ORDER
Goda Raghuram, J.
1. The A.P. State Co-operative Bank Limited – the petitioner, sanctioned a term loan of Rs. 36.75 lakhs and working capital loan of Rs. 15.31 lakhs comprising Rs. 9.34 lakhs under cash credit limit and Rs. 5.97 lakhs under Bills limit, to the 1st respondent on the acceptance by the 1st respondent of the terms and conditions stipulated in the agreement executed by respondents 2 to 4. The petitioner bank obtained security documents and personal guarantees of respondents 2 to 4. The term loan of Rs. 36.75 lakhs was repayable in ten half yearly equal instalments at the rate of Rs. 3,67,500/- starting from 8-10-1993 to 8-4-1998. The term loan carried an interest of 19% p.a., at half yearly rests and penal interest of 2% p.a., on over dues/ defaults. The validity of the working capital limit expired on 23-1-1996. As payments were not made by the loanee, the petitioner issued notice for repayment of the entire loan amount due. Despite repeated requests and notices by the petitioner, the 2nd respondent did not repay the loan amount due. In the circumstances, the petitioner sought reference to arbitration under Section 61 of the A.P. Co-operative Societies Act, 1964 (for short ‘the 1964 Act’), for recovery of Rs. 83,48,917.75 ps, with further interest and penal interest with effect from 1-10-1997. After following due procedure, the 5th respondent – Arbitrator, passed an award dated 22-12-1998 determining the liability of the respondents 2 to 4 herein jointly and severally to the petitioner in a sum of Rs. 83,48,917.75 ps, with further interest at 19% PA on the term loan; at 19.5% PA on working capital loan at half yearly rests and penal interest @ 2% pa….., with effect from 1-10-1997 till the date of payment of the entire loan amount. The 5th respondent by the award also held that respondents 2 to 4 herein are liable to pay the interest completely by the end of January, 1999 and that the principal amount has to be repaid in four quarterly instalments commencing from 31-3-1999 and that in default of payments as aforesaid, the petitioner – Bank is at liberty to realise the awarded amount from respondents 2 to 4 personally or from their properties or both.
2. Aggrieved thereby, the respondents 2 to 4 preferred an appeal to the 1st respondent – Tribunal under Section 76 of the 1964 Act The 1st respondent Tribunal, by the order dated 23.6.2001 in CTA No. 55 of 1999 confirmed the liability of the respondents 2 to 4 herein as determined by the 5th respondent – Arbitrator, but modified the award to the extent of the interest directed to be paid under the Award. Consequently the award was partly modified to the extent of interest which was directed to be payable at 6% p.a., from the date of the award till the date of realisation, on the principal amount due as on the date of the award duly setting aside the order of the Arbitrator awarding interest at 19% p.a.
3. Aggrieved by the order of the 1st respondent – Tribunal, to the extent of scaling down of the interest, the petitioner – Bank is before this Court seeking judicial review of the order in CTA No. 55/99.
4. In support of the decision scaling down of the interest, the 1st respondent -Tribunal relied upon the decision of the Supreme Court in M.Veerappa v. Canara Bank, and a decision of this Court in .
The Issue:
5. Whether the adjudicator/Arbitrator or the appellate forum – the Co-operative Tribunal under Sections 61 and 76 respectively of the 1964 Act are empowered to invoke or rely upon the provisions of Section 34 CPC, scale down the rate of interest, contrary to the agreement between the parties to a lis.
6. It needs be noted that the 1st respondent – Tribunal in scaling down the rate of interest did not specifically refer to Section 34 CPC. During the course of hearing of the writ petition, however, learned Counsel for the 2nd respondent sought to justify the decision of the Tribunal on the basis of the discretion available to a Court under Section 34 CPC. The relevant portion of the reasoning of the Tribunal is set out hereunder:
“Point:
(8) The chief contention of the appellants is that awarding of interest at 21% p.a., (19% + 2% penal interest) is excessive and must be limited to 6% p.a., from the date of reference till the date of realisation.
(9) In support of their contention, the learned Counsel for the appellants relied on the following decisions:
(1) 1998(2) ALT 6 S.C.
(2)
(3) .
The learned Counsel for the respondent-bank relief on the following decisions:
(1)
(2) 2001(1) ALD page 148 S.C.
