Indian Bank, Rep. By The Zonal Manager, Hyderabad v. P. Venkata Satyavathi And Others

1. In both these revisions filed by the decree holder-Bank, common questions are raised. The Bank had filed suits for recovery of money which was obtained as loan by the two debtors. It had also prayed for grant of future interest. After trial, the suits were decreed and in the decree that was drafted future interest was directed to be paid on the entire suit amount. It appears that execution was levied on the basis of the said decree and the decretal amount also realised. Later on, the defendants in both the cases filed applications for amendment of the decree under Sections 151,152 and 153 C.P.C contending that the decree was not in accordance with the judgment in as much as future interest could be granted under Section 34 of C.P.C, only on the principal amount and not on the entire suit amount. The Bank opposed the application, but the trial court by the impugned order directed that the decree be amended by substituting the principal amount in the place of the suit amount on which future interest is to be paid.

2. In these revisions it is contended by Sri P.L.N Sarma, learned counsel for the Bank that the loans were granted by the Bank with an agreement that it should be repaid together with compound interest at quarterly rests. According to him, after the quarterly rests, the interest due would become part of the principal for the purposes of calculating future interest. In this view he has contended that the order granting amendment of the decree was not justified. He has relied upon two decisions of the Madras High Court reported in Sigappiachi v. Palaniappa AIR 1972 Madras 463. and Lakshmanan Chettiar v. Karuppan Chettiar 1978 2 MLJ 364. in support of his contention. Sri T. Veerabhadrayya, learned counsel for the defendant has; however, tried to distinguish these cases on the ground that they relate to account suits and not suits for recovery of loans and also invited my attention to the Bench decision of the Madras High Court reported in M.V. Mahalinga Aiyar v. Union Bank Limited, Kumbakonam AIR 30 1943 Madras 216. which directly supports his contention that future interest under Section 34 C.P.C could be granted on the principal amount of the loan and not on anything else. The controversy therefore is about the meaning to be given to the words ‘principal amount’ used in Section 34 C.P.C, for the purpose of grant of future interest. The Division Bench judgment of the Madras High Court in M.V. Mahalinga Aiyar v. Union Bank Limited, Kumbakonam is binding on me. But the two subsequent decisions relied upon by Mr. Sarma are also of the Division Bench of the same Court, though after the formation of the Andhra Pradesh High Court. Prima facie, I am also of the view that in view of the changed circumstances that the lenders are mostly public institutions the 1943 decision of the Madras High Court requires reconsideration as it will put the debtor who is in default in an advantageous position than the debtors who are regularly paying the amount. For this purpose, I consider that the matter should be referred to a Division Bench for consideration and an authoritative pronouncement as this question will arise in several suits by banks or public financial institutions.

(Delivered by Division Bench)

3. The above Civil Revision Petitions were referred to the Division Bench as to the meaning to be given to the words ‘Principal amount’ used in Section 34 of Code of Civil Procedure for the purpose of grant of future interest. In M.V. Mahalinga Aiyar v. Union Bank Limited, Kumbakonam the Division Bench of the Madras High Court held that future interest under Section 34 C.P.C could be granted on the principal amount of loan. As two subsequent decisions of the Madras High Court in Singappiache v. M.A.P.A Palaniappa Chettiar and P.C.T.L Lakshmanan Chettiar v. K.T.R.M.K.R.R.M Karuppan Chettiar, though after formation of the Andhra High Court, took a different view from that of the decision in M.V. Mahalinga Aiyar v. Union Bank Limited, Kumbakonam and as the learned single Judge felt that in view of the changed circumstances, the said decision of the Madras High Court in Mahalinga Iyer v. Union Bank Limited, Kumbakonam (1 supra) requires reconsideration, the papers were placed before the Hon'ble the Chief Justice for posting the above C.R Ps. before a Division Bench. Accordingly, the above C.R Ps are posted before us.

4. For proper appreciation of the question referred, it is necessary to advert in brief to the facts that led to filing of the above C.R Ps.

