IMPORTANT POINT
For all claims for interest under Interest Act, notice demanding interest is mandatory.

D.V.S.S. Somayajulu, J.—This appeal is filed by the defendant against the judgment and decree dated 03.11.2003 in O.S.No.1573 of 2001 passed by the VII Senior Civil Judge, City Civil Court, Hyderabad.

2. For the sake of convenience, the parties are referred to as the plaintiff and the defendant only.

3. The suit O.S.No.1573 of 2001 out of which the present appeal arises, which is a suit filed by the plaintiff against the defendant (present appellant) for recovery of money with interest and costs. The lower Court conducted the trial, in which PW.1 was examined for the plaintiff; Exs.A.1 to A.25 were marked. DWs.1 to 5 were examined for the defendants and Exs.B.1 to B.15 were marked. The lower Court ultimately passed a decree holding that the plaintiff is entitled to a part of the claim with interest from 15.06.2001 till the date of the decree. In the lower Court, the first issue was on the question of interest. The findings on this issue are the subject matter of this appeal. Other issues were not really raised or argued.

4. This Court has heard Sri S. Satyanarayana Prasad, learned senior counsel appearing for Ms. C. Sindhu Kumari, learned counsel for the appellant/defendant and Sri C.V. Mohan Reddy, learned counsel for the respondent/plaintiff on the question of award of interest.

5. The learned senior counsel appearing for the appellant/defendant argued that the lower Court erred in granting interest from the date of the notice till the date of the decree. He also argued that there is no legal or factual basis for awarding interest as prayed for. In reply thereto, the learned counsel for the respondent/plaintiff argued that the award of interest is perfectly valid and as per the law of land including the Interest Act, 1978.

6. The facts which are necessary to decide this issue are in a narrow compass. The plaintiff supplied material to the defendant for which the payment was not made completely. Therefore, the suit is filed for recovery of the balance sum along with interest. Admittedly, there is no clause in the understanding between the parties for payment of interest.

7. The law is very well settled that in the absence of any contract for payment of interest, interest can be demanded as per Section 3 (b) of the Interest Act, 1978. This section of the law caters to a situation where the contract is silent about the interest. In such a case, the legal mandate as per settled law on this subject is that a party should demand the principal along with interest through a written notice and then the Court is empowered to grant interest from the date mentioned in the notice. In this case, admittