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1988 SCC OnLine Del 254 : AIR 1989 Del 107 : (1991) 71 Comp
Cas 602

In the High Court of Delhi

(Single Bench)
(BEFORE Y.K. SABHARWAL, J.)

Syndicate Bank … Petitioner;

versus
M/s. W.B. Cements Ltd. and others … Respondents.
S. No. 348 of 1980
Decided on October 10, 1988
The Judgment of the Court was delivered by
The plaintiff, Syndicate Bank, has filed this suit for recovery of Rs.
33,39,026.75p. The case as set up in the plaint is that the bank
amongst various other facilities sanctioned overdraft limit of Rs.
10,00,000/- to defendant 1 company against hypothecation of fiat cars
jeeps and commercial vehicles. The defendants, in consideration of the
said overdraft limit, executed a demand promissory note dated 2-2-
1972 for said sum of Rs. 10,00,000/- carrying interest at 10½% per
annum for the time being. The defendants also executed further
documents as set out in the plaint and availed of the said overdraft
limits of Rs. 10,00,000/-. The defendants acknowledged their liabilities
in writing to the extent of Rs. 11,83,327.95 p. as on 31st of December,
1974 by acknowledgment of debt dated 31st of

Page: 109

January, 1975. It is further claimed that in spite of acknowledgment of

liability the defendants failed to deposit money in the said over draft
account and when called upon to deposit the sale proceeds of the
hypothecated vehicles the defendants stated that the same had been
utilised elsewhere and they were not in a position to pay the same to
the bank. By Resolution dated 7th of January, 1977, defendants again
acknowledged their liabilities in respect of the said overdraft account.
Once again by Resolution dated 14th of November, 1977 the
defendants acknowledged their liabilities in respect of the said overdraft
account and also confirmed the previous acknowledgment dated 31st of
January, 1975. By acknowledgment of debt dated 16th of November,
1977 defendants admitted their liabilities to the extent of Rs.
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17,38,401.85p. as on 31st of December, 1976 with interest thereon

from 1st of January, 1977 under the promissory note dated 2nd of
February, 1972. The defendants failed to pay anything despite the bank
writing numerous letters to them. The bank further claims that
originally the rate of interest was 101/2% per annum and because of
enhancement in the bank rate, by Reserve Bank of India, the interest
chargeable from the defendants also stood enhanced and the
defendants had agreed to be bound by the various rules and
regulations of the bank regarding enhancement of interest and the
same has been charged at the rate of 161/2% per annum and has been
computed accordingly in the statement of account filed in the suit.
Accordingly it is claimed that a sum of Rs. 33,39,826.75 p. is due from
and payable by the defendants to the bank.

2. The written statement on behalf of defendant 1 was filed about

four years after service of summons on the said defendant. Although
adjournment was taken to file written statement on behalf of other
defendants but no written statement was filed. The plea taken by the
defendant 1 in the written statement is that the said defendant became
a sick unit and as such is not liable to pay any interest. The averments
made in the plaint were not specifically controverted as required by. R.
5 of O. 8 of Code of Civil Procedure. The rate of interest was also not
specifically controverted nor execution of the various documents. The
substance of the plea of defendant 1 is given in additional pleas in the
written statement in the following words
“That the answering Defendant took diverse amounts from the
Plaintiff Bank from time to time which are subject matter of this
suit as well as the other suits filed by the plaintiff. The answering
Defendant is always ready to pay the principal amount and being
a sick unit is not liable to pay any interest. The answering
Defendant became a sick unit but although it has since
substantially recovered but is still a sick unit for purposes of
payment of amount, which is subject matter of the present suit as
well as the connected suits. The plaintiff is, therefore, not entitled
to charge any interest and can claim only the principal amount. A
proposal has already been submitted by the answering Defendant
to the Plaintiff Bank in which in order to settle the matter the
answering Defendant has even agreed to the payment of interest
at the reduced rate set out in the said proposal.”
3. On pleading of the parties the following issues were framed :
“1. Whether the principal amount as claimed by the Bank is not
principal amount on the ground that it includes interest added
from the date of advance till date of the suit? If so, what is its
effect? OPD.
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2. Whether there are special circumstances for disallowing interest