5. C.R.P 620/86 arises out of LA. No. 184/85 in O.S No. 173/81. The suit O.S No. 173/81 was filed by the Indian Bank against two defendants, i, e., the borrower and the surety, for recovery of Rs. 35,346-08 Ps. based upon the cash credit loan. In the joint promissory note, the defendants agreed to pay interest at 6% p. a. over the minimum of 15% rate of Reserve Bank of India with quarterly rests. The 2nd defendant denied that, he undertook to repay the loan with 15% interest with quarterly rests and submitted that the interest charged is usurious and as the defendants are agriculturists, the interest is liable to be scaled down. After framing appropriate issues, the trial Court decreed the suit of the plaintiff with costs against both the defendants as prayed for granting further interest at 12% p.a and the defendants were allowed to pay the decretal amount in installments. But in the decree drafted it was stated that the defendants do pay to the plaintiff a sum of Rs. 35,346.08 Ps. with interest at 12% p.a from the date of the suit till the date of realisation. Alleging that in the said judgment on issue No. 7 it was only mentioned that the suit of the plaintiff is decreed as prayed for and as the subsequent interest can never be ordered on the total sum of amount claimed in the suit, but only on the principal sum as contemplated under Section 34 of Civil Procedure Code, the defendants filed an application I.A No. 184/85 for amendment of the decree to bring it in conformity with the judgment as the drafting of the decree is due to a ministerial error. After hearing both sides, the amendment was allowed by the lower Court and it accordingly directed payment of interest on Rs. 25,000/- i.e, the principal amount at 12% p.a from the date of the suit till the date of realisation. Aggrieved by the same, the above C.R.P No. 620/86 was filed.

6. Similarly, O.S No. 181 of 1981 was filed by Indian Bank for recovery of Rs. 31,751.19 Ps. based on open cash credit loan. The first defendant firm is the borrower; defendants 2 and 3 are its partners and fourth defendant is guarantor. All the defendants executed a promissory note on 13-7-1977 for Rs. 25,000/- and subsequently renewed agreeing to repay the same with interest at 6% p.a over and above the rate of interest of Reserve Bank of India. The third defendant remained ex parte. Defendants 1 and 2 adopted the written statement of fourth defendant. Fourth defendant pleaded mainly that he did not execute the suit promissory note as co-obligant and he is also not a guarantor and was merely an attester and the rate of interest is usurious. The trial Court decreed the suit with costs as prayed for but granted installments. Alleging that in the decree drafted the defendants were made liable to pay further interest at 12% p.a not on the principal sum of Rs. 25,000/- but on the suit amount of Rs. 31,751.19 Ps which is not in conformity with the judgment, the judgment-debtors filed I.A No. 115/85 in O.S No. 181/81 under Sections 151, 152 and 153 of Civil Procedure Code for amendment of decree by adding at the end of paragraph No. 1 of the decree portion “The words on the principal sum of Rs. 25,000/-”. This amendment was allowed and the lower Court directed payment of further interest on Rs. 25,000/- at 12% p.a Aggrieved by the same, C.R.P No. 621/86 was filed.

7. Hence, the only question that arises for consideration is “What is the meaning of the expression “Principal sum adjudged” in Section 34 of Civil Procedure Code?”

8. Section 34(1) and (2) of Civil Procedure Code (without proviso) after the amendment of 1956 reads as follows:

34. (1) Where and in so far as a decree is for the payment of money, the Court may, in the decree, order interest at such rate as the Court deems reasonable to be paid on the principal sum adjudged, from the date of the suit to the date of the decree, in addition to any interest adjudged on such principal sum for any period prior to the institution of the suit, with further interest at such rate not exceeding six per cent per annum as the Court deems reasonable on such principal sum, from the date of the decree to the date of payment, or to such earlier date as the Court thinks fit.

(2) Where such a decree is silent with respect to the payment of further interest on such principal sum from the date of the decree to the date of payment or other earlier date, the Court shall be deemed to have refused such interest, and a separate suit therefore shall not lie:

9. By the Code of Civil Procedure (Amendment) Act, 1956 (Act No. 66 of 1956), for the words in sub-section (1) “with further interest at such rate as the Court deems reasonable on the aggregate sum so adjudged”, the words “with further interest at such rate not exceeding six per cent per annum as the Court deems reasonable on such principal sum” were substituted and in sub-section (2) also for the words “on such aggregate sum as aforesaid”, the words “on such principal sum” were substituted. From a reading of Section 34(1) of Civil Procedure Code, it is clear that in a decree for payment of money, the Court may order interest at such rate as the Court deems reasonable to be paid on the principal sum adjudged, from the date of the suit to the date of the decree and further interest at such rate not exceeding six per cent per annum as the Court deems reasonable on such principal amount from the date of the decree to the date of payment or to such earlier date as the Court thinks fit. Thus, the Court can award in a money decree interest from the date of the suit as well as interest subsequent to the decree on the principal sum adjudged. It is also made clear that the granting of interest from the date of suit and from the date of decree is in addition to any interest adjudged on such principal sum for any period prior to the institution of the suit.

