Neutral Citation No. ( 2025:HHC:26697-DB ) IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA OSA No. 3 of 2016 a/w OSA No. 5 of 2015. Reserved on 02.07.2025 Pronounced on: 08.08.2025 OSA No. 3 of 2016. Himachal Pradesh State Co-Operative Bank Ltd. & Another …..Appellants/Plaintiffs Vs. Uttar Pradesh State Financial Corporation & Another …Respondents/Defendants __________________________________________________________ OSA No. 5 of 2015. Uttar Pradesh State Financial Corporation & Another ….. Appellants/Defendants vs Himachal Pradesh State Co-Operative Bank Ltd. & Another …..Respondents/ Plaintiffs Coram: The Hon'ble Mr. Justice G.S. Sandhawalia, Chief Justice. The Hon’ble Mr. Justice Ranjan Sharma, Judge. Whether approved for reporting? Yes. OSA No. 3 of 2016. For the Appellants : Mr. Sunil Mohan Goel, Senior Advocate with Mr. Raman Jamalta & Mr. Paras Dhaulta, Advocates. For the respondents: Mr. Ashwani K. Sharma, Senior Advocate with Ms. Nisha Nalot, Advocate. OSA No. 5 of 2016. For the Appellants : Mr. Ashwani K. Sharma, Senior Advocate with Ms. Nisha Nalot, Advocate. 2 For the respondents: Mr. Sunil Mohan Goel, Senior Advocate with Mr. Raman Jamalta & Mr. Paras Dhaulta, Advocates. G.S. Sandhawalia, Chief Justice. These Original Side Appeals are directed against the judgment of the learned Single Judge passed on 08.07.2015 in Civil Suit No. 26 of 2009, titled H.P. State Cooperative Bank Ltd. and another vs. Utter Pradesh State Financial Corporation and another, whereby, the learned Single Judge has partly decreed the suit in favour of the plaintiffs and against the defendants jointly and severally for recovery of Rs.76,00,000/- (seventy six lacs) with costs. However, interest upon the same was declined. 2. Against the said judgment, plaintiffs have filed Original Side Appeal bearing OSA No 3 of 2016, praying for grant of pendente lite interest and future interest and the defendants have filed Original Side Appeal bearing OSA No. 5 of 2016 praying for dismissal of the suit. Since both the appeals arise out of a common judgment passed by the learned Single Judge, hence both are taken up together for disposal, in order to avoid multiplicity of facts pleaded in the Appeals. 3 3. Parties shall be referred to as they were before the learned Single Judge as plaintiffs and defendants for the purpose of convenience. 4. The plaintiff is a Bank constituted under the provisions of H.P. Cooperative Societies Act. The plaintiff- Bank had filed civil suit for recovery of Rs.90,67,466/-on account of principal amount and interest through its Managing Director Shri Rajinder Singh son of Shri Kehar Singh being the principal officer who was competent to file and maintain the said suit. 5. The defendant No.1 is a body Corporate established under the provisions of State Financial Corporations Act, 1951 (Act No. LXIII of 1951), which floated a scheme in the year 2005 regarding SLR bonds which was referred to as "UPSFC SLR Restructured Bonds Series 2011". Plaintiff Bank subscribed the bond under the said scheme worth Rs. 6,00,00,000/-(Rupees six crores) on 14th December, 2005, the maturity date of said bond was 12.2.2011. The plaintiff-Bank thereafter on 15th December, 2005 subscribed to further bond under the scheme aforesaid and invested an amount of Rs. 3,50,00,000/- (Rupees three crores fifty lakhs). The bonds were also to 4 mature in the month of February, 2011. The aforesaid bonds, in which the money was invested by the plaintiff bank aggregating to Rs. 9,50,00,000/-(Rupees nine crores fifty lakhs) was to bear periodical interest @ 8% per annum and rupees 76 lakhs was the principal amount claimed in the suit. The interest payable on the said bond was half yearly every year and the schedule for payment of interest pertaining to bonds was amounting to Rs. 6,00,00,000/- (Rupees six Crores) was 12th August and 12th February every year whereas the schedule for payment of interest with respect to bonds amounting to Rs. 3,50,00,000/- (Rupees three crores fifty lakhs) was 31st August and 28th February every year and the balance amount of Rs.14,67,466/- was on account of the interest on the said interest element and therefore, the suit for recovery of Rs.90,67,466/- was filed. 6. The defendant No.1 did not pay the accrued interest on the above said bonds as scheduled. The total amount recoverable as interest accrued on the principal amount of bond which was payable as per the schedule comes to Rs. 76,00,000/- (rupees seventy six lakhs) from the month of February, 2007. 5 7. The defendant No.2 State Government of Uttar Pradesh had guaranteed the payment of principal amount invested in the bonds as well as the periodical interest, and had thus been arrayed as such. The scheme with respect to the said bonds was floated by defendant No.1 with the approval of defendant No.2 who had assured guaranteed for payment of interest as well as the principal amount invested. Since the affairs of defendant No. 1 also are under the control of defendant No.2 as such both the defendants were averred to be jointly and severally liable to ensure the payment of periodical interest as well as the amount of maturity of bonds in which plaintiffs had invested a huge sum. 8. The plaintiffs had served legal notice on the defendants under Section 80 of the Code of Civil Procedure (hereinafter referred to as “the CPC”). It is pleaded that despite legal notice, defendants failed to liquidate the liability. It is further pleaded that cause of action has accrued to plaintiffs on 14.12.2005 and 15.12.2005 and further arose on 12.8.2006, 12.2.2007, 31.8.2006 and 28.2.2007. 6 9. Defendant No.1 filed its written statement wherein it has been pleaded that no cause of action has accrued in favour of the plaintiffs in Himachal Pradesh. It was further pleaded that contract of payment of interest entered into with bond holders was frustrated and same could not be enforced. It was further pleaded that plaintiffs have no locus standi to file the present suit through the said authorized person. It was further pleaded that U.P. Financial Corporation is a statutory body established under the provisions of State Financial Corporations Act 1951. It was pleaded that bonds were purchased by plaintiff No.1 through open market subject to all credit risk. It was further pleaded that plaintiff bank has no legal right to enforce the liability of interest against defendant No.1 in view of the poor financial status of defendant No.1. It was pleaded that Small Industrial Development Bank of India had also totally stopped refinancing of loans in respect of defendant No.1 and that defendant No.1 has approached various bond holders for One Time Settlement and for waiver of interest but plaintiff bank did not agree. The plea taken was that the suit was barred by limitation as same was filed beyond three years. 7 10. Defendant No.2, on the other hand, filed its separate written statement and pleaded therein that High Court of HP has no jurisdiction to try the suit as none of the defendants reside at Shimla or in Himachal Pradesh nor carry any business at Shimla. The fact that the plaintiffs have entered into contract for purchase of bonds from open market at Kanpur U.P was put forth. The issue that the suit is barred by limitation had also been raised and that the contract between plaintiffs and defendant No.1 was frustrated as per provision of Section 56 of Contract Act. The plea taken was that suit ought to have been filed before Debt Recovery Tribunal Allahabad and was not filed through competent person. It was further pleaded that bonds were purchased by plaintiffs from open market subject to credit risk and that the plaintiff bank has no legal right to enforce the liability of interest. It was denied that defendant No.1 is the guarantor relating to payment of interest and principal amount and that co- defendant No.2 has no link with defendant No.1. It is further pleaded that one time settlement was offered to various bond holders. A prayer for dismissal of suit has been sought by both the defendants. 8 11. On the basis of the pleadings of the parties, on 13.12.2010, the learned Single Judge framed the following issues. “1. Whether plaintiffs are entitled to the suit amount if so at what rate of interest? ….OPP 2. Whether suit is not maintainable as alleged? ...OPD 3. Whether plaintiffs have no locus standi to file and maintain the present suit?. ...OPD 4 Whether this Court has no jurisdiction to try the present suit if so its effect? ....OPD. 5. Whether contract has become frustrated on account of subsequent events if so its effect? ...OPD-2. 6. Whether suit has not been filed through a competent and authorized person if so its effect?. ...OPD. 7. Whether suit is barred under the provisions of Recovery of Debt due to Banks and Financial Institutions Act 1993?. ...OPD-2. 8. Whether suit is not within time? ...OPD. 9. Relief.” 12. Both the parties led evidence and after conclusion of the evidence, learned Single Judge partly decreed the suit in favour of the plaintiffs and against the defendants jointly and severally for recovery of Rs.76,00,000/- only as aforesaid. Hence, both the plaintiffs and defendants have filed separate Appeals as stated above. 9 Reasoning of the learned Single Judge: 13. The reason which weighed with the learned Single Judge to allow the Civil Suit, after examining the statements of two witnesses from both sides and the documentary evidence produced on record on Issue No. 1 was that the plaintiffs are entitled to the suit amount to the extent of Rs.76 lacs only from both the defendants jointly and severally since there was admission made by DW-1 R.K. Bharti Assistant Grade-1 of UPSFC, Kanpur that a sum of Rs.76 lacs was due to the plaintiffs as the interest amount. Similar statement had also flowed from DW-2 S.K. Singh, Chief Manager (Law) UPSFC, Kanpur of the defendant that the interest element was 11.5% which had been reduced to 8% and the amount of interest was outstanding when the suit had been filed. However, interest as such on the principal amount was not granted on the ground that the plaintiff-bank had further sold the bonds to Ajmer Urban Cooperative Bank Ltd. and the C.K.P. Cooperative Bank Ltd. Mumbai, therefore, they were not entitled to claim interest after the sale of bonds. 