Partly allowed

Muralidhar v. a R Ramesh

Karnataka HC3 Nov 2023RSA/377/2018

Case brief

AI extract

What is this about?

In this regular special appeal, the High Court of Karnataka examined challenges to the inclusion of pre-suit interest and the award of future interest at 12% per annum. Relying on Supreme Court precedent, the Court held that pre-suit interest can form part of the principal sum. However, the Court set aside the 12% future interest as exceeding the statutory limit of 6% under Section 34 CPC, modifyi

What did the court decide?

Second appeal allowed in part; future interest awarded at 6% per annum instead of 12%; plaintiff entitled to recover Rs.6,34,805/- with 6% interest.

Muralidhar Vs a R Ramesh — Money Laundering | Karnataka HC (2023)

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1 - NC: 2023:KHC:39135 RSA No. 377 of 2018

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 3^RD DAY OF NOVEMBER, 2023

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BEFORE

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THE HON'BLE MR JUSTICE SACHIN SHANKAR MAGADUM

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REGULAR SECOND APPEAL NO.377 OF 2018 (MON)

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BETWEEN:

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MURALIDHAR S/O LATE M S LOGANATH MUDALIAR AGED ABOUT 61 YEARS R/AT NO.95, MES COLONY KONENA GRAHARA BEHIND MSIL COMPLEX VIMANAPURA (OLD AIRPORT ROAD) BENGALURU - 560 017

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…APPELLANT

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(BY SRI. G BALAKRISHNA SHASTRY, ADVOCATE)

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Digitally signed by ALBHAGYA Location: HIGH COURT OF KARNATAKA

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AND:

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A R RAMESH S/O LATE A N RAM AGED ABOUT 53 YEARS R/AT DOOR NO.980/1 GEETHA ROAD CHAMARAJAPURAM CHAMARAJA MOHALLA MYSURU - 570 005

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…RESPONDENT

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(BY SRI.G.S.BALAGANGADHAR, ADVOCATE)

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NC: 2023:KHC:39135 RSA No. 377 of 2018

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THIS RSA IS FILED U/SEC.100 OF CPC., AGAINST THE JUDGEMENT AND DECREE DTD 31.10.2017 PASSED IN R.A.NO.849/2016 ON THE FILE OF THE V ADDL. DISTRICT AND SESSIONS JUDGE, MYSURU, DISMISSING THE APPEAL AND CONFIRMING THE JUDGEMENT AND DECREE DTD 29.07.2016 PASSED IN OS.NO.640/2013 ON THE FILE OF THE IV ADDL. SENIOR CIVIL JUDGE, MYSURU AND ETC.

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THIS APPEAL, COMING ON FOR ADMISSION, THIS DAY, THE COURT DELIVERED THE FOLLOWING:

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JUDGMENT

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The captioned appeal is filed by unsuccessful

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defendant feeling aggrieved by the concurrent judgments of the both Courts, wherein the Trial Court has decreed the suit and the same is confirmed by the Appellate Court. These concurrent judgments are under challenge by the defendant.

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For the sake of brevity, the parties are

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referred as they are ranked before the Trial Court.

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NC: 2023:KHC:39135 RSA No. 377 of 2018

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Facts leading to the case are as under;

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The defendant is the brother-in-law of the

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plaintiff. During 2005, the BEML Employees House Building Co-operative Society Limited, Mysuru called applications for distribution of sites formed in City of Mysuru namely Vasantha Nagar Layout. The plaintiff approached the defendant to apply for a site in the name of defendant as the plaintiff is an earlier beneficiary of site under the aforesaid society. Accordingly, plaintiff has paid amount including Membership Fee of Rs.2,01,005/- on 05.09.2005 by way of cheque and also second installment of Rs.1,36,000/on 23.11.2006 by way of In January 2007, plaintiff and defendant mutually agreed to prepare an agreement and thereby, intended to share the sale proceeds after allotment. Thereafter, the plaintiff prepared an agreement dated 21.12.2007 and the same has been sent to defendant for his signature. However, the defendant did not sign said agreement despite a request to that effect. The plaintiff demanded the defendant either

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4 - NC: 2023:KHC:39135 RSA No. 377 of 2018

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to sign the said agreement or to refund the amount paid by him to Society. The defendant executed a receipt agreeing to repay a sum of Rs.3,37,005/- acknowledging the receipt towards payment of installments to Society along with passbook. The defendant did not repay the said amount. Having no other alternative, the plaintiff has filed the present suit for recovery of money.