10. Thus, the Section contemplates adjudging of interest on such principal sum prior to the institution of the suit and therefore clearly distinguished the principal and interest adjudged even prior to the institution of the suit and provide for awarding of interest pendente-lite and from the date of the decree on the principal sum. The amendment of 1956 by substituting the words “principal sum adjudged” for the “aggregate sum” made it clear that the interest subsequent to the suit can only be awarded not on the aggregate sum claimed consisting of principal and interest, but only on the principal sum adjudged. Thus, the awarding of interest subsequent to the suit is on the principal sum as adjudged by the Court. If there is no dispute between the parties as to the principal sum originally lent or outstanding on the date of suit, there may not be any necessity for the Court to adjudicate upon the same. But in the event of dispute, the Court has to adjudicate the principal sum due. In any event, the interest subsequent to the suit can only be on the principal sum as determined or adjudged by the Court.

11. It is submitted by Sri P.R Prasad, the learned counsel for the petitioners that in cases where simple interest is charged, there may not be any difficulty and the interest will not form part of the principal amount. In such cases, the interest subsequent to the suit can only be awarded on the principal sum. But it is contended that in cases where the parties agree for payment of compound interest with certain rests, the amount of interest accrued upto the period of rest specified in the agreement, will be added to the principal sum outstanding as on that date and the aggregate sum of principal and interest would constitute the principal amount for the next period and that in such cases no distinction can be made between the principal and interest as both of them would constitute the principal sum for the next period. In such cases, according to the learned counsel for the petitioners the aggregate sum claimed in the suit has to be taken as a principal sum adjudged for the purpose of awarding interest subsequent to the suit. But such interpretation is in the teeth of amendment of 1956 of Section 34 of Civil Procedure Code, whereby the words “aggregate sum” were substituted by the words “principal sum adjudged”. Thus, the very intention and purpose of amendment of Section-34 of Civil Procedure Code in 1956 is for restricting the award of interest subsequent to the suit on the principal sum only and not on the aggregate sum claimed in the suit. The parties may agree for payment of compound interest with periodical rests, but that is only for the purpose of calculating interest for the next period and such interest cannot become part of the principal amount lent. The claim made in the suit consists of principal sum as well as interest thereon for the period prior to the institution of the suit, but under Section 34 C.P.C the aggregate amount claimed in the suit cannot be said to be the principal adjudged and thus Sec. 34 C.P.C makes a clear distinction between interest adjudged and the principal even for period prior to the institution of the suit and subsequent interest is to be awarded only on the principal sum adjudged. Therefore, for the purpose of Section 34 of the Code of Civil Procedure, the interest will not merge in the principal sum and they are treated as distinct and separate amounts. There cannot be different interpretation of the word ‘principal’ adjudged in Sec. 34 of the Code of Civil Procedure depending upon whether the parties stipulated simple rate of interest or compound rate of interest. We are, therefore, not inclined to accept the contention of the learned counsel for the petitioner that in cases where parties stipulated compound interest, the amount claimed in the suit shall be treated as principal sum adjudged for the purpose of Section 34 CPC for awarding interest from the date of suit to the date of decree and from the date of decree until realization.

12. Now we will advert to the decisions cited at the Bar by both the learned counsel.

13. In M.V. Mahalinga Aiyar v. Union Bank Limited, Kumbakonam (1 supra) a Division Bench of Madras High Court on consideration of the provisions of Section 34 C.P.C held that:

“Any interest awardable from the date of plaint to the date of the decree must be only upon the principal sum due and not on the suit amount which includes interest.”

