M/S. Empee Distilleries Ltd. vs M/S. S.S.Enterprises Pvt. Ltd.
2011 Latest Caselaw 3498 Del

IN THE HIGH COURT OF DELHI AT NEW DELHI



RFA NO.534/2004



			Judgment reserved on:  11.11.2010


				  Judgment delivered on:  25.7.2011 


		


M/s. Empee Distilleries Ltd. 			......Appellant





			Through: 	Mr. Carmichael Martin and 				Ms. 	Pallavi Sharma, Adv. 


					Vs.


M/s. S.S. Enterprises Pvt. Ltd.			 ......Respondent


				Through: Mr. S.S. Salooja, Adv.


CORAM:


HON'BLE MR. JUSTICE KAILASH GAMBHIR


1. Whether the Reporters of local papers may 


be allowed to see the judgment? 			Yes


2. To be referred to Reporter or not? 			Yes


3. Whether the judgment should be reported       Yes


in the Digest?








KAILASH GAMBHIR, J. 

*

1. By this appeal filed under Order 41 Rule 1 read with Section 96 of the Civil Procedure Code, 1908 the appellant seeks to challenge the impugned judgment and decree dated 31.5.2004, passed by the Court of Additional District Judge, Delhi, whereby the suit for recovery filed by the respondent company herein was decreed in favour of the respondent for a sum of Rs.7,81,000/- together with interest of Rs. 4,36,960/- along with pendent lite interest from the date of filing of the suit till realization.

2. Brief facts of the case relevant for deciding the present appeal are that the appellant company had placed certain orders on the respondent company for supply of goods. Consequently the respondent company had raised bills against them but the appellant effected only part payment of the bills raised and therefore, a suit for recovery was filed by the respondent which vide judgment and decree dated 31.5.2004 was decreed in favour of the respondent and against the appellant for a sum of Rs.7,81,000 and interest @18 p.a which amounts to Rs. 4,36,960 alongwith pendentilite interest from the date of filing of the suit till realization. Feeling aggrieved with the same, the appellant has preferred the present appeal.

3. Two principal contentions were raised by the counsel for the appellant; one; to challenge the jurisdiction of Delhi courts and second; the award of interest by the learned trial court @18% p.a. without any evidence led by the respondent to prove said rate of interest. Half heartedly, counsel for the appellant also took the ground of defective goods supplied by the respondent due to which the appellant had suffered losses.

4. Placing reliance on Section 20 of the CPC, learned counsel for the appellant submitted that the learned trial court erroneously held that the cause of action arose at Delhi as the defective goods were discovered at Chennai, the goods were sent to Chennai, the registered Office of the appellant is at Chennai and also the order was placed at Chennai and hence the courts at Chennai had the jurisdiction to entertain the suit. In support of his argument, counsel for the appellant placed reliance on the following judgments:

	Hanil Era Textiles Ltd. Vs. Puromatic Filters (P) Ltd. (2004) 4 SCC 671



	Rajasthan State Electricity Board Vs. Universal Petrol Chemicals Ltd. (2009)3 SCC 107



	Shree Subhlaxmi Fabric (P) Ltd. Vs. Chand Mal Baradia &    Ors. (2005) 10 SCC 704

5. Learned counsel for the appellant further submitted that the as per clause 7 of the two purchase orders, proved on record as Ex.PW1/5 and Ex.PW1/13, both the courts i.e Delhi and Chennai had jurisdiction, but the jurisdiction was limited to the Chennai courts only as per the consent of the both the parties arising from the purchase orders. Counsel further submitted that the said consent arose out of a contract in terms of the purchase orders and is thus binding on both the parties. The contention of the counsel for the appellant was that the due to the binding nature of the contract between the two parties, the suit ought to have been filed at Chennai only. In support of his argument that the purchase order is to be treated as a contract, the counsel placed reliance on the following judgments:

IDL Chemicals Vs. State of Orissa (2007)14 SCC 386

2. Groupe Chimique Tunisien SA Vs. Southern Petro Chemicals Industries Corpn. Ltd.(2006) 5 SCC 275

3. K.M.P.R.N.M. Firm Vs. M.Somasundaram Chetti & Co. AIR 1925 Mad 161

6. The other argument canvassed by the counsel for the appellant was that the terms and conditions contained in the purchase orders have to be read as a whole and not as piecemeal and if read in entirety, then the jurisdiction clause contained in the said purchase order cannot be ignored and will have a binding effect on the respondent plaintiff. In support of his arguments, counsel for the appellant placed reliance on the following judgments.

