Code of Civil Procedure, 1908: Section 34 [as amended by the Code of Civil Procedure (Amendment) Act (66 of 1956) w.e.f. 1.1.1957] Recovery of money - Suits for - By Banking Institutions against their borrowers - "Principal sum adjudged" and "such principal sum" - Bank sanctioned loan to borrower - Loan carried 11% interest per annum - Bank instituted suit for recovery of money - Trial court decreed suit for the total outstanding amount inclusive of interest on the date of institution of suit with 8% future interest per annum - On appeal, High Court directed interest at 11% per annum to be payable only on the principal sum from the date of suit till realisation through the decree for the original amount was maintained - Correctness of - Held : Subject to contract between parties interest on loans and advances may be charged on periodical rests and also capitalised on remaining unpaid - Principal sum actually advanced coupled with the interest on periodical rests so capitalised is the principal sum on the date of suit - The principal sum so adjudged is "such principal sum" on which interest pendente lite and future interest i.e. post decree interest may be awarded by court - However, penal interest cannot be capitalised.

Recovery of money - Suits for - By Banking institutions against their borrowers - Pleadings - Held: There must be an averment in the plaint that interests and capitalisation thereof are in accordance with the directions of RBI - A statement of account to this effect to be filed - Onus is on the borrower to show why the principal sum as claimed cannot be accepted and adjusted - This practice would narrow down the scope of controversy and enable expeditious disposal of suits - Banking Regulations Act, 1949.

Banking Regulations Act, 1949:

Sections 21 and 35-A - Banking practice - Role of RBI - Directives/Circulars - Held: RBI should continue to issue directives/circulars dealing with rate of interest, periodical rests and capitalisation of interest - Such directives/circulars are binding on the concerned parties - Such directives may be treated as standards for deciding whether interest charged is excessive, usurious or opposed to public policy.

Interpretation of Statutes:

Rules of construction - Principles - Held: a construction, which leads to repugnancy or inconsistency, has to be avoided - Ordinarily, a word or expression used at several places in an enactment should be assigned the same meaning.

Words and Phrases :

"The Principal sum adjudged" and "such principal sum" - Meaning of-In the context of S.34(1) of the Code of Civil Procedure, 1908.

The petitioner-bank sanctioned a loan to respondent No. 1 on the guarantee of respondent Nos. 2 and 3. Respondent No. 1 executed a demand promissory note and also executed term agreement of hypothecation of the vehicle. The loan carried interest at the rate of 11% per annum with quarterly rests. The total outstanding inclusive of the interest charged as per agreement was Rs. 1,51,825 on the date the petitioner-bank filed a suit for recovery. The trial court passed a decree for Rs.1,51,825 with future interest at the rate of 8% per annum from the date of the suit till realisation. An appeal preferred by the Bank before the High Court was partly allowed modifying the decree of the trial court by awarding interest at the rate of 11% per annum. However, the High Court directed the interest at the rate of 11% per annum to be payable only on Rs.99,000, which was stated to be the principal sum, from the date of the suit till realisation through the decree for Rs.1,51,825, the amount due and payable on the date of the suit, was maintained. Hence this appeal.

The following question arose before the Court:

What is the meaning to be assigned to the phrases "the principal sum adjudged" and "such principal sum" as occurring in Section 34(1) of the Code of Civil Procedure, 1908 [as amended by the Code of Civil Procedure (Amendment) Act (66 of 1956) w.e.f. 1.1.1957], a question of frequent recurrence and having far reaching implications in suits for recovery of money, specially those filed by banking institutions against their borrowers?