# SRI RAMNIK V ALLABHDAS MADHV ANI AND ORS v. TARABEN PRAVINLAL MADHVANI

- **Citation:** [2003] Supp. 5 S.C.R. 230
- **Court:** Supreme Court of India
- **Decided:** 2003-11-05
- **Case number:** Civil Appeal Nos. 6429-31 of 1995
- **Bench:** V.N. Khare, S.B. Sinha, Arun Kumar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/sri-ramnik-v-allabhdas-madhv-ani-and-ors-v-taraben-pravinlal-madhvani-19398
- **Pages:** 35

## Headnote

Code of Civil Procedure (Amendment) Act, 1976-Section 97-InterestRate of-Suit instituted prior to Amendment Act of 197 6-Amendment of plaint
C sought for changing rate of interest to 13'Yo-Amendment allowed in 1985Court awarding 13% interest from date of decree till realization-Held,
unamended provision would apply in view of Sec. 97 (l)(e) of the Civil
Procedure Code (Amendment) Act, 1976-Unamended provision restricted
interest from date of decree to realization to 6'Yo-Held, 13% rate of interest
could not be allowed-Code of Civil Procedure, 1908-Section 34.
D
Code of Civil Procedure, 1908-0rder VI Rule 17-AmendmentProcedure after allowing-Held, opposite party must be given a char:ce to
contest the amended plea-Amendment allowed by court and on the same day
decree was passed on basis of amended plea-Held: illegal.
E
Constitution of India, 1950-Article 136-Special Leave Petition--
Dismissal of-Effect of-Held, cannot act as res-judicata-Court allowing
amendment in rate of interest sought for by the plaintijf-l>ecree awarded on
the amended rate of interest-Amended rate of interest against provision of
/aw-Held, decree is an nullity being without jurisdiction-There is no res
F judicata in cases of inherent lack of jurisdiction.
Words and Phrases-Goodwill-Meaning of
The respondent was the widow of the paternal uncle of the
appellants. The family owned a tea estate, which was being managed by
G family firm of which the husband of the respondent was a partner. The
firm was continuously in business since 1954. The husband of the
respondent died on 4.5.1969. The respondent thereafter filed a suit against
the appellants and their widowed mother praying for the following relief:
(a) decree of partition of the tea estate.
I-I
230
R.V. MADHVANI v. T.P. MADHVANI
231
(b) decree for accounts of the family firm including goodwill, stocks A
in trade, standing crops etc. of the firm along with interest at 6% per
annum from 4.5.1969.
(c) decree for accounts of mesne profit from 5.5.1969 with interest
at 6 % per annum from 5.5.1969.
The Trial Court, by a preliminary decree, granted prayer (b) along
with interest thereon at 6% per annum from 4.5.1969. The suit of the
respondent in respect of other prayers was dismissed.
B
The respondent appealed against the preliminary decree. While the
appeal was pending before the High Court, the respondent applied for C
amendment of the plaint filed by her and the High Court allowed the
amendment application on 16.12.1985 and rate of interest claimed in
prayer (c) was changed to 13% per annum from 6% per annum. No
chance was given to the appellants to file reply to the amended plaint and
by order dated 16.12.1985, the High Court also allowed the appeal of the D
respondent. All three prayers made by the respondent in the plaint were
decreed. The High Court, taking note of amendment in Section 34 of the
Code of Civil Procedure by Code of Civil Procedure (Amendment) Act,
1976, allowed interest at the rate of interest as charged by the nationalised
banks during the relevant period on commercial loan. The special leave
petition filed against the order allowing amendment and the preliminary E
decree passed by High Court was summarily dismissed.
The Trial Court, thereafter, passed final decree in accordance with
the order of ,the High Court. Insofar as mesne profits was concerned, the
Trial Court determined a sum of Rs. 26,330,16.30 as due by way of mesne
profit to the respondent and awarded simpte interest thereon at the rate F
of 13% per annum till realization.
The appellants and the respondent filed appeals against the final
decree. By consent of parties a Commission consisting of a retired High
Court Judge and two Chartered Accountants, one nominated by each G
party, was appointed for determining the amount of mesne profit. The
Commission determined the mesne profit at Rs. 33,32,847.83.
Ultimately, the High Court disposed of the appeals modifying the
decree of the Trial Court. The High Court determined the mease

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A
SRI RAMNIK V ALLABHDAS MADHV AN! AND ORS.
v.
TARABEN PRAVINLAL MADHVANI
NOVEMBER 5, 2003
B
[V.N. KHARE, CJ., S.B. SINHA AND ARUN KUMAR, JJ.]
Code of Civil Procedure (Amendment) Act, 1976-Section 97-InterestRate of-Suit instituted prior to Amendment Act of 197 6-Amendment of plaint
C sought for changing rate of interest to 13'Yo-Amendment allowed in 1985Court awarding 13% interest from date of decree till realization-Held,
unamended provision would apply in view of Sec. 97 (l)(e) of the Civil
Procedure Code (Amendment) Act, 1976-Unamended provision restricted
interest from date of decree to realization to 6'Yo-Held, 13% rate of interest
could not be allowed-Code of Civil Procedure, 1908-Section 34.