and accordingly modified the decree by awarding interest on the amount of principal sum of Rs. 8,500/- instead of on 9981-1-9 claimed in the suit Which includes interest upto the date of suit. The case K. Venkanna Chettiarand Sons By Managing Partner K.V Muthukrishna Chettiar v. K.K Shaik Muhammad Rowther AIR 31 1944 Madras 105. which was cited before us does not deal with the interpretation as to what is the principal sum adjudged in Section 34 C.P.C but only with regard to interpretation of Section 3 of Usurious Loans Act, 1918, as amended by Madras Amendment Act, 1936 and the proviso to Section 3(2)(b) and therefore, is not relevant. In Sigappiachi v. M.A.P.A Palaniappa Chettiar (2 supra) the suit was filed for settlement of account. It was held that the provisions of Section 34 C.P.C will apply in awarding interest in an account suit. It was further held that taking into account the provisions of the Civil Procedure Code and the method in which the accounts suit is valued and court fee paid thereon, the principal sum adjudged would be the principal sum i. e., found payable by the defendant from the date of the suit. Dealing with the question as to what is “principal sum adjudged” it was held that the principal sum adjudged will be the sum total found due as on the date of the suit and “that the interest that is awardable from the date of the suit to the date of the decree can only be on the principal sum adjudged i.e, the amount found due as on the date of the suit.” But it is to be seen that the aforesaid decision relates to a suit for accounts in which Court has to determine the amount due as on the date of the filing of the suit. The above observations are appropriate to the suits filed for accounting where the Court has to decide the amount due as principal on the date of the filing of the suit. But the said observations are not appropriate in suits filed for recovery of money. We are therefore not inclined to agree with the observations that even in money suits under Section-34 C.P.C that the principal sum adjudged will be the sum total found due as on the date of the suit. In a suit for recovery of money on the basis of pronote the sum total found due on the date of the suit was principal plus interest until the date of the plaint. It is therefore not correct to say that in money suits also, the principal sum adjudged will be the total sum found due as on the date of the suit and that the interest is awardable on the said sum from the date of the suit. The learned Judges have not considered the effect of the 1956 amendment to Section 34 C.P.C whereby the words “aggregate sum” were substituted with the “Principal sum adjudged.”

14. In P.C.T L Lakshmanan Chettiar v. K.T.R.M.K.R.R.M Karuppan Chettiar (3 supra) the dispute relates to accounts. Dealing with the question that interest has to be awarded only on the principal and not on the principal and interest accruing every year it was observed that:

“If once the request of the appellants as regards the rate of interest based on the contract is acceded, then under the contract, the principal at the beginning of each year would be the principal plus interest which accrued during the previous year.”

15. Hence, it was held that the amount claimed in the suit has to be treated as the principal sum. For the reasons already mentioned above, in considering the decision in Sigappiachi v. M.A.P.A Palaniappa Chettiar (2 supra) we are not inclined to agree that in money suits the principal sum adjudged for purposes of Section 34 C.P.C is the amount claimed in the suit. Moreover, the earlier Division Bench decision of the Madras High Court in M.V. Mahalinga Aiyar v. Union Bank Limited, Kumbakonam (1 supra) was not considered by the subsequent two Division Benches of that Court.

16. Reliance is also placed on the following two decisions of the Punjab and Haryana High Courts i.e S.K Engineering Works, Batala v. New Bank of India, Batala AIR 1987 Punjabi Haryana 90. and Jagadamba Rice Mills v. Oriental Bank of Commerce, Karnal AIR 1990 Punjab & Haryana 60.. The first cited decision was a case where the Bank filed a suit against the defendant for recovery of Rs. 6,87,808.86 ps. with interest as agreed between the parties at 6 ½% p.a over the Reserve Bank of India rate subject to a minimum of 15 ½%p.a But the trial Court directed that the plaintiff is entitled to future interest at 12 ½ % p.a on the decretal amount from February, 1982 till realisation. In the appeal filed by the Bank it was contended that they were entitled to future interest at the contractual rate as agreed between the parties by virtue of the proviso to Section 34 C.P.C as amended in 1976. It was held that in view of the proviso to Section 34 C.P.C the Bank was entitled to the future rate of interest at the contractual rate 15 ½ % p.a with quarterly rests. Thus, the question whether the principal sum adjudged under Section 34 C.P.C includes the principal sum advanced or the principal sum plus interest that accrued upto the date of the filing of the suit was not considered and decided. It is only the effect of the proviso to Section 34 C.P.C as inserted by amendment Act, 1976 was considered. But in the instant case we are not concerned with the interpretation of the proviso to Section 34 C.P.C and hence not relevant. In the second case cited above, repelling the contention that under Section 34 C.P.C interest from the date of decree to the date of realisation should not have been allowed at more than 6% p.a, it was held that under Section 34 C.P.C future interest could be allowed on the principal amount as adjudged by the Court at the contract rate of 13 ½% p.a With regard to the contention that the principal amount was only Rs. 5,43,674.16 ps. it was observed that:

“It could not be successfully argued by the learned counsel for the judgment-debtors that the principal amount was Rs. 5,43,674.16 ps. At the time of the passing of the decree, the total amount was adjudged to be the principal amount and therefore the plaintiff bank was rightly given interest thereon at 13 ½% p.a”

17. Thus, it is seen that the learned Judge has no occasion to consider the meaning of the words the principal sum adjudged under Section-34 C.P.C—

18. In State of Punjab v. The Scheduled Caste Co-Operative Land Owning Society. Ltd., Bhatinda7 a Division Bench of the Punjab and Haryana High Court, in considering the rate of interest payable on compensation amount under Land Acquisition Act has occasion to deal with the interpretation of Section 34 C.P.C On a consideration of the provisions of Section 34 C.P.C as amended by the Civil Procedure Code (Amendment) Act (No. 66 of 11956) it was held:

“By the Civil Procedure Code (Amendment) Act (66 of 1956), the words “on such principal sum” have been substituted for the words “on the aggregate sum so adjudged.” Before this amendment, the “aggregate sum” contemplated the aggregate of the principal sum adjudged, the interest from the date of suit to the date of decree and the pre-$uit interest. The Section classifies the interest awardable after the date of the suit into two classes—

(1) Interest on the principal sum adjudged from the date of suit to date of decree; and

(2) Interest on such principal sum from the date of decree to date of realization or to such earlier date as the Court thinks fit.

Thus, interest awardable from the date of the plaint to the date of decree, under the section as it stands now, will be only upon the principal sum and not on the whole amount including interest claimed by the plaintiff. Before the above mentioned amendment of Section 34 by Act No. 66 of 1956, further interest was awardable on the aggregate of the principal and interest as on the date of the decree but it was not compound interest but only interest on a fixed sum declared to be due by the decree. (Reference may be made to AIR Commentaries on the Code of Civil Procedure by Chitaley, 10th Edition, Vol. I, pages 460 to 467).

The intention of the Parliament, while amending Sec. 34 of the C.P.C by Act No. 66 of 1956, would be clear from the report of the Joint Committee on the Bill as published in the Gazette of India Extraordinary, Part II, S. II, Dt. Dece., 13, 1955. Para 11 of the Report relating to Cl. 2 of the Bill seeking amendment of Sec. 34 reads as under:—

“Sec. 34 of the Code empowers a court to award further interest from the date of the decree up to the date of payment on the ‘aggregate sum’ which comprises principal sum with interest accrued thereon. The Committee are of the opinion that interest should not be awarded on interest but only on the principal sum. Suitable amendment has accordingly been incorporated in this clause.”

From the aforesaid amendment made in Sec. 34 of the C.P.C it becomes clear that the intention of Parliament is against the grant of compound interest by the courts, that is, on the principal amount as well as on the interest accrued thereon. Similar view has been taken recently in a single Bench decision of this Court in Food Corpn. of India v. Samana Co-operative Marketing-cum-Processing Society Ltd., Samana Mandi, (1987) 1 Cut. LJ (Civ. & Cri.) 778, wherein J.V Gupta, J. held as under:—

From the perusal of the said section, it is quite evident that the Court could order interest on the principal sum adjudged from the date of the suit. Since principal sum adjudged is Rs. 65,625/- the interest could be awarded only on that amount and not on the amount of interest, which sum was adjudged as Rs. 23,375/-.”

19. Thus, the Punjab and Haryana High Court was of the view that under Sec. 34 C.P.C, interest awardable from the date of the plaint to the date of decree will only be upon the principal sum and not on the whole amount including interest claimed by the plaintiff.

20. The Syndicate Bank v. West Bengal Cements Limited AIR 1989 Delhi 107., is a case where the bank filed a suit for recovery of money. The parties stipulated interest to be chargeable at 16 ½% p.a with quarterly rests. The bank calculated the interest accordingly and claimed the suit amount of Rs. 33,39,026.75p. Dealing with the contention that only the amount originally advanced is to be the principal sum and the amount inclusive of interest cannot be treated as principal sum, it was held by the Learned Judge of Delhi High Court at page-113 that it is not possible to accept the contention “that the interest can never become principal and the words principal sum in Section 34 C.P.C should be given the ordinary meaning as given in the dictionaries. It follows that the argument that the interest under Sec. 34 C.P.C can be awarded only on the original sum advanced is misconceived. The interpretation sought to be placed by Mr. Khanna would also run counter to the normal banking practice and act as a premium for those not paying the amount of interest when it is due at the cost of those making payment of interest when it is due.” But the effect of 1956 amendment to Section 34 of C.P.C was not considered.

