State of Kerala and others v. A Abdul Rehim

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE P.SOMARAJAN THURSDAY, THE 16[th] DAY OF JUNE 2022 / 26TH JYAISHTA, 1944 RFA NO. 238 OF 2006 (F) AGAINST THE JUDGMENT AND DECREE DATED 30.07.2005 IN OS No.285/2002 OF PRINCIPAL SUB COURT, KOLLAM ## APPELLANTS/DEFENDANTS: 1 STATE OF KERALA, REPRESENTED BY PRINCIPAL SECRETARY, IRRIGATION DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM. 2 THE CHIEF ENGINEER, IRRIGATION & ADMINISTRATION, TRIVANDRUM. 3 THE EXECUTIVE ENGINEER, IRRIGATION DIVISION, KOLLAM. BY GOVERNMENT PLEADER SRI. S. UNNIKRISHNAN ## RESPONDENT/PLAINTIFF: A.ABDUL REHIM, OZHUKKANVILAYIL VEEDU, VADAKKUMTHALA EAST P.O., KARUNAGAPPALLY, KOLLAM DISTRICT. BY ADV SRI.SIRAJ KAROLY THIS REGULAR FIRST APPEAL HAVING COME UP FOR HEARING ON 16.06.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: RFA No.238 of 2006 2 **CR** ## **JUDGMENT** This appeal is against the decree granted by the trial court granting interest for the delayed payment of the amount due to the plaintiff from the State Government, the defendants. The plaintiff had earlier approached this Court in Writ for getting the amount due and this court directed the State Government to pay the amount due within a period of two months with a further direction that it will not carry any interest till that time. It is thereafter the present suit was instituted for recovery of the interest for the delayed payment. It was granted by the trial court, against which, the State Government/defendants came up in appeal firstly on the ground that the plaintiff is not entitled to interest in view of the direction issued in the writ petition by this court. Secondly on the ground that the trial court has granted 12% interest as pre-litigation interest, which is not in conformity with the mandate under Section 34 C.P.C.. RFA No.238 of 2006 3 2. The questions came up for consideration are whether it is permissible to bypass the jurisdiction of civil court in the matter of grant of interest to the sum due or any delayed payment or any other matter by way of writ jurisdiction and whether Section 34 C.P.C would operate regarding pre-litigation interest or its adjudication **.** 3. The entitlement of pre-litigation interest is not governed by Section 34 C.P.C., but governed by the contract/understanding by the parties, subject to the application of Section 23 of the Contract Act and other provisions governing the field including the provisions under the Negotiable Instruments Act, Usurious Loans Act and the like. Section 34 of C.P.C. is extracted below for reference: “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 RFA No.238 of 2006 4 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: Provided that where the liability in relation to the sum so adjudged had arisen out of a commercial transaction, the rate of such further interest may exceed six per cent, per annum, but shall not exceed the contractual rate of interest or where there is no contractual rate, the rate at which moneys are lent or advanced by nationalised banks in relation to commercial transactions. Explanation I.-In this sub-section, "nationalised bank" means a corresponding new bank as defined in the Banking Companies (Acquisition and Transfer of Undertakings) Act 1970(5 of 1970) Explanation II.-For the purposes of this section, a transaction is a commercial transaction, if it is connected with the industry, trade or business of the party incurring the liability. (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.” (emphasis supplied) RFA No.238 of 2006 5 4. There is no statutory limitation or restriction regarding the grant of pre-litigation interest under Section 34 of C.P.C.. Interest prior to the suit is a matter of substantive law and is outside the scope of Section 34 C.P.C.. Section 34 would operate only with respect to the entitlement of _pendente lite_ interest and post-decree interest (future interest) to the sum adjudged and cannot be applied for the determination of pre-litigation interest. Since the question of determination of pre-litigation interest is a part of substantive law, it shall be adjudicated based on the agreement of the parties and in the absence of any such arrangement by applying the general principles and custom which governs the field, but subject to the restriction under Section 23 of the Contract Act and other provisions governing pre-litigation interest, that is, special enactments – Negotiable Instruments Act, Usurious Loans Act etc. The expression “further interest” made mentioned in sub-section (1) and its proviso and in sub-section (2) stands for the interest RFA No.238 of 2006 6 from the date of decree to the date of payment or other earlier date (post-decree interest/future interest) and not for pendente lite interest. The future interest/post-decree interest shall not exceed 6% per annum to the principal sum adjudged, unless the liability in relation to the sum so adjudged had arisen out of a commercial transaction. Further, the section makes it clear that the _pendente lite_ interest and post-decree interest can be awarded “in addition” to the interest that can be adjudged for any period prior to the institution of the suit (pre-litigation interest). It is settled by the Apex Court in **M/s** **Everest Industrial Corporation and Others v. Gujarat State Financial Corporation (AIR 1987 SC 1950** ) that Section 34 C.P.C. would be applicable only at the stage of passing of decree and not to any stage posterior to the decree. 5. It is a case wherein a suit was filed for recovery of the interest accrued for the delayed payment. The suit though for recovery of interest alone for the delayed payment, would not come under the RFA No.238 of 2006 7 deeming provision - sub-section (2) of Section 34 C.P.C. The direction, if any issued by this Court by exercising the writ jurisdiction regarding waiver or fixation or modification of interest payable has no much relevance, since it is not permissible to bypass the jurisdiction of the trial court by exercising the Writ jurisdiction. The legal position has been very much settled by a Seven Judge Bench of the Apex Court in **Chandrakumar v. Union of India (1997 KHC 503)** . The direction issued by this Court in exercise of the Writ jurisdiction waiving the right of interest though for a limited period will not have any application while adjudicating the entitlement based on substantive law by a civil court. What is granted by way of pre-litigation interest is only 12 % per annum. The Apex Court has applied and accepted 12% interest as settled practice on delayed payment **[O.P.Gupta v. Union of India and Others** ( **AIR 1987 SC 2257)** and **Mahendra Singh Jaggi v. Dataram Jagnnath (AIR 1997 SC 1219]** and as such, it will not stand hit by public policy as embodied under Section 23 RFA No.238 of 2006 8 of the Contract Act or any other provision governing interest payable. The appeal fails, dismissed. **Sd/-** **P.SOMARAJAN** **JUDGE** sv