M/s. H. Bhurmal vs Basavant Dharmappa Pujari

A.N. Venugopala Gowda, J.—Defendants in O.S. No. 23 of 1998 on the file of the Additional Senior Civil Judge at Belgaum are the appellants. The respondent had instituted the suit on 23-9-1998 to pass a decree for recovery of Rs. 72,000/- with interest and costs. Written statement was filed and suit was contested. Eight issues were raised for trial. Plaintiff got examined himself as P.W.1 and marked 8 documents as Exs. P.1 to P. 8. Defendant 2 got himself examined as D.W. 1 and marked 4 documents as Exs. D.1 to D. 4. The suit was decreed on 17-3-2003 for a sum of Rs. 15,297/- by way of damages for the period from 23-9-1995 till 1-1-1997 i.e., being the loss caused to the plaintiff by the defendants for having used the suit schedule premises unauthorisedly. Then said sum was directed to be paid with interest at 18% p.a. from 1-1-1997 till realisation along with the cost of the suit, quantified at Rs. 5,844/-. R.A. No. 26 of 2003 filed in the District Court at Belgaum by the defendants having been dismissed on 29-10-2005 by the II Additional District Judge, Belgaum, this second appeal was filed. The grievance of the appellants is limited to that part of the impugned judgments and decrees by which the Courts below have held that the plaintiff is entitled to interest at 18% p.a. on the sum of Rs. 15,297/-.

The substantial question of law for consideration is, whether interest can be awarded on the sum claimed as damages for a period prior to the date of demand of institution of the suit?

Smt. Hemalekha K.S., learned Advocate, argued that no interest should have been awarded for the period prior to the date of filing of the suit and even otherwise, the rate of interest awarded is highly excessive. She submitted that Interest Act, 1978 (for short, ''the Act'') is not applicable as no sum was payable as debt and there was not demand for payment of interest prior to the service of notice vide Ex. P. 6. She further submitted that what was demanded was damages and not interest. Reliance was placed upon the decision in Mahabir Prasad Rungta v. Durga Datta, AIR 1961 SC 990.

Sri Ravi S. Balikai, learned Advocate, on the other hand submitted that the award of interest being within the discretion of the Court, this appeal is liable to be dismissed. Learned Advocate further submitted that the Court is entitled to award interest for the pendente lite period at 18% p.a. and hence, no interference is called for.

O.S. No. 412 of 1991 filed in the Court of III Additional Munsiff at Belgaum, by the appellants against the respondent having been dismissed on 12-8-1993, R.A. No. 122 of 1993 was filed in the Court of the II Additional District-judge at Belgaum. The appeal having been dismissed, RSA No. 1210 of 1994 was filed and the matter was compromised and the possession of the suit schedule premises was handed over.

O.S. No. 232 of 1998 was instituted for recovery of Rs. 72,000/- with costs by contending that the possession of the appellants over the suit property from April 1991 to 1-1-1997 was unauthorised and illegal. It was contended that the appellants by remaining in unauthorised possession of the suit property, made wrongful gains for themselves and hence, they are liable to pay costs and damages. The suit was decreed on 17-3-2003, directing the defendants to pay to the plaintiff a sum Rs.15,297/- by way of damages for the period from 23-9-1995 till 1-1-1997.

Undisputedly, the demand for payment of damages was made on 3-4-1997 vide Ex. P. 6. The Trial Court without noticing the date of demand made vide Ex. P. 6 has passed the decree to pay interest at 18% from 1-1-1997, on Rs. 15,297/-, being the damages i.e., till realisation.

Section 3 of the Act confers power on the Court to allow interest in any proceedings for recovery of debt or damages or in a proceeding in which a claim for interest in respect of any debt or damages already paid is made. The Court may, if it thinks fit, allow interest to the person entitled to the debt or damages or to the person making such claim as the case may be, at a rate not exceeding the current rate of interest, for the whole or part of the following period shown in clauses (a) and (b) of sub-section (1) of Section 3 of the Act, which is extracted herein below:

"3. Power of Court to allow interest. - (1) In any proceedings for the recovery of any debt or damages or in any proceedings in which a claim for interest in respect of any debt or damages already paid is made, the Court may, if it thinks fit, allow interest to the person entitled to the debt or damages or to the person making such claim, as the case may be, at a rate not exceeding the current rate of interest, for the whole or part of the following period, that is to say.-

(a) if the proceedings relate to a debt payable by virtue of a written instrument at a certain time, then, from the date when the debt is payable to the date of institution of the proceedings;

(b) if the proceedings do not relate to any such debt, then, from the date mentioned in this regard in a written notice given by the person entitled or the person making the claim to the person liable that interest will be claimed, to the date of institution of the proceedings:

Provided that where the amount of the debt or damages has been repaid before the institution of the proceedings, interest shall not be allowed under this section for the period after such repayment."

In Mahabir Prasad Rungta''s case interest was disallowed on the ground that notice which was given did not specify the sum which was demanded and therefore, the Interest Act, 1839 did not apply. On the question whether interest could be awarded on the grounds of equity, it has been held that what was claimed by the plaintiff was interest as damages and it could not, therefore, be awarded.

In the present case, the plaintiff made the demand as per Ex. P. 6. Even after the said demand, the payment was not made and hence the suit was filed. The condition prescribed by the Act to claim interest has been fulfilled by service of Ex. P. 6. Hence, there arose the liability to pay interest with effect from the date of demand. The Trial Court has committed error in awarding interest for the period prior to the demand made vide Ex. P. 6 and the lower Appellate Court has committed error in not noticing the same and modifying the decree. The interest awarded for the period prior to service of demand notice-Ex. P. 6 is illegal.

Having regard to the facts and circumstances of the case, interest awarded at 18% p.a. is excessive. In the case of Mahabir Prasad Rungta, the rate fixed at 6% p.a. was held as excessive and was directed to be calculated at 4% p.a. and decree was accordingly modified. E.P. No. 4 of 2006 having been filed by the respondent, the appellants have paid the principal amount of Rs. 15,297/- and the interest at the rate of 6% p.a.

At this stage, learned Advocates appearing for the parties entered into an understanding and submitted that the interest payable be modified to 9% p.a. instead of 18% p.a. At memo of calculation was filed by the learned Advocate for the appellants. Difference of the interest amount at the rate of 9% p.a. for the period from 1-5-1997 to 31-8-2005 and the cost already paid in E.P. No. 4 of 2006 was calculated and the balance amount payable was found to be Rs. 4,425/-. The said amount was paid by the appellants to the respondent and an acknowledgement was made by Sri Ravi S. Balikai, on the memo filed by Smt. Hemalekha.

In view of the above, the appeal is allowed in part and the impugned judgments and decrees are modified. Appellants are held as liable to pay interest at 9% p.a. on the decree amount of Rs. 15,297/-, with effect from 1-5-1997 till 31-8-2005, i.e., the date on which the amount was deposited along with costs in the Trial Court. The difference of the amount arrived at, as above, having been paid and acknowledged by Sri Ravi S. Balikai, E.P. No. 4 of 2006 pending on the file of Additional Civil Judge (Senior Division), Belgaum be closed by recording full satisfaction.

Parties shall bear their respective costs.