payable to the plaintiff from the date of the filing of the suit to the
date of the decree and from the date of the decree till the date of
the payment and, in any case, for charging the same at reduced
rate or rates of interest? OPD.
3. Whether the amount paid by the Defendant during the pendency
of this suit is liable to be adjusted against the principal amount or
towards interest? OPD.
4. Relief.”
4. The order framing issues specifically records that parties do not
desire any other

Page: 110

issue to be framed. It was further agreed that evidence will be by

affidavits. As onus of all the issues was on the defendants they were
directed to first file affidavits by way of evidence. The bank had filed
various suits against the defendants on similar averments. For the
purpose of trial suit Nos. 348/80, 806/79, 1412/79, 807/79, 1345/79,
687/79, 729/79, 735/79, 1098/79, 343/80 and 1374/79 were
consolidated and the main evidence was directed to be taken in the
present suit. By orders made on 11th of April 1986, defendants were
directed to file affidavits by way of evidence by 30th of April 1986 and
the case was directed to be listed for cross-examination of the
deponents, if desired, on 12th of May, 1986 and also for arguments.
The defendants did not file affidavits by way of evidence within the
time granted by the Court. By order made on 16th of May, 1986 the
defendants were granted last opportunity to file their affidavits by way
of evidence by 10th of July, 1986 and case was listed for arguments for
25th of July, 1986. On 23rd of July, 1986 it was noticed that in spite of
the last opportunity granted defendants had not filed the affidavits and
accordingly the case was fixed for 13th of August, 1986 for further
proceedings. On 13th of August, 1986 again a request was made for
grant of time to file affidavits by way of evidence which request was
declined. Thereafter, on some dates arguments were heard but the case
had to be adjourned on 30th of September, 1986 as the documents
which had been kept in sealed cover were not traceable. The orders
passed on 6th of March, 1987 show that the record had been traced
and accordingly the case was fixed for further hearing for 9th of April,
1987. It appears that in between the defendants filed affidavit of Shri
B.K. Sahni along with an application for condonation of delay in filing
the said affidavit by way of evidence. In view of the fact that further
proceedings had not taken place as record was not traceable and the
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affidavit had already been placed on record, the Court by orders made
on 28th of July, 1987 condoned the delay in filing the said affidavit.

5. I have heard learned counsel for the parties in support of the

issues. The primary questions for determination are: (i) scope of S. 34
of Code of Civil Procedure including interpretation of the words
‘Principal Sum’ in the said Section, and; (ii) from the date of the decree
to the date of payment, where liability has arisen out of a commercial
transaction, the grant of interest at the contractual rate, should be the
rule or a rare exception. Now, the issues :—
6. Issue No. 1:
Mr. P.C. Khanna, learned counsel for the defendants, has vehemently
contended that the defendants are not liable to pay interest to the
plaintiff on the suit amount. The argument is that, in fact, the suit
amount is not the principal sum because it includes interest added from
the date of advance till tha date of the suit. The thrust of the
arguments of the learned counsel is that only the amount of initial
advance is the principal sum and under S. 34 of the Code of Civil
Procedure, after institution of suit, interest can be awarded, in the
discretion of the Court only on the principal sum and not on the amount
inclusive of interest from the date of advance till the date of the suit. It
may be mentioned that the liability of the defendants to pay the suit
amount has not been disputed. The dispute is about the amount on
which interest is leviable after the filing of the suit till the date of the
decree and from the date of the decree to the date of the payment.
7. It is well settled that interest for the period prior to suit is payable
either under an agreement or usage or under a statutory provision or
under the Interest Act and in some cases it can also be awarded by
courts of equity. There is no dispute about the award of interest for the
period prior to the institution of the suit. After the institution of the suit
the award of interest is governed by provision of S. 34 of the Code of
Civil Procedure. Under this section, after institution of the suit, the
Court has discretion to order payment of interest on the principal sum
adjudged.
8. What is the principal sum? Is the amount initially advanced can
alone be treated as ‘principal sum’, as contended by Mr. Khanna,

