Now it is high time for the courts to change the trend on the “Rate of Interest”.
Supreme Court held in the judgment of C K Sasankan Vs The Dhanalakshmi Bank Ltd. that interest id to be awarded at the reasonable rate and that too only on “Principal amount”.
In this context, Section 34 of the CPC needs to be read carefully. Rate of interest is the discretion of the court but that discretion now requires to be exercised carefully and cautiously. For this purpose, Honorable court should rely upon the provision of The Interest Act, which provides for awarding of “Current Rate of Interest”.
It is important to mention that current rate of interest is decided by RBI under provisions of Banking Regulation Act, 1949.
As per section 171 of the Motor Vehicle Act, 1988 (hereinafter referred as ‘Act’) where the claim for compensation made under the act is 5 allowed by the Claims Tribunal, the tribunal may direct that in addition to the amount of compensation simple interest shall also be paid at such rate from such date not earlier than the date of making claim.
In the year 2003 in the case of Abati Bezbaruah v. Dy. Director General, Geological Survey of India and Another reported in (2003) 3 SCC 148 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.
At present everybody is aware the prevailing rate of interest is anything between 6-7% per annum and Honorable Supreme Court has also shown trend of awarding interest @ 6% on the amount of compensation.
Therefore now, it is high time for all advocates to draw the attention of the Honorable court on the change of interest rate and argue for awarding the interest @ 6%-7% per annum, relying upon the recent judgments of the honorable Supreme court and also showing guidelines of RBI .
Such arguments can also be based on provisions of section 34 of CPC.
I am hopeful that with proper argument and with proper production of latest judgments of the Honorable Supreme Court and circulars of RBI, advocates will be able to convince the Honorable court regarding awarding of interest @ 6% per annum.