D
Code of Civil Procedure, 1908-0rder VI Rule 17-AmendmentProcedure after allowing-Held, opposite party must be given a char:ce to
contest the amended plea-Amendment allowed by court and on the same day
decree was passed on basis of amended plea-Held: illegal.
E
Constitution of India, 1950-Article 136-Special Leave Petition--
Dismissal of-Effect of-Held, cannot act as res-judicata-Court allowing
amendment in rate of interest sought for by the plaintijf-l>ecree awarded on
the amended rate of interest-Amended rate of interest against provision of
/aw-Held, decree is an nullity being without jurisdiction-There is no res
F judicata in cases of inherent lack of jurisdiction.
Words and Phrases-Goodwill-Meaning of
The respondent was the widow of the paternal uncle of the
appellants. The family owned a tea estate, which was being managed by
G family firm of which the husband of the respondent was a partner. The
firm was continuously in business since 1954. The husband of the
respondent died on 4.5.1969. The respondent thereafter filed a suit against
the appellants and their widowed mother praying for the following relief:
(a) decree of partition of the tea estate.
I-I
230
R.V. MADHVANI v. T.P. MADHVANI
231
(b) decree for accounts of the family firm including goodwill, stocks A
in trade, standing crops etc. of the firm along with interest at 6% per
annum from 4.5.1969.
(c) decree for accounts of mesne profit from 5.5.1969 with interest
at 6 % per annum from 5.5.1969.
The Trial Court, by a preliminary decree, granted prayer (b) along
with interest thereon at 6% per annum from 4.5.1969. The suit of the
respondent in respect of other prayers was dismissed.
B
The respondent appealed against the preliminary decree. While the
appeal was pending before the High Court, the respondent applied for C
amendment of the plaint filed by her and the High Court allowed the
amendment application on 16.12.1985 and rate of interest claimed in
prayer (c) was changed to 13% per annum from 6% per annum. No
chance was given to the appellants to file reply to the amended plaint and
by order dated 16.12.1985, the High Court also allowed the appeal of the D
respondent. All three prayers made by the respondent in the plaint were
decreed. The High Court, taking note of amendment in Section 34 of the
Code of Civil Procedure by Code of Civil Procedure (Amendment) Act,
1976, allowed interest at the rate of interest as charged by the nationalised
banks during the relevant period on commercial loan. The special leave
petition filed against the order allowing amendment and the preliminary E
decree passed by High Court was summarily dismissed.
The Trial Court, thereafter, passed final decree in accordance with
the order of ,the High Court. Insofar as mesne profits was concerned, the
Trial Court determined a sum of Rs. 26,330,16.30 as due by way of mesne
profit to the respondent and awarded simpte interest thereon at the rate F
of 13% per annum till realization.
The appellants and the respondent filed appeals against the final
decree. By consent of parties a Commission consisting of a retired High
Court Judge and two Chartered Accountants, one nominated by each G
party, was appointed for determining the amount of mesne profit. The
Commission determined the mesne profit at Rs. 33,32,847.83.
Ultimately, the High Court disposed of the appeals modifying the
decree of the Trial Court. The High Court determined the mease profits
payable to the respondents, including interest from 5.5.1969 to 5.8.1986, H
232
SUPREME COURT REPORTS (2003] SUPP. 5 S.C.R.
A at Rs. 78,33,560.
The High Court calculated the interest at varying rates of interest
(ranging between 10% to 19% per annum) on periodical basis based on
change in the bank rate of interest as decided by the High Court earlier
while deciding the appeal against the preliminary decree. Though the High
B Court did not approve grant of such rates of interest, it did not change it
in view of the fact that the special leave petition against the earlier order
of the High Court had been dismissed. The High Court further awarded
the respondent Rs. 39,41,920 as mesne profits from 6.8.1986 till realization
with simple interest at the rate of 13% per annum. The High Court also
C awarded Rs. 1,23,111.37 to the respondent on account of her share of
goodwill, standing crops etc. with simple interest at the rate of 13% per
annum.
The appellants filed appeal before the Court.
Allowing the appeal in part and modifying the rate of interest
D awarded, the Court
HELD : Quantum of mesne profits
Per Arun Kumar, J (for himself and C.J)
E
1.1. The High Court arrived at a finding regarding quantum of mesne
profits after looking into the accounts, the report of the Commission
appointed by it and other relevant facts and material. There is no reason
to differ with the view of the High Court on this aspect. The Court is not
required to re-appreciate the material. However, a mistake has been
committed by the High Court in calculation of interest on mesne profits.
