1. This is an appeal by the plaintiff United Bank of India. It arises out of O. S. Suit No. 460 of 1983. The appeal is directed against the judgment and decree dated May 23, 1986 passed by a learned single Judge of this court. That decree had been passed partly in favour of the plaintiff but the plaintiff has felt aggrieved by the reduced interest -- both interim and on judgment and by the instalments granted by the learned Judge in decreeing the plaintiff's claim.
2. The plaintiff-appellant had lent and advanced various amounts to the defendant No. 1, The New Glencoe Tea Company Ltd. on hypothecation of moveables including the plants, machinery, stores, raw materials, finished and semi finished products etc. In 1983 the plaintiff instituted the above suit against the defendants for a decree for Rs. 58,41,677,25, interim interest and interest on judgment at the rate of Rs. 18 per cent; for a declaration that moveables specified in the Schedule stand charged and/or mortgaged in favour of the plaintiff and a decree for sale thereof.
3. When this suit came up for hearing before the learned trial Judge, it was found that pending the suit a sum of Rs. 26,28,647,60 had been paid by the defendant No. 1, leaving a balance of Rs. 32,13,029,65. Accordingly the learned trial Judge decreed the suit against defendant No. 1, for a sum of Rs. 32,14,000/-together with a sum of Rs. 5,50,000/- towards interim interest and interest on judgment at 7 1/2 per cent. He further directed payment of the decretal amount on instalments extending over 7 years and only on default of payment of three consecutive instalments there will be a decree for sale. Plaintiff appellant has felt aggrieved by the fact that while the contractual rate of interest was 18% the interim interest and interest on judgment had been decreed at a rate not exceeding 7 1/2 per cent and further by the fact that the decree providing for payment on instalments has deferred sale of the moveables indefinitely beyond seven years.
4. Mr. Amiya Nath Bose appearing on behalf of the appellant has contended that the present suit being one for realisation of an amount due on enforcement of a mortgage in respect of moveables, the learned trial Judge could not have reduced the decree for interim interest to a rate lower than the contractual rate and further he could not have granted instalments for payment of the amount due and thus defer the decree for sale. According to Mr. Bose, procedure analogous to the procedure prescribed by Order 34 of the Code should have been followed and even if Section 34 of the Code could be invoked, it being a suit for enforcement of a commercial loan, the court should have decreed the interim interest and interest on judgment at a rate not other than the contractual rate. He has further contended that in such a suit, there could be no decree for instalments in the matter of payment of the decretal amount. He has relied on a Bench decision of the Gujarat High Court in the case of Central Bank of India v. P. R. G. Industries Pvt. Ltd. .
5. Mr. S. B. Mookherjee appearing on behalf of the defendant No. 1 respondent has contested the point raised by Mr. Bose. According to Mr. Mookherjee Order 34 of the Code lays down a procedure, only for suits on mortgages in respect of immoveable properties and has no application to suits like the present one. He has contended that it being a suit for recovery of money due the court had ample authority to grant instalments under Order 20 Rule 11 of the Code and grant reduced interest in terms of Section 34 of the Code.
6. We have carefully considered the rival contentions put forward before us. We may well agree with Mr. Bose that under the Indian law there can be valid mortgage of moveables though such a mortgage may be different from such mortgage at English Common Law or under Bills of Sales Act. Such a mortgage when not accompanied by delivery of possession is still operative save and except against bona fide purchasers without notice. See Misrilal v. Mozahar Hossain (1886) ILR 13 Cal 262, Venkatachalam v. Venkatrami Reddy AIR 1940 Mad 929. This position appears now to be well recognised. But still the question remains as to whether a suit for enforcement of such a mortgage shall be governed by a procedure similar to the one prescribed by Order 34 of the Code. Though Mr. Bose has contended that it should be so governed, the judicial opinion on the point is not uniform. Indeed a Division Bench of this court in the case of Co-operative Hindusthan Bank v. Surendra Nath Das 36 Cal WN 263 : (AIR 1932 Cal 524) observed.
"The mortgage no doubt was in respect of moveables but rules of Order 34 of the Code are based on well settled rules of equity which in the absence of any statutory provision to the contrary should be applied in suits on mortgages of moveables as well." This observation supports the stand taken by Mr. Bose. But this observation has not been approved but distinguished by other High Courts vide New Citizen Bank v. K. B. Burnel . In
the case of Official Assignee of Bombay v. Chimniram Motilal AIR 1933 Bom 51 a Division Bench of the Bombay High Court on more persuasive reasons has held that Order 34 of the Code is applicable to suits on mortgages in respect of immoveable properties only and not to suits on mortgages in respect of moveables. On very careful consideration of the legal position we would prefer to follow the Bombay decision as above than the obiter observations of this court.
7. Though we may not accept the contention of Mr. Bose that the principles underlying Order 34 of the Code will govern the suit out of which the present appeal arises, yet we are left to consider two important issues, viz., (1) whether in such a suit there could be order for payment on instalment and (2) whether and how far the court in decreeing the interim interest or interest on judgment can deduce it from the contractual rate. We propose to consider the two issues separately.
