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Life Insurance Corporation Of India v. Kumar Purnendu Nath Tagore And Another
Factual and Procedural Background
This appeal challenges an order and preliminary decree in a mortgage suit filed by the plaintiff-appellant. The appellant's sole grievance was that the trial Judge did not grant interest from the date of filing the suit. The suit was instituted in June 1959; a preliminary decree was passed in 1969. The appeal was preferred in 1970 and, at the time of this opinion, had been pending for 17 years.
Legal Issues Presented
- Whether interest should be awarded for the period between institution of the suit and the date of the decree.
- Whether the court is bound to apply the contractual rate of interest, or may fix a different rate for interim interest.
- What rate and period of interest should be awarded in the circumstances of this case.
Arguments of the Parties
Appellant's Arguments
- The trial Judge was obliged to grant interest from the date of institution to the date of decree; discretion exists only as to the rate of interest.
- Reliance was placed on West Bengal Financial Corpn. v. Bertram Scott (I) Ltd. (in liquidation) reported in AIR 1983 Cal 381 and State Bank of India v. B. Gupta (Tea) Pvt. Ltd., AIR 1987 1 Cal 64.
- The contractual rate of interest was 7½% and the appellant sought interest at that rate.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| West Bengal Financial Corpn. v. Bertram Scott (I) Ltd. (in liquidation) reported in AIR 1983 Cal 381 | Cited for the proposition that interest between the date of institution and the date of decree should be granted. | The court accepted that interim interest should have been allowed and that there was no discretion to refuse such interest. |
| State Bank of India v. B. Gupta (Tea) Pvt. Ltd. reported in AIR 1987 1 Cal 64 | Referenced as a subsequent Division Bench decision following the earlier authority on award of interim interest. | Regarded as supporting the proposition that interim interest is to be awarded; the court proceeded to fix the rate and period in the present case. |
Court's Reasoning and Analysis
The court held that interim interest (from institution of the suit to decree) should have been allowed and that there was no discretion to refuse such interest. The court further held it was not bound to apply the contractual rate of interest. Considering the long time span involved (suit instituted 1959, preliminary decree 1969, appeal pending 17 years), the court directed that interest be allowed for a total of 15 years. The court noted the plaintiff's lack of diligence in prosecuting the appeal and accordingly fixed the rate at 5% rather than the contractual 7½%. The Life Insurance Corporation was observed to be a public institution engaged in lending and investing funds collected by premiums, but, having regard to the years involved, interest was limited to 15 years. For calculation purposes the principal was to be deemed Rs. 4 lakhs; interest at 5% for 15 years was computed to total Rs. 3 lakhs. The preliminary decree was modified accordingly. The court also noted there had been part adjustment under a settlement and directed that any amounts already paid be dealt with as specified in the settlement order. Preliminary decree was to be drawn up in accordance with law and the judgment.
Holding and Implications
Appeal allowed in part; preliminary decree modified to award interest.
Direct consequences: the court awarded interest on the principal (deemed Rs. 4 lakhs) at 5% for a period of 15 years, quantified as Rs. 3 lakhs in interest; the preliminary decree is to be drawn up and modified accordingly. Any amounts paid pursuant to the part adjustment/settlement will be dealt with as specified in the settlement order. The opinion does not purport to establish any broader new precedent beyond the application of existing authorities cited.
Bimal Chandra Basak, J.:— This appeal is directed against an order and preliminary decree passed in a mortgage suit filed by the plaintiff appellant herein. The only grievance of the appellant is that the learned Judge has not granted any interest from the date of filing of the suit. It is submitted that so far as the question of interest between the date of the institution of the suit and the date of the decree is concerned, the learned Judge has to grant interest. He has only the discretion so far as the rate of interest is concerned. In this context reliance is placed on a Division Bench decision of this Court in the case of West Bengal Financial Corpn. v. Bertram Scott (I) Ltd. (in liquidation) reported in AIR 1983 Cal 381 which has been followed in another Division Bench decision of this Court in the case of State Bank of India v. B. Gupta (Tea) Pvt. Ltd. reported in AIR 1987 1 Cal 64. So far as the rate is concerned it is submitted that the contractual rate was 7½% and it should be granted at that rate.
2. In our opinion so far as the interim interest is concerned the learned Judge should have allowed such interest and there was no question of any discretion in the matter. On the question as to what rate of interest should be allowed, we are not bound by the contractual rate of interest and having regard to the number of years involved we direct that altogether 15 years' interest should be given. It should be pointed out this suit was instituted in June 1959 and preliminary decree was passed in the year 1969. This appeal was preferred in 1970 and it is pending for the last 17 years. In our opinion, the plaintiff should have been diligent in expeditious hearing of this appeal and we shall not accordingly allow more than 5% interest. So far as the Life Insurance Corporation is concerned it is public institution. It carries on the business of earning money by giving loans and the money which it invests is collected on account of premiums by the assured. However, having regard to the number of years involved, we shall grant interest on the principal sum for 15 years only. For the purpose of calculation of interest only, the principal sum would be deemed to be 4 lakhs. Accordingly such further interest subsequent to the institution of the suit shall be at the rate of 5% for a period of 15 years which makes a total sum of Rs. 3 lakhs so far as the interest is concerned.
3. The appeal is allowed to this extent and the preliminary decree is modified to that extent. We should point out in this context that there was part adjustment of this appeal whereby certain amounts were to be paid. If that amount has been paid then it would be dealt with in a manner specified in the order regarding the terms of setdement. Preliminary decree is to be drawn up in accordance with law and in accordance with this judgment and decree.
Satyabratamitra,J.:— 4. I agree.
Order accordingly.
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