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A lender’s contract lawfully capitalises ordinary interest at agreed periodic rests before a money suit is filed. For section 34 of the Code of Civil Procedure, 1908, what forms the principal sum…

Question and options

A lender’s contract lawfully capitalises ordinary interest at agreed periodic rests before a money suit is filed. For section 34 of the Code of Civil Procedure, 1908, what forms the principal sum adjudged, assuming the amounts are established?

  1. Only the outstanding principal actually advanced

  2. The outstanding principal plus the capitalised pre-suit interest

  3. The outstanding principal plus the uncapitalised pre-suit interest

  4. The entire decretal amount, including costs

Answer and explanation

Correct answer: B - The outstanding principal plus the capitalised pre-suit interest

Central Bank of India v. Ravindra holds that ordinary pre-suit interest validly capitalised at contractual rests can form part of the principal sum adjudged under section 34. Uncapitalised interest remains separate, and decretal costs are outside the principal sum.

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