Case Note & Summary
The Supreme Court of India, in a bench comprising K. Ramaswamy, Faizan Uddin, and G.B. Pattanaik, dealt with a matter arising from Special Leave Petition (C) Nos. 3954/94, 9082 and 9088/1995 and Civil Appeal Nos. 3964 and 3967 of 1992, involving Central Bank of India as petitioner and Ravindra & Ors. as respondents. The proceedings concerned the interpretation of Section 34 of the Code of Civil Procedure, 1908, particularly the meaning of the phrase 'the principal sum adjudged' in the context of lender's claim for interest. The court heard the learned Attorney General and amicus curiae advocates A. Subba Rao, Ranjit Kumar, and K.M.K. Nair. The learned Attorney General drew the attention of the court to two earlier decisions of the Supreme Court: Corporation Bank v. D.S. Gouda & Ors., (1994) SCC 213, and Bank of Baroda v. Jagannath, C.A. No. 2785/87 decided on September 21, 1994. In those cases, he contended, the court had proceeded on the basis that the principal sum adjudged and the principal sum mentioned later in Section 34 would be the same, relying on the word 'such'. He pointed out that before Amendment Act 66 of 1956, the phrase used was 'aggregate sum so adjudged', which was substituted by 'the principal sum adjudged' after the amendment. The court observed that the distinction between the pre-amendment and post-amendment language had not been brought to the attention of the court in the two earlier judgments, particularly the later one. The core legal issue was whether the liability of the borrower to pay interest on the principal sum included interest that had become merged with the principal sum adjudged, or whether it referred only to the original principal sum lent. The court formed the view that this question required an authoritative interpretation by a Constitution Bench of five judges. Accordingly, the court did not decide the merits but directed the Registry to place the matter before the Hon'ble Chief Justice for constituting a Constitution Bench. The judgment was delivered on May 7, 1996.
Headnote
A) Civil Procedure - Interest - Section 34 Code of Civil Procedure, 1908 - Principal Sum Adjudged - Interpretation of Whether Interest Merges into Principal Sum - The court considered the meaning of 'the principal sum adjudged' under Section 34 CPC, noting that prior to Amendment Act 66 of 1956 the phrase was 'aggregate sum so adjudged' and after amendment it became 'the principal sum adjudged'; the learned Attorney General argued that both phrases refer to the same principal sum based on the word 'such'; the court observed that the distinction was not addressed in Corporation Bank v. D.S. Gouda & Ors. and Bank of Baroda v. Jagannath; it held that the question of whether interest that merged with principal sum is included requires authoritative decision by a Constitution Bench. Held that an authoritative decision by a Bench of five judges is required; directed Registry to place matter before Chief Justice for constituting Constitution Bench.
Issue of Consideration
Whether the liability of the borrower to pay interest on the principal sum under Section 34 CPC includes interest that became merged with the principal sum adjudged, or whether 'such principal sum' refers only to the original principal sum lent, given the change in language by Amendment Act 66 of 1956.
Final Decision
The Supreme Court directed the Registry to place the matter before the Hon'ble Chief Justice for constituting a Constitution Bench of five judges to authoritatively interpret Section 34 CPC on the question of 'principal sum adjudged' and interest merger. No final adjudication was made.
Law Points
- Interpretation of Section 34 CPC regarding principal sum adjudged
- distinction between pre-amendment 'aggregate sum so adjudged' and post-amendment 'the principal sum adjudged'
- whether interest merges into principal sum
- requirement of authoritative decision by Constitution Bench