As seen from the records, admittedly, the loan was advanced to the appellants for commercial purposes and the contract rate of interest was 19% p.a., and the appellants herein had committed periodical defaults (as per the loan Ledger Extract and Calculation Memos filed by both the parties) in payment of instalments, resulting in the respondent-bank making the reference to the arbitrator. Though the written statement filed by the appellants before the learned Arbitrator show that they deny the said transaction, but at the same time in foregoing para of the written statement they admitted that loan and execution of hypothecation agreement etc. That apart prior to filing of the suit, the respondent-bank got issued legal notice dated 26-9-1997 calling upon the appellants herein to pay the loan amount due within (15) days. After acknowledging the notice, a reply was sent to the plaintiff-bank on behalf of the 1st defendant firm, wherein it was prayed to the plaintiff Bank that “magnanimous review may please be ordered for a favourable consideration of the revised time schedule which directly under your kind control and authority for a soft, conclusion of the issue and also withdraw the legal notice as well as my legal action proposed by the Bank — We sincerely promise that we will restore regular repayments from the next February, 1998 onwards as we truly anticipate a consideration sales and profit rate in the coming future. Finally, we humbly request you to sanction little time for the commencements of the repayments.”
10. The abovesaid reply cuts the averments made by the appellants by way of written statement filed before the learned Arbitrator. As such it can be said that the appellants have admitted the entire claim, claimed by the plaintiff bank and only prayed for time. As seen from the calculation memos filed by the plaintiff-bank and the appellants, subsequent passing of the award, certain payments had been made by the appellants to the credit of the said loan account. Whatever be the matter, having regard to the judgment of the Hon’ble Supreme Court of India report in 1998 (2) ALT page-6 followed by the judgment of our Hon’ble High Court reported in 1999(6) ALD at page 382, though the Court cannot sit in the judgment by reopening the excessive rate of interest agreed to between the parties under the term loan, still the power of Court is neither taken away nor the provisions under the Banking Regulation Act overwrite the discretion vested in the Court with regards to the rate of interest chargeable during pendency of the suit and till the date of realisation. In this aspect, we agree with the contention of the learned Counsel for the appellants only to the extent of award of interest at 6% p.a., from the date of award till the date of realisation and the said interest shall be calculated on the principal amount due as on the date of passing of the award. As regards to the rest of the contention that interest should be awarded at 6% p.a., right from the date of dispute, the same cannot sustain in view of the view taken by the Hon’ble Supreme Court of India.”
7. The issue arising herein is a recurrent theme in quite a few matters instituted in this Court. At the Bar Sri Deepak Bhattacharjee, learned Counsel for the petitioner – Bank and Smt. Soubhagya Lakshmi, learned Counsel for the 2nd respondent cited authorities in support of their respective contentions apart from the authorities relied upon by the learned Counsel for the 2nd respondent in support of her contention that this Court should not interfere under Article 226 of the Constitution unless there is a serious miscarriage of justice or a perverse quasi judicial decisions that requires to be corrected. This Court does not propose to deal in extenso with the authorities relied upon on behalf of the 2nd respondent in respect of the later contention. If the contention of the petitioner-bank that the 1st respondent Co-operative Tribunal had no power, authority or jurisdiction to scale down the rate of interest from that percentage agreed upon between the parties, then and in such an event, the decision of the 1st respondent – Tribunal would constitute an error of jurisdiction and on the face of the record and would certainly present an issue for disposition under Certiorari jurisdiction.
8. Having regard to the importance of the question involved and as various other Co-operative Banks and institutions may also be affected by any principle enunciated on this issue, I considered it appropriate to hear the learned Advocate-General. Sri Ramesh Ranganathan, learned Additional Advocate-General, with his usual thoroughness and fairness, placed the relevant principles and authorities while assisting the Court. I place on record the appreciation of this Court for the valuable assistance rendered Sri Ramesh Ranganathan and also to the learned Counsel for the petitioner and learned Counsel for the 2nd respondent.
