Judgment:
ORDER
1. This judgment disposes of Civil Revision No, 1386 of 1991, Civil Revision No. 4098 of 1991, Civil Revision No. 3871 of 1991 and Civil Revision No. 3548 of 1991. Civil Revision No. 1386 of 1991 came up for motion hearing before V. K. Jhanji, J. on 22-11-1991 and the learned Judge admitted the petition to Division Bench observing thus :--
'Punjab National Bank filed a suit for recovery against the petitioners. The said suit was decreed with costs and interest. While awarding interest, it was granted at the contractual rate. In execution an objection was raised by the petitioners that the Court while passing the decree had no jurisdiction to grant more than six per cent future interest as the loan was a crop loan and an agricultural loan cannot be considered as commercial loan taken in connection with some industry, trade or business. Objections were dismissed by the executing Court as it was of the view that the Court cannot go beyond the decree.
Learned counsel for the petitioner has impugned the order of the trial Court granting future interest beyond six per cent. In support of his arguments, he has relied upon a decision of this Court in Krishan Lal v. State Bank of Patiala .
On the other hand, learned counsel for the respondents has relied upon a Division Bench judgment of this Court in Commr. of Wealth-tax, Patiala v. Hari Singh to contend that agricultural operations involve carrying on systematic entreprenurial activity with the help of capital and labour with a view to earn profits and in view of this the loan was purely commercial and moreover, once a decree has been passed, the executing Court cannot go beyond the same.
Recovery with regard to future interest beyond six per cent is stayed till further orders.
In case, the amount with future interest at the rate of six per cent is not deposited by the judgment-debtors within 15 days from today, then it shall be open to the executing Court to auction the property of the judgment-debtors.'
2. The precise question which arises for determination is whether an agricultural loan can be considered as commercial loan taken in connection with some industry, trade or business and the Court can award - future interest on the contractual rate of interest and if the contractual rate of interest is not established, at the rate at which moneys are lent or advanced by nationalised banks in relation to commercial transactions. Future interest is allowable under 5. 34 of the Code of Civil Procedure. The same reads thus :--
'Interest. (1) Where and in so far as a decree is for the payment of money, 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 1 (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 :
2 (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 hew bank as defined in the Banking Companies (Acquisition And transfer of Under-taking)Act, 1970;
Explanation II.-- For the purpose of the 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 (on 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.)'
3. The Division Bench of this Court while deciding R.S.A. No. 2665 on 4-6-1993 held thus :--
'For the reasons stated above, we hold that the plaintiff-Bank will be entitled to recover interest pendente lite and future interest to be determined as under :--
(i) Interest pendente lite is payable on the principal sum adjuged, but no interest is payable on the amount of interest adjudged on such principal sum;
(ii) Future interest will be awarded on the contractual rate of interest and if the contractual rate of interest is not established, at the rate at which the moneys are lent or advanced by the nationalised banks in relation to commercial transactions. In the present case, the loan was advanced by the bank and as such it is a commercial transaction.
Consequently, the judgments and decree of the Courts below are modified and the case is remitted to the trial Court for passing a fresh decree in terms of the directions given above.'
4. In view of the authoritative pronouncement it is no more open to exception that under S. 34 of the Code future interest exceeding 6 per cent per annum can be granted if liability adjudged has arisen out of commercial transaction and in no event it shall exceed the contractual rate of interest, and if the contractual rate of interest is not established the Court can grant interest at a rate allowed by the nationalised bank In relation to commercial transactions. The Court seized of the suit has to come to conclusion that the money was advanced in a commercial transaction and once it so holds the case will be squarely covered under Ist proviso to S. 34 of the Code. If the liability sought to be imposed does not arise out of a commercial transaction where the loan was advanced to an agriculturist for purchase of mechanising cart or somewhat identical purposes, it cannot be said that the loan was connected with commercial transaction. In Krishan Lal v. State Bank of Patiala while interpreting the proviso read with Explanation II of S. 34 of the Code observed thus :--
'The proviso, read with Explanation(II) of S. 34 as reproduced above, would not apply to the facts of the case in hand. The loan of Rs. 5000/- for the purchase of a mechanised cart, cannot be remotely connected with a commercial transaction, connected with the industry, trade or business of the party incurring liability. As ruled in Siri Chand's case (1988 (93) PLR 473) (supra), it is the jurisdiction of the Court to pass an order for grant of future interest at the time of passing the decree and if such an order is passed which is beyond the jurisdiction of the Court, same could be nullity and objection to that effect can be taken in execution proceedings. To the extent, as stated above, the decree of the Civil Court cannot be executed against the judgment-debtor (petitioner).'