21. Learned Single Judge of Orissa High Court in Indian Bank v. Kamala Baya Cloth Store AIR 1991 Orissa 44. took the view, following the Delhi High Court Judgment in Syndicate Bank v. West Bengal Cements Limited that the words “principal sum” appearing in Sec. 34 C.P.C is the amount initially advanced including interest added from the date of advance to the date of the suit. But an earlier decision of Orissa High Court, in Food Corporation of India v. Samana Co-operative Marketing Society Ltd. (1987 Orissa Law Journal (Civil and Criminal) 778) wherein it is was held that interest under Sec. 34 C.P.C could only be on the principal amount and not on the amount of interest which was adjudged, was not considered.

22. In Jafar Hussain v. Bishambhar Nath AIR 1937 Allahabad 442. the interpretation of the words on the principal amount found and declared due in Cl. (a) sub-Cl. (i) of R. 11 of 0.34 came up for consideration before a Division Bench of Allahabad High Court. It was held that:

“The words on the principal amount found or declared due in cl. (a) sub-cl. (i) of R. 11 of O. 34 Civil P.C refer not only to the principal sum secured by the mortgage deed but also to the amount due on account of interest which has become a part of principal in accordance with the terms of the deed on the date when the preliminary decree is prepared. The mortgagee is therefore entitled to interest on the principal sum and on the interest due, which has become part of the principal at the contract rate, from the date of the suit till the date fixed for payment if the mortgage deed provides it.” In arriving at that conclusion the learned Judges relied upon observations of the Privy Council in Jagannath Prasad v. Surajmal Jalal ILR 54 Cal. 161. that:

“On a preliminary decree for fore closure or sale under O. 34 Rr. 2 and 4, C.P.C, 1908 a mortgagee was entitled to interest at the rate and with the rests, stipulated in the mortgage down to the date fixed for redemption by the decree; and if the decree was varied on appeal, down to the date fixed for redemption by the appellate Court.”

and the view expressed in Chotey Lal v. Mohammed Ahmad Ali Khan AIR 1933 Oudh 128. that:

“the principal amount found due or declared due on the mortgage” mean only the principal amount secured under the mortgage deed without interest till the date of the suit and that therefore the mortgagee was entitled to interest from the date of suit to the date fixed for payment at the contract rate only on the principal amount secured by the mortgage deed and not on the total amount which at the date of suit consisted of the amount secured as well as the interest which had become part of the principal in accordance with the terms of the mortgage deed and that of Rejendra Bahadur Singh v. Raghubhir Singh AIR 1934 Oudh 463. where it was held:

“Where a mortgage deed provided that in case of non-payment of interest for any period of six months on the due date, the amount of interest shall be added to the principal money and interest and compound interest thereon shall run at the aforesaid rate till the date of payment, the Court could allow interest on the aggregate amount found due instead of on the principal sum lent.”

23. But in these revision petitions before us we are not concerned with the interpretation of Clause (a) sub-clause (i) of Rule-11 of Or. 34 C.P.C and hence the decision reported in Jafar Hussain v. Bishambhar Nath (10 supra) need not be considered byus. Suffice it to mention that in Canara Bank v. Sri Venkateszvara Rice Mills 1985 2 ALT 307. Justice Jayachandra Reddy as he then was took the view that interest under Or. 34 Rule-11 C.P.C can only be granted on the principal sum and not on the total amount claimed in the suit which includes interest. But a Division Bench of the Allahabad High Court in Kalyanpur Cold Storage, Kalyanpur bothers v. Sobanlal Bajpai, held that the expression “principal sum adjudged” in Sec. 34 C.P.C means “the final amount which has been adjudged by the Court in the case must be deemed to be the principal amount adjudged and the interest, therefore, occured on this amount and not on the original amount advanced to the defendant. But the learned Judges did not consider the effect of 1956 amendment to Section 34 C.P.C which substituted “the principal sum adjudged” for “aggregate sum” and with great respect to the learned Judges, we are not inclined to accept their view.

