1982 (10) TMI 213 - HC - Companies Law

Summary

Issues Involved:
1. Entitlement to interest subsequent to August 1977.
2. Discretion of the court in granting interest under Section 34 of the Civil Procedure Code (CPC).
3. Applicability of provisions of the Transfer of Property Act and the West Bengal Financial Corporation Act, 1951.

Issue-wise Detailed Analysis:

1. Entitlement to interest subsequent to August 1977:
The primary contention in this appeal was whether the petitioner, a secured creditor, was entitled to interest subsequent to August 1977, as per the mortgage deed. The learned trial Judge had directed payment of the principal amount, interest, insurance charges, and consultant fees up to August 1977 but did not grant interest thereafter. The petitioner argued that as a secured creditor, they were entitled to full interest at the rate mentioned in the mortgage deed until payment. The court noted that the learned Judge did not provide any reason for not granting subsequent interest, which was seen as an error.

2. Discretion of the court in granting interest under Section 34 of the Civil Procedure Code (CPC):
The court examined whether it had the discretion to grant or refuse interest under Section 34 of the CPC. The provision allows the court to order interest at a reasonable rate from the date of the suit to the date of the decree and further interest not exceeding six percent per annum from the date of the decree to the date of payment. The court referred to several judgments, including those of the Privy Council and the Federal Court, which indicated that while the court must decree pendente lite interest, it has discretion over the rate of interest. The court concluded that there was no discretion about granting or not granting interest, but discretion existed regarding the rate of interest.

3. Applicability of provisions of the Transfer of Property Act and the West Bengal Financial Corporation Act, 1951:
The petitioner relied on Sections 58, 60, 67, and 68 of the Transfer of Property Act, which establish that a secured creditor is entitled to enforce their rights outside the scope of winding-up proceedings and be paid according to the mortgage deed. The court noted that the petitioner, being a secured creditor, was outside the winding-up proceedings and entitled to enforce their rights. However, the enforcement of these rights must be regulated by the CPC, specifically Section 34 and Order 34. Additionally, the court acknowledged that the West Bengal Financial Corporation Act did not grant the petitioner any greater rights than those available under the law.

Conclusion:
The court modified the order of the learned trial Judge, directing that interest at half percent per annum be granted from August 1977 to December 14, 1978, during the pendency of the litigation, and no interest thereafter. The court emphasized that there was no discretion about granting or not granting interest but discretion regarding the rate of interest. The parties were directed to bear their own costs, with the Official Liquidator retaining costs out of the assets in his hands. The stay requested was refused.

Separate Judgment:
Suhas Chandra Sen, J. concurred with the judgment.