F Interest has to be calculated on yearly basis because the amount of mesne
profits on which interest is to be awarded has to be arrived at on year to
year basis. Interest cannot be allowed oil the whole amount from the
beginning. Interest had to be worked out on amounts falling due towards
mesne profits on yearly basis i.e. on the amount of mesne profits which
G could be taken to be due to the respondent at the end of each successive
year. (240-A, B, F, G]
Per S.B. Sinha, J. (concurring)
1.2. Decree for mesne profit was granted in favour of the respondent
for wrongful use of the property. The quantum of mesne profits can be
H arrived at by the High Court keeping in view the well-known principles
R.V. MADHVANI v. T.P. MADHVANI
233
of valuation for determining the same. The court in not enjoined with any A
duty to accept the quantification determined only on the basis of books of
account maintained by the appellants, particularly when the same had not
been proved. The High. Court has rightly considered the matter from
different angles. Even if any of the methods adverted to the High Court
and referred to herein before is adopted, the respondent would have been B
entitled to much more amount than claimed by her. The findings of the
High Court being just and proper need not be interfered with. [255-F, G)
Legality of rate of interest awarded
Per Arun Kumar, J. (for himself and C.J.).
c
2.1. On an amendment being allowed, the opposite party has to be
given a chance to respond to the amended pleading and if the plea is
contested the Court has to give its decision thereon. Not affording an
opportunity to the contesting party to contest a plea, which has been
allowed to be amended, is negation of justice. A bare reading of Order D
VI Rule 17 of Code of Civil Procedure shows that amendment is of a plea
contained in the pleadings and the object of allowing amendment of
pleadings is to determine the real questions in controversy between the
parties. This means the parties have to be given a chance to contest the
questions of controversy and the Court has to give its decision ultimately
on such contested issues. (243-E, F; 240-A, BJ
E
2.2. In the present case the amendment application of the resp .•ndent
was allowed vide order date 16th December 1985 when on the same date
the appeal against the preliminary decree was disposed of. No amended
pleadings were filed. No opportunity was given to the appellants to contest F
the plea. The procedure followed in the present case in wholly illegal.
(244-A)
J. Jermons v. Aliammal and Ors., (1999) 7 SCC 382, relied upon.
3. The rate of interest awarded went even beyond what was
permitted by view of amendment. The respondent had only sought leave G
to amend the rate of interest as originally pleaded as 6% per annum to
13% per annum. This amendment was allowed. But in the decree the Court
allowed interest to be charged at the prevailing bank rate of interest
charged by nationalised banks from time to time on commercial
transactions during the relevant period. Thus the High Court while H
234
SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.
A allowing the prayer for amendment simultaneously passed a decree not
only based on the amended plea, but far exceeding it. Thus the decision
of the High Court in allowing interest on mesne profits at rate of interest
charged by nationalised banks from time to time on commercial
transactions is wholly illegal and unsustainable. (243-F-H; 244-C-D)
B
4.1. An amendment of plaint relates back to the date of institution
c
of the suit. Section 97(2)(e) of the Civil Procedure Code (Amendment) Act,
1976 provides that in suits instituted before enforcement of the amended
provision, interest has to be awarded as per unamended Section 34 to the
Code of Civil Procedure. In the present suit which was instituted much
before amendment of Section 34 of the Code of Civil Procedure, therefore,
interest had to be allowed as per the unamended Section 34 of the Code
of Civil Procedure. (244-G-H; 245-A)
4.2. Section 34 of the Code of Civil Procedure as it stood before
amendment by Code of Civil Procedure (Amendment) Act, 1976 deals with
the question of interest in three stages. About the interest prior to the date
D if institution of suit, Section 34 does not say anything. About the interest
from the date of the institution of suit till date of decree, it says that interest
to be awarded should be as considered reasonable by the Court. About
interest from the date of the decree till realisation of the decretal amount,
the power of the Court to award interest is cirumscribed, i.e. it cannot be
E more than 6% per annum. (244-F, G)
4.3. While considering a reasonable rate of interest to be awarded
for the pre-decree period under Section 34 of the Code of Civil Procedure
as it stood before amendment, it is to be noted that in the present case
mesne profits are being awarded on account of retention of Shares of a
F co-owner in a property by the other-co-owners. This cannot be said to be
a commercial transaction. Moreover respondent herself claimed interest
in the plaint originally instituted at the rate of 6% per annum. By way of
amendment of the plaint she wanted to take advantage of the amended
provisions in the Code of Civil Procedure so as to claim interest at the
higher rate which in law she was not entitled to. Therefore, award of
G interest at the rate of 6% per annum on the amount found due would be
fair and reasonable in the facts and circumstances of the case. (245-B-D)
Effect of dismissal of special leave petition
Per Arun Kumar, J. (for himself and C.J.)
H
5.1. The disposal of special leave petition against a judgment of the
R.V. MADHVANI v. T.P. MADHVANI
235
High Court does not mean that the said judgment is affirmed by such A
dismissal. The order on special leave petition is also never res judicata.
(246-C)
Kunhavammed and Ors. v. State of Kera/a and Anr., [200016 SCC 359,
relied on.