1. P.K.Mohan Ram Vs. B.N.Ananthachary & Ors. (2010) 4 SCC 161.

2. C.Cheriathan Vs. P.Narayan Embranthiri (2009)2 SCC 673

7. On the issue of interest, counsel for the appellant contended that there was no agreement between the parties to charge interest @ 18% p.a. Counsel further submitted that so far the applicability of such rate of interest as per the practice of trade in the market is concerned, no evidence to this effect was led by the respondent. Counsel thus submitted that the learned trial court has committed illegality in awarding the interest @18% p.a. without there being any agreement or any evidence to support the same. In support of his arguments counsel for the appellant has placed reliance on the following judgments of the Apex Court.

Union of India Vs. Parmal Singh & Ors. (2009)1 SCC 618

C.K.Sasankan Vs. Dhanalakshmi Bank Ltd. (2009)11 SCC 60

Rampur Fertiliser Ltd. Vs. Vigyan Chemicals (2009)12 SCC 324

M/s. Marwar Tent Factory Vs. UOI & Ors.(1990)1 SCC 71

South Eastern Coalfields Ltd. Vs. State of M.P. & Ors (2003)8 SCC 648

Tepidly, the counsel also contended that the appellant could not address the final arguments before the learned trial court as the counsel could not appear due to personal difficulty, and the question of jurisdiction being a pure question of law can be urged at any stage of proceedings. Reliance was placed on the following judgments, in support of his argument:

Duvuru Jaya Mohana Reddy & Anr. Vs. Alluru Nagi Reddy and Ors. 1994 Supp. (2) SCC 559

State of Bihar Vs. Ram Naresh Pandey & Ors. 1957 SCR279

8. Refuting the said submissions of the counsel for the appellant, counsel for the respondent submitted that the respondent never agreed to confer jurisdiction on Madras courts only as clearly in the bills/invoice raised by the respondent it was clearly stipulated that all disputes will be subject to Delhi jurisdiction only. The contention of the counsel for the respondent was that the bills raised by the respondent are the basis of contract between the parties and not the purchase orders and therefore, the respondent rightly filed a suit in the Court at Delhi. Counsel further submitted that the major cause of action also arose in Delhi and in terms of Section 20 of CPC, Delhi Courts alone had jurisdiction to try and entertain the suit.

9. On the issue of interest, counsel for the respondent submitted that the interest @18% was the usual interest applicable at the relevant time in the commercial transactions and therefore the learned trial court rightly awarded the said rate of interest in favour of the respondent. In support of his arguments, counsel for the respondent placed reliance on the following judgments:

Laxman Prasad Vs. Prodigy Electronics Ltd. & Ors.(2008)1 SCC 6182

Velupillai Naravana Pillai Vs. N.Gopala Pillai & Ors. AIR 1974 Kerala 27 (V 61 C 10)

M/s. Femina Handloom of India Vs. M/s. M.R.Verma & Sons AIR 1993 Kerala 210

4. State of Orissa vs. Pratibha Prakash Bhawan AIR 2005 Orissa 58

10. I have heard learned counsel for the parties at considerable length and gone through the records.

11. Before dealing with the rival contentions advanced by the counsel for the parties, it would be appropriate to reproduce Section 20 of the Civil Procedure Code, 1908 as under:

"20. Other suits to be instituted where defendants reside or cause of action arises

Subject to the limitations aforesaid, every suit shall be instituted in Court within the local limits of whose jurisdiction-

(a) the defendant, or each of the defendants where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain; or

(b) any of the defendants, where there are more than one, at the time of the commencement of the suit actually and voluntarily resides, or carries on business, or personally works for gain, provided that in such case either the leave of the Court is given, or the defendants who do not reside, or carry on business, or personally work for gain, as aforesaid, acquiesce in such institution; or

(c) the cause of action, wholly or in part, arises."