14. He noticed that the defendant’s witnesses have stated that the settlement had been arrived at between 10 the subsequent purchaser of the bonds and therefore, while placing reliance upon the judgment of the Apex Court in V. Kala Bharathi and others vs. The Oriental Insurance Company Ltd. (2014) 5 SCC 577, wherein it was held that the interest on interest was not liable to be awarded, the interest element was denied. Thus, Issue No. 1 was partly decided in favour of the plaintiffs. 15. On Issue No. 2, maintainability aspect as such, it was held that the plaintiffs being purchaser of the SLR bonds were legally entitled to file the suit for recovery for interest due, as the bonds were transferable by way of endorsement. Similarly, locus standi to file the suit under Issue No. 3 was also upheld and right to claim interest from the defendants jointly as the co-defendant, who stood guarantor of the bonds. On the issue of jurisdiction, under Issue No. 4, it was held that the argument raised that this Court had no jurisdiction as the interest was to be payable at Kanpur, was rejected on the ground that the territorial jurisdiction could not be snatched by way of self agreement. The interest element had been earlier sent to the plaintiff bank at Shimla and the amount had been deposited in the payee account while referring to the 11 cheque sent on 29.03.2006 Ext.PW1/B, whereby a sum of Rs.10,85,840/- had been credited and having been received at Shimla, a part of cause of action had accrued at Shimla. Therefore, the said Issue was decided in favour of the plaintiffs, in view of Section 20 (c) of the CPC. The issue that the contract had been frustrated on the ground of subsequent events, as prayed under Issue No.5 on account of financial crisis, was rejected on the ground that the balance sheet had not been filed and there is no evidence as such that the company had been declared bankrupt by the competent Court of law and similarly on the oral testimony of the defendant’s witnesses, relief could not be granted and the contract had not become frustrated. While rejecting the plea of the suit having not been not filed by the authorized and competent person, under Issue No. 6, it was held that defendant did not produce any positive, cogent and reliable evidence that the Managing Director of the plaintiff-bank was not authorized to file the suit. The suit being barred under the provisions of Recovery of Debts due to the Banks and Financial Institutions Act, 1993, under Issue No. 7 and the onus being on the defendants, was also rejected that 12 Section 18 of the Recovery of Debts Due to the Banks and Financial Institutions Act, 1993, was not applicable to the Cooperative Banks registered under the Cooperative Societies Act, while placing reliance on the judgment in M/s Phoneix Impex vs. State of Rajasthan and others AIR 1998 Rajasthan 100, since the plaintiff-Bank was not registered under the Companies Act. The last Issue,i.e., No. 8 as such was Issue of Limitation and the suit being within time. The said Issue was also decided in favour of the plaintiffs and against the defendants by noting that the demand notice had been issued on 12.02.2008 and the suit had been filed on 07.04.2009 and there was proposal on 12.11.2006 Ext.PW-1/D by the defendant No. 1 for settlement to accept full and principal amount without interest at Rs.9.5 crores. The acknowledgment to pay the amount was also accordingly taken into consideration that the limitation would be extended by Section 18 of the Limitation Act and the suit was filed within three years. Arguments of Counsels: 16. The Counsel for the defendant-Bank has accordingly argued that the issue of jurisdiction under 13 Issue No. 4 has been wrongly decided by the learned Single Judge and similarly Issue of limitation under Issue No. 8. Therefore, the judgment rendered by the learned Single Judge was sought to be stated to be not sustainable and the suit was liable to be dismissed for the above reasons and thus he has limited his argument on the said two main Issues. 17. The bonds, in principle had been referred to by Ext.DW1/A and Ext.DW1/B to point out that the liability to pay interest was at Kanpur and the payment was promised to be made to the Punjab National Bank @11.5% per annum. Mere sending of the cheques dated 28.03.2006 and 29.03.2006 of the interest amount at Shimla to the plaintiffs as such would not give a cause of action more so, since the bond had been purchased in the year 2005. Accordingly, reliance was placed upon the provisions of Section 20 of the CPC that the defendants were voluntarily residing and carrying on business at Kanpur, and no cause of action wholly or in part arose at Shimla under Section 20 (c) of CPC. Resultantly, reliance was placed on the judgment of Hriday Nath Roy v. Ram Chandra Barna Sarma AIR 1921 Calcutta 34 (FB) and 14 Raja Virbhadra Singh vs. M/s Roshanlal Kuthiala and others AIR 1975 HP 13. 