8. Mr. Mookherjee has strongly relied on Order 20 Rule 11 of the Code in supporting the direction for payment on instalment as made by the learned trial judge. In our opinion Order 20 Rule 11 of the Code has its application to simple money decrees and not to decrees for sale of a property for realisation of money due. That provision on its own terms can have no application to a mortgage suit be it a suit on a mortgage in respect of immovable property or on a mortgage in respect of moveables. We have indicated hereinbefore that there can be valid mortgage in respect of moveables. A suit for enforcement of such a mortgage will still be a mortgage suit resulting in a mortgage decree though not in terms of Order 34. Such a suit will not result in a simple money decree but in a decree for sale. See Basivireddi v. Kamaraju, AIR 1933 Mad 241 and Vasudevan v. Kutti Umma, AIR 1941 Mad
805. That Order 20 Rule 11 of the Code is limited in its application to money decrees only is well settled vide Basanta Kumar v. Chotanagpur Banking Association, AIR 1948 Pat 18 and N. Shantilal v. A. Sankara Subba, . In the present case, the suit was one for
enforcement of a mortgage in respect of moveables and if the plaintiff establishes his claim as found by the learned trial Judge -- the plaintiff is entitled to a decree for sale. The court could not apply Order 20 Rule 11 of the Code to such suit and pass a decree for payment on instalment and then defer the decree for sale only until there arises 3 consecutive defaults in payment of instalments. Mr. Mookherjee incidentally argued that such instalment could be granted at least in exercise of inherent jurisdiction. There can be no jurisdiction inherent when the jurisdiction has been expressly granted but subject to certain limits and in any event exercise of any such jurisdiction to grant instalment in a mortgage decree would be wholly inconsistent with the scheme. Hence we must uphold the contention of Mr. Bose that the learned trial Judge went wrong in granting instalments for paying the decretal amount.
9. Next we proceed to consider the issue with regard to interim interest and interest on judgment. Relying upon the decision of the Gujarat High Court referred to hereinbefore and referring to the added proviso to Section 34 of the Code, it has been strongly contended by Mr. Bose that the trial court should have granted interest at the contractual rate from the date of the suit until realisation. Mr. Mookherjee in contesting this claim of Mr. Bose has relied on a decision of this court in the "case of W.B. Financial Corporation v. Bertram Scott in contending that when it was left to the discretion of the court to award interim interest at such rate as it deems fit as also awarding of interest on judgment the trial court cannot be said to have awarded such interest at the rate of 7 1/2 per cent in wrongful exercise of its discretion. In our opinion Section 34 of the Code leaves it to the discretion of the court as to what interest is to be decreed by way of interim interest and so far as interest on judgment is concerned that too is also left entirely to the discretion of the court but subject to a limit of 6 per cent. The added proviso only removed the limit imposed by the main provision to the interest on judgment in a case arising out of a commercial transaction. But the proviso does not take away the discretion left with the court nor does it limit the scope of exercise of such discretion. The Gujarat decision also acknowledges the existence of such a discretion with the court but only lays down that as a rule in a decree arising out of a commercial transaction, interim interest and interest on judgment should be at the contractual rate. We, however, are of the opinion that such a proposition would be too wide and it would not be proper to lay down such a rule as of universal application. Indeed in our opinion like all discretions, discretion in this regard must depend upon consideration of all the attending facts and circumstances including the circumstance that the amount decreed was in respect of a liability arising out of a commercial transaction. Exercise of such discretion must necessarily be judicial and hence reasonable.
10. Tested on the above principle it is difficult for us to uphold the decree in respect of interim interest and interest on judgment. While interim interest awarded works out at or about 6 per cent, interest on judgment has been awarded at 7 1/2 per cent. On the decree, the decretal amount is repayable over 7 years. This means that the appellant bank is made to invest the diminishing balance over several years at an interest of 7 1/2 per cent much below the interest payable by the bank to its depositors for deposits extending to such a period. After all when the added proviso to Section 34 exempted the interest to be awarded on judgment debt arising out of commercial transactions from the statutory limit of 6 per cent, it intended to prevent commercial loans being freezed at a fixed rate of interest. For these reasons we would not have upheld the decree in the respect had we upheld the order for instalments.
11. In the result the appeal succeeds and is allowed. In modification of the decree passed by the trial court, we pass a decree for Rs. 32,13,029,65 together with interim interest at the rate of 10 per cent up to this date. An officer to be nominated by the plaintiff and the Manager of the Tea Estate are appointed Joint Receivers in respect of the hypothecated moveables. The joint receivers will not interfere with the administration of the tea estate but they would effect sale of all the products and collect all the book debts and other dues and out of the sale proceeds and collections keeping apart such sum as would be necessary to meet the wages and salaries of employees and other day to day expenditures, the rest would be paid to the bank in pro tanto satisfaction of the decretal amount. If the entire decretal amount be not liquidated and/or otherwise paid by defendant No. 1 within three years all the hypothecated moveables would be sold and the sale proceeds be paid to the plaintiff in proportionate satisfaction of the decretal dues. Plaintiff will get a decree for interest on this judgment at the rate of 6 per cent. Defendant No. 1 will be entitled to adjust all amounts paid by way of instalments in terms of the decree under appeal. There will be no order for costs in this appeal. But costs of the suit as decreed by the trial court is affirmed.
12. Stay of the operation of this order is granted for one month from this date. Certified copy be given forthwith.
13. I agree.