2025 Supreme(SC) 559

SUPREME COURT OF INDIA
J.B. PARDIWALA, R. MAHADEVAN, JJ.
I.K. Merchants Pvt. Ltd. & Ors. - Appellants
Versus
The State of Rajasthan & Ors. - Respondents
Civil Appeal Nos. 4560-4563 of 2025 (Arising out of SLP (C) Nos. 11779 – 11782 of 2022)
Decided On : 01-04-2025

IMPORTANT POINTS
(1) Rate of interest – Courts have authority to determine appropriate interest rate, considering totality of facts and circumstances in accordance with law – Rate of interest should be determined in a manner that balances both fairness and financial impact.
(2) Government Contract – Public Interest denotes a wider concept with its genus rooted to welfare of public at large, with different species attributable to individual and specific impact, depending upon concept and subject under consideration.

Headnote:

(A) Civil Procedure Code, 1908 – Section 34 – Rate of interest – Courts have authority to determine appropriate interest rate, considering totality of facts and circumstances in accordance with law – That apart, Courts have discretion to decide whether interest is payable from date of institution of suit, a period prior to that, or from date of decree, depending on specific facts of each case – Court has full discretion to determine interest rate based on fairness, commercial usage and equity – In present case, there was no agreement between parties relating to grant of interest for delayed payment – Even exchange of communications between parties remains silent on this aspect – In absence of any agreement or contract, provisions of Section 34 of Code of Civil Procedure dealing with ‘interest’ would come into play – If claim arises from a commercial transaction, courts may allow interest at a higher rate based on agreements between parties – In peculiar facts and circumstances, it is fit, just and appropriate to award simple interest at the rate of 6% per annum from 8th July 1975, on enhanced valuation of shares till date of decree and interest at the rate of 9% per annum from date of decree till date of realisation. (Paras 13, 13.1 and 14)

(B) Civil Procedure Code, 1908 – Section 34 – Power of Court to award interest – While discretion to award interest, whether pendente lite or post-decree, is well recognized, its exercise must be guided by equitable considerations – Rate and period of interest cannot be applied mechanically or at an unreasonably high rate without any rationale – Though it is not possible to arrive at actual value of improvement or inflation on fair consideration, if paid at relevant point of time, it is just and necessary that rate of interest must be a reparation for appellant – Court must ensure that while claimant is fairly compensated, award does not become punitive or unduly burdensome on Judgment Debtor – Rate of interest should be determined in a manner that balances both fairness and financial impact, taking into account “loss of use” principle and economic prudence, in specific facts of each case. (Para 16)

(C) Government Contract – Public Interest – Term “Public Interest” denotes a wider concept with its genus rooted to welfare of public at large, with different species attributable to individual and specific impact, depending upon concept and subject under consideration – It deals with impact of a policy decision on society – Generally, public interest is anathema to commercial transactions – However, by exception, when terms are oppressive or one-sided, they are to be termed as unconscionable, arbitrary and by application of externalities, public interest will have to lean towards individual who has been wronged, as such contracts are deemed to take away fairness, affecting free consent required to culminate into a valid contract – Constitutional Courts, under such circumstances will be armed with Article 14 to strike down such contracts or to pass appropriate decrees or orders. (Para 12)

Facts of the case:

Genesis of case arises from a five-decade long litigation concerning valuation of shares of Respondent No. 2 which were sold by appellants to Respondent No.1. Only issue remains to be considered by Court in present round of litigation is the rate of interest on enhanced valuation of shares as determined by High Court and affirmed by this court.

Findings of Court:

Interest shall be paid along with amount due towards enhanced value of shares, after adjusting amount already paid, to appellants, within a period of two months.

Result : Appeal allowed.