24. An unreported judgment of full bench of the Bombay High Court in Suit No. 575/88, Union Bank of India v. Daplat Gauri Sankar has occasion to consider the expression the principal sum adjudged in Section 34 C.P.C and whether the interest becomes part of the principal within the meaning of Sec. 34 CPC in case the parties agree for compound interest.

25. The questions that were framed in that suit are:—

(1) Whether the expression ‘the Principal sum adjudged’ in Section 34 of the Code of Civil Procedure means only the original amount lent or the amount of original principal without addition of and interest whatsoever thereto and interest pendent lite or post decretal interest can be awarded by the Court only on such original amount?

(2) When interest becomes part of the principal or gets merged with the principal within the meaning of Sec. 34 of the Code when the agreement provides for addition of interest to the principal at certain intervals with periodical rests?

(3) Whether the expression ‘Principal sum adjudged’ includes the aggregate amount found due and payable on the date of the suit inclusive of amount of interest added to the principal with or without periodical rests in accordance with the agreement between the parties, express or implied or the practice followed?

(4) What is the meaning of the expression “Principal” used in Order 34 Rule 2 and Order 34 Rule 11 of the Code?

26. After elaborate discussion and on consideration of all the cases referred to earlier by us, held, that under Section 34 C.P.C the interest canbe awarded only on the principal sum and not on the aggregate sum comprising of principal and interest accrued thereon and that the Principal sum adjudged used in Section-34 C.P.C means the original amount lent without the addition thereto of any interest whatsoever. This will be the position not withstanding any agreement between the parties or any prevailing banking or trade practice to the contrary.

27. A Division Bench of this Court (to which one of us A. Venkatarami Reddy J. is a party) in C.C.C.A No. 148/83,149/83,150/83 and batch by its Judgment dated 19-8-1992 held that interest from the date of suit upto the date of decree and future interest from the date of decree can be granted only on the principal sum adjudged and not on the aggregate sum claimed in the suit.

28. For all the aforesaid reasons, we are inclined to accept the decision of the Division Bench of Madras High Court in M.V. Mahalinga Aiyar v. Union Bank Limited, Kumbakonam (1 supra), the decision of Bombay High Court in Union Bank of India v. Daplat Gauri Sankar in Suit No. 575/88 dated 2-4-1992 (unreported), the decision of Punjab High Court in State of Punjab v. The Scheduled Caste Co-Operative Land Owning Society Ltd. Bhatinda (7 supra), the decision of the Orissa High Court in Food Corporation of India v. Samana Co-Operative Marketing-cum-Processing Society Ltd., Sarnana Mandi (1987 1 Cut. LJ (Civ. & Cr.) 778) and the decision of the Division Bench of Andhra Pradesh High Court in CCCA Nos. 148/83 and batch dated 19-8-1992 as laying down the correct law and express our respectful dissent with the contrary view taken by the Madras High Court in Sigappiache v. M.A.P.A Palaniappa Chettiar (2 supra) and in P.C.T.L Lakshmanan Chettiar v. K.T.R.M.K.R.R.M Karuppan Chettiar (3 supra), the decision of Punjab High Court in Jagadamba Rice Mills v. Oriental Bank of Commerce, Karnal (6 supra), the decision of the Delhi High Court in Syndicate Bank v. West Bengal Cements Limited (8 supra) and the decision of the Orissa High Court in Indian Bank v. Kamala Baya Cloth Store (9 supra). We, therefore, hold that the expression ‘principal sum adjudged’ in Section 34 of Civil Procedure Code means only the principal amount lent or principal amount adjudged by the court, but does not include any interest whatsoever even in cases if the parties agree for charging compound rate of interest with periodical rests. In support of the second contention that once a decree is satisfied and full satisfaction is recorded, the Court has no jurisdiction to correct the mistake, the learned counsel relied on the decision in Munuswami Pillai v. Mahdi Hussain Khan Saheb AIR 1926 Madras 516.. wherein it was held, that:

“Court would not be justified in making correction under Section 152 C.P.C which involves payment of larger sum of moneys by one party to another long after the full satisfaction was recorded and when nothing remains to be done and the decree has become dead.”

29. The said case is not for amendment of decree to bring it in conformity with the judgment as in the instant case. We are therefore, of the view that the decision cited above has no application to the facts of this case.

30. In the result, the Civil Revision Petitions are dismissed, but in the circumstances without costs.