Analysis of the relevant statutory environment : Relevant provisions of the 1964 Act:
9. The 1964 Act is a consolidating and amending legislation relating to the Co-operative Societies in the State of Andhra Pradesh. It is legislation referable to the legislative field enumerated in Entry 32 of List II (State List) and Entry 13 of List III (Concurrent List) in the VII Schedule to the Constitution. The Act has been reserved for the assent of the President and has received such assent on 24-2-1964, which assent has been published in the A. P. Gazette Part IV B (Ext.), dated 25-2-1964 (under Article 254(2) of the Constitution).
10. Section 2(o) defines “Rule” as a Rule made under the Act.
11. Section 61 begins with a non-obstante provision and specifies the disputants and the disputes which arise amongst them that shall be referred to the Registrar (of Co-operative Societies as defined in Section 2(n) of the Act), for decision.
12. Section 62(1) enacts that the Registrar may, on reference of a dispute under Section 61, decide the dispute himself; or transfer it for disposal to any person who has been invested by the Government with powers in that behalf; or refer it for disposal to an arbitrator. Section 62(2) empowers the Registrar or such other person or arbitrator to implead as a party to the proceedings, persons who have acquired interest in the property, in case where the dispute involves immovable properties. Section 62(3) empowers the Registrar by order and for reasons to be recorded, to withdraw any reference transferred to any other person under Clause (b) of Section 62(1) either to himself or to any other person or to refer such dispute to an arbitrator under Clause (c) of Section 62(1). Section 62(4) enacts that the Registrar, such person or arbitrator, shall decide the dispute in accordance with the provisions of this Act and the Rules and the Bye Laws and that such decision shall, subject to the provisions of Section 76, be final. (Emphasis)
13. Sections 70 to 74 including Section 70-A occurring in Chapter X of the Act set out the powers and procedures in respect of execution of decisions, decrees and orders. Section 72 enacts that the Registrar or any person authorised by him in this behalf shall be deemed, when exercising any powers under the Act, for the recovery of any amounts by attachment and sale or by sale without attachment of property, or when passing any orders on any application made to him for such recoveries or to take such steps in aid of such recovery, to be a Civil Court for the purpose of Article 182 of the First Schedule to the Indian Limitation Act, 1908.
14. Chapter XI sets out provisions relating to appeal, revision and review. Under Section 75 the State Government may constitute as many Co-operative Tribunals as may be necessary and this provision also spells out the composition and provides for the constitution incumbency and other relevant aspects relating to Co-operative Tribunals.
15. Section 76 provides the remedy of an appeal to any person or society aggrieved by any decision passed or order made, inter alia, under Section 62 (4). The procedure for disposal of an appeal preferred as also principles of natural justice to be followed by the Tribunal in disposing of the appeal, have also been incorporated in Section 76.
16. Sections 77 and 78 deal with revisional and review powers. No revision is available against an appellate order under Section 76. Section 78 enables a review to be filed to the Co-operative Tribunal against any order passed by it and enumerates the grounds on which such review may be considered and also the time and manner in which such review may be preferred. These later aspects are prescribed by the Rules made under the Act.
17. Section 120(1) confers, inter alia, on the Tribunal, the Registrar, or any person authorised by him in this behalf, by general or special order, the arbitrator or any other person deciding a dispute, the powers of a civil Court while trying a suit under the Code of Civil Procedure, 1908 (CPC), in respect of – (a) summoning and enforcing of attendance of any person and examining him on oath or affirmation; (b) compelling the production of any book, account, record or other document, cash, security or other property; (c) issue a commission for examination of any witness; (d) receiving evidence on affidavit. Sub-section (2) confers other relevant powers to compel furnishing of information and the like to effectuate the adjudication proceedings.
18. Section 121 bars the jurisdiction of any Court in respect of any order passed, decision or action taken or direction issued under this Act by an arbitrator, a liquidator, the Registrar or an officer or person authorised or empowered by him, the Tribunal or the Government or any officer subordinate to them.
The A.P. Co-operative Societies Rules, 1964:
19. Rule 48 specifies the fees payable to the Government for service rendered to a society or a person. Entry 11 of the Table I thereunder specifies the fees payable for settlement of disputes in exercise of the jurisdiction under Sections. 61 and 62. Table II specifies the fees payable for execution under Section 70.
