(1.) AGGRIEVED against the Order passed by the PO, DRT, Ernakulam, with regard to the award of interest the Bank has preferred this appeal. The PO, DRT, has awarded interest at 14% per annum from 1.1.2000 till the date of OA on the sum of Rs. 1,92,62,055/- plus interest at 12% p.a. from 21.2.2001 till the date of Order and 8% p.a. from the date of decree till the date of realisation.
(2.) Counsel for the appellant Bank submits that the award of interest at the rate referred to above is not proper and the appellant Bank is entitled for the contractual rate of interest at 17.5% p.a. and the PO, DRT, ought to have allowed interest at that rate. Counsel for the respondents submits that the award of interest ordered by the PO, DRT, is perfectly justified because as on 31.12.1999 the amount due to the Bank was Rs. 1,92,62,055/- inclusive of interest and additional interest and only for that amount interest has been ordered at 14% from 1.1.2000 till the date of OA. The reason given by the PO, DRT, is that the applicant Bank caused more than one year's delay in filing the suit even after the recall notice. Notice was issued by the appellant Bank to the respondents on 29.12.1999. the OA was filed on 20.2.2001. There was a delay of more than one year in filing the suit after the issue of notice. The appellant Bank has caused unnecessary delay in filing the suit after issue of notice. The explanation given by the Counsel for the appellant Bank is that the respondent was sending proposal to the Bank for compromise and since the compromise was under consideration the OA was not filed and thus the delay was caused and Bank is not responsible for that. The respondents sent proposal for compromising the matter. If the Bank was not agreeable for the compromise the Bank ought to have replied immediately and filed the suit in lime so as to avoid unnecessary harassment to the respondents by making the respondents liable for more interest. If the suit was filed in time the interest would not have accrued much. The appellant Bank did not file the suit immediately after issue of notice and caused delay of more than one year in filing the suit and for that the respondents cannot be held liable. The PO, DRT, has clearly given the reason in the Order for awarding lesser rate of interest. Further, as on 31.12.1999 the amount due was Rs. 1,92,62,055/- inclusive of interest and additional interest. Even in the plaint it has been set out so. So, it is crystal clear that as on 31.12.1999 the sum of Rs. 1,92,62,055/- was inclusive of interest and additional interest. Only for that amount the interest has been awarded from 1.1.2000 at 14% till the date of OA i.e., from the date of issue of notice. For the prior period with regard to award of interest the PO, DRT, did not interfere. Only because of the delay in filing the OA after issue of notice, for that delayed period only the PO, DRT has reduced the rate of interest to 14% from the date of issue of notice i.e., from 1.1.2000.
Counsel for the respondents submitted that since the sum of Rs. 1,92,62,055/- was inclusive of interest and additional interest, again interest cannot be calculated for that interest also and that cannot be capitalised again. He relies upon the decision of the Apex Court reported in Central Bank of India v. Ravindra and Ors., I (2002) BC 150=VII (2001) SLT 400=IV (2001) CLT 127 (SC)=2002(2) C.T.C. Page 354, wherein the Apex Court has observed in Para 55 that "Penal interest, service charges and other overheads are debited in the account of the borrower had capitalised of which debits the borrower may not even be aware. If the practice of charging interest on quarterly rests is upheld and given a judicial recognition, unscrupulous Banks may resort to charging interest even on monthly rests and capitalising the same." It has further been observed therein that "Though interest can be capitalised on the analogy that the interest falling due on the accrued date and remaining unpaid, partakes the character of amount advanced on that date, yet penal interest, which is charged by way of penalty for non-payment, cannot be capitalised. Further interest, i.e., interest on interest, whether simple, compound or penal, cannot be claimed on the amount of penal interest. Penal interest cannot be capitalised. It will be opposed to public policy ".
(3.) THE PO, DRT, has also relied upon the abovesaid decision in her Order. Following the decision of the Apex Court, I find that once interest has been capitalised it cannot be capitalised again. THE PO, DRT, has rightly awarded interest on Rs. 1,92,62,055/- from 1.1.2000. THE PO, DRT, has awarded interest at 12% p.a. from 21.2.2001 i.e., from the date of OA till the date of Order and at 8% p.a. from date of decree till realisation. THE Apex Court (Civil Appellate Jurisdiction) has held in State Bank of India v. Material Marketing Company and Ors., SLP (C) No. 9298/2000, that even under the RDDB & FI Act, 1993 the PO, DRT, has got discretionary power to award interest for pendente lite and post decree. Section 19(20) of the Act also empowers the PO, DRT, to pass Order to meet the ends of justice. Section 19(20) states that:
"THE Tribunal may, after giving the applicant and the defendant an opportunity of being heard, pass such interim or final Order, including the order for payment of interest from the date on or before which payment of the amount is found due upto the date of realisation or actual payment, on the application as it thinks fit to meet the ends of justice.";