B
5.2. An illegal decree is a nullity and can be ignored. Clear illegality
has been committed by the High Court in awarding interest on the decree
for mesne profits at a rate much higher than what claimed or what is
admissible. Similar is the illegality regarding award of interest at the rate
of 13% per annum on decree for accounts as per prayer (b). The decree
to that extent is a nullity and cannot be allowed to be enforced. (246-E) C
Anil R. Deshumkh v. Onkar N. Wagh and Ors., (1999) 2 SCC 205; Smt.
Nai Bahu v. Lala Ramnaryan and Ors., (1978) l SCC 58 and Srimati
Kaushalya Devi and Ors. v. Shri K.L. Bansal, [1969) l SCC 59, referred to.
Per Sinha, J. (concurring)
5.3. The principles of res judicata which according to the High Court
would operate in the case, is not applicable. Principles of res judicata is a
procedural provision. The same has no application where there is inherent
lack of jurisdiction, In the facts and circumstances of the present case,
D
the principles of res judicata was not applicable. [255-H; 256-A)
E
Chief Justice of A.P. and Anr. v. L. V.A. Diskshitulu and Ors. etc., [1979)
2 SCC 34; Dwarka Prasad Agarwal (D) by LRs and Anr. v. B. D. Agarwal
Ors., (2003) 6 SCC 230 and Mis Shree Bharat Laxmi Wool Store, Panipat
and Ors. v. Punjab National Bank and Anr., (1992) l SCC 204, referred to.
Goodwill
Per Sinha, J.
6.1. The term goodwill signifies the value of the business in the hands
F
of a successor, so far as increased by the continuity of the undertaking G
being preserved in the shape of the right to use the old name and otherwise.
It is something more than a mere chance of probability of old customers
maintaining their connection, though this is a material part of the practical
fruits. 'Goodwill' may be the whole advantage belonging to the firm, its
reputation as also connection thereof. It, thus, means that every affirmative
advantage as contrasted with negative advantage that has been acquired H
236
SUPREME COURT REPORTS (2003) SUPP. 5 S.C.R.
A in carrying on the business whether connected with the premises of
business or its name or style everything connected wi(h or carrying the
benefit of the business. (260-F-H(
B
Inland Revenue Commissioner v. Muller & Co., (19011 AC 223,
Halsbury's Laws of England, 4 th Edn., referred to.
6.2. The goodwill has been claimed for the firm's continuous business
since 1954. The Court has proceeded to calculate the amount of goodwill
on the basis of the profits derived by the firm for the last five years on an
average. The District Judge as also the High Court has assigned sufficient
and cogent reasons for awarding a sum of Rs. 3,45,139.14 towards the
C plaintiffs' share in goodwill. There is no infirmity in the judgment of the
Court below in this regard. (263-B-DI
D
E
F
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 6429-31 of
1995.
From the Judgment and Order dated 23.9.93 of the Madras High Court
in A. Nos. 998, 350 and 1305 of 1988.
WITH
C.A. Nos. 6432-6434/95 and 6484-8486 of 1995.
Bhimrao Naik, K. Ramamoorthy, Vinod A. Bobde, V. Balachandran,
V. Ramasubramanian, Ms.V. Mohana, Senthil Jagadeesan, S.R. Setia, Bhargava
V. Desai and Sanjeev Kr. Singh for the appearing parties.
The Judgment of the Court was delivered by
ARUN KUMAR, J. C.A. Nos. 6429-31/1995:
These appeals arise from a suit filed by respondent in the court of
Subrodinate Judge at Ootacamund, State of Tamilnadu on 28th October,
1972. The parties to the suit are closely related. Respondent Taraben is the
G widow of Pravinilal Madhvani while Santokben, original defendant No. 1.,
was the widow of Vallabhdas Madhvani real brother of Pravinlal Madhani.
Santokben died during the pendency of the litigation. Her three sons who
were defendants No. 2 (Ramnik), No. 3 (Praful) and No. 4 (Rajnikant) in the
suit, were appellants in these appeals. Appellants Santokben and her son
H Praful died during pendency of the appeals. Necessary steps regarding
J
R.V. MADHVANI v. T.P. MADHVANI [ARUN KUMAR, J.]
237
substitution have been taken. Appellant No. 4 Mis. Bengorm Nilgiri Plantations A
Co.,, is a partnership firm.
The family owned a tea estate in the Neelgiris area. It was known as
Bengorm Tea Estate. It was a co-wonership property of the members of the
family. A partnership firm was constituted under the name and style of
Bengorm Tea Plantations to manage the tea estate. The partnership did not B
have any proprietary interest in the estate. The shares of the parties in the tea
estate as well as in the partnership firm are not in dispute. Pravinilal died on
4th May, 1969. He left behind a will. Taraben respondent No. I claiming to
be sole executor of the estate of her husband Pravinlal filed the present suit
claiming the following reliefs:
C
"18{a) Decree for partitions by metes and bounds of the plaintiffs
33% share in Bengorm Estate mentioned in Schedule to the Plaint
and separate possession thereof against defendants I to 4 and/or 6 in
severally.