18. Similarly, reliance has been placed upon the judgment in A.B.C. Laminart Pvt. Ltd and another vs. A.P. Agencies, Salem (1989) 2 SCC 163, apart from the judgment of the Apex Court in Food Corporation of India vs. Evdomen Corporation (1999) 2 SCC 446 and recent judgment in Excel Dealcomm Private Ltd vs. Asset Reconstruction Company (India) Ltd and others (2015) 8 SCC 219 and lastly upon a Three Judge Bench decision in Asma Lateef and another vs. Shabbir Ahmad and others (2024) 4 SCC 696 to contend that lack of jurisdiction as such would divest the Court to exercise its jurisdiction. 19. On Issue No. 8 of limitation, it was argued that the date of institution of the suit was 07.04.2009 and the last payment of interest having been made on 29.03.2006 Ext. PW1/B and therefore, the suit was barred as it was filed beyond three years as the acknowledgment on 12.11.2006 Ext. PW1/D would not extend the limitation. 20. Per contra, the learned Counsel for the plaintiff argued and placed reliance upon A.B.C. Laminart’s case 15 (supra) wherein it has been held that there was no contract as such excluding jurisdiction of the Court at Shimla and therefore, the judgments cited as such were without any basis and not applicable to the facts and circumstances of the present case. Reliance was also placed on Globe Transport Corporation vs. Triveni Engineering Works and another (1983) 4 SCC 707, wherein it has been held that where there are more than one Forums where a suit can be filed, it is open to the parties to select a particular Forum and exclude the other Forums in regard to claims which one party may have against the other under a contract, which had not been done in the present case. It was accordingly pointed out from para 9 of the written statement that there is an admission that the payment of interest was stopped in February, 2006 and the suit had been filed in March, 2009 and it is thus contended that the default had taken place in August 2006 as the second interest installment for the said period had to be paid at that point of time. Reliance was placed on Article 25 of the Limitation Act, 1963, that three years period has to be counted from the date when the interest becomes due. 16 21. In support of the claim for interest, which had been denied, Mr.Goel, learned Senior Advocate has further argued that though in the plaint, specific prayer as such was not made regarding the break-up of the principal and interest amount but while referring to Section 34 of the CPC and para 8 as such of the plaint, it was pointed out that having failed to pay the accrued interest periodically, the defendants were liable to repay the suit amount along with future interest @18% per annum. It is thus submitted that an amount of Rs.93,260/- was paid as Court fee on the amount of Rs.90,67,466/-, out of which, the principal amount of the interest element was Rs.76 lacs which was payable on the bonds. Having not been paid on the time prescribed, the first default having occurred in August, 2006, the defendants were liable to pay interest on the amount retained which amounted to Rs.14,67,466/-. Resultantly, he placed reliance upon the judgment of the Constitution Bench of the Apex Court in Central Bank of India vs. Ravindra and others (2002) 1 SCC 367. It was accordingly argued that reliance upon V. Kala Bharathi’s case by the learned Single Judge was not justified as it was a case pertaining how the principle of 17 payment in execution proceedings is to be applied and whether the amount deposited by the judgment debtor in a decree is to be adjusted first towards interest or towards principal decretal amount. 22. Counsel for the defendants on the issue of interest has submitted that the reasoning of the learned Single Judge are justified that the interest should not be paid on the interest and the appeal of the plaintiff was not liable to be allowed to that extent. Our Reasoning on Jurisdiction and Limitation: 23. After hearing counsel for the parties, we are of the considered opinion that the arguments that this Court did not have jurisdiction, is liable to be rejected. It was a specific case as such of the plaintiffs that on the amount of rupees six crores invested, the interest was payable on 12.08.2006 to the tune of Rs.24 lacs and similarly, on 12.02.2007, the second amount of interest @18% was payable which amounted to Rs.24 lacs each. Similarly, for the amount of Rs.3,50,00,000/- deposited, the payment was due on 31.08.2006 to the tune of Rs.14 lacs, and for the subsequent installment on 28.02.2007 also. The total amount thus came to Rs.76 lacs which would be clear 18 from the table as such in para 4 of the plaint, which reads as under: Sr. No. Amount invested Interest payment dates Rate of interest Amount of defaulted interest. 1. Rs.6,00,00,000/- 12.8.2006 8% Rs.24,00,000/- 2. Rs.6,00,00,000/- 12.2.2007 8% Rs.24,00,000/- 3. Rs.3,50,00,000/- 31.8.2006 8% Rs.14,00,000/- 4. Rs.3,50,00,000/- 28.2.2007 8% Rs.14,00,000/- The total amount recoverable as interest accrued on the principal amount of bond which was payable as per the schedule comes to Rs.76,00,000/- (rupees seventy six lakhs) till the month of February, 2007.” 