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Learned counsel appearing for the defendant

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has vehemently argued and contended that if the suit claim was only for Rs.2,01,005/- and Rs.1,36,000/respectively, however, while instituting suit, the plaintiff has calculated interest on the amount advanced by the plaintiff. Therefore, he would contend that the Trial Court erred in including the interest as a part of the principal amount. Therefore, he would contend that the substantial question of law would arise for consideration in this appeal.

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5 - NC: 2023:KHC:39135 RSA No. 377 of 2018

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The second limb of argument advanced by the

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learned counsel for the defendant is that both the Courts have exceeded in its jurisdiction by awarding future interest at the rate of 12% per annum, which runs contrary to Section 34 of the Civil Procedure Code.

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The learned counsel appearing for the defendant to buttress his arguments has placed reliance on the judgment rendered by this Court in the case of SOWCAR T.THIMMAPPA VS. S.L.PRASAD¹ . Placing reliance on the dictum cited supra, he would vehemently argue and contend that since present dispute does not fall within the category of commercial transactions, the Court of first instance erred in granting future interest at the rate of 12%. He would also raise serious objection for having decreed the suit inclusive of interest calculated by the plaintiff, which is towards pre-suit period.

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1 1977(2) KAR.L.J 346

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6 - NC: 2023:KHC:39135 RSA No. 377 of 2018

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Per contra , the learned counsel appearing for the plaintiff has countered the arguments advanced by the learned counsel appearing for the defendant. In support of his arguments, he has placed reliance on the law laid down by the Constitutional Bench of the Hon'ble Apex Court in the case of CENTRAL BANK OF INDIA VS.

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RAVINDRA AND OTHERS² . Referring to the said dictum, he would point out that "the principal sum adjudged" includes the amount of interest, charged on periodical rests, and capitalised with the principal sum actually advanced. Referring to the law laid down in the judgment cited supra, he would point out that the principal sum actually advanced can be amalgamated with the principal amount and the principal sum on the date of the suit, on adjudication inclusive of interest, has to be treated as a principal sum within the meaning of Section 34 of Civil Procedure Code. He would further point out that if the principal sum is adjudged, it is well within the jurisdiction of the Court to impose interest pendente lite and future

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2 AIR 2001 SCC 3095

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7 - NC: 2023:KHC:39135 RSA No. 377 of 2018

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interest. Referring to the principles laid down by the Constitutional Bench, he would point out that no substantial question of law arises for consideration. He would also place reliance on Section 3 of the Interest Act, 1978. Referring to Section 3 of the Interest Act, he would point out that hands of the Courts are not tied under Section 34 of the Civil Procedure Code. Section 3 of the Interest Act vests the Authority in a given case to grant interest in excess of 6%. He would also bring to the notice of this Court that provisions of Interest Act prevail over Section 34 of the Civil Procedure Code. On these set of defence, he would contend that substantial question of law framed by this Court needs to be answered against the defendant and therefore, prays to dismiss the appeal.

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This appeal is admitted on the following substantial questions of law.

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1. Whether both Courts erred in including the interest for the pre-suit period?

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8 - NC: 2023:KHC:39135 RSA No. 377 of 2018

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2. Whether both Courts having passed the money decree erred in awarding future interest at the rate of 12% per annum contrary to the provisions of Section 34 of the Civil Procedure Code, which contemplates that the future interest in a given case can be awarded at such rate not exceeding 6% per annum?

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My findings regarding first substantial question

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of law.

