State of Chhattisgarh vs M/s. R.C.C. Hume Pipe and Products

N.K. Agarwal, J.—Instant first appeal u/s 96 of the CPC arises out of the judgment and decree dated 13-12-2000 passed by the District Judge, Bastar at Jagdalpur in Civil Suit No. 7-B/1999. Brief facts of the case are that the respondent (henceforth ''the plaintiff'') filed a suit for recovery of Rs. 2,22,000/- on account of certain supply of R.C.C. Hume Pipes through M.P. Laghu Udyog Nigam, Bhilai. The plaintiff while claiming the amount also claimed interest at the rate of 18% per annum. The appellant (henceforth ''the defendant'') admitted supply as well as entitlement to the extent which could not be paid within a reasonable time. However the defendant denied the liability to pay interest.

Learned trial Court vide judgment and decree impugned held plaintiff firm is entitled for a decree of Rs. 2,22,000/- which includes amount of interest i.e. Rs. 95,967/- calculated at the rate of 18% per annum. The interest at the rate of 6% per annum was also granted from the date of suit till recovery of decretal amount on the principle amount of Rs. 1,26,188/-.

The only contention of Shri Vaswani, learned Govt. Advocate appearing for the appellant/State, is that the rate of interest award is shockingly on higher side. Looking to the facts and circumstances of the case, rate of interest should not exceed 6% per annum as provided u/s 34 of C.P.C.

On the other hand, Shri Bharat, learned counsel appearing for the respondent would submit, the rate of interest awarded by the trial court is just and reasonable and the appeal deserves to be dismissed.

I have heard learned counsel for the parties and perused the record of the court below.

Admittedly, the transaction between the parties is a commercial transaction and there is no contract to the contrary which prohibits payment of interest. As per Section 3 of the Interest Act, 1978, in any proceeding for the recovery of any debt or damage 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. Section 2(b) of the Interest Act defines "current rate of interest" Which means the highest of the maximum, rates at which interest may be paid on different classes of deposits (other than those maintained in savings account or those maintained by charitable or religious institutions) by different classes of Scheduled banks in accordance with the direction given or issued to banking companies generally by the Reserve Bank of India under the Banking Regulation Act, 1949 (10 of 1949).

In view of above, the defendant shall not be liable to pay interest at the rate not exceeding ''current rate interest''.

It is stated, the current rate of interest in the year 1996 was 12% per annum. Learned Court below has awarded interest at the rate of 18% per annum without being any foundation therefore. As per the interest Act, 1978, interest is payable only at ''current rate of interest'' Therefore in the considered opinion of this Court, learned trial Court has erred in awarding interest for pre-suit period at the rate of 18% per annum. The proper rate of interest for which the plaintiff is entitled is 12% per annum i.e. the current rate of interest prevailing at the time of transaction.

For the reasons mentioned hereinabove, the appeal is allowed in part. The judgment and decree impugned is modified. The respondent is entitled for the interest on principle decretal amount for pre-suit period at the rate of 12% per annum. Rest of the conditions of the judgment and decree shall remain intact. In the facts and circumstances of the case, no order as to costs.