12. Despite a catena of judgments on the jurisdiction issue, it seems that the legal position still remains to be crystallized. No doubt jurisdiction sometimes is a core issue between the parties where any party due to the forum conveniens confers the jurisdiction to a particular place but more often than not it is found that the issue of jurisdiction is brought up very strongly by those who find their case feeble on merits. The settled legal position is that the parties cannot by agreement confer jurisdiction on a court which it otherwise does not possess. The legal position is clear so far the conferring of jurisdiction of a particular place of court is concerned where at least part of cause of action has arisen. It is thus the unfettered right of any of the parties to a transaction or to an agreement to confer jurisdiction on a court of a place where at least part of cause of action in terms of Section 20 of the Civil Procedure Code has arisen.

13. Ouster of jurisdiction of a court can be claimed by either party if there is a clear agreement that the expression implies to oust the jurisdiction of a court and also when such a court otherwise has jurisdiction to try and entertain the suit. It is further a settled legal position that ouster of jurisdiction of a court or place would arise only in a case where both the parties have agreed to confer the jurisdiction at a particular place or court by using the necessary expression of "only" "exclusive" and also when such a place otherwise has jurisdiction to try and entertain the suit.

14. The appellant in the present case has claimed exclusive jurisdiction of Madras courts only and exclusion of territorial jurisdiction of Delhi courts based on two purchase orders proved on record as Ex. PW1/5 and Ex.PW1/13. These purchase orders carry terms and conditions of the purchase on the reverse of the same and clause 7 of the same deals with the jurisdiction of place which reads as under:

"Any dispute arising out of this contract will be subject to the jurisdiction of Madras Courts only."

15. Two-fold arguments were raised by the counsel for the appellant based on the said purchase orders on the issue of jurisdiction i.e. the said purchase orders constitute contract between the parties and the said contract envisages a jurisdiction clause which restricts the jurisdiction to file a suit with Madras court only.

16. In Hakam Singh Vs. Gammon (India) Ltd., (1971)1SCC286, the Apex Court held that it is not open to the parties to confer by their agreement jurisdiction on a court which it does not possess. It further held that where two or more courts have the jurisdiction to try a suit or a proceeding, an agreement between the parties that the dispute between them shall be tried in one of such courts is not contrary to the public policy and that such an agreement does not contravene Section 28 of the Contract Act. Therefore, the parties to a contract can by an ouster clause oust the jurisdiction of a particular court which other wise had the jurisdiction to entertain the suit, which was further clarified by the Apex Court in the case of A.B.C.Laminart (P) Ltd. Vs. A.P. Agencies (1989)2SCC163, where the same question was examined in considerable detail and it was held as under:

"From the foregoing decisions it can be reasonably deduced that where such an ouster clause occurs, it is pertinent to see whether there is ouster of jurisdiction of other courts. When the clause is clear, unambiguous and specific accepted notions of contract would bind the parties and unless the absence of ad idem can be shown, the other courts should avoid exercising jurisdiction. As regards construction of the ouster clause when words like "alone", "only", "exclusive" and the like have been used there may be no difficulty. Even without such words in appropriate cases the maxim "expressio unius est exclusio alterius" -- expression of one is the exclusion of another -- may be applied. What is an appropriate case shall depend on the facts of the case. In such a case mention of one thing may imply exclusion of another. When certain jurisdiction is specified in a contract an intention to exclude all others from its operation may in such cases be inferred. It has therefore to be properly construed."

The same view was reiterated by the Apex Court in the case of Angile Insulations vs. Davy Ashmore India Ltd (1995)4 SCC 153.