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Though the arguments advanced by the learned

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counsel appearing for the defendant at first glance seems to be quite impressive in the light of the restrictions imposed on the Courts in granting interest under Section 34 of the Civil Procedure Code, however, I am not inclined to accede to the said arguments that the Courts cannot compute the pre-suit interest and the same cannot form a part of the principal sum. The grounds urged in the captioned second appeal are squarely dealt by the judgment rendered by the Constitution Bench in the case

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9 - NC: 2023:KHC:39135 RSA No. 377 of 2018

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of CENTRAL BANK OF INDIA VS. RAVINDRA AND

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OTHERS . The grievance of the defendant is that plaintiff while instituting the suit could not have computed the interest part for pre-suit period towards principal sum. The said issue is dealt by the Constitutional Bench in the judgment cited supra. The Constitutional Bench, while answering the reference, has held that the principal sum claimed at the time of filing of suit includes the interest. The Hon'ble Apex Court has held that the principal sum so adjudged, shall be treated as "principal sum" within meaning of Section 34 of the Civil Procedure Code on which interest pendente lite and future interest i.e., postdecree interest at such rate may be awarded by the Court by exercising discretion.

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In the light of the law laid down by the Constitutional Bench of the Hon'ble Apex Court in the judgment cited supra, the grounds urged by the learned counsel appearing for the defendant that the plaintiff could not have calculated the pre-suit interest at the time of

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10 - NC: 2023:KHC:39135 RSA No. 377 of 2018

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filing of the suit cannot be acceded to. The interest claimed forms part of the principal sum and can be amalgamated with the principal, which is permissible, the substantial question of law needs to be answered in the negative and against the defendant.

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My findings on the second substantial

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question of law.

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The defendant is questioning the future interest awarded by the both Courts at the rate of 12% per annum. The main ground of attack is that the Courts had no jurisdiction to award interest on the principal sum adjudicated in excess of 6% per annum. Section 34 of the Civil Procedure Code clearly contemplates that in the event the principal sum adjudged from the date of the decree in addition to any interest adjudged on the principal sum for any period prior to the institution of the suit, the Courts have jurisdiction in a deserving case to award future interest at the rate not exceeding 6% per annum.

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11 - NC: 2023:KHC:39135 RSA No. 377 of 2018

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However, in the case on hand, the Court of first instance has awarded 12% interest, which runs contrary to the provisions of Section 34 of the Civil Procedure Code. As rightly pointed out by the learned counsel appearing for the defendant, no reasons are assigned in awarding 12% interest. I would equally find some force in the submission made by the learned counsel appearing for the defendant that the case on hand does not fall within the category of commercial transaction. The suit amount, which was paid to the defendant, was admittedly towards investment. The investment was made on behalf of the plaintiff and the said investment was rooted out through the defendant, who appears to be brother-in-law. Therefore, the transaction on hand cannot be termed as a commercial transaction even otherwise.

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On examining the reasons assigned by both

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the Courts while awarding future interest at the rate of 12%, the same is not supported by any reasons. The award of interest pendente-lite and post decree is

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12 - NC: 2023:KHC:39135 RSA No. 377 of 2018

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discretionary and is essentially governed by Section 34 of the Civil Procedure Code. Under the Amendment by Act 66 of 1956, the interest after decree till payment can be awarded at the rate of interest not exceeding 6%. Subject to the above limits, the question of interest after decreetal payment is within the discretionary of the Court. The award of interest under Section 34 of CPC., is a matter of procedure and therefore, the Courts are bound to grant interest in all money decrees, but however, while awarding interest, the Courts should bear in mind that it does not exceed 6%. Therefore, I am of the view that second substantial question of law framed by this Court needs to be answered in the Affirmative and in favour of the defendant.

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For the reasons stated supra, I pass the

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following;

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ORDER

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(i) The second appeal is allowed in part .

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13 - NC: 2023:KHC:39135 RSA No. 377 of 2018

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(ii) The judgment and decree rendered by

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the both Courts is partly modified. The plaintiff

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is hereby entitled to recover a sum of Rs.6,34,805/- along with interest @ 6% per annum from the date of suit till realization.

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Sd/JUDGE

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NBM

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List No.: 1 Sl No.: 9

Muralidhar v. a R Ramesh

Case brief

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Muralidhar v. a R Ramesh

Case brief

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