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TMI Blog1999 (9) TMI 971X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of installments, but later she committed default, whereupon legal notices were sent to the defendants. 3. Defendants No. 1 and 2 who are respondents No. 1 and 2 in the present appeal are wife and husband respectively. One of the pleas taken in defence is that on 10th June, 1994, the defendants had requested the plaintiff Bank to adjust the amount due to the Bank from the Fixed Deposit Receipts which were lying with the Bank as security. According to the defendants the Bank should have encashed the Fixed Deposit Receipts for adjustment of the dues on default of payment of installments. The claim of interest is also disputed. 4. The rate of interest stipulated to be paid is as per document (Exh.A) in this appeal. There is no dispute about the execution or validity of this document. According to it, the interest on the advance is chargeable at the rate of 1% above the State Bank of India Advance Rate at minimum 17.5% per annum with quarterly rests and enhanced rate of 2% with quarterly rests in terms stated in para 7 of this document. 5. To appreciate the controversy raised in this appeal, it would be useful-to reproduce Clause 6 of the Form of Agreement dated 16th M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gle Judge has held that in view of Clause 6 as aforesaid the Bank was required to adjust the installment of ₹ 2755/- which was due every month to it from the collateral security in the shape of F.D.R's. The learned Single Judge goes on to hold that the absolute discretion vested in the Bank under Clause 6 has to be exercised judiciously and not arbitrarily or at the sweet will of the Bank and in this regard reference has also been made to an earlier adjustment having been made by the Bank on 21st November, 1991 appropriating a sum of ₹ 9500/- from the Fixed Deposit Receipts being the amount due on that date. It has been held that there was no impediment whatsoever in the Bank to adjust the installments when the same became due in future as well from the collateral security, but the Bank did not follow the same procedure which it earlier followed while appropriating ₹ 9500/-. In these circumstances, Counsel for the Bank was asked to prepare a chart of every installment from the collateral security, namely, the fixed deposits, to workout that if adjustments were made every month out of fixed deposit receipts, what would be the balance amount payable by the defen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of aforenoticed Clause 6 is that the Bank can dispose of the security without giving any notice to the respondents. It is only a waiver of the stipulation of right of the respondents to a reasonable notice before the Bank decides to appropriate the security. Learned Counsel relies upon a decision of the Delhi High Court in Bank of Maharashtra v. M/s Racmann Auto (P) Ltd. AIR1991Delhi278 . In the said decision, the question which came up for considerations was whether there was any legal duty cast on the plaintiff Bank to take early steps for disposing of the pledged goods. Construing section 176, it was held that the very wording of the section makes it clear that it is the discretion of the pawnee to sell the goods in case the pawnor makes default but if the pawnee does not exercise that discretion no blame can be put on the pawnee and pawnee has the right to bring a suit for recovery of the debt and retain the goods pledged as collateral security. Doubt was also expressed whether a defendant as pawnor could force the pawnee to dispose of the pledged goods without defendant clearing the debt. However, on the facts of the present case, we need not go into this latter aspect on whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obligation on the appellant to adjust the amount due to it every month out of the Fixed Deposit Receipts. The acceptance of such contention may throw open various questions. We may just make mention of one of it. If adjustment from the amount of installment of ₹ 2775/- was to be made on default being committed every month in payment thereof, what would happen to the remaining amount of F.D.R?. Would it be kept again in fixed deposit ? Would it be kept in a saving account or would it be kept in a suspense account? All this clearly shows that the adjustment as made by learned Single Judge cannot be sustained in law. 16. Mr. Thali, learned Counsel for the respondents, also contends that the appellant Bank had earlier appropriated ₹ 9500/- from the Fixed Deposit Receipts and therefore it does not now lie in their mouth to plead or contend otherwise. We are unable to accept this contention of learned Counsel as well. The fact of the said appropriation will not change the legal position that the Bank is not obliged to make appropriations month by month which is the effect of the impugned judgment. It may be noticed that Mr. Nadkarni explains that earlier appropriation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he aforesaid Statement of Account and the trial Court having granted decree in favour of Bank with costs, which the learned Counsel contends, would mean that his clients would have to pay the costs twice-over. Mr. Nadkarni states that he would look into the matter and if it is case of payment twice-over as pointed out by Mr. Thali, he would instruct the Bank to give necessary adjustment to the respondents. 18. Reverting now to the second contention as to the amount on which interest can be awarded under section 34, there has been divergence of views of various High Courts. Section 34 deals with power to award interest at two stages, one during the pendency of the suit pendente lite interest; and two, after the decree future interest. We would notice some of the judgments relevant on the point in issue. 19. In Syndicate Bank v. M/s. West Bengal Cements Ltd. and others, 1989 BJ. 330 (Del.): A.I.R. 1989 Delhi 107 considering the judgment of House of Lords in Paton v. Inland Revenue Commissioners, 1938 A.C. 341, the Banking practice and the views of the Allahabad and Madras High Courts, one of us (Y.K. Sabharwal, J.) came to the conclusion that for determining the principal sum u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's case, it was observed that in the said decision, the interest was awarded evidently on the expression principal sum adjudged to mean principal sum only and not aggregate amount including the interest due and payable on the date of the suit. 21. If the legal position had rested as propounded in the Full Bench decision, there would have been no difficulty in the matter of grant of interest under section 34. However, there have been subsequent pronouncements taking different views than the one taken by the Full Bench because of decision of the Supreme Court. 22. The Apex Court in the case of Bank of Baroda v. Jagannath Pigment Chem. and others, (1996) 5 SCC 280 has reversed the aforesaid decision of the Division Bench of this Court which was one of the judgments on the basis of which the Pull Bench decision was rendered. The Apex Court, reversing the High Court decision has restored that of the trial Court and has thus upheld the grant of interest by the Trial Court on the sum of ₹ 1,66,759.29 and has not confined it to the sum borrowed viz. ₹ 1,20,675/-. A learned Single Judge of this Court in Central Bank of India v. Tarseema Compress Wood Manufacturin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, there was a contract for payment of interest with quarterly rests. 27. In the present appeal, another small point which still remains to be decided is about the award of future interest at the rate of 6% per annum. Learned Counsel for the appellant contends that the future interest was rightly awarded at the contractual rate by the trial Court. On due consideration of the evidence on record, the learned Single Judge came to the conclusion that only 6% future interest could be awarded as it was not a commercial transaction since that was the deposition of the Manager of the Bank. In this state of the evidence on record, we find no ground to upset the decision of the learned Single Judge on the aspect of grant of future interest at the rate of 6% per annum. 28. Except for the grant of future interest at 6% per annum, for the reasons as aforesaid, we set aside the impugned judgment and restore that of the trial Court. However, the respondents would be entitled to the benefit of the adjustment of ₹ 1,20,340/- as noticed hereinbefore and to that extent the judgment and decree of the Trial Court shall also stand modified since it grants the decree in favour of the appella ..... 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