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Bank Of Baroda v. Jagannath Pigment & Chem. And Others
Factual and Procedural Background
Intervention applications were dismissed. The appellant-bank filed a suit to recover Rs 1,66,759.29 with interest and costs. The trial court decreed the suit for the said amount with proportionate costs and awarded future interest at 13½% per annum on Rs 1,66,759.29 from the date of the suit until payment or realisation.
The borrower filed First Appeal No. 364 of 1986, contending that the bank was not entitled to claim compound interest or to convert the principal to include interest, and that future interest should not be granted on the principal sum adjudged. The High Court accepted this contention and modified the decree to provide that future interest be calculated on the sum actually borrowed, i.e., Rs 1,20,675.59, rather than on the principal sum adjudged (Rs 1,66,759.29).
In the present appeal, counsel for the appellant-bank asserted that the High Court’s approach was contrary to the Supreme Court’s decision in Corporation Bank v. D.S. Gowda (1994) 5 Scale 46. The respondents, though served, did not enter an appearance. The court concluded that the premise of the High Court’s decision no longer holds in view of Corporation Bank, reversed the High Court, and restored the trial court’s decree, allowing the appeal with no order as to costs.
Legal Issues Presented
- Whether the bank could claim compound interest and treat the principal sum as inclusive of interest for the purposes of the decree.
- Whether future interest should be calculated on the principal sum adjudged (Rs 1,66,759.29) or only on the original sum borrowed (Rs 1,20,675.59).
- Whether the High Court’s approach remained valid in light of the Supreme Court’s decision in Corporation Bank v. D.S. Gowda (1994) 5 Scale 46.
Arguments of the Parties
Appellant-Bank's Arguments
- The High Court’s approach to the calculation of future interest and treatment of interest was contrary to the Supreme Court’s decision in Corporation Bank v. D.S. Gowda (1994) 5 Scale 46.
Respondents' Position
- The respondents, though served, did not enter an appearance; the opinion records no arguments on their behalf.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Corporation Bank v. D.S. Gowda, (1994) 5 Scale 46 | The opinion does not specify the detailed principle; it is cited to show that the High Court’s approach to interest calculation and the underlying premise no longer holds. | Relied upon to conclude that the High Court’s premise was untenable; on that basis, the High Court’s modification was reversed and the trial court’s decree was restored. |
Court's Reasoning and Analysis
The court’s reasoning is concise and turns on binding precedent. It held that the premise underpinning the High Court’s modification—limiting future interest to the amount actually borrowed and rejecting capitalization/compound interest—no longer holds in view of the Supreme Court’s decision in Corporation Bank v. D.S. Gowda. Accordingly, the High Court’s decision was reversed. The court restored the trial court’s decree, which had awarded future interest at 13½% per annum on the principal sum adjudged (Rs 1,66,759.29) from the date of suit until payment or realisation. The intervention applications were dismissed, and the appeal was allowed with no order as to costs.
Holding and Implications
Intervention applications dismissed.
APPEAL ALLOWED; HIGH COURT JUDGMENT REVERSED; TRIAL COURT DECREE RESTORED; NO ORDER AS TO COSTS.
Direct implication: The original trial court decree stands, including future interest at 13½% per annum on Rs 1,66,759.29 from the date of the suit until payment or realisation. No broader implications are discussed; the order applies the cited precedent to the parties’ dispute without announcing a new rule.
Order
1. Intervention applications are dismissed.
2. The appellant-bank had filed a suit to recover a sum of Rs 1,66,759.29p with interest and costs. The suit was decreed for the said amount with proportionate cost. Future interest was awarded at the rate of 13½ per cent per annum on the said amount of Rs 1,66,759.29p from the date of the suit till payment or realisation. Against the said decree the borrower preferred an appeal, First Appeal No. 364 of 1986, in which one of the contentions raised was that the bank was not entitled to claim compound interest and convert the principal sum claimed as inclusive of interest and that the Court was not justified in granting future interest on the said principal sum-adjudged. The High Court accepted the contention and modified the decree in that it held that future interest should be calculated on the sum borrowed, viz., Rs 1,20,675.59p and not the principal sum-adjudged i.e Rs 1,66,759.29p. Counsel for the appellant-bank states that this approach of the High Court runs counter to this Court's decision in Corporation Bank v. D.S Gowda (1994) 5 Scale 46. The respondents though served have not chosen to enter an appearance and contest this appeal.
3. The premise on which the High Court based its impugned decision no longer holds the field in view of the decision in Corporation Bank. Therefore, the said decision of the High Court must be reversed and the decision of the trial court restored. The appeal is allowed accordingly with no order as to costs.
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