24. The above amount was thus principal amount which was payable when the suit was filed with the specific plea that non payment of interest had created financial set-back to the plaintiffs and as per the communication dated 12.11.2006 Ext. PW1/D, the defendant No. 1 had requested the plaintiffs to accept only the principal amount and waive off the interest. A request had been again made on 15.12.2006, 25.08.2007 and 12.02.2008. Resultantly, notice was sent on 26.06.2008 on which date cause of action arose to invoke the jurisdiction of this Court. It was mentioned that the interest amount had also been sent to the plaintiffs to their Head Office at Shimla after the amount had been 19 invested. The said factum of interest element being sent to Shimla vide communication dated 29.03.2006 as such has not been refuted in the reply, apart from the bald averment that no part of cause of action arose within the territorial jurisdiction of this Court. The defendants have also as such taken the plea that it does not carry on business or has any office at Shimla, the suit for recovery is not maintainable and also in the preliminary objections that the amount was payable at Kanpur. It has not been clarified or denied that the interest as such was sent to Shimla to the plaintiffs. 25. A perusal of Ext. PW1/B would go on to show that apart from the admission, as noticed by the learned Single Judge, the amount was sent by way of cheque. The relevant document reads as under:- “Ref. No. 3657/FC-RMA/SLR/2005-06 Date: 29.3.2006 By Courier The Manager The State Coop. Bank Ltd. The Mall No. 1. Bank Building SHIMLA-171001. UPFC bonds: Payment of interest. Dear Sir, Please find enclosed herewith a cheque no. 149360 dated 28.3.06 for Rs.10,85,840/ of UB.I. Kanpur Main Branch drawn in your favor. This is regarding payment of interest on 20 UPFC bonds held by you viz. 11.5% - 2011 (II) for face value Rs. 3.50 crore (restructured), due on 28.2.06, as under: Gross interest 14,00,000 Less TDS 22.44% 3,14,160 Net Interest 10,85,840 Please acknowledge receipt. Encl: As above. Yours faithfully. (S.K. Singh) Dy. Senior Manager (Fin)” 26. It has been thus recorded by the learned Single Judge that the witness Sh. S.K. Singh DW-2, himself has admitted that the amount was sent to Shimla address and therefore, it can be said that part of cause of action arose at Shimla under Section 20 (c) and thus the contention that the interest was payable at Kanpur would not take away the jurisdiction of this Court. There is nothing to show from the bonds as such that the parties were restricted by the contract as such that Court at Kanpur shall have jurisdiction exclusively. Thus, reliance upon Hriday Nath Roy (supra) would not be justified as the issue therein was that the previous suit had been withdrawn under Order 23 Rule 1 sub-Clause (2) and the Court trying the subsequent suit was not competent to 21 enter into the question whether permission had been granted properly or not. 27. Similarly, reliance upon Raja Virbhadra’s case (supra) of the judgment of the learned Single Judge of this Court as such is misplaced as the question therein was regarding recasting of the issue of burden of proof and to throw the same upon the plaintiff. 28. In A.B.C. Laminart’s case referred to by both the Counsels, the issue was regarding the preliminary question of jurisdiction whereby the parties had agreed as such that the jurisdiction would be at Kaira situated in Gujarat. It was resultantly held that there was no total ouster of jurisdiction and therefore, the Court at Salem in Tamil Nadu, where the suit had been filed, would not be divested of jurisdiction on account of connecting factor of delivery of goods. It was accordingly held that cause of action means bundle of facts and part of cause of action arises where money is expressly or impliedly payable under a contract, the Court would get jurisdiction. Thus, once the amount had been paid at Shimla, it cannot be said that no part of cause of action had arisen at Shimla. 22 29. In Food Corporation of India (supra), the appellant as such had objected to the jurisdiction of the Bombay High Court and resultantly it was held that the said Court would have jurisdiction as appellant did carry on business in Bombay and therefore, the plea that there was no jurisdiction since the charter party agreement and cargo had been brought at Orissa and the matter had been referred to the Arbitrator and arbitration proceedings had taken place at Bombay. Therefore, the said judgment is also of no help. 30. In Excel Dealcomm’s case (supra), the Apex Court as such was again dealing with the exclusive jurisdiction agreed between the parties on the Courts at Mumbai and therefore, it was held that Calcutta High Court does not have jurisdiction. In Asma Lateef (supra) it was only held that the Courts must not only have jurisdiction with respect to the subject matter and only where it is conceded and the jurisdiction has to be qualified or restricted by variety of circumstances which could be territorial, pecuniary and jurisdiction of subject matter should be of a fundamental character. The factum of interest being paid at Shimla by sending cheques as 23 such thus gave jurisdiction to the Court at Shimla and therefore, keeping in view the provisions of Section 20 (c) a part of cause of action had arisen at Shimla and therefore, it cannot be said that the Court at Shimla had no jurisdiction. 