Page: 111

learned counsel for defendants or the amount advanced inclusive of the

interest is the ‘principal sum’, as contended by Mr. Dewan learned
counsel for the plaintiff?
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9. The defendants did not dispute that as on 31st of December,

1974 they had acknowledged their liabilities to the extent of Rs.
11,83,327.95 p. and as on 31st of December, 1976, the liability of Rs.
17,38,401.85 p. The statement of account also shows that the bank
computed interest with quarterly rests. After the quarter the interest
was added to the last balance and that amount was treated as
“principal sum” for computing interest for the next quarter and so on
and so forth. Learned counsel for the plaintiff submitted that if interest
is not paid, by the due date, by the borrower, which under the contract
he is liable to pay, a concession is given to the borrower by adding the
amount of such interest to the amount of last balance and the sum
total of the two becomes the principal sum. In support the learned
counsel has placed reliance on a Division Bench judgment of Madras
High Court in P.C.T.L. Lakshmanan Chettiar v. K.T. RM.KR.RM.
Karuppan Chettiar, (1978) 2 Mad LJ (HC) 364, for the proposition that
the principal at the beginning of the each year would be the principal
plus interest which accrued during the previous year. The Bench held
that the contract between the parties has to be worked out as a whole
and it cannot be interpreted in a truncated fashion and, therefor, the
interest calculated on the amounts arrived at annually would be the
principal for the next year. Mr. Khanna is not right in submission that
the said judgment is not applicable as it was based on contract and in
the present case the plaintiff bank has not proved any contract. The
plaintiff bank had levied interest in the manner stated above which was
not challenged. The only specific plea taken in the written statement is
that the defendant is not liable to pay interest because it was a sick
unit. The onus of this issue is on defendants who had to show how
under the contract the amount inclusive of interest was not the
principal sum. They have not led any evidence to process this issue. In
the affidavit of Mr. Sahni reliance has been placed only on the
provisions of S. 34. No contract has been either pleaded or proved
showing that amount inclusive of interest cannot be treated as
‘principal sum’. On the suit amount, no issue was even claimed. The
issue claimed was only on the amount and the rate at which interest
was payable after the institution of suit. It was neither argued nor could
it be argued that the defendant is not liable to pay suit amount. The
only argument was that the defendant is not liable to pay interest on
suit amount but on amount of the initial advance. In view of the above
it is not possible to accept the submission of Mr. Khanna that there was
no contract for including interest in the amount of initial advance and
treating it as the ‘principal sum’.
10. In support of the submission that only the amount of original
advance is the principal sum and amount inclusive of interest cannot be
treated as ‘principal sum’, the learned counsel for defendants has
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placed reliance on a judgment of House of Lords in Paton v. Inland

Revenue Commissioners, (1938) AC 341. While analysing the facts, the
points in dispute and the ratio of Paton's case it is to be borne in mind
that the dispute in the said case was not between a debtor and a
creditor or between a bank and its customer but was between an
individual and revenue Commissioner i.e., tax collecting agency. Briefly
the facts of the said case are that one Mr., Fenton had loan accounts
with the National Bank Limited and the Halifax Commercial Banking
Company Ltd. (subsequently the Bank of Liverpool and Martins, Ltd.) on
which he had drawn large sums. The practice of the banks was to debit
Mr. Fenton's accounts at the close of each half year with the interest
accrued and to carry the balance forward to the next half-year. As the
balance carried forward included the amount of the interest, accrued in
the preceding half-year the result was that the, interest debited at the
end of the next half-year included interest on the interest accrued in
the preceding half-year. In effect by thus adding interest to principal
half-yearly the banks charged Mr. Fenton with compound interest. As
regards the loan accounts which