20. Rule 49 sets out the procedure for arbitration and settlement of disputes under Section 61 and also prescribes the period of limitation in respect of specified disputes. Rule 49(4) sets out the obligation of the Registrar, the arbitrator or other person deciding the dispute, to record a brief note of the evidence and the decision taken on such evidence and further requires that such decision be taken in accordance with justice, equity and good conscience
and such decision shall be in writing. Rule 49-A sets out the procedure regarding disposal of an appeal by the Tribunal and ordains that the proceedings shall be summary and shall be governed as far as practicable by the provisions of CPC. (Emphasis)
21. Rule 50 sets out the mode of service of summons.
22. Rule 52 sets out a detailed and elaborate procedure with regard to execution of decrees, decisions or orders, broadly incorporating the provisions Order XXI CPC.
23. Rule 54 sets out the mode of attachment before judgment under Section 73.
The Code of Civil Procedure, 1908 :
24. This enactment is referable to the legislative field enumerated in Entry 13 of List III (Concurrent List) of the VII Schedule to the Constitution of India.
25. Section 34(1) enables the “Court” in a decree for payment of money, to 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 the period prior to the institution of the suit, as also further interest at such rate not exceeding 6% 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 deems fit. Sub-section (2) enacts that where the decree is silent with respect to payment of further interest from the date of decree to the date of payment or to such other earlier date as the Court deems fit and Sub-section (2) states that where the decree is silent with respect to the payment of further interest, on such principal sum, from the date of decree to the date of payment, or other earlier date, the Court shall be deemed to have refused such interest and a separate suit therefor shall not lie.
Structural Analysis of Section 34, CPC :
26. Interest awardable to a plaintiff in a suit for money broadly falls under 3 heads, according to the period for which it is allowed:
(a) Interest accrued due prior to the institution of the suit on the principal sum adjudged (as distinct from the principal sum claimed);
(b) Additional interest on principal sum adjudged, from the date of the suit to the date of the decree “at such rate as the Court deems reasonable”; and
(c) Further interest on the principal sum adjudged, from the date of the decree to the date of the payment or to such earlier date as the Court deems fit, at a rate not exceeding 6% per annum.
27. It is almost the settled principle that interest upto the date of the suit is a matter of substantive law and that provisions of Section 34 do not encompass the pre-institution of suit, period. The provisions of Section 34 apply only to categories (b) and (c) enumerated above viz., to pendente life interest and post decretal interest. It is also apparent from the provisions of Section 34 that pendente life interest is at the discretion of the Court and that in respect of post decretal period the Court is conferred a discretion to award interest at such rate not exceeding 6% per annum, as it thinks fit. It needs to be noticed, however, that even in respect of pre-institution period, the Court has a discretion to depart from the rate of interest, if any, agreed to between the parties, if obligated to such a course of action on account of any legislative mandate such as usury laws or is required to scale down the interest to a reasonable level if the rate is penal in view of the provisions of Section 74 of the Indian Contract Act, 1872. Subject to such exceptional circumstances however, for the period prior to the institution of the suit the contractual rate of interest is mandatory and the Court has no discretion in the matter – vide Central Bank of India v. Ravindra and Ors., .
The Banking Regulation Act. 1949 :
28. Part V has been incorporated into the legislation by Act 23 of 1965. Subsequent amendments have also been made to the provisions contained in this part. Suffice it however to note that qua these amendments Co-operative Societies, as specified by the amendments, including State Co-operative Banks have been brought within the regulatory framework of the Act and encompassed within the definition “Banking Company”.
29. Section 21-A incorporated into the Act by Act 1994 with effect from 15-2-1994, enacts that notwithstanding anything contained in the Usurious Loans Act, 1918 or any other law relating to indebtedness in force in any State, the transaction between a Banking Company and its debtor shall not be reopened by any Court on the ground that the rate of interest charged by the banking company in respect of such transaction is excessive. The validity of Section 21-A has been upheld by the Supreme Court in State Bank of India v. Yasangi Venkateswara Rao, .