31. In New Moga Transport Co. vs. United India Insurance Co. Ltd. And others, (2004) 4 SCC 677, while referring to the choice of forum available to the plaintiff, it was held that the plaintiff cannot be compelled to go the place of residence of the defendant and the suit could be filed where cause of action arose and only on account of an exclusion clause, the defendant could save itself. The relevant part reads as under: “9. Normally, under clauses (a) to (c) plaintiff had a choice of forum and cannot be compelled to go to the place of residence or business of the defendant and can file a suit at a place where the cause of action arises. If the defendant desires to be protected from being dragged into a litigation at some place merely because the cause of action arises there it can save itself from such a situation by an exclusion clause. The clear intendment of the Explanation, however, is that where the Corporation has a subordinate office in the place where the cause of action arises it cannot be heard to say that it cannot be sued there because it does not carry on business at that place. Clauses (a) and (b) of Section 20 inter alia refer to a Court within local limits 24 of whose jurisdiction the defendant inter alia "carries on business". Clause (c) on the other hand refers to a Court within local limits of whose jurisdiction the cause of action wholly or in part arises.” 32. The endorsement on the bonds as such is not of that nature as it reads as under: “Interest payable at UP Financial Corporation Kanpur” 33. The Clause does not have the stipulation alone, only or exclusively which could have ousted the jurisdiction of other Courts. On the Issue of Limitation and Right to claim Interest. 34. As noticed, the suit would be within limitation on account of the fact that the claim as such is based on the payment of interest which was due on the bonds in August, 2006 for the two principal deposits of Rs.6 crores and Rs.3,50,00,000/-, separately which would be clear from the table reproduced in para 17 above. The period of limitation as such would be three years from the date, the amount of interest became due, in view of Article 25 of the Limitation Act, which reads as under: Description of suit Period of limitation Time from which period begins to run Art.25 For money payable for interest upon Three years When the interest becomes due. 25 money due from the defendant to the plaintiff 35. As noticed above, the suit of the plaintiff as such was based on the ground that the interest element had not been paid which was required to be paid annually in the months of February and August respectively. The amount thus was claimed upon the interest element for the non-payment both for August, 2006 installments and February, 2007 installments on the amount of Rs. 6 crores and 3,50,00,000/- separately. The said amounts having not been paid, the suit had, therefore, been filed on 07.04.2009 as noticed above, while recording the finding that it was within limitation, since Article 25 of the Limitation Act provides that three years period has to be counted from the date when the interest becomes due. The interest having not been paid in August, 2006 and February, 2007 led to the claim as such being the principal amount on which the interest became payable in view of Section 34 of the CPC which provides that the Court in the decree may order interest at such rate as they deem fit and reasonable to be paid on the principal sum adjudged from the date of the suit to the date of the decree 26 (interest pendente lite). In addition to this, interest element on the principal sum, prior to the institution of the suit and also further interest at such rate, not exceeding 6% as the Court may deem fit and reasonable, on the principal sum from the date of decree to the date of the payment or to such an early date as the Court thinks fit. The proviso further provides that the liability which arises out of commercial transaction may carry interest at the rate exceeding 6% but shall not exceed the contractual rate of interest. However, where there is no contractual rate, the rate at which moneys are lent or advanced by the Nationalized Banks in relation to commercial transactions would govern Section 34 of CPC, which reads as under: “34. Interest.-(1) Where and in so far as a decree is for the payment of money, the Court may, in the decree, order interest at such rate as the Court deems reasonable to be paid on the principal sum adjudged, from the date of the suit to the date of the decree, in addition to any interest adjudged on such principal sum for any period prior to the institution of the suit, with further interest at such rate not exceeding six per cent. per annum as the Court deems reasonable on such principal sum), from the date of the decree to the date of payment, or to such earlier date as the Court thinks fit: 27 Provided that where the liability in relation to the sum so adjudged had arisen out of a commercial transaction, the rate of such further interest may exceed six per cent per annum, but shall not exceed the contractual rate of