N.M. VEERAPPA versus CANARA BANK

Citation: [1998] 1 S.C.R. 342 · Decided: 27-01-1998 · Supreme Court of India · Bench: S. SAGHIR AHMAD · Disposal: Appeal(s) allowed

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Judgment (excerpt)

A 
N.M. VEERAPPA 
v. 
CANARA BANK 
JANUARY 27, 1998 
B 
'[S. SAG IR AHMAD AND M. JAGANNADHA RAO, JJ.] 
Code of Civil Procedure, 1908 : 
S. 34, Order 34 Rule l 1-Suit based on mortgage-Future interest-
C Rate of-Held, special provision of Order 34 Rule 11 is applicable and not 
s. 34-Caurt 's discretion to fix rate of interest-Explained-Provisions of 
s. 21-A of Banking Regulation Act, 1949 do not effect Order 34 Rule 11-
Banking Regulation Act, 1949-21-A. 
D 
Banking Regulation Act, 1949 : 
21-A-Rates of interest charged by banking companies-Scrutiny by 
courts-Exclusion of-Held, ss. 21, 21-A and 35 do not affect Order 34 Rule 
1 l CPC-Act does not intend to override the Code of Civil Procedure-
Discretionmy power conferred on civil court under Order 34 Rule 11 CPC 
to cut down of suit and even upto date fixed for redemption is an independent 
E power---,-Code of Civil Procedure, 1908-0rder 34 Rule 1 ]-Usurious Loan 
Act, 1918. 
F 
The respondent-Bank filed a suit based on mortgage against a 
partnership firm and its partners for recovery of money loaned to them by 
the Bank. The trial court passed a preliminary mortgage decree, but directed 
the decree-holder Bank to file a fresh memo of calculation calculating the 
contractual interest at 16.5% per annum on the balance of principal amount 
due from the date of the equitable mortgage at yearly rests till date of suit. 
As regards the future interest, it was directed that the plaintiff was entitled 
to future interest at 6% per annum on the principal amount from date of 
G suit till date of recovery of full amount. The Bank filed an appeal before the 
High Court, which held that by virtue of s.34 of the Code of Civil Procedure, 
1908, the Bank was entitled to future interest also at the contractual rate 
of interest of 16.5% from date of suit till date of realisation. Aggrieved, 
defendant No. 2, the Managing Director of the firm filed the present appeal. 
H 
It was contended for the appellant that the suit being based on mortgage, 
342 
\ 
N.M. VEERAPPA v. CANARA BANK 
343 
I 
as regards Interest pendent lite, the provision applicable was Order 34, Rule A 
11 and not s.34 of the Code and, therefore, the court could exercise discretion 
to award a lesser rate of interest than the contractual rate. The contention 
of the respondent was that apart from S.34 of the Code being applicable, if 
contractual rate of interest for the period the suit remained pending was not 
applied, Bank's interest would be seriously prejudiced. It was also contended B 
thats. 21-A of the Banking Regulation Act, 1949 would override Order 34 
Rule I I of the Code and, therefore, the court could not reopen the banking 
transaction nor could it reduce the contractual rate of interest. 
Allowing the appeal, this Court 
HELD : 1. Order 34 Rule I I of the Code of Civil Procedure, 1908 C 
applies to mortgage suits and not s.34 of the Code. S.34 applies to simple 
money decrees and payment of interest pending such suits. Order 34 Rule 
I I of the Code deals with mortgage suits and payment of interest. Thus so 
far as mortgage suits are concerned, the special provision in Order 34 Rule 
I I alone is applicable and not s.34. The High Court was wrong in holding D 
that s.34 was applicable to the present case. 1348-E-F] 
State Bank of Mysore v. G.P. Thulasi Bai, ILR (1985) Karnataka 2976, 
approved. 
2.I Before I929, it was obligatory for the court to direct the contract E 
rate of interest to be paid by the mortgagor on the sum adjudged in the 
preliminary decree, from the date of suit till the date fixed for payment as 
per Order 34 Rule 2(c)(i) or Order 34 Rule 4(I) or Order 34 Rule 7(c)(i), 
respectively in suits for foreclosure, sale or redemption. 1352-G] 
2.2 But after the 1929 amendment, because of the words used in the F 
main part of Order 34Rule11, namely that "the Court may order payment 
of interest" it is no longer obligatory on the part of the court while passing 
preliminary decree from date of suit till the date fixed in the preliminary 
decree for payment of the amount. The new provision gives a certain amount 
of discretion to the court as regards pendents lite interest and subsequent G 
interest. 1352-H; 353-A-B] 
2.3 It is no longer obligatory to award the contractual rate after date 
of suit and upto date fixed for redemption even though there was no question 
of the contractual rate being penal, excessive or substantially unfair within 
the meaning of the Usurious Loans Act, 1918.

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