( 1 ) RESPONDENT No. 3 - H. B. Portfolio Leasing Limited has filed this application under Section 151 Civil Procedure Code for modification of that part of the order dated 25th September, 1998 by which respondent No. 3 was directed to pay further interest at the rate of 14% till 31st October, 1998 on the amount of interest on allotment money from 26th March, 1995 till 30th April, 1995.

( 2 ) IT is, inter alia, alleged that respondent No. 3 came out with a Public issue of 1,60,000 Fully Convertible Debentures and Rights issue of 1,74,02,424 Fully Convertible Debentures of Rs. 65. 00 each in November/december 1994. As per the terms of Prospectus and Letter of Offer a sum of Rs. 20. 00 per debenture was payable on application while further sum of Rs. 45. 00 per debenture was payable on allotment. Pursuant to the decision of the Board of Directors, respondent No. 3 called upon the allottees to make the payment of Call money of Rs. 45. 00 per debenture by 25th March, 1995. It is further stated that because of impending financial year ending On 31st March, 1995, around 90% allottees could not pay the amount of Call money and, therefore, the last date to pay the allotment money was extended by 30th April, 1995. The present writ petition was filed by the petitioner seeking direction to respondent No. 3 to make the payment of 14% interest for the period 26th March, 1995 to 30th April, 1995 to all those allottees, who had paid the allotment money at the said rate before 25th March, 1995. With respect to this prayer of the petitioner, without prejudice to the rights and contentions, respondent No. 3 filed C:m. 7799/98 agreeing to pay interest at the rate of 14% for the said period to all those debenture holders, who had paid the allotment money upto 25th March, 1995. On the said application order was passed on 25th September, 1998. Ommitting the immaterial portion the order reads:-

"as prayed in C. M. No. 7799/98, respondent No. 3/company is granted three months time to pay interest on allotment money for the period from 26th March, 1995 till 30th April, 1995 with further interest on that amount (3) 14% till 31st October. 1998. . . . . . . . . . . . (emphasis supplied)

( 3 ) GRANT of interest over interest was not even prayed for by the petitioner in the writ petition. Respondent No. 3 also had not agreed to pay the same while filing C. M. 7799/98. The application moved by respondent No. 3 (C. M. 7799/98) was still underconsideration. Final order had not been passed. The petitioner had to file reply to the said application. In the meanwhile feeling aggrieved, respondent No. 3 filed Special Leave Petition before the Supreme Court, which came up for hearing on 15th February, 1999. During the course of the hearing it was observed by the Court that the question of payment of interest over interest had not been-brought to the notice of this court. Accordingly, learned counsel appearing for respondent No. 3 prayed for the withdrawal of the Special Leave Petition and to make an appropriate application in the matter before this court It is further stated that grant of interest over interest is prohibited under Section 3 (3) (c) of the Interest Act, 1978 and, therefore, part of the said order dated 25th September, 1998 (underlined by us) granting interest over interest at the rate of 14% till 31st October, 1998 deserves to be varied.

( 4 ) WE have heard the learned counsel for the parties and have also been taken through the averments made in C. M. 7799/98 filed by respondent No. 3 - applicant.

( 5 ) SECTION 3 of the Interest Act, 1978 which is relevant provides as under:-

"3. Power of Court to allow interest. 1) Any proceedings for the recovery of any debt or damages 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