under :

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“ (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 a s 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 a t 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:”

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4. The use of word ‘may’ in Section 34 confers 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

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Appeal No. 116 of 2023-DRAT-Kolkata

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of the decree and may be made to stop running either with payment or with such earlier date as the court thinks fit. In a Constitution Bench of the Hon’ble Apex Court in Central Bank of India -vs- Ravindra & Others [(2002) 1 SCC 367 it was held in paragraph 55 Sub-para (8) that :

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“(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 post-decree 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.”

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Discretion vested with the Court has to be exercised fairly judicially and for reasons.

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5. Further in C.K. Sasankan -vs- Dhanalakshmi Bank Limited [2009 (11) SCC 60] Hon’ble Apex Court held that the discretion under Section 34 of the C.P.C. has to be exercised by the Court properly, reasonably and on sound legal proposition and not arbitrarily and while doing so Court is also to consider the parameters, scope and ambit of Section 34 of the Code. Hon’ble Apex Court in paragraph 14 considered its earlier judgment wherein it was held that

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“14. We are inclined to refer to the decision in Clariant International Limited -vs- Securities & Exchange Board of India (2004) 8 SCC 524 where it was held by this Court that the interest can be awarded in terms of an agreement or statutory provisions and it can also be awarded by reason of usage or trade having the force of law or on equitable considerations but the same cannot be awarded by way of damages except in cases where money due is wrongfully withheld and there are equitable grounds therefor, for which a written demand is mandatory. It was further held that in the absence of any agreement or

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Appeal No. 116 of 2023-DRAT-Kolkata

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statutory provision or a mercantile usage, interest payable can be only at the market rate and such interest is payable upon establishment of totality of circumstances justifying exercise of such equitable jurisdiction. It was also held that in ascertaining the rate of interest the courts of law can take judicial notice of both inflation as also a fall in the bank rate of interest. The bank rate of interest both for commercial purposes and other purposes has been the subject-matter of statutory provisions as also the judge-made laws. In the said case reference was made to the decisions in Kaushnuma Begum -vs- New India Assurance Co. Limited, [(2001) 2 SCC 9] H.S. Ahammed Hussain -vs- Irfan Ahammed [(2002) 6 SCC 52] and United India Insurance Co. Limited -vs- Patricia Jean Mahajan [(2002) 6 SCC 281] and it was observed that even in cases of victims of motor vehicle accidents, the courts have upon taking note of the fall in the rate of interest held 9% interest to be reasonable. Direction to pay such a rate of interest is also found to be reasonable and fair as the plaintiff was deprived to utilise and roll its money in commercial transaction and kept out of it due to wrongful withholding of the same by the defendant.”

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6. Now it is to be seen whether the Learned DRT has exercised its jurisdiction properly in awarding interest at the rate of 15.48% per annum pendente lite and future? 7. Loan was sanctioned in 2013; since then an amount of Rs.3,44,664.00 was paid by the Defendants. It is stated by the Appellant that the property was lying vacant as the rent receipt available was to be deposited with the Bank but after the tenant vacated the property no new tenant could be found and the loan could not be repaid. No doubt liability of the Defendant to repay the loan entirely lies upon the Defendants. In the C.K. Sasankan (supra), the Hon’ble Apex Court has observed that the Tribunal has to look into the rate of inflation, if any, coupled with the market rates and the Bank rate of interests. Judicial notice can be taken to the fact that the interest rates even in the deposit in the

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Appeal No. 116 of 2023-DRAT-Kolkata Bank has come down drastically. In such circumstances, I find it appropriate that interest at the rate of 9% simple pendente lite and future should be awarded in favour of the Bank. Accordingly, the impugned judgment and order is partly modified and appeal is liable to be partly allowed.

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O R D E R E D

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Appeal is partly allowed. Impugned judgment and order dated 27.02.2020, passed by Learned DRT-II, Hyderabad, allowing O.A. 3966 of 2017, is modified to the extent that the Bank would be entitled to recover Rs.50,30,783.27p from Defendants No. 1 and 2 with pendente lite and future interest at the rate of 9% simple till the date of realisation. Rest of the findings of the Learned DRT are confirmed.

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No order as to costs.

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Copy of the order be supplied to Appellant and the Respondents and a copy be also forwarded to the concerned DRT.

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File be consigned to Record room.

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Order signed, dated and pronounced in open Court.

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(Anil Kumar Srivastava,J) Chairperson

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Dated: 15^th May, 2024 ac

D S B Sreedevi v. Federal Bank

Case brief

What is this about?

What did the court decide?

D S B Sreedevi v. Federal Bank

Case brief

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