Case Note & Summary
The appeal was filed by the borrowers (M/s. Cozy Polystone (P) Ltd. and its directors) against the order dated 02.11.2012 passed by the XXXVII Additional City Civil and Sessions Judge, Bangalore, in Misc. No.802/1999. The Karnataka State Financial Corporation (KSFC) had filed a petition under Sections 31(1), 31(1)(aa) and 32 of the State Financial Corporations Act, 1951 for recovery of its dues. The trial court allowed the petition and held KSFC entitled to recover its dues with costs and interest at the rate of 16.5% per annum from the date of presentation of the petition till realization. The appellants challenged only the rate of interest, contending that it was excessive and that the court should have exercised its discretion to award a lower rate. The High Court, after hearing both sides, observed that the trial court had not given any reasons for awarding 16.5% interest. The court noted that the loan was taken in 1992 and the petition was filed in 1999. Considering the facts and circumstances, the court held that the interest rate of 16.5% was on the higher side and reduced it to 10% per annum from the date of petition till realization. The appeal was allowed in part, modifying the trial court's order only to the extent of the interest rate.
Headnote
A) Interest - Rate of Interest - Discretion of Court - Section 34 of Code of Civil Procedure, 1908 read with Section 32(9) of State Financial Corporations Act, 1951 - The court has discretion to award interest at a rate not exceeding the contractual rate or the rate prescribed under the Act. In the absence of any contractual rate, the court may award interest at a reasonable rate. Held that the trial court's award of 16.5% per annum was excessive and reduced to 10% per annum from the date of petition till realization (Paras 5-8).
Issue of Consideration
Whether the rate of interest awarded by the trial court at 16.5% per annum from the date of presentation of the petition till realization is excessive and requires reduction.
Final Decision
Appeal allowed in part. The order dated 02.11.2012 passed in Misc. No.802/1999 is modified to the extent that the rate of interest is reduced from 16.5% per annum to 10% per annum from the date of petition till realization. No order as to costs.
Law Points
- Interest rate
- Discretion of court
- Section 34 CPC
- Section 32(9) SFC Act
- Recovery of dues
- State Financial Corporation