Page: 112

Mr. Fenton had with the Halifax Commercial Banking Company, Ltd., in
each of the calendar years 1920 and 1921 when interest fell due half
yearly on June 30 and December 31, Mr. Fenton did not make any
payment to the bank, and the bank at the end of each half-year simply
debited the accounts with the accrued interest and carried the balance
forward, charging interest at the end of the succeeding half-year on the
accumulated principal and interest and so on. Mr. Fenton claimed that
the action of the bank in debiting with his consent to his loan accounts
half-yearly the accrued interest and carrying forward the accumulated
sum constituted, as between him and the bank, payment at each half-
yearly period of the interest then falling due. He accordingly maintained
that in the tax year to April 5, 1921, he had in this way paid 27076£
10s 10d of interest to the bank, without deduction of tax, on the bank's
advances to him. As, after allowing for deductions and repayments, he
paid income tax for the year to April 5, 1921, on 7777£, he claimed
that the sum of 27076£ 10s 10d of interest had to the extent of 7777£
been paid out of profits or gains brought into charge to tax, and that he
was accordingly entitled to repayment of tax on 7777£ under S. 36 sub
-sec.(1) of the Income-tax Act, 1918. He submitted similar calculations
for the fiscal year to April 5, 1922, bringing out a claim for repayment
for that year of tax on 2722£. Section 36 of the aforesaid Act on which
reliance was placed by Mr. Fenton reads under :—
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“(I) Where interest payable in the United Kingdom on an advance

from a bank carrying on a bona fide banking business in the
United Kingdom is paid to the bank without deduction of tax out
of profits or gains brought into charge to tax, the person by whom
the interest is paid shall be entitled, on proof of the facts to the
satisfaction of the special commissioners, to repayment of tax on
the amount of the interest.”
11. The question for determination before the House of Lords was
whether there was any payment by Mr. Fenton of the interest in respect
of which repayment of tax was claimed by him under the aforesaid
provision. The, Court of Appeal had held that Mr. Fenton had paid or
must be deemed to have paid the interest in question. This finding of
Court of Appeal was under challenge before the House of Lords. Another
ancillary question was whether the payment was out of profits or gains
brought into charge to tax. However, in the present case we are not
concerned with the said ancillary question. The House of Lords, while
interpreting the aforesaid provision, held that the payment of interest
could not be notional but it had to be paid in reality in order to become
entitled to refund. Lord Atkin express the opinion that ‘in circumstances
such as the present there is no ground for holding that the interest in
question was paid by Mr. Fenton’. Similar opinions were also expressed
by the other Law Lords. The ratio of Paton's case (1938 AC 341) (supra)
is not that only the amount of original advance is the principal sum in a
dealing between bank and its customer. It rather opined to the
contrary. Lord Atkin in his opinion has recognised the practice of adding
interest to the sum advanced and then charging interest on the sum
total of the two as the principal sum in the following words :
“The privilege of a banker to balance the account at the end of the
year, and accumulate the interest with principal is founded on this
plain ground of equity, that the interests ought then to be paid,
and, because it is not paid the debtor becomes thenceforth debtor
in the amount, as a principal sum itself bearing interest”.
Similarly, Lord Macmillan opines that ‘Now it may well be that as
between a bank and its customer this method of dealing may have the
result that the accrued interest which the bank has with the customer's
assent added to the principal loan thereby ceases to be due or
recoverable as interests but becomes merged in the principal load’.
12. From the aforesaid discussion it is evident that Mr. Fenton was
not held entitled to refund of the tax under the provisions S. 36 as
interest in reality had not been paid in by him but that is not the
question with which we are concerned in this suit. The opinion on

Page: 113
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the question with which we are concerned was against the borrower,
like the defendant, and the method of dealing with loan accounts and
adding interest to the amount advanced and treating the merged
amount as the principal loan was recognised.