(b) A decree for accounts against the defendants for the 30% share D
of Pravinlal Vithaldas Madhvani deceased in the defendant No. 6 in
respect of profits and monies to his credits and in the assets of the
firm including stocks in trade, stores and spares, standing crops,
investments, provisions, reserves and goodwill as mentioned in
paragraph 12 of the plaint and decree for the amount found to be due E
to the plaintiff as ascertained in this suit on enquiry with interest at
6% per annum from 4th May, 1969.
(c) Decree for accounts for mesne profits and/or illegal gains from
5th May, 1969 till payment as mentioned in paragraph 13 the plaint
and decree for the amount found to be due to the plaintiff as ascertained F
in this suit on enquiry with interest at 6% per annum from the date
herein."
A preliminary decree was passed by the trial court on 13th April, 1978
granting a decree in favour of the plaintiff {respondent herein) for accounts
against defendants for the 30% share of Pravinlal in the partnership firm with G
interest thereon at the rate of 6% per annum from 4th May, 1969 till realisation.
The suit with respect to other reliefs was dismissed. The plaintiff appealed
against the said preliminary decree with regard to relief denied to her by the
trial court. During the pendency of the appeal before the High Court on 21st
November, 1980, the plaintiff {appellant before the High Court) applied for H
238
SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.
A amendment of the plaint. An amendment was sought with respect to the rate
of interest as mentioned in paragraphs l 8(b) and 18( c) of the plaint. The
plaintiff had originally claimed interest at the rate of 6% per annum in both
these paras of the plaint. By amendment the rate of interest was sought to be
revised from 6% per annum to 13% per annum. The High Court disposed of
B the amendment application simultaneously with the appeal against the
preliminary decree vide judgment and orders dated 16th December, 1985.
The only amendment allowed was with respect to rate of interest in para
18( c) of the plaint. The plaintiff was allowed to amend the said prayer so as
to raise the claim with respect to rate of interest from 6% per annum to 13%
per annum. Similar amendment sought in para l 8(b) of the plaint was
C specifically rejected. So far as appeal against preliminary decree passed by
the trial Court is concerned, the Division Bench of the Madras High Court
allowed the same, thereby the prayer of the plaintiff with respect to 33%
share in the Bengorm Tea Estate and mesne profits after the death of Pravinlal
Vithaldas Madhvani on 4th May, 1969 alongwith interest on the amount
found due by way of mesne profits was allowed. The preliminary decree
D passed by the trial Court on 13th April, 1978 with respect to prayer contained
in para l 8(b) of the plaint became final. On the question of interest with
respect to para 18( c) of the plaint even though the High Court had allowed
the amendment to enable the plaintiff to claim interest at the rate of 13% per
annum, the High Court took note of amendment of Section 34 C.P.C. in the
E meanwhile and treating the suit claim as a commercial transaction, allowed
interest at the rate of interest as charged by nationalised banks during the
relevant years from time to time on commercial loans. The trial court pa~sed
a final decree on 6th January, 1988 and determined a sum of Rs .. 2633016.33
paise as due by way of mesne profits. It awarded simple interest thereon at
the rate of 13% per annum till realization. It also passed a d1:cree for Rs.
F 67, 11 I .3 7 paise in pursuance of prayer in para 18(b) of the plaint with simple
interest at the rate of 6% per annum w.e.f. 5th May, 1969 till realisation.
The appellants appealed against the said final decree before the Madras
High Court. During the pendency of the appeals, with the agreement of
G counsel for the parties, the High Court appointed a Commission to determine
the amount of mesne profits payable to the plaintiff in the suit. The Commission
filed its report on 2nd September, 1990 determining a sum of Rs. 33,32,847.83
in this behalf. Ultimately by its impugned judgment dated 23rd September,
1993, the High Court dismissed to the appeals filed by the present appellants
against the final decree of the trial court. It modified the decree of the trial
H court and passed a final decree in the following terms :
R.V. MADHVANlv. T.P. MADBVANI [ARUN KUMAR, J.]
239
"The respondents/defendants do pay the petitioner/plaintiff the sum A
of Rs. 78,33,560 by way of mesne profits and interest due for the
period from 5.5.1969 to 5.8.1986 with simple interest at the rate of
13 per cent per annum of Rs. 39,41,920 from 6.8.1986 till date of
realisation and defendants do also pay the plaintiff the sum of Rs.
1,23, 111.37 by way of her share of good-will, standing crops and B
missing items with simple interest at the same rate of 13 per cent per
annum on this sum from 5.5.1969 till date of realization and the
proportionate cost. The petitioner/plaintiff should pay the court fee at
the time of execution."