30. On an analysis of the 1964 Act and the Rules made thereunder it is clear that the Registrar or other person or arbitrator adjudicating a dispute referred under Section 61 of the said Act is a quasi-judicial Tribunal constituted under the Act and not a civil Court or a Court within the meaning of the provisions of the CPC. Similar is the position with regard to a Co-operative Tribunal constituted under Section 75 of the 1964 Act. In fact the position of the Co-operative Tribunal fell for consideration in Nellore District Co-operative Marketing Society Ltd. v. Co-operative Tribunal, 1987 (1) ALT 551. This Court on an analysis of the legal environment held that the District Munsif or a Subordinate Judge as the case may be, constituting a Tribunal under Section 75 of the Act would not be functioning as a regular civil Court, but only as a persona designata under Section 75(1) of the Act This Court also held that the CPC applies to all proceedings before Courts of civil judicature and that in view of Section 49-A the provisions of CPC are applicable to a Cooperative Tribunal only as far as practicable. It was also held that several provisions of CPC which are technical in nature are not obligatory nor do all the provisions of CPC which are not repugnant to any of the provisions of the 1964 Act or the Rules made thereunder, ipso facto apply to the proceedings before the Tribunal.
31. The 1964 Act is a special State enactment consolidating and amending the law relating to Co-operative Societies in the State. It has received the assent of the President as required under Article 254(2) of the Constitution. Section 133 of this Act enacts an overriding effect to the provisions of the Act over any inconsistent provisions contained in any other law. Section 61 constitutes the Registrar or any other person or an arbitrator, as a Tribunal to adjudicate upon the disputes and between the disputants specified in the said provision. Section 62(4) requires the adjudicators specified in Section 61 to decide disputes in accordance with the provisions of the Act and the Rules and the Bye-Laws. Section 72 enacts that such adjudicators when exercising any power under the Act in respect of matters specified in the said section shall be a civil Court for the purpose of Article 182 of the First Schedule to the Indian Limitation Act, 1908. Section 120 confers the powers of a civil Court while trying a suit under the CPC on the Tribunal or other adjudicators (Sections 76, 61 and 62 respectively) only in respect of the matters specified in Section 120. Section 121 enacts a bar on the jurisdiction of any Court in respect of any order passed or decision taken under the Act including those under Sections 61, 62 and 76. Rules 48, 49 and 52, in particular, specify the fees for the settlement of disputes as well as incorporate an elaborate procedure for arbitration and settlement of disputes and for execution of decrees, decisions or orders including those made or passed under Sections 61 and 62.
32. On a holistic and interactive analysis of the provisions of the 1964 Act and the 1964 Rules thereunder, it is clear that except to the extent specified by the provisions of the Act, the procedural prescriptions contained in CPC are not ipso facto applicable to an adjudication or arbitration under Sections 61 and 62 of the Act. This inference is irresistible on the analysis of the provisions of the 1964 Act and the Rules thereunder and as a consequence of the assent of the President obtained to the Act under Article 254(2) of the Constitution of India.
33. In Seth Thawardas Pherumal v. Union of India, , the Supreme Court was considering the scope of the power of an arbitrator to award interest on the claims awarded in circumstances where the contract between the parties did not provide for payment of interest and the requirements of the Interest Act, 1839 were not fulfilled. Dealing with the contention of the contractor that interest from the date of the award should atleast be allowed on the analogy of Section 34 CPC, the Supreme Court (Bose, J) held–
” ….. But Section 34 does not apply because an arbitrator is not a “Court” within the meaning of the Code nor does the Code apply to arbitrators, and, but for Section 34, even a Court would not have the power to give interest after the suit.”
34. The question whether the rate of interest chargeable on the amount payable under an order passed under Section 32 of the State Financial Corporations Act, 1951, from the date of the said order, is governed by Section 34 CPC or whether such interest is payable at the contractual rate agreed upon between the parties, fell for consideration of the Supreme Court in Employees Insurance Corporation v. Gujarath State Financial Corporation, . The Supreme Court while declaring that Section 34 CPC is not applicable to an order passed under Section 31(1) of the State Financial Corporations Act, 1951, as the proceedings are in the nature of execution proceedings, at a stage posterior to the passing of a decree and that an application under Section 31(1) is in the nature of an application for attachment of property in execution of a decree, held that interest would be payable on the principal amount due in accordance with the terms of the agreement between the parties, till the entire amount due was paid in accordance with the order passed under Section 32 of the Act. It is to be noted that the Supreme Court upheld the decision of the High Court that interest is payable as per the terms of the agreement between the parties, in the context of the appellant’s contention that the order under Section 32 of the 1951 Act is in the nature of a decree and that the order was silent as regards the interest payable from the date of the “decree” till the date of payment. If the contention that the order under Section 32 of the 1951 Act is in the nature of a decree of the civil Court had been approved by the Supreme Court, it would not have upheld the order of the High Court that interest is payable as per the agreement between the parties, in view of Section 34(2) of the CPC.
