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High Court Of Calcutta
D. K. SEN, AJIT KUMAR SENGUPTA
STATE BANK OF INDIA - Appellant
Versus
B.GUPTA (TEA) P.LTD. - Respondent
Appeal 143 Of 1984
Decided On : 04/30/1985
INTEREST ON DECREE - RATE OF INTEREST - COURT'S DISCRETION - EXERCISE OF - PRINCIPLES - CONTRACTUAL RATE - AWARD OF - FACTORS TO BE CONSIDERED.
Fact of the Case:
The plaintiff bank filed a suit for recovery of Rs. 3,89,646.80 with interest at the agreed rate of 16.15%. During the pendency of the suit, the defendants offered to settle the claim by paying the principal amount along with interest at 10% from the date of filing of the suit till payment. However, the plaintiff bank did not accept the offer. Subsequently, the defendants submitted to a decree for the entire amount claimed by the plaintiff bank, with interest at 6% from 1st July 1980 till the date of payment.
Finding of the Court:
The court held that the plaintiff bank was entitled to interest at the contractual rate of 16.15% from 1st July 1980 to 14th July 1980, the date of institution of the suit. The court further held that the rate of interest from the date of the suit to the date of the decree was solely in the discretion of the court, and that the court had not erred in awarding interest at the rate of 6%. The court also held that the rate of interest from the date of the decree to the date of payment was also in the discretion of the court, and that the court had not erred in awarding interest at the rate of 18%.
Issues: 1. Whether the plaintiff bank was entitled to interest at the contractual rate of 16.15% from 1st July 1980 to 14th July 1980, the date of institution of the suit? 2. Whether the court erred in awarding interest at the rate of 6% from 15th July 1980 to 26th April 1984, the date of the decree? 3. Whether the court erred in awarding interest at the rate of 18% from 27th April 1984, the date of the decree, till the date of payment.
Ratio Decidendi: 1. The court held that the plaintiff bank was entitled to interest at the contractual rate of 16.15% from 1st July 1980 to 14th July 1980, the date of institution of the suit, as there was a stipulation for the payment of interest at a fixed rate, and the court had no discretion in awarding interest antecedent to suit at any rate other than the contractual rate. 2. The court held that the rate of interest from the date of the suit to the date of the decree was solely in the discretion of the court, and that the court had not erred in awarding interest at the rate of 6%. The court noted that the defendants had offered to pay the entire sum claimed in the suit along with interest at 10% in one installment without raising any objection as to the correctness of the claim made by the plaintiff Bank, and that the rate of interest at 6% was conditional upon the payment of the entire decretal dues within stipulated time of two weeks. The court also noted that the cost was assessed at Rs. 20,000/- which was excessive, and that this was intended to compensate the plaintiff for delay in realisation of the claim made in the suit. 3. The court held that the rate of interest from the date of the decree to the date of payment was also in the discretion of the court, and that the court had not erred in awarding interest at the rate of 18%.
Final Decision: The court modified the decree to the extent that the respondents were required to pay interest at the rate of 7% from 15th July 1980 to 26th April 1984, and at the rate of 10% from 27th April 1984 to 11th May 1984. The respondents were also required to pay a further sum of Rs. 17,624/- as and by way of interest.
( 1 ) ON or about 14th July, 1980 the State Bank of India instituted a suit being Suit No. 601 of 1980 against the respondents, inter alia, for a decree for Rs. 3,89,646. 80 which included interest up to 30th June, 1980 calculated at the agreed rate of 16. 15%. On or about 5th Sept. , 1983 the Advocate on record of the respondents wrote to the Advocate on record of the plaintiff-bank, inter alia, as follows :-"at the time of meeting held between your Mr. J. Sanyal and our Mr. S. Ray it was categorically made clear that our client the defendant abovenamed is ready and willing to settle the claims of your client without going into the actual account provided the plaintiff bank is ready to accept total claim of the suit together with interest calculated at the rate of 6% per annum from the date of filing of the suit until payment in full. However at the request of your Mr. Sanyal our Mr. S. Ray intimated him that the said rate of interest may be raised to 10% per annum from 6% per annum. Hence if your client is rigid in so far as the payment of interest is concerned at the rate of 16. 15% then our client shall have no other alternative but to contest the suit and which would only delay in recovery of your clients' dues herein. It may be pointed out that there are very serious and major discripancies in the claim of your client in the above suit and if the suit is not settled out client would strongly rely on such discripancies of accounts at the hearing. Therefore, we do hope that for expeditious recovery of public money the plaintiff bank would reconsider its views relating to the rate of interest. ""we are informed by your client above named the defendant herein that if the suit is settled and a total figure of claim of your client with interest and costs is arrived at then our client would pay the same in one installment simultaneously with the filing of the terms of the settlement before this Hon'ble Court. "
( 2 ) THE Bank, however, did not agree to the said proposal.
( 3 ) ON 16th April, 1984 the respondents submitted to a decree. The judgement and decree dated 26th April, 1984 are to the following effect :-"inasmuch as on behalf of the defendants it was submitted that the whole claim of the plaintiff, namely Rs. 3,62,060. 48 P. and interest thereon from the 1st of January 1980 up to 30th June, 1980 amounting to Rs. 27,586. 32 P. totaling a sum of Rs. 3,89,646. 80 P. is agreed to be paid by the defendants and a fortnight's time is asked for paying off the sum and a request also made that the interim interest should be reduced and that the plaintiff should not be entitled to more than 6% per annum from the 1st of July 1980 until payment, this Court considers the same to be a reasonable offer and grants the defendants' prayer. Mr. Suresh Majumdar appearing on behalf of the plaintiff had made over to the Court a letter of 5th Sept. , 1983 wherein it appears that at that time the defendants were agreeable to pay the principal amount due to the plaintiff and interest thereon at the rate of 10% per annum. Mr. Majumder, relying on this letter, submits that interest should be paid at least at the rate of 10% per annum. Mr. Majumder contends that in fact a higher rate of interest of 16. 15% should be allowed as claimed by the plaintiff and if the Court should accede to the request of the defendants, the Court should not allow interest to be less than 10% which was offered by their letter of the said date. Having heard the respective contention of the parties, this Court is of the view that the letter of the defendants of 5th Sept. , 1983 cannot be relied upon at this stage the plaintiff did not accept the same at the time it was issued. Moreover, in view of the fact that the defendants have submitted to a decree for Rs. 3,62,060. 48 P. plus interest thereon for the period from 1st Jan. , 1980 to 30th June, 1980 at the rate of 16. 15% which amounts to a sum of Rs. 27,586. 32 P. and offers to pay the same within
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