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Report No. 55

34. Article 38 considered.-

The Directive principle contained in Article 38 of the Constitution, which lays emphasis on social, economic and political justice will be furthered,1 rather than impaired, by our proposal. No doubt, the debtor is sometimes in an inferior position, and stands at a disadvantage in relation to the creditor. For such cases, there are Acts regulating the rates of interest on loans advanced, as well as the total amount which can be recovered on each such loan. The rule of Hindu Law known as the rule of Damduput (under which a creditor cannot recover more than double the principal sum), is well-known. These regulatory measures were necessary to protect debtors. But the case of commercial debts stands on an entirely different footing.

The amendment which we are recommending is intended to expedite the execution of money decrees. By taking note of the increase in the rates of interest in the market, the amendment seeks to bring the law in line with conditions which exist in reality and which, if not attended to, may constitute an obstacle to speedy justice. It will not only prevent commercial credit from drying up by reason of the dishonesty of judgment-debtors, but also advance economic justice by creating a legal frame-work which will permit the court to take into account the peculiar nature of these transactions.

1. See also para. 33, supra.

35. Position of agricultural debtors.-We should now consider the effect of the proposed amendment on special Jaws. So far as the relief of agricultural indebtedness is concerned, there is in most States, self-contained legislation for the scaling down of debts, and such legislation will not be affected by any amendment of the procedural law. Even where such legislation itself contains a provision referring back to section 34 of the Code, the court can be expected to exercise its discretion fairly and after bearing in mind the special features of the case.

The last-mentioned reasoning applies equally to situations where the judgment-debtor, though not an agriculturist, belongs to a section of the society which is more often exploited than not, or where the circumstances in which the monetary liability was incurred, make it desirable that the court should not award a high rate of interest. It should be pointed out that even after the amendment which we propose, the rate will be in the discretion of the court. And, it is well established that such discretion must be exercised on sound judicial considerations.1-2

Reference may also be made in this context to a provision in the Kerala Act3 for the relief of agricultural debtors.

"5. Interest payable on debts and rents:-

(1) (a) For determining the amount of a debt other than a debt due to a banking company as defined in the Banking Companies Act, 1949, for the purpose of payment under this Act, notwithstanding anything contained in any law,4 contract or decree or order of court,-

(i) Interest shall be calculated at the rate applicable to the debt under the law, custom, contract or decree or order of court under which it arises or at five per cent. per annum simple interest, whichever, is less, and credit shall be given for all sums paid or credited towards interest and only such amount as is found outstanding, if any, as interest thus calculated shall be deemed payable together with the principal amount or such portion of it as is due; and

(ii) notwithstanding anything in clause (i) not more than one-half 01e lie principal shall be deemed payable or to have been payable towards interest which accrued due till the commencement of this Act.

If the amount paid or credited towards interest exceeds the amount payable under clause (i) or clause (ii), such excess shall be credited towards the principle and the balance, if any, and future interest alone shall be recoverable."

1. Amar Chand v. Union of India, AIR 1964 SC 1658 (1963), para. 17.

2. Sarajubala v. Saradanath, AIR 1919 Cal 144 (150).

3. Kerala Agricultural Debtors Relief Act, 1958.

4. Emphasis supplied.



Rate of Interest for the Period after Decree and Interest on Costs Under Sections 34 and 35 of the Code of Civil Procedure, 1908 Back




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