Venkataramiah, J. - (1.) The short question which arises for consideration in this case is whether the rate of interest chargeable on the amount payable under an order passed under S. 32 of the State Financial Corporations Act, 1951 (63 of 1951) (hereinafter referred to as 'the Act') from the date of the said order is governed by Sec. 34 of the Code of Civil Procedure, 1908 (hereinafter referred to as 'the Code') or whether it is payable at the contractual rate.
(2.) The Appellant No. 1 M/s. Everest Industrial Corporation Private Limited, Baroda and its Directors had borrowed from the Gujarat State Financial Corporation (hereinafter referred to as 'the Corporation') a sum of Rs. 6 lakhs for the acquisition of fixed assets, namely, land, bearing original Survey No. 163 and now bearing Survey No. 949 of Baroda Measuring 1 acre and 3 gunthas and the factory building to be constructed thereupon and for purchasing plant and additional machinery under a deed of hypothecation dated April 24, 1970 hypothecating all machinery and equipment situated at the factory premises situated on Survey No. 949. They also created an equitable mortgage mortgaging the said land and factory building by depositing the original title deeds of the properties with the Corporation by signing the letter evidencing the said deposit of title deeds. Under the said transaction the loan of Rs. 6 lakhs had to be repaid within a period of 8 years by half yearly instalments, such first half yearly instalment of 1/13th of the loan being payable at the end of 24 months of the disbursement of the first instalment of the loan and subsequent half yearly instalments of 1/13th of the loan to be paid each half year and the last half yearly instalment of 1/13th of the loan to be paid on 24-4-1978. According to the said agreement the first instalment of Rs. 46,153/- was to be paid on 27-4-1972 and second instalment of Rs. 46,153/- was to be paid on 27-10-1972. The appellants were liable to pay interest at 8.5 per cent per annum and that was to be calculated and charged at the end of every half year and was payable on the 31st of March and 30th September in each year. The appellants committed default in payment of instalments And interest due to the Corporation. Hence the Corporation filed an application on 9th August, 1973 under S. 31 of the Act before the District Judge, Baroda in Civil Miscellaneous Application No. 123 of 1973 claiming that in view of the default, the entire outstanding loan, interest and commitment charges amounting to Rs. 6,73,390.42 paise had become due and payable. In the said proceedings the appellants having admitted the claim of the Corporation a compromise was arrived at under Which the 1st Appellant - M/s. Everest Industrial Corporation undertook to pay a sum of Rs. 15,000/- every month towards the claim of the Corporation and further agreed that if there was a default in payment of any two instalements at a time, then the Corporation could recover the entire outstanding amount then due forthwith. On the basis of the above compromise an order was passed on 29-4-1977 by the learned Joint Judge, Baroda before whom the case was pending at that time. The operative portion of the order read as follows: "ORDER Claim of the applicant is decreed. Opponent No. 1 to pay the amount of Rs. 15,000/- fifteen thousand per month through the Bank of Maharashtra to the applicant towards his claim. If two instalments of Rs. 15,000/- each at a time are not paid by Opponent No. 1, then the applicant shall be entitled to recover the remaining amount then due, at a time. Decree to be drawn on payment of Court-fees by the applicant. 2/3 of the Court-fee amount be refunded to the applicant advocate. Costs to be borne by opponent No. 1. Costs to be assessed after deducting the amount of court-fees refundable to the applicant."
(3.) Because the 1st Appellant failed to pay the amount as ordered by the Court an application was filed by the Corporation under S. 32(8) of the Act before the District Judge, Baroda requesting that the property hypothecated in favour of the Corporation be directed to be sold by the Commissioner appointed by the Court and the amount so realised might be appropriated towards the dues of the Corporation. Accordingly an order directing the sale of the properties was passed on 8-2-1980. Before the property could be sold the appellants raised an objection regarding the actual amount which could be realised by the Corporation by the sale of the properties mortgaged in its favour. The objection which related to the amount of interest payable by the appellants was formulated thus:Since under the order dated 29-4-1977, which was described as a decree, the Court had not expressly directed payment of any interest on the decretal amount, the Corporation was not entitled to recover any amount by way of interest due on the principal amount for the period subsequent to the date of the order. It was further submitted that since the question of payment of interest on the amount due for the period subsequent to the date of the decision of the Court is governed by Sec. 34 of the Code the appellants were not liable to pay any interest because the Court had not ordered payment of any amount by way of interest to be paid as required by that section. In other words the contention of the appellants was that when the "decree" was silent about the payment of interest for the period between the date of the "decree" and the date of payment the Corporation was not entitled to recover it. It may be mentioned that the Corporation had claimed interest at the rate agreed upon under the transaction, i.e., 8.5 per cent per annum and that had not been disputed by the borrowers. The said objection was overruled by the Joint Judge by his Order dated February 25, 1983. He determined that Rs. 9,35,547.84 paise was due as on February 8, 1983 and that thereafter interest at the rate of Rs. 178.60 paise per day would be accruing, Aggrieved by the order of the Joint Judge, the appellants filed an appeal in First Appeal No. 1474 of 1983 before the High Court of Gujarat. That appeal was dismissed by the learned single Judge on February 2, 1984. Under the Letters Patent Appeal No. 94 of 1984 filed by the appellants, a Division Bench of the High Court affirmed the judgment of the learned single Judge by its decision dated January 2, 1985. This appeal by special leave is filed against the judgment of the Division Bench of the High Court.;