•
On the question of interest, the High Court has in Para 42 of the C
impugned judgment noted that it was wrong on the part of the High Court
·while passing the preliminary decree vide judgment dated 16th December,
1985 to award interest as per the rate of interest charged by nationalised
banks on commercial transactions form time to time. It was also felt that the
High Court ought not to have proceeded on the basis of amended Section 34
of the Code of Civil Procedure .. Yet the High Court did not interfere with D
award of interest only for the reason that the Special Leave Petition against
the preliminary decree had been dismissed by this Court.
The appellants who were defendants in the suit have filed the present
appeals against the judgment dated 23rd September, 1993 of the High Court.
During the hearing the learned counsel for appellants raised three points for E
decision of this Court in these appeals.
(i)
Determination of quantum of mesne profits payable to the
respondent-plaintiff by the appellants;
(ii) Rate of interest to be awarded on the decretal amount;
F
(iii) Adjustment of admitted liability of Pravinlal towards the
partnership firm in the sum of Rs. 4, 13,364.24 paise.
Point No. I
So far as the question of determination of quantum of mesne profit is G
concerned the liability to pay is not being disputed. The only dispute is with
respect to the determination of amount payable by way of mesne profits. As
pointed out earlier the Division Bench of the High Court had appointed a
Commission headed by a retired judge of the Madras High Court and assisted
by two Chartered Accountants, one nominated by each party, to carry out the H
240
SUPREME COURT REPORTS (2003] SUPP. 5 S.C.R.
A exercise regarding determination of mesne profits. The Commission filed its
report in the High Court. The High Court arrived at a finding regarding
quantum of mesne profits after looking into the accounts, the report of
Commission and other relevant facts and material. We have no reason to
differ with the view of the High Court on this aspect. We are not required
to reappreciate the material. As a matter of fact during the course of hearing,
B counsel for the appellant indicated willingness to go by the Commissioner's
report in this behalf. Therefore, we accept the finding of the High Court on
this issue. Total amount by way of mesne profits as per the impugned judgment
of the High Court comes to Rs. 39,41,920. This figure does not include
interest.
c
Interest is leviable on the amount of mesne profits. The High Court has
in its impugned judgment awarded interest w.e.f. 5th May, 1970 till 5th
August, 1986 on periodical basis at varying rate of interest. Periods have
been fixed based on change in bank rate of interest. The rate of interest varies
between I 0% p.a. to 19% p.a .. The award of interest by the High Court is
D based on its earlier order dated 16th December, I 985 regarding levy of interest
as per prevailing bank rate of interest on commercial transactions form time
to time. This part of the judgment of the High Court in our view is not
correct. The rate at which interest is to be awarded is being separately
considered under Point No. 2 That decision will govern the award of interest
E on mesne profits.
A mistake has been committed by the High Court in calculation of
interest on mesne profits. Interest has to be calculated on yearly basis because
the amount of mesne profits on which interest is to be awarded has to be
arrived at on year to year basis. Mesne profits for the first year would be
F from 5th May, 1969 to 4th May, 1970, for the second year it will be from
5th May, 1970 to 4th May, 197 I and so on. It keeps adding on from year to
year. The total amount of mesne profits fol!nd due by the High Court on the
basis of Commissioner's report comes to Rs 38,41,920. This amount is the
total of mesne profits calculated on yearly basis. Interest cannot be allowed
on the whole amount form the beginning. Interest had to be worked out on
G amounts falling due towards mesne profits on yearly basis i.e. on the amount
of mesne profits which could be taken to be due to the plaintiff at the end
of each successive year.
Point No. 2
H
The question of rate of interest has been the subject matter of serious
R.V.MADHVAN!v. T.P .. MADHVANI [ARUNKUMAR,J.]
241
controversy between the parties. The learned counsel for the appellant A
submitted that in the plaint filed on 28th April, 1972 interest claimed in paras
18(b) and 18(c) was at the rate of 6% per annum. He has further drawn our
attention to Section 34 of the Code of Civil Procedure as it stood at the time
of institution of the suit. It permitted interest being awarded maximum at the
rate of 6% per annum from the date of decree till realisation of the decretal B
amount. The said section is reproduced below:
"34(1) Where and in so far as a decree is for the payment of money,
the Court may, 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 C
adjudged on such principal sum for any period prior to the institution
of the suit, 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) 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 therefore shall not
lie."
Our attention was invited to para l 8(b) of the plaint in which decree for
accounts of the partnership firm to the extent of 30% share of Pravinlal is
sought alongwith interest at the rate of 6% per annum from 5th May, 1969.
D
E
The trial Court passed a preliminary decree on 13th April, 1978 as per which
only para I 8(b) of the plaint was decreed i.e. 30% share of Pravinlal in the
partnership firm with interest at the rate of 6% per annum from 4th May, F
1969 till realisation. This part of the preliminary decree was never challenged
by any party. Rest of the prayers in the plaint were rejected in the preliminary
decree. The plaintiff appealed against the preliminary decree only to the
extent it rejected other prayers in the plaint. There was no challenge to the
award of interest at the rate of6% per annum as claimed in para 18(b) of the G
plaint. Thus according to the learned counsel this part of the preliminary
decree became final and so far as the decree for accounts is concerned, the
plaintiff is entitled to interest only at the rate of 6% per annum.