35. The question whether in view of Section 21-1 A of Banking Regulation Act 1939, in a suit filed based on a mortgage, interest from the date of the suit till recovery, is payable at the contractual rate of interest or in accordance with the principles set out in Section 34 or Order XXXIV, Rule 11 of the CPC, fell for consideration of the Supreme Court in N. M. Veerappa v. Canara Bank, , The trial Court had awarded future interest at 6% on the principal amount due as determined till the date of recovery. On appeal, the High Court allowed the appeal and decreed payment of future interest also at the contractual rate of 16.5% applying Section 34 CPC. The matter fell for the consideration of the Supreme Court in this factual matrix. The Apex Court reiterated that Section 34 CPC is not applicable in respect of award of pendente lite interest in a suit based on mortgage and that Order XXXIV, Rule 11 CPC was the applicable provision. Responding to the aspect as to the effect of Section 21 A of the Banking Regulation Act, 1939, the Supreme Court held that Section 21 A curtailed the power of the Court to reopen the question of rate of interest on the ground of its being excessive qua the Usurious Loan Act, 1918 or any other law related to indebtedness in any State but had no application nor was the provision intended to expressly override the provisions of the CPC. The Court held that the discretionary power given to the Courts under Order XXXIV Rule 11 CPC is an independent power that is traceable neither to Section 74 of the Contract Act nor to any power in the Usurious Loans Act, 1918, nor to any State statute permitting a Court to scale down the contractual rate of interest. It needs, however, be noticed that the decision in Veerappa’s case (supra) was rendered in an appeal arising out of a mortgage suit instituted under the Code of Civil Procedure before a civil Court and in circumstances where the application of the provisions of CPC was not or could not have been, in question.
36. In State Bank of India v. Yasangi Venkateswara Rao, , the legislative competence of the Parliament in enacting Section 21-A of the Banking Regulation Act 1939, and consequently the validity of the said provision fell for consideration. The declaration made by this Court in a Second Appeal that Section 21-A was ultra vires the legislative power of the Parliament, was declared erroneous and the Supreme Court upheld the vires of the provision. This decision is of no assistance to the resolution of the questions arising in this case.
37. Smt. Souhhagya Lakshmi, learned Counsel for the petitioner also places reliance on the decision of a Division Bench of this Court in Sri Panduranga Traders and Ors. v. State Bank of India, . In this case the question of existence of a power or discretion in the civil Court, to fix the rate of interest from the date of the suit till the date of realisation, under Order XXXIV, Rule 11 CPC, in an appeal arising out of a suit filed by a bank for the recovery of a loan granted on the security of an equitable mortgage, fell for consideration. This Court while expressing the opinion that Veerappa decision (supra) might perhaps require reconsideration having regard to the fact, that Section 21-A of the Banking Regulation Act is a special provision regulating the power of the Court to reopen the rate of interest in a transaction relating to a loan advanced by a bank vis-a-vis the general power available
under Order XXXIV, Rule 11, nevertheless followed the ratio of Veemppa case (supra) and reduced the rate of interest from the contractual rate of 15.5.% to 12.5%. this decision is not relevant to the resolution of the issues arising in this case, as it arose in the factual context where the application of CPC to a civil suit instituted in a civil Court, was not in doubt.
38. Equally, the decision of a Division Bench of this Court in Indian Bank, Madras v. N.Munisankar , is of no relevance to the questions arising in this case. This decision was considering the question whether the interest should be awarded on the principal sum borrowed or on the amount adjudged. The provisions of Section 34 CPC were considered in that context, which is not the issue before this Court, in the case on hand.
39. Andhra Bank, Nuzvid v. Atluri Sesha Rao, 1996 (6) ALD 328, is also a decision in an appeal arising out of a suit filed by a Bank in the civil Court, wherein this Court applied the ratio in Veerappa case (supra) and upheld the scaling down of the interest rate by the Tribunal for pendente lite period. This decision is also therefore, of no assistance.