5. The ratio of this judgment will squarely cover those cases where the loan is not referable to commercial transactions. The view taken in Krishan Lal's case is affirmed. The view taken in Krishan Lal's case flows from the correct interpretation of 1st proviso to S. 34 of the Code and this view has already been affirmed by the Division Bench of this Court in R.S.A. No. 2665 of 1989 referred above. The observations of the learned single Judge in the reference order indicates that the learned Judge felt that discardent note put by Division Bench of this Court to Ist proviso to S. 34 of the Code in Commr. of Wealth-tax, Patiala v. Hari Singh .
In Hari Singh's case the Bench interpreted Cl. (2) of Para A, Part 1 and Rule l(i), Para Bof the Schedule to the Wealth-tax Act, 1957. The same reads thus :--
'(2) In addition, in the case of every individual and Hindu undivided family, where the net wealth of the individual or Hindu undivided family includes the value of any asset, being building or land (other than business premises) or any right in such building or land, situated in an urban area (such asset being hereafter in this part referred to as urban asset) :--
.....
'Business premises' means any building or land or part of such building or land, or any right in building or land or part thereof, owned by the assessee and used throughout the previous year for the purposes of his business or profession, and includes any building used for the purpose of residence of persons employed in the business or any building used for the welfare of such persons as a hospital, creche, school, canteen, library, recreational centre, shelter rest room or lunchroom but does not include any premises in the nature of guest house.'
The Wealth-tax Officer while making wealth-tax assessment for the year 1974-1975 treated the agricultural land situated within the urban area as urban asset within the meaning of Cl. (2) of Para A, Part I of the Schedule to the Wealth-tax Act. On appeal by the assessee, the Assistant Appellate Commissioner reversed the order of the Wealth-tax Officer holding that the agricultural operation carried on by the assessee fell within the category of 'business' and, therefore, it is covered by the exemption provided in para A(2) of the Schedule to the Wealth-tax Act. The Department assailed the order of the Assistant Appellate Commissioner in appeal before the Tribunal. The Tribunal dismissed the appeal observing thus :--
'The agricultural land owned by the assessee which is an urban asset is covered by the expression envisaged by paragraph A(2) of Schedule 1, Part 1, inasmuch as, such land was used by the assessee throughout for the purpose of profession within the meaning of Rule 1, paragraph B of Schedule 1.'
6. On a reference to this Court, theDivision Bench upheld the order of the Tribunal and answered the reference in favour of the assessee. A reading of this judgment suggests that the assessee claimed exemption under the provisions of the statute of the Wealth-tax Act reproduced (supra) on the ground that the building or land owned by the assessee and used during the previous year for the purpose of business or profession has to be excluded for the purpose of levying additional wealth-tax on urban asset. The use of the land may be for agricultural purpose or otherwise for business or professional purposes by the assessee during the previous year, it has to be excluded for the purpose of levying additional wealth-tax on urban assets. The expression 'business' has not been defined in the Wealth-tax Act and it was in this context that the Bench alluded to the definition of profession as mentioned in S. 2(36) of the Income-tax Act for the purpose of interpreting the word business, trade or profession as appearing in Cl. (2) of Para A, Part 1 and Rule 1 (i), Para B of the Schedule to the Wealth-tax Act. These observations have not been read divorced from the context and cannot be used for interpreting the word commercial transaction appearing in first proviso to S. 34 of the Code. The ratio of the judgment in Hari Singh's case (1980 Tax LR 35 is of no assistance for interpreting the 1st proviso to S. 34 of the Code.
7. In Krishan Lal's case (1990 97 Pun LR 132) (supra), this Court has held that executing Court can go into question whether future interest was awarded in conformity with S. 34 of the Code. Interest awardable under S. 34 of the Code may be divided into three headings namely :
(1) interest accrued due prior to the institution of the suit on the principal sum adjudged (as distinguished from the principal sum claimed).
(2) additional interest on the principal sum adjudged, from the date of the suit to the date of the decree, at such rate as the Court deemsreasonable.
(3) further interest on the principal sumadjudged from the date of the decree to the date of the payment or to such earlier date as the Court thinks fit at a rate not exceeding 6 per cent per annum.
Interest up to the date of the suit is a matter of substantive law and the section does not refer to payment of interest under the first head. It applies only to 2nd and 3rd heads. Interest pendente lite is one of the procedure within the discretion of the Court. Interest on the principal amount adjudged from the date of the decree to the date of payment cannot be allowed at a rate higher than 6 per cent per annum under the first proviso to S. 34 of the Code. Future interest exceeding 6 per cent per annum can be granted if the liability adjudged has arisen out of a commercial transaction. The executing Court can examine if the decree was passed by the Court in conformity with the Ist proviso to S. 34 to the Code.
8. For the reasons stated above we set aside the impugned orders and remit the cases to the executing Court to decide the objections in the light of the law laid down in the judgment. The parties through their counsel are directed to appear before the executing Court on 15-10-1993 and the executing Court will dispose of the objections within one month thereafter.
9. Order accordingly.