M/S OSWAL VINYL INDUSTRIES LTD. AND ORS. v. VIJAYA BANK

1. Mr Hemant Chaudhari, who appears on behalf of the petitioners, says that the principal amount has already been paid. For this purpose, he has drawn our attention to paragraph 7 of the impugned order dated 13.06.2019, passed by the Debt Recovery Appellate Tribunal [in short, ‘DRAT’].

2. According to Mr Chaudhari, in terms of the judgements rendered by the Supreme Court and other courts, pendente lite interest need not be awarded at the contractual rate. Mr Choudhari submits, the concerned forum [in this case, the Debt Recovery Tribunal-III, Delhi (in short, ‘DRT-III’)], had the discretion to award interest to the respondent-bank at a lower rate.

2.1. To be noted, the DRAT has pegged the pendente lite interest at 2022:DHC:1317-DB W.P.(C) 1241/2020 2/5 18.25% compounded monthly, whereas the DRT had pegged the same at the rate at 12% (simple).

2.2. In support of his submission, Mr Chaudhuri has placed reliance on the observations made in the constitution bench judgement rendered by the Supreme Court in Central Bank of India v Ravindra and Ors. MANU/SC/0663/2001. The relevant observations read as follows: “54(8). Award of interest pendent lite and post-decree is discretionary with the Court as it is essentially governed by Section 34 of the CPC de hors 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 the interest is disproportionate with the component of the principal sum actually advanced the Court may exercise its discretion in awarding interest its discretion in awarding interest pendent 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. xxx xxx xxx 57(2). The principal sum so adjudged is such principal sum’ within the meaning of Section 34 of the Code of Civil Procedure, 1908 on which interest pendent lite and future interest i.e. postdecree interest, at such rate and for such period which the Court may deem fit, may be awarded by the Court.”

2.3. Furthermore, reliance is also placed by Mr Chaudhuri on the judgement of another constitution bench rendered in State Bank of India v Sarathi Textiles and Ors. (2009) 16 SCC 328. The relevant observations read as follows: W.P.(C) 1241/2020 3/5 “4. The present proceeding arises out of an application filed before the Debts Recovery Tribunal under the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, hereinafter referred to as “the Act”. The Tribunal did grant interest @ 19½%, but on appeal being carried, the same has been reduced to 10% by the Appellate Tribunal. xxx xxx xxx

6. Prime facie, sub-section (20) of Section 19 confers a discretion on the Tribunal to award interest on an application being filed as it thinks fit to meet the ends of justice. That being so, in the case in hand, we see no justification for interference by this Court under Article 136 of the Constitution of India against the appellate order of the Tribunal. This petition accordingly stands dismissed.”

2.4. Besides this, reliance is also placed by Mr Chaudhari on the following observations made in paragraph 13 in another judgment of the Supreme Court rendered in Punjab & Sindh Bank v Allied Beverages Company Pvt. Ltd. and Ors. MANU/DE/3946/2019. For the sake of convenience, the said paragraph is extracted below: “13. By drawing our attention to the decision of this Court in Syndicate Bank, Chennai vs. Mohan Brothers and Ors., (2004) 10 SCC 549, it is contended that in view of proviso to Section 34(1) CPC, if the liability in relation to the sum adjudged had arisen out of commercial transaction, the rate of such further interest may exceed 6% p.a. but shall not exceed the contractual rate of interest and the bank is entitled to claim interest as per the contract. It is true that in this decision, a three-Judge Bench, after finding that the decision in Central Bank of India's case (supra) shows that no reference has been made to the proviso which specifically deals with the awarding of interest arising out of commercial transaction, referred the issue to a larger bench. We were not informed about any decision by a W.P.(C) 1241/2020 4/5 larger Bench contrary to the decision in Central Bank of India (supra). Even otherwise, considering factual aspects, even the Company agreed for settlement but it was not successful due to financial difficulties and all other circumstances, we feel that the High Court has fairly neutralized the claim of the Bank as well as the sufferings of the Company and passed a workable order by reducing the rate of interest to 14% p.a., which would be simple interest, in respect of period pendente lite and future interest with effect from 04.07.2003, the day on which the Bank filed an application before the DRT. Though request was made by the Company for further reduction upto 12% p.a., since it was a commercial transaction and the Bank being a nationalized bank, we are not inclined to accede to their request.”

3. Having regard to the dicta of the aforementioned judgments, it cannot but accepted by the counsel for the respondent-bank that the DRT had the necessary discretion to award a rate of interest for the pendente lite period, which was less than the contractual rate of interest.

3.1. The DRT appears to have taken the necessary circumstances into account and granted interest at the rate of 12% (simple) per annum for the pendente lite period.

4. Accordingly, the impugned order dated 13.06.2019 passed by the DRAT is modified, to the extent it awards interest in favour of the respondent-bank at the rate of 18.25%, compounded monthly, for the pendente lite period. The direction issued by the DRT in that behalf i.e., awarding interest at rate of 12% (simple) for the pendente lite period, shall stand supplanted in place of the aforesaid direction issued by the DRAT.

5. The writ petition is disposed of in the aforesaid terms. W.P.(C) 1241/2020 5/5

6. Consequently, pending application shall stand closed.

RAJIV SHAKDHER, J POONAM A. BAMBA, J APRIL 8, 2022 Click here to check corrigendum, if any