13. The defendants have not been able to show how the suit amount
claimed is not the ‘principal sum’. It cannot be inferred that it is not
the principal sum because it includes interest from the date of the
advance till the date of the suit. As stated above, the defendants have
neither pleaded nor proved any contract under which the plaintiff could
be precluded from claiming the principal amount in the manner claimed
by it. I cannot accept the general statement that the amount of initial
advance will always remain the principal sum and interest will always
remain interest and the two can never merge. The definition of the
word principal sum as given in various dictionaries is not relevant for
the purpose of adjudging principal sum under S. 34. It will depend
upon contract between the parties. If the contention of the defendants
is accepted the contracts to pay interest with rests will become
meaningless. Reference may also be made to decision of Allahabad
High Court in Jafar Hussain v. Bishambhar Nath, AIR 1937 All 442. This
was a case under O. 34, R. 11 of Code of Civil Procedure. Under O. 34
R. 11 a mortgagee is entitled to interest on the principal amount found
or declared due on the mortgage. While interpreting the words ‘on the
principal amount found or declared due’ the Division Bench of the
Allahabad High Court held that the mortgagee is entitled to interest at
the contract rate from the date of the suit till the date fixed for the
payment. If the mortgage deed provides that interest will be calculated
six monthly and if it was not paid then it would become a part of the
principal then that agreement will have to be enforced. It was further
held that R. 11 O. 34 does not provide the rate at the time of
calculating the due to the mortgagee, interest will be allowed only on
the principal sum secured by the deed and not on the interest which,
according to the agreement of the parties had become part of the
principal on the date on which the accounts are taken. Reference may
also be made to the Division Bench decision of Madras High Court in
Sigappiachi v. M.A.P.A. Palaniappa Chettiar, AIR 1972 Mad 463, where
justice Kailasan speaking for the Bench held that the ‘principal sum
adjudged’ is the amount found due as on the date of the suit. In this
case again the Division Bench of Madras High Court was considering the
scope of S. 34 of the Code of Civil Procedure. In view of the above
discussion it is not possible to accept the contention of Mr. Khanna
learned counsel for the defendants that the interest can never become
principal and the words principal sum in S. 34, Code of Civil Procedure,
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should be given the ordinary meaning as given in the dictionaries. It

follows that the argument that the interest under S. 34 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. I will conclude discussion on this issue by
reproducing the plea taken by the defendants in the affidavit of Mr. B.K.
Sahni in the following words :
“Even though a bank for the purpose of its book keeping adds
interest to the principal periodically and then treats the principal
and interest as principal and during the next calculating period
(whether quarterly, six monthly or yearly) treats the principal plus
interest as principal, but under the Code of Civil Procedure the
principal amount remains separate as it was at the time when the
first loan was granted and interest over interest remains separate.
The two channels, that is principal and interest and interest over
interest, flow closely but never merge and do not become one”.
In view of the above discussion, I answer Issue No. 1 against the
defendant and adjudge Rs. 33,39,026.75 p. as the principal sum.
Issue No. 2 :

Page: 114

14. Mr. Khanna, learned counsel for the defendants, vehemently urged
that, as a matter of rule, the courts should lean in favour of awarding
reduced rate of interest after the date of the suit as that is the scheme
of S. 34. It is true that under S. 34 a wide discretion has been
conferred on the courts in the matter of grant of interest. But it is
equally true that the discretion is to be exercised not arbitrarily but on
sound judicial principles. In this case we are concerned with the scope
of S. 34 in regard to the grant of interest at two stages viz. (1) from
the date of the suit to the date of the decree, i.e., pendente lite
interest; and (2) from the date of decree to the date of payment, i.e.,
future interest or further interest. Pendente lite interest can be awarded
at such rate as the court deems reasonable. Further interest can be
awarded at such rate not exceeding 6% per annum. But under the
proviso to S. 34 the rate of such further interest may exceed 6% per
annum where the liability in relation to the sum so adjudged had arisen
out of a commercial transaction, but such rate shall not exceed the
contractual rate of interest, or where there is no contractual rate, the
rate at which monies are lent or advanced by the nationalised banks in
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relation to commercial transactions. Explanation II states that a

