2003 (8) TMI 364 - SC - Companies Law

Whether the future interest was to be at the rate of 5% above the prevailing bank rate subject to a minimum of 13 % per annum or whether the future interest was to be at such other rate of interest as may be decided by the Corporation for similar advances from time to time? Whether the half yearly rests on product basis was to be only applied if the rate of interest was to be decided by the Corporation and not if the rate of interests was to be 5% above the prevailing bank rate subject to a minimum of 13 %? Held that - Appeal allowed. Clauses 2 and 7 of the compromise deed make it very clear that the Appellants were entitled to charge interest on half yearly basis. We see no substance in the submission that the half yearly rests was to apply only if the rate of interest was to be decided by the Appellants. These words clearly applied to both the options. In the classificatory portion the words on half yearly basis have not been mentioned because the portion is only clarifying how interest was to be calculated. This portion, thus, does not detract from the fact that the decree is in terms of the compromise deed. Merely because some other minor changes, which appeared to be inadvertent changes, have crept in, do not also detract from the fact that the decree is in terms of the compromise deed. We also do not find any uncertainty in the decree.

Issues Involved:
1. Validity of the calculation of interest with half-yearly rests.
2. Jurisdiction of the High Court under Section 115 of the Civil Procedure Code.
3. Interpretation of the decree in terms of the compromise deed.
4. Authority of the executing court to go beyond the decree.

Detailed Analysis:

1. Validity of the Calculation of Interest with Half-Yearly Rests:
The appellants had sanctioned a loan to the respondents against the security of a mortgage. The respondents failed to repay the loan, leading to a compromise deed that included terms on interest calculation. The compromise deed specified that interest would be calculated at 5% above the bank rate, subject to a minimum of 13.5%, with half-yearly rests. The High Court later held that the appellants were not entitled to charge interest on a half-yearly rests basis. However, the Supreme Court found that clauses 2 and 7 of the compromise deed clearly allowed for interest to be charged on a half-yearly basis.

2. Jurisdiction of the High Court under Section 115 of the Civil Procedure Code:
The appellants argued that the High Court exceeded its jurisdiction under Section 115 of the Civil Procedure Code by revising the decree. The Supreme Court agreed, stating that the High Court overlooked the fact that the decree had been passed in pursuance of a compromise deed signed by both parties. The decree was supposed to reflect the terms of the compromise deed, and any changes should have been explicitly recorded by the court.

3. Interpretation of the Decree in Terms of the Compromise Deed:
The decree issued on 22nd September 1977 was based on the compromise deed, which included specific terms about interest calculation. The Supreme Court noted that the decree did not provide any variations from the compromise deed, and any changes made should have been explicitly recorded. The Supreme Court emphasized that the decree was in terms of the compromise deed, and the terms of the compromise deed, including the calculation of interest on a half-yearly basis, should be upheld.

4. Authority of the Executing Court to Go Beyond the Decree:
The respondents had filed objections to the calculation of interest with half-yearly rests, which the executing court overruled. The Supreme Court reiterated that the executing court could not go beyond the decree. The executing court must take the decree according to its tenor, and it cannot entertain objections that the decree was incorrect in law or fact. The Supreme Court cited several precedents, including Vasudev Dhanjibhai Modi v. Rajabhai Abdul Rehman and Greater Cochin Development Authority v. Leelamma Valson, to support this principle.

Conclusion:
The Supreme Court set aside the impugned judgment of the High Court and restored the order of the executing court. The appeal was allowed, and it was concluded that the appellants were entitled to charge interest on a half-yearly basis as per the terms of the compromise deed. The decree was to be executed according to its original terms, without any modifications by the High Court.

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