EVEREST INDUSTRIAL CORPORATION & OTHERS versus GUJARAT STATE FINANCIAL CORPORATION

Citation: [1987] 3 S.C.R. 607 · Decided: 21-07-1987 · Supreme Court of India · Bench: E.S. VENKATARAMIAH · Disposal: Disposed off

Cited by 1 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

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EVEREST INDUSTRIAL CORPORATION & OTHERS. 
A 
v. 
GUJARAT STATE FINANCIAL CORPORATION. 
JULY 21, 1987 
-f_ 
[E.S. VENKATARAMIAH AND K.N. SINGH, JJ.] 
B 
¥,· 
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. .._ 
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State Financial Corporations Act, 1951: ss. 31 & 32-NatUre of 
proceedings under-Loan-Rate of interest chargeable on principal 
amount-Whether governed bys. 34 C.P.C. or payable at contractual 
rate. 
Civil Procedure Code, 1908: s. 34, 0. 34, rr. 6 & 11-Applica- c 
bility of to orders passed under s. 32, State Financial Corporations Act, 
1951. 
The appellants had borrowed from the respondent Corporation a 
certain sum for the acquisition of fixed assets under a deed of hypothe- D 
cation. They also created an equitable mortgage, mortgaging the land 
and factory building by depositing the original title deeds of the proper-
ties with the Corporation. The loan had to be repaid within a period of 
8 years by half yearly instalments. The appellants were liable to pay 
interest at 8.S per cent per annum and that was to be calculated and 
charged at the end of every half year. 
E 
The appellants committed default in payment of instalments and 
interest due to the Corporation. The Corporation filed an application 
under s. 31 of the State Financial Corporations Act, 1951 before the 
District Judge claiming the entire outstanding loan, interest and com-
mitment charges. The appellants having admitted the claim of the F 
Corporation, an order of compromise was passed by the Court under 
which the appellants undertook to pay a sum of Rs.15,000 every month 
towards the claim of the Corporation. The appellants failed to pay the 
amount as ordered by the Court. 
A 
The respondent thereupon filed an application under s. 32(8) of G 
the Act requesting that the property hypothecated in favour of the 
Corporation be directed to be sold by the Commissioner appointed by 
the Court and the amount so realised be appropriated towards the 
dues. 
The appellants raised an objection that since the Court had not in H 
607 
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608 
SUPREME COURT REPORTS 
[1987] 3 S.C.R. 
its order expressly directed payment of any interest on the amount, the 
A 
Corporation was not entitled to recover any amount by way of interest 
due on the principal amount for the period subsequent to the date of the 
order, and since payment of interest subsequent to the date of the 
decision of the Court was governed by s. 34 of the Code of Civil Proce-
dure, the appellants were not liable to pay any interest. The first appeal 
B 
and the Letters Patent Appeal filed by the appellants were dismissed by ~ 
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the High Court. 
In this appeal by special leave, it was contended for the appellants 
that a proceeding under s. 31 of the Act is in the nature of a suit, an 
order made thereon under s. 32 thereof is a decree, and since by sub-
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s. (6) of s. 32 of the Act, the District Judge was required to Investigate 
C 
the claim of the Corporation In accordance with the provisions of the 
.... 
Code, s. 34 of the Code would be attracted to the proceeding instituted 
under s. 31 of the Act also, and that since the decree passed in this case 
is silent on the question of payment of any interest on principal sum 
from the date of the decree to the date of payment, the Court should be 
D 
deemed to have refused such interest by virtue of sub-s. 2 of s. 34 of the y 
i., 
Code. 
E 
F 
Disposing of the appeal, 
HELD: 1. The High Court was right in holding that Interest 
would be payable on the pri11cipal amount due in accordance -With-the 
terms of the agreement between the parties till the entire amount due 
was paid as per the order passed under s. 32 of the State Financial 
Corporations Act, 1951. [613GH] 
2. Section 34 of the Code of Civil Procedure, 1908 is not appli-
cable to this case. A proceeding instituted under s. 31(1) of the Act is 
something akin to an application for attachment of property in execu-
tion of a decree at a stage posterior to the passing of the decree. That 
being so, no question of passing any order under s. 34 of the Code would 
arise since that provision would be applicable only at the stage of the 
passing of the decree and not to any stage posterior to the decree. Even . 
G 
under the Code, the question of interest payable in mortgage suits liled"-
in civil courts is governed by Order 34 rule 11 of the Code and not by 
s. 34 of the Code which may be applicable only to cases of personal 
decrees passed under Order 34 rule 6 of the Code. [614C, 613F] 
3. In the instant case, the Joint 

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