transaction is a commercial transaction, if it is connected with the
industry, trade or business of the party incurring the liability. Prior to
1956 amendment pendente lite or further interest could be awarded at
such rate as the Court deemed reasonable. The Upper limit of grant of
further interest at the rate of 6% was incorporated by amendment of S.
34 made in the year 1956. Before 1976 amendment of Code of Civil
Procedure further interest could be awarded at such rate not exceeding
6% per annum as the court deemed reasonable. The said upper limit
has continued for all transactions except where the liability has arisen
out of a commercial transaction where the upper limit is the contractual
rate of interest and in the absence of contractual rate, the rate at which
the monies are lent or advanced by the nationalised banks in relation to
commercial transactions. It cannot be disputed that in the present case
liability has arisen out of a commercial transaction. It is also true that,
in a given case, even in respect of liability arising out of commercial
transactions courts can grant further interest at a rate less than the
contractual rate or even disallow it altogether. The courts can also
disallow pendente lite interest. The question for determination,
however, is whether after amendment of 1976, for liabilities arising out
of commercial transactions, should the contractual rate of interest be
the rule or an exception. Of course, Mr. Khanna contends that as a rule
grant of interest should not exceed 6% per annum and only in
exceptional cases the courts should exercise discretion under the
proviso to grant further interest on the contractual rate. If the
contention of Mr. Khanna is accepted the amendment of 1976 would
become more or less illusory. The very purpose of amendment would be
lost if as a matter of rule interest is awarded at a rate not exceeding
6% per annum in commercial transactions. The grant of interest at a
rate lesser than the contractual rate as a matter of rule, will amount to
giving premium to those who trade upon the money of others. The
defaulting borrower, in my opinion, cannot be given the benefit of
reduced rate of interest as a matter of rule only because the bank had
to resort to legal recourse on account of non-payment by the borrower
except of course in exceptional circumstances. The existence of
exceptional or special circumstances will depend on facts and
circumstances of each case. One such illustration of exceptional or
special circumstances can be where borrower made every sincere effort
to pay but failed and grant of interest at contractual rate will render
closure of his unit resulting in unemployment of large number of
persons. Another such illustration can be the conduct of the creditor
himself, which may justify the grant of reduced rate of interest. I will
not venture to lay down any broad proposition by multiplying these
illustrations. Ultimately facts of each case will determine special or
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exceptional circumstances. No rigid or hard and fast rule can be laid

down. In my opinion, in commercial transaction, grant of interest at the
contractual rate ought to be the rule and grant of interest at reduced
rate a rare exception. The same principles should be

Page: 115

applied for determining the reasonable rate of pendente lite interest.