interest or where there is no contractual rate, the rate at which moneys are lent or advanced by nationalised banks in relation to commercial transactions. Explanation I. In this sub-section, "nationalised bank" means a corresponding new bank as defined in the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970). Explanation II For the purposes of this section, a transaction is a commercial transaction, if it is connected with the industry, trade or business of the party incurring the liability.] (2) Where such a decree is silent with respect to the payment of further interest Jon such principal sum] from the date of the decree to the date of payment or other earlier date, the Court shall be deemed to have refused such interest, and a separate suit therefor shall not lie.” 36. The provisions of Section 34 of the CPC came up for consideration before the Apex Court in Central Bank of India vs. Ravindra and others (2002) 1 SCC 367, wherein the power of the Court on the word “may” in Section 34 of the CPC was subject matter of consideration. Resultantly, it was held that the Court may be called upon to adjudge the interest payable by the defendants for the 28 plaintiff for the pre-suit period and the interest pendente lite and future interest is liable to be awarded on the principal sum adjudged on the date of the suit. It was also held that the interest, being not paid on the due date, the creditor is deprived of such use of the money and is liable to be compensated for the deprivation. The argument that interest becomes payable on interest was rejected. “41.A few points are clear from a bare reading of the provision. While decreeing a suit if the decree be for payment of money, the Court would adjudge the principal sum on the date of the suit. The Court may also be called upon to adjudge interest due and payable by the defendant to the plaintiff for the pre-suit period which interest would, on the findings arrived at and noted by us hereinabove, obviously be other than such interest as has already stood capitalised and having shed its character as interest, has acquired the colour of the principal and having stood amalgamated in the principal sum would be adjudged so. The principal sum adjudged would be the sum actually loaned plus the amount of interest on periodical rests which according to the contract between the parties or the established banking parties has stood capitalised. Interest pendente lite and future interest (i.e. interest post-decree not exceeding 6 per cent per annum) shall be awarded on such principal sum i.e. the principal sum adjudged on the date of the suit. It is well settled that the use of the word 'may' in Section 34 confers a discretion on the Court to award or not to award interest or to award 29 interest at such rate as it deems fit. Such interest, so far as future interest is concerned may commence from the date of the decree and may be made to stop running either with payment or with such earlier date as the Court thinks fit. Shortly hereinafter we propose to give an indication of the circumstances in which the Court may decline award of interest or may award interest at a rate lesser than the permissible rate. 42. It was submitted by the learned amicus and other counsel for the borrowers, that the expression "on such principal sum" as occurring twice in the latter part of Section 34(1), which refers to interest pendente lite and post-decree, should be interpreted to mean principal sum arrived at by excluding the interest even if it has stood capitalised. This would be consistent with the legislative intent as reflected in the report of Joint Committee and sought to be fulfilled by 1956 Amendment. For two reasons this contention has to be rejected. Firstly, entertaining such a plea amounts to begging the question. As we have already held that the interest once capitalised ceases to be interest and becomes a part of principal sum or capital. That being so the interest forming amalgam with the principal, in view of having been capitalized, is principal sum and therefore the question of awarding interest on interest does not arise at all. Secondly, well-settled principles of interpretation of statutes would frown upon such a plea being entertained. A construction which leads to repugnancy or inconsistency has to be avoided. Ordinarily, a word or expression used at several places in one enactment should be assigned the same meaning so as to avoid "a head-on clash" between two meanings assigned to the same word or expression occurring at two places in the same enactment. It 30 should not be lightly assumed that "Parliament had given with one hand what it took away with the other" [See - Principles of Statutory Interpretation, Justice G.P. Singh, 7th Edition 1999, p.1 13]. That construction is to be rejected which will introduce uncertainty, friction or confusion into the working of the system (ibid, p.l 19). While embarking upon interpretation of words and expressions used in a Statute it is possible to find a situation when the same word or expression may have somewhat different meaning at different places depending on the subject or context. This is