17. In the present case, the appellant is claiming jurisdiction of Madras courts to the exclusion of the jurisdiction of Delhi courts based on the said clause 7 of the purchase order which restricts the jurisdiction with Madras courts only. The appellant has also claimed that the purchase order has a binding effect on the respondent as the same constitutes a contract between the parties. The respondent, on the other hand has based the jurisdiction with the Delhi courts on the premise that the orders were received by the respondent at Delhi, the payments were to be made by the appellant to the respondent at Delhi; the goods were dispatched from Delhi. Surprisingly, neither the appellant in its written statement has claimed vesting of jurisdiction with Madras courts based on its purchase orders nor even the respondent claimed jurisdiction of Delhi Courts based on the invoices/bills. The appellant in its written statement took a stand that the suit is not maintainable in Delhi courts as the cause of action has arisen in Chennai where the goods were delivered; where the agreement was entered into; payment was to be made at Chennai and the appellant had to store all the defective goods at Chennai. The defence taken by the appellant in its written statement is not specific to clause 7 of its purchase orders. Even in reply to the preliminary objections, the appellant did not make any specific reference to the said purchase orders to claim jurisdiction with the Madras courts only. It is not the case of any of the parties that prior to placing the said orders by the appellant there was any other contract between the parties whereunder the issue of jurisdiction of courts was settled between them. In the absence of any such agreement, the appellant has claimed exclusion of jurisdiction of Delhi courts based on clause 7 of the purchase orders while the respondent on the other hand has claimed jurisdiction of Delhi courts based on the printed terms in its invoices/bills. It is not the case of the appellant that after placing of the said orders, through the purchase orders, the respondent had agreed to the said jurisdiction clause, rather it is an admitted case between the parties that in the invoices/bills raised by the respondent, the printed clause which relates to the jurisdiction restricts the jurisdiction of disputes to Delhi courts only. It is thus quite manifest that there was no consensus or meeting of minds or any sort of agreement or contract between the parties to confer jurisdiction on a particular court. It also cannot be denied that so far the cause of action is concerned, the same arose within the jurisdiction of both the places i.e. Madras as well as Delhi and the jurisdiction could be restricted by the parties to one of the courts had there been any clear agreement between the parties to this effect. In the absence of any clear agreement between the parties, the appellant cannot claim ouster of jurisdiction of Delhi courts merely based on clause 7 of the purchase orders, which was never agreed to by the respondent.

18. The reliance on the judgment of the Apex Court by the counsel for the appellant in the matter of Groupe Chimique Tunisien SA (supra) will be of no help to the case of the appellant as the facts of the said case were quite dissimilar to the facts of the present case. In the facts of the said case the purchase orders which contained the venue of arbitration at Delhi were duly countersigned by the other party in acceptance of the terms of the purchase orders, while in the facts of the present case the situation is entirely different as in response to the purchase orders, the respondent through its invoice had put forth their condition relating to the jurisdiction of courts. In another judgment of Hanil Era Textiles Ltd. (supra), relied upon by the counsel for the appellant the Apex Court gave weightage to the jurisdiction clause in the purchase orders restricting the jurisdiction to the courts in Mumbai on account of the fact that the major part of the cause of action arose in Mumbai only. Clearly, in the facts of the said case there was no corresponding jurisdiction claimed by the other party as has been claimed by the respondent in the present case based on the jurisdiction clause printed on its invoices/bills and thus would not be applicable to the present case. The same is the situation in the matter of Rajasthan State Electricity Board vs. Universal Petrol Chemicals Ltd.(supra) cited by the counsel for the parties wherein the clause in the agreement vested the jurisdiction to the courts at Delhi alone although the courts at Calcutta also had the jurisdiction to entertain the matter but in the face of the ouster clause, the courts in Jaipur were held to have jurisdiction. There was no counter clause in any other agreement and hence will not be applicable to the facts of the case at hand. Yet another judgment in the case of Shree Subhlaxmi Fabrics (P) Ltd. (supra) relied upon by the counsel for the appellant can be of no assistance to the case of the appellant as the jurisdiction was claimed of a court which otherwise had no jurisdiction.