40. As has been noticed earlier, interest falls into broadly three categories. These may conveniently be classified as pre-suit interest, interest pendente lite and interest post-decree. Having regard to the conferment of a discretion, as regards money suits, in respect of pendente lite interest and in respect of a post-decree interest subject to the prescribed ceiling, under Section 34 CPC, the Civil Court exercises the power authority and jurisdiction in the prescribed areas and in accordance with the statutory prescriptions. It is on account of the occupation of the area of pendente lite and post-decree interest by the procedural law legislation – the CPC that these areas are described as being the subject matter of procedural law while the pre-suit interest is held to be a matter of substantive law – see Secretary, Irrigation Department, Government of Orissa v. G.C.Roy, .
41. There are situations where the provisions of the CPC are inapplicable to certain classes of litigative dispositions as in circumstances where on account of the adjudication falling to be processed before specialist Tribunals under a special law and where the provisions of the CPC are wholly or pro tanto excluded, either expressly or by necessary implication. In such situations all the three categories of interest – presuit, pendente lite and post-decree, will be governed by a substantive law or the general principles governing the liability to interest.
The Character of ”Interest” :
42. Generically ‘interest’ has been construed as: (A) Compensation paid by the borrower to the lender for deprivation of the use of his money – Riches v. Westminister Bank, (1947) AC 390;
(B) Damages for delay in the payment of money as compensation for the use or detention of money, and as consideration paid for the use of money or for forbearance in demanding it when due – (see Words and Phrases permanent Edition, Volume 22 at page 55). The United States Supreme Court in Equitable Life Assurance Society of United States v. Commissioner of Internal Revenue, 88 L. Ed 927, has interpreted the usual import of “interest’ to mean the amount which one has contracted to pay for the use of money. Blacks Law Dictionary defines ‘interest’ as compensation fixed by agreement or allowed by law for the use or detention of money, or, for the loss of money by one who is entitled to its use, in particular, the amount owed to a lender in return for the use of the borrowed money.
In the opinion of Lord Wright in Riches case (supra) “interest is a payment that becomes due as the creditor has not had his money at the due date. It could be regarded either as representing the profits he might have earned if he had the use of the money, or, conversely, the loss he has suffered as he had not that use.” The general premise is that he is entitled to compensation for the deprivation; the money due to the creditor not having been paid, or, in other words, being withheld from him by the debtor after the time when payment ought to have been made, in breach of his legal rights, and interest is a compensation where the compensation is liquidated under an agreement or a statute.
43. In the case on hand this Court has already come to the conclusion that Section 34 CPC, has no application to a proceeding before the Registrar/Arbitrator or the Co-operative Tribunal. These adjudicatory bodies have therefore no power inhering to restructure the rate of interest due to the petitioner-Bank from the party respondents herein – the rate of interest being governed by the agreement between the parties, qua the provisions of Section 34 CPC. Further the petitioner-Bank is a Banking Company within the meaning of the Banking Regulation Act, 1949, in view of the Section 21-A and in view of non-applicability of Section 34 CPC, Registrar/ Arbitrator acting under Sections 61 and 62 or the Co-operative Tribunal acting under Section 76 of the 1964 Act are denuded of any power, authority or jurisdiction to interfere with the rate of interest that is owed by a debtor to a Banking Company, on the ground that it is excessive. On this analysis the petitioner-bank is entitled to the rate of interest as per the agreement entered into by the debtors with it.
44. On the above analysis the order of the 1st respondent-Co-operative Tribunal dated 23-6-2001 in CTA No. 55 of 1999 to the extent it has modified the order of the Co-operative Sub-Registrar/Arbitrator in ARC No. 344/1998/Jl, dated 22-12-1998 and has reduced the rate of interest to 6%, is unsustainable and is set aside. Consequently the petitioner-Bank shall be entitled to recover from the respondents 2 to 4 herein the amounts due and outstanding as per the award of the Co-operative Sub-Registrar/Arbitrator in ARC No. 344/1998/ Jl, dated 22-12-1998. The writ petition is accordingly allowed. No order as to cost.