IMPORTANT POINT
Provisions of the Interest Act, 1993 are applicable only with prospective effect.

JUDGMENT

Dr. Mukundakam Sharma, J. —

1. Leave Granted.

2. Discord in this appeal lies in a very narrow compass. The issue that arises for our consideration is with regard to the nature of interest that the respondent is entitled to in respect of the amount for which he had laid claim and in respect of which a decree was passed in its favour.

3. The present respondent filed a suit in the Court of Munsif, Dehradun on 31.10.1991 for recovery of Rs. 15,027.75 along with interest at the rate of 24% per annum and at 2% per month compounded with monthly rest from 23.9.1992 till actual date of recovery. According to the respondent-plaintiff it used to supply hydrated lime to the appellant-defendant but the defendant did not pay the bills amounted to Rs. 10,593.75. Consequently, the aforesaid suit was filed claiming the amount of Rs. 10,593.73 along with interest at the rate of 18% per annum till the date of suit and cost of legal notices. However, during the pendency of the suit, the plaint was amended after coming into force of the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 (hereinafter referred to as the ‘Act’). The Act came into force with effect from 23.9.1992 whereunder if the buyer fails to make the payment on or before the agreed date or where there is no agreement before the appointed date the supplier becomes entitled to interest at such rate which is 5%, point above the floor rate for comparable lending with monthly rest.

4. By virtue of the aforesaid amendment the respondent requested for payment of interest at the rate of 24% per annum from 1.11.1991 to 22.9.1992 and 2% per month compounded with monthly rest from 23.9.1992 till the actual date of realization. The aforesaid suit filed by the respondent-plaintiff was decreed by the Civil Judge (Junior Division) for recovery of Rs. 15,027.75 along with interest at the rate of 18% per annum under judgment and decree dated 30.7.1998.

5. Feeling aggrieved by the aforesaid judgment and decree passed by the trial court, the appellant-defendant preferred an appeal before the Civil Judge (Senior Division) which was registered as Civil Appeal No. 51 of 1998. The respondent-plaintiff filed a cross-objection contending inter alia that the said respondent was entitled to higher rate of interest. The First Appellate Court vide its judgment and decree dated 21.2.2001 dismissed the appeal filed by the appellant but it allowed the cross-objection of the respondent-plaintiff whereby the First Appellate Court modified the decree to the extent that the plaintiff would be entitled to get interest at the rate of 23% per annum with monthly rests from 23.9.2002 till the date of realization. While arriving at the said finding the learned Civil Judge (Senior Division) held that the Scheduled Banks provide loan on interest at the rate of 18% per annum.

6. Being aggrieved by the aforesaid judgment and decree the appellant-defendant preferred a Second Appeal No. 167 of 2001 in the High Court which was admitted on the questions of law framed in the memo of appeal and the High Court also stayed the aforesaid order dated 30.7.1998. The appeal was taken up for final hearing during the course of which reference was made to the provisions, particularly Section 4 and 5, of the Act.

7. The learned Single Jude of the High Court disposed of the said appeal by judgment and order dated 2.5.2007 and held that the aforesaid Act No. 32 of 1993 was promulgated on 02.04.1993 and, therefore, the increased rate of interest would be payable from 02.04.1993 whereas the present suit was filed on 31.10.1991.

8. In the aforesaid premises it was held that the provisions of interest as provided in the said Act would not be applicable. However, as the respondent-plaintiff had not filed any document showing the scheduled banking rate of interest the learned Single Judge presumed the same to be at the rate of 13% per annum. Consequently, the decree passed by the trial court was modi