Paras 18(a) and 18(c) of the plaint relate to award of mesne profits and
·interest thereon on the share of Pravinlal as a co-owner in the Bengorm Tea H
242
SUPREME COURT REPORTS [2003) SUPP. 5 S.C.R.
A Estate. The High Court accepted the appeal filed by the plaintiff against the
preliminary decree. A decree for partition of the Bengorm Estate to the extent
of one-third share of the plaintiff and for mesne profits on that one-third
share after the death of Pravinlal till separation of the one-third share was
passed on 16th December, 1985. The High Court awarded interest on the
B amount of mesne profits as per rate of interest charged by the nationalised
banks during the relevant years from time to time on commercial loans in
view of amended Section 34 of the Code of Civil Procedure. The learned
counsel for the appellant challenged this part of the judgment of the High
Court on various grounds particularly:
c
D
E
F
G
H
(a) in the original plaint interest had been claimed only at the rate
of 6% per annum;
(b) amendment of the plaint was applied for in 1980 and was allowed
on 16th December, 1985 which enabled the plaintiff to amend
para I 8(c) of the plaint to claim interest at the rate of 13% per
annum.instead of6% per annum as originally pleaded. This means
that the question of interest being charged at the rates prevailing
with nationalised banks from time to time on commercial
transactions could never arise. The decree could not go beyond
prayer of the plaintiff;
(c) The share of the plaintiff in Bengrom Estate with respect to
which mesne profits were awarded and on which interest was
being sought, could not be said to be a commercial transaction
so as to attract rate of interest charged by nationalised banks
from time to time on commercial transactions;
( d) In view of Sections 13 and 97 of the Code of Civil Procedure
(Amendment) Act 1976, the present suit having been instituted
prior to amendment of the C.P.C., interest could be awarded as
per provisions of unamended Section 34 only. Unamended Section
34 permitted interest maximum at the rate of 6% per annum
from the date of decree till realisation. Clause (e) of sub-section
(2) of Section 97 of the Amending Act of 1976 is reproduced as
under:
"( e) the provisions of Section 34 of the principal Act, as amended by
Section 13 of this Act, shall not affect the rate at which interest
may be allowed on a decree in any suit instituted before the
commencement of the said section 13 and interest on a decree
R.V.MADHVAN!v. T.P.MADHVANI [ARUNKUMAR,J.]
243
passed in such suit shall be ordered in accordance with the A
provisions of Section 34 as they stood before the commencement
of the said Section 13 as if the said section 13 had not come into
force;"
(e) Amendment of plaint once allowed relates back to the date of
original plaint. Therefore, in view of the specific bar contained B
in Section 97 referred to above, such an amendment was clearly
illegal;
(f)
The Court had only permitted amendment of the plaint which
does not mean that the plea contained by way of amendment is
accepted by the Court. The defendants had to be given a chance C
to contest the plea without which the amended claim with respect
to rate of interest could not be enforced.
It may be noted at this stage that on applications moved by the plaintiff
in this behalf, one-third share of the plaintiff in the Estate known as Bengom
Tea Easte was delivered to the plaintiff by the defendants on 5th March, D
1988 and there is no dispute about this fact.
The grounds raised on behalf of appellants can now be conveniently
dealt with. First we deal with the question of amendment of para 18 (C) of
the plaint allowed by the High Court in an application moved for that purpose.
One is a procedural aspect while the oth~r is a legal aspect. Procedural aspect E
demands that on amendment of being allowed, the opposite party has to be
given a chance to respond to the amended pleading and if the plea is contested
the Court has to give its decision thereon. Not affording an opportunity to the
contesting party to contest a plea, which has been allowed to be amended, is
negation of justice. In the present case the fact remains that amendment F
application of the plaintiff was allowed vide order dated 16th· December,
1985 when on the same date the appeal against the preliminary decree was
disposed of and rate of interest going even beyond what was permitted by
way of amendment, was awarded. The decree which was passed was for
much more than the amendment allowed. The plaintiff had only sought leave
to amend the rate of interest as originally pleaded as 6% per annum to 13% G
per annum. This amendment was allowed. But in the decree the Court allowed
interest to be charged at the prevailing bank rate of interest charged by
nationalised banks from time to time on commercial transactions during the
relevant period. Thus the High Court while allowing the prayer for "amendment
simultaneously passed a decree not only based on the amended plea, but for H
244
SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.
A exceeding it. No amended pleadings were filed. No opportunity was given to
defendants to contest the plea. A bare reading or Order VI Rule 17 of Code
of Civil Procedure shows that amendment is of a plea contained in the
pleadings and the object of allowing amendment of pleadings is to determine
the real questions in controversy between the parties. This means the parties
have to be given a chance to contest the questions in controversy and the
B Court has to· give its decision ultimately on such contested issues. This
procedure was not followed in the present case. The procedure followed is
wholly illegal. This Court had occasion to pronounce on this issue in J.