19. Based on the above discussion, this court does not find any infirmity in the impugned judgment deciding issue no.3 in favour of the respondent and against the appellant, taking a view that the Delhi Court has jurisdiction to try and entertain the suit filed by the respondent.

20. Now dealing with the second argument raised by the counsel for the appellant that the respondent has been granted excessive rate of interest @18% p.a without leading any evidence to prove the said rate of interest. It is a settled legal position that the rate of interest so far the pre-suit period is concerned can be awarded in terms of the agreement between the parties or where the rate of interest itself is stipulated in any statutory provision. In the absence of any such agreement or existence of statutory provision, the rate of interest can also be awarded by reason of usage of trade having the force of law or on equitable considerations. In any case, the rate of interest cannot be awarded by way of damages except when money due is wrongfully withheld and there are equitable grounds to penalize the defaulter for such wrongful withholding of money. It is also a settled legal position that in the absence of any agreement or statutory provision or mercantile usage, interest can be payable at the market rate and for establishing such rate of interest prevailing in the market, necessary evidence has to be led by the party claiming a particular rate of interest. The court can also take judicious note of the interest rates being charged by the scheduled banks and also the market inflation. This pre suit interest is essentially governed by section 3 of the Interest Act,1978 which is as follows:

"3.Power of court to allow Interest.- (1) 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, 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.

(2) Where in any such proceedings as are mentioned in sub-section (1) :-

(a) judgment, order or award is given for a sum which , apart from interest on damages, exceeds four thousand rupees, and

(b) the sum represents or includes damages in respect of personal injuries to the plaintiff or any other person or in respect of a person$s death. then , the power conferred by that sub-section shall be exercised so as to include in that sum interest on those damages or on such part of them as the court considers appropriate for the whole or part of the period from the date mentioned in the notice to the date of institution of the proceedings, unless the court is satisfied that there are special reasons why no interest should be given in respect of those damages.

(3)Nothing in this Section ;-

(a) shall apply in relation to:-

(i) any debt or damages upon which interest is payable as of right, by virtue of any agreement; or

(ii) any debt or damages upon which payment of interest is barred , by virtue of an express agreement;

(b) shall affect:-

(i) the compensation recoverable for the dishonour of a bill of exchange, promissory note or cheque, as defined in the Negotiable instrument Act, 1881: or

(ii) the provisions of rule 2 of Order II of the First Schedule to the Code of Civil Procedure, 1908;

(c) shall empower to court to award interest upon interest." 

As will be evident from the aforesaid provision, the same, inter alia, provides that in any proceedings for the recovery of any debt or damages the Court may, if it thinks fit, allow interest to the person entitled to the debt or damages at a rate not exceeding the current rate of interest for the whole or part of the period from the date when the debt is payable to the date of the institution of the proceedings, if such debt is payable by virtue of a written instrument at a certain time. If the proceedings do not relate to any such debt, then, from the date mentioned in any written notice given by the person making a claim to the person liable for that interest will be claimed to the date of institution of the proceedings. The Courts are consistent in their view that normally when a money decree is passed, it is most essential that interest be granted for the period during which the money was due, but could not be utilized by such person due to non payment of such money. Here it would be relevant to refer to the judgment of the Apex Court in the case of State of Rajasthan vs. Ferro Concrete Construction Pvt. Ltd. (2009)12SCC1 where the import of Section 3 of the Interest Act was succinctly held as under:

"34. The position regarding award of interest after the Interest Act, 1978 came into force, can be stated thus:

(a) where a provision has been made in any contract, for interest on any debt or damages, interest shall be paid in accordance with the such contract.

(b) where payment of interest on any debt or damages is expressly barred by the contract, no interest shall be awarded.

(c) where there is no express bar in the contract and where there is also no provision for payment of interest then the principles of Section 3 of Interest Act will apply in regard to the pre-suit or pre- reference period and consequently interest will be payable:

(i) where the proceedings relate to a debt (ascertained sum) 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;

(ii) where the proceedings is for recovery of damages or for recovery of a debt which is not payable at a certain time, then from the date mentioned in a written notice given by the person making a claim to the person liable for the claim that interest will be claimed, to date of institution of proceedings.