15. The special circumstances for disallowing interest to the plaintiff

from the date of the filing of the suit to the date of the decree and from
the date of the decree till the date of the payment, or charging the
interest at the reduced rate, on which reliance has been placed by the
defendants are as set out in their additional pleas where primarily the
emphasis is on defendant 1 being a sick unit. The plea taken is that
although the defendant has substantially recovered but still it is a sick
unit for the purpose of payment of interest of amount which is the
subject matter of the present suit as well as the connected suits. It is
not disputed that the defendant 1 has not been statutorily declared as
a sick unit. The affidavit of Mr. B.K. Sahni shows that the company paid
to other creditors a sum of about Rupees two crores which included
payment to the Bank of Madura, Punjab National Bank, Statutory
Creditors like Sales-tax and other departments and sundry creditors.
Another affidavit dated 11th of August, 1988 filed by Shri Seshagiri
Rao, Corporate Manager of defendant 1 shows that over Rs. 1.2 crores
were spent by the company between July 1984 and August 1985 for
acquiring some other unit. These averments show the genuineness of
defendant's claim of being a sick unit. As stated above the plea even in
the written statement about the defendant company being a sick unit
has been taken in a guarded language when it is stated although it has
since substantially recovered but is still a sick unit for the purposes of
payment of the amount which is subject matter of the present suit as
well as in the connected suits'. The defendants have not placed on
record any other evidence except the two affidavits referred to above in
support of its claim that there are special circumstances for either
disallowing the interest or awarding it at a reduced rate from the date
of the suit till the date of the decree and thereafter up to the date of
payment. The defendants have not placed on record their balance-sheet
or accounts or any other documents in support of their plea of existence
of special circumstances for awarding reduced rate of interest.
16. It cannot be said that there are any special circumstances
justifying the grant of interest at a reduced rate. I have also set out
above the conduct of the defendants. The written statement was filed
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nearly 4 years after service of summons. The affidavit by way of

evidence was not filed in spite of grant of last opportunity. The request
for grant of further time was declined but still court permitted the
placing of the said affidavit on record as by the time the affidavit was
filed the arguments could not be concluded because the record was not
traceable. The totality of the circumstances show that the defendants
have not been able to show any exceptional or special circumstances
justifying reduction of rate of interest and not awarding it at the rate of
161/2% per annum. The plaintiff claimed interest at this rate. There is
no specific denial by the defendants. It has neither been pleaded nor
proved that the contractual rate of interest is not 161/2% and is less.
Defendants did not join issue with the plaintiffs in respect of
contractual rate of interest. The bank rate of interest is also not less
than 161/2% per annum. Even if the conduct of the defendants is
ignored, then also, they will not be entitled to reduction of rate of
interest as no special or exceptional circumstances have been
established.
17. For the aforesaid reasons, I answer issue No. 2 against the
defendants and hold that there are no special circumstances for either
disallowing interest or allowing at a reduced rate.
Issue No. 3 :
18. It has not been disputed that during the pendency of the suit
defendants have paid Rs. 7,40,000/- to the plaintiff bank in the year
1983-84. A sum of Rs. 5,00,000/- was paid by cheque dated 29th May
1984 handed over in Court to the counsel for the plaintiff on 30th of
May 1984 and realised on 2nd of June 1984. It is also not disputed that
a sum of Rs. 2,40,000/- was paid by the defendants to the plaintiff on
or about September 1983. It is

Page: 116

also not disputed that along with the aforesaid payment totaling Rs.
7,40,000/- defendants did not give any special instructions to the
plaintiff as to how the said amount was to be adjusted. Under S. 60 of
the Indian Contract Act 1872 in absence of any instructions from the
defendants the bank could apply it at its discretion to any lawful debt
actually due and payable to it from the defendants. The defendants
have not led any evidence showing that they had instructed the bank
that the amount of Rs. 7,40,000/- be adjusted towards the principal
amount. The bank admits that adjustment of this amount is to be given
but disputes that it is to be adjusted towards principal. The defendants,
in law, cannot insist that this amount is liable to be adjusted against
the principal amount in absence of any such instructions to the bank.
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Accordingly the defendants cannot claim that the amount of Rs.

7,40,000/- is liable to be adjusted against the principal amount. Issue
No. 3 is decided accordingly.

Issue No. 4 : Relief.

19. For the reasons aforesaid, I pass a decree in favour of plaintiff
and against the defendants for sum of Rs. 33,39,026.75 p. with interest
thereon at the rate of 161/2% per annum from the date of suit to the
date of realisation. The plaintiff will also be entitled to its costs.
Order accordingly.
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