Jermons v Aliammal and Ors., [1999] 7 SCC 382. It was held that a new plea
cannot be allowed to be raised without effecting amendment of pleadings,
C without giving reasonable opportunity to the opposite party to file further
pleadings.and adduce evidence. Thus the decision of the High Court in
allowing interest on mesne profits at rate of interest charged by nationalised
banks from time to time on commercial transactions is wholly illegal and
unsustainable. As noted earlier even the High Court while passing the final
decree felt that in its earlier order dated 16th December, 1985, it should not
D have proceeded on the basis of amended Section 34 of the Code of Civil
Procedure while awarding interest at the rate charged by nationalized bank
on commercial transactions from tim~ of time. The impugned award of interest
is thus wholly unwarranted and illegal and has to be set aside.
E
Coming to the legal aspect of the amendment of plaint allowed in the
present case by the High Court, it is to be noted that Section 34 of the Code
of Civil Procedure deals with the question of award of interest. Section 34
C.P.C. as it stood before amendment in February 1977 deals with the question
of interest in three stages. First is, interest prior to the date of institution of
suit, second stage is interest from the date of institution of suit till date of
F decree and the third stage is from the date of decree till realisation of the
decretal amount. About the first stage, Section 34 does not say anything
while about the second stage it says that the interest to be awarded should be
as considered reasonable by the Court. About the third stage i.e. from the
date of decree till realisation, the power of the Court to award interest is
G circumscribed i.e. it cannot be more than 6% per annum.
An amendment of plaint relates back to the date of institution of the
suit, Section 97(2) ( e) of the Civil Procedure Code (Amendment) Act, 1976
provides that in suits instituted before enforcement of the amended provision,
interest has to be awarded as per the unamended Section 34 C.P.C. In the
H present suit which was instituted much before amendment of Section 34 of
R.V. MADHVANI v. T.P. MADHVANI [ARUN KUMAR, J.]
245
the Civil Procedure Code, therefore, interest had to be allowed as per the A
unamended Section 34 C.P.C. which means that from the date of decree till
realisation interest could not be more awarded than 6% per annum.
For the period prior to passing of the decree it is left to the court to
consider what would be the reasonable rate of interest. While considering a
reasonable rate of interest to be awarded for the pre decree period we have B
to note that in the present case mesne profits are being awarded on account
of retention of share of a co-owner in a property by the other co-owners. This
cannot be said to be a commercial transaction. Moreover plaintiff herself
claimed interest in the plaint originally instituted at the rate of 6% per annum.
By way of amendment of the plaint she wanted to take advantage of the C
amended provisions in the Code of Civil Procedure so as to claim interest at
a higher rate which in law she was not entitled to. Therefore, we consider
award of interest at the rate of 6% per annum on the amount found due on
account of mesne profits to be calculated on any yearly basis as indicated
earlier would be fair and reasonable in the facts and circumstances of the
case.
D
We may now note the submission on behalf of the respondent in reply
to the arguments of the appellants on the question of award of interest. The
learned counsel for respondent only banked upon the fact that a Special
Leave Petition against the preliminary decree dated I 6th December, 1985
had been dismissed by this Court on an earlier occasion and according to the E
learned counsel, the consequence of that dismissal would be that the decision
on the question of award of interest contained in the preliminary decree dated
16th December, 1985 had the seal of approval of this Court and therefore, it
need not be interfered with at this stage. The learned counsel further argued
that assuming that award of interest by the High Court as per the preliminary F
decree dated 16th December, 1985 was erroneous, it was not such an error
as may render the decree a nullity. According to him the court had earlier
declined to interfere with these findings therefore, at this stage, this Court
should not go into this.
The learned counsel for respondent tried to draw our attention to the G
limitations in exercise of jurisdiction by this Court under Article 136 of the
Constitution of India. In our view, the argument advanced by the learned
counsel for the respondent has no substance. The scope of powers of this
Court under Article 136 of the Constitution oflndia was elaborately considered
in a recent decision of this Court in Kunhayammed and Ors. v. State of H
246
SUPREME COURT REPORTS [2003) SUPP. 5 S.C.R.
A Kera/a and Anr., (2000] 6 sec 359. The following observation are worth
noting.
"The Supreme Court cannot and does not reverse or inodify the
decree or order appealed against while deciding the petition for special
leave to appeal. What is impugned before the Supreme Court can be
B
reversed or modified only after granting leave to appeal and then
assuming appellate jurisdiction over it. If the order impugned before
the Supreme Court cannot be reversed or modified at the SLP stage
obviously that order cannot also be affirmed at the SLP stage.
It follows that disposal of SLP against a judgment of the High Court
C does not mean that the said judgment is affirmed by such dismissal. The
order on Special Leacial petition is also never res judicata.