however an exception which can be resorted to only in the event of repugnancy in the subject or context being spelled out. It has been the consistent view of Supreme Court that when the Legislature used same word or expression in different parts of the same section or statute, there is a presumption that the word is used in the same sense throughout, (ibid, p.263). More correct statement of the rule is, as held by House of Lords in Farrell v. Alexander, [1976] 2 All E.R. 721, 736, "where the draftsman uses the same word or phrase in similar contexts, he must be presumed to intend it in each place to bear the same meaning". The Court having accepted invitation to embark upon interpretative expedition shall identify on its radar the contextual use of the word or expression and then determine its direction avoiding collision with icebergs of inconsistency and repugnancy. 43. xxx xxx xxx 44. We are of the opinion that the meaning assigned to the expression 'the principal sum adjudged' should continue to be assigned to "principal sum” at such other places in Section 34(1) where the expression has been used qualified by the adjective "such" that is to say, as "such principal sum".Recognition of the method of 31 capitalisation of interest so as to make it a part of the principal consistently with the contract between the parties or established banking practice does not offend the sense of reason, justice and equity. As we have noticed such a system has a long established practice and a series of judicial precedents upholding the same. Secondly, the underlying principle as noticed in several decided cases is that when interest is debited to the account of the borrower on periodical rests, it is debited because of its having fallen due on that day. Nothing prevents the borrower from paying the amount of interest on the date it falls due. If the amount of interest is paid there will be no occasion for capitalising the amount of interest and converting it into principal. If the interest is not paid on the date due, from that date the creditor is deprived of such use of the money which it would have made if the debtor had paid the amount of interest on the date due. The creditor needs to be compensated for deprivation. As held in Pazhaniappa Mudaliar and Ors v. Narayana Ayyar and Ors (supra) the fact-situation is analogous to one as if the creditor has advanced money to the borrower equivalent to the amount of interest debited. We are, therefore, of the opinion that the expression "the principal sum ad- judged" may include the amount of interest, charged on periodical rests, and capitalised with the principal sum actually advanced, so as to become an amalgam of principal in such cases where it is permissible or obligatory for the Court to hold so. Where the principal sum (on the date of suit) has been so adjudged, the same shall be treated as "principal sum" for the purpose of "such principal sum" - the expression employed later in Section 34 C.P.C.. The expression "principal sum"cannot be given different meanings at 32 different places in the language of same section, i.e., Section 34 C.P.C.” 37. Therefore, the fall back by the learned Single Judge on the judgment, as pointed out by the learned Senior Counsel for the plaintiffs on V. Kala Bharathi’s case (supra), was not justified since the issue therein was how the amount deposited by the judgment debtor in a decree is to be adjusted, firstly towards interest or towards principal decretal amount. In such circumstances, the observations that flowed by holding that the decree holder was entitled to interest to the extent of unpaid principal amount, in Central Bank (supra), would apply. 38. Consequently, we allow the appeal bearing OSA No. 3 of 2016, filed by the plaintiff-bank and modify the findings of entitlement of suit amount along with 8% interest under Issue No. 1 since the claim as per the plaint was for the principal amount of Rs.76 lacs and the balance was Rs. 14,67,466/- which was interest element on Rs.76 lacs which they had been deprived of from August, 2006 and thus they had further claimed interest element from the date of institution of the suit till its realization @18% per annum. 33 39. It is also to be noticed that while issuing notice on 28.09.2015, in the present appeal, the defendants had been directed to deposit the entire decreetal amount within a period of two months and thereafter had been granted extensions, the last one of which was granted for 8 weeks on 29.11.2016. 40. Resultantly, the amount deposited is directed to be released to the plaintiffs. The plaintiffs shall also be entitled for the interest element at the same rate of 8% as payable on the bonds from the date of institution of the suit which was 07.04.2009 till 08.07.2015, the date of decree and thereafter till its realization on the principal amount of Rs.76 lacs. Accordingly, the appeal bearing OSA No. 5 of 2015 field by the defendants stands dismissed. All pending miscellaneous applications, shall stand disposed of accordingly. The decree sheet be prepared accordingly. (G.S. Sandhawallia) Chief Justice (Ranjan Sharma) Judge August 08, 2025. (cm Thakur)