Judicial Dictionary

Interest calculation of, in a civil suit

The scope and ambit of Section 34 of the Code of civil procedure has been the subject of discussion in many cases of this Court.

We are inclined to refer to the decision in Clariant International Ltd. v. Securities and Exchange Board of India, (2004) 8 SCC 524, where it was held by this Court that the interest can be awarded in terms of an agreement or statutory provisions and it can also be awarded by reason of usage or trade having the force of law or on equitable considerations but the same cannot be awarded by way of damages except in cases where money due is wrongfully withheld and there are equitable grounds therefor, for which a written demand is mandatory.

It was further held that in absence of any agreement or statutory provision or a mercantile usage, interest payable can be only at the market rate and such interest is payable upon establishment of totality of circumstances justifying exercise of such equitable jurisdiction. It was also held that in ascertaining the rate of interest the courts of law can take judicial notice of both inflation as also fall in bank rate of interest. The bank rate of interest both for commercial purposes and other purposes has been the subject-matter of statutory provisions as also the judge-made laws. In the said case reference was made to the decisions in Kaushnuma Begum v. New India Assurance Co. Ltd. (2001) 2 SCC 9; H.S. Ahammed Hussain v. Irfan Ahammed (2002) 6 SCC 52 and United India Insurance Co. Ltd. v. Patricia Jean Mahajan (2002) 6 SCC 281, and it was observed that even in cases of victims of motor vehicle accidents, the courts have upon taking note of the fall in the rate of interest held 9% interest to be reasonable. Direction to pay such rate of interest is also found to be reasonable and fair as the plaintiff was deprived to utilize and roll its money in commercial transaction and kept out of it due to wrongful withholding of the same by the defendant.


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