(d) payment of interest pendente lite (date of institution of proceedings to date of decree) and future interest (from the date of decree to date of payment) shall not be governed by the provisions of Interest Act, 1978 but by the provisions of Section 34 of Code of Civil Procedure 1908 or the provisions of the law governing Arbitration as the case may be.

35. Therefore, even in regard to claims for damages, interest can be awarded for a prior to the date of ascertainment or quantification thereof if (a) the contract specifically provides for such payment from the date provided in the contract; or (b) a written demand had been made for payment of interest on the amount claimed as damages before initiation of action, from the date mentioned in the notice of demand (that is from the date of demand or any future date mentioned therein). In regard to claims for ascertained sums due, interest will be due from the date when they became due. In this case, interest has been awarded only from 3.9.1990, the date of the petition under Section 20 of the Act for appointment of arbitrator. We find no reason to alter the date of commencement of interest.

36. In regard to the rate of interest, we are of the view that the award of interest at 18% per annum, in an award governed by the old Act (Arbitration Act, 1940), was an error apparent on the face of the award. In regard to award of interest governed by the Interest Act, 1978, the rate of interest could not exceed the current rate of interest which means the highest of the maximum rates at which interest may be paid on different classes of deposits by different classes of scheduled banks in accordance with the directions given or issued to banking companies generally by the Reserve Bank of India under the Banking Regulation Act. Therefore, we are of the view that pre-reference interest should be only at the rate of 9% per annum. It is appropriate to award the same rate of interest even by way of pendente lite interest and future interest upto date of payment."

Hence, to grant the current rate of interest would be the guiding factor for awarding the pre-suit interest in accordance with the Interest Act.

21. So far as the determination of pendent lite interest and the future interest from the date of passing of the decree till realization of the amount is concerned, the parameters laid down under Section 34 of the Code of Civil Procedure will be attracted. For better appreciation, the same is reproduced as under:

"(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 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:

Provided that where the liability in relation to the sum so adjudged had arisen out of a commercial transaction, the rate of such further interest may exceed six per cent, per annum, but shall not exceed the contractual rate of interest or where there is no contractual rate, the rate at which moneys are lent or advanced by nationalised banks in relation to commercial transactions.

Explanation I.-In this sub-section, "nationalised bank" means a corresponding new bank as defined in the Banking Companies (Acquisition and Transfer of Undertakings) Act 1970 (5 of 1970).

Explanation II.-For the purposes of this section, a transaction is a commercial transaction, if it is connected with the industry, trade or business of the party incurring the liability.

(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."

On a bare look of the said provision it can be seen that so far the amount of interest from the date of decree till realization is concerned, the same is within the discretion of the court as would be evident from the use of the word 'may' in the above section but necessarily such a discretion has to be exercised by the courts on sound judicial principles and not arbitrarily or based on the whims and fancies of the courts. Here it would be pertinent to refer to the judgment of eth Apex Court in the case Dharampal vs. U.P State Road Transport Corp. AIR2008SC2312 where the court took notice of the trend of the rate of interest being awarded through years and the relevant excerpt is reproduced as under:

"10. Interest is compensation for forbearance or detention of money, which ought to have been paid to the claimant. No rate of interest is fixed under Section 171 of the Act and the duty has been bestowed upon the court to determine such rate of interest. In order to determine such rate we may refer to the observations made by this Court over the years. In the year 2001 in the case of Kaushnuma Begaum (Smt.) and Ors. v. New India Assurance Co. Ltd. and Ors.  : [2001]1SCR8 on the question of rate of interest to be awarded it was held that earlier, 12% was found to be the reasonable rate of simple interest but with a change in economy and the policy of Reserve Bank of India the interest rate has been lowered and the nationalized banks are now granting interest @ 9% on fixed deposits for one year. Accordingly, interest @ 9% was awarded in the said case. We may at this stage also refer to the following observations of their Lordships in the aforesaid decision which are relevant to the present case:

24. Now, we have to fix up the rate of interest. Section 171 of the MV Act empowers the Tribunal to direct that 'in addition to the amount of compensation simple interest shall also be paid at such rate and from such date not earlier than the date of making the claim as may be specified in this behalf'. Earlier, 12% was found to be the reasonable rate of simple interest. With a change in economy and the policy of Reserve Bank of India the interest rate has been lowered. The nationalized banks are now granting interest at the rate of 9% on fixed deposits for one year. We, therefore, direct that the compensation amount fixed hereinbefore shall bear interest at the rate of 9% per annum from the date of the claim made by the appellants....

11. In the year 2002, in United India Insurance Co. Ltd. and Ors. v. Patricia Jean Mahajan and Ors.   : [2002]3SCR1176 this Court held that the interest is payable on the equitable grounds to the aggrieved person who is deprived of using the money which is due and payable to him. Following the observations made in the case of Kaushnuma Begaum (supra) interest @ 9 % was awarded in this case also. It was held as follows:

In our view the reason indicated in the case of Kaushnuma Begum (supra) is a valid reason and it may be noticed that the rate of interest is already on the decline. We therefore, reduce the rate of interest to 9% in place of 12% as awarded by the High Court.

12. In the year 2003 in the case of Abati Bezbaruah v. Dy. Director General, Geological Survey of India and Anr.: [2003]1SCR1229 it was held that the question as to what should be the rate of interest, in the opinion of this Court, would depend upon the facts and circumstances of each case. Award of interest would normally depend upon the bank rate prevailing at the relevant time. After referring to the aforementioned decisions interest @ 9% was awarded in the said case.

13. However, in the year 2005 in Tamil Nadu State Transport Corporation Ltd. v. S. Rajapriya   : AIR2005SC2985 this Court again taking note of the then prevailing rate of interest on bank deposits directed for lowering the rate of interest fixed by the Tribunal at 9% per annum and altered the same to 7.5% per annum.

14. In the backdrop of the aforesaid legal position, we may now examine the facts of the present case. The accident in the present case had taken place on 1.9.2004 and the Tribunal had passed the award on 18.5.2005. Rate at which the interest is to be awarded would normally depend upon the bank rate prevailing at the relevant time. Since in the case of State of Tamil Nadu State Transport Corpn. Ltd. (supra) decided in the month of April, 2005, the prevailing rate of interest on bank deposits was found and held to be 7.5% per annum, we consider it appropriate to award the same rate of interest, as the same was the prevailing rate of interest on the date of the passing of the award i.e. 18.05.2005 in the present case. Consequently, we hold that the appellants would be entitled to be paid interest at the rate of 7.5% from the date of application till the date of payment."

Hence, it would be evident that the courts have taken notice of the declining rate of interest in the market and awarded the interest accordingly.

22. Adverting to the facts of the present case, it is not in dispute between the parties that the transaction between them was commercial in nature but no evidence was led by the respondent to prove the rate of interest @18% p.a. either by usage of trade having the force of law or by proving such a rate of interest prevailing at the relevant time in their commercial trade. In the absence of any such evidence led by the respondent, certainly, the respondent was not entitled to such a high rate of interest @18%p.a. and grant of such rate of interest in the absence of any evidence would be exorbitant and excessive. However, considering the facts and circumstances of the case and particularly looking into the period of transaction this court is of the view that the rate of interest so far the pre suit period is concerned can be granted @9% p.a. and the same rate of interest shall also be payable by the appellant pendent lite in future, till the final realization of the decretal amount.

23. The present appeal filed by the appellant is accordingly disposed of in terms of the above directions. The impugned judgment and decree now stands modified to the limited extent of reducing the rate of interest from 18% p.a. to 9% p.a. which rate of interest will be attracted pre suit and pendent lite till final realization of the amount.

24. The judgment and decree shall be drawn accordingly.

July 25,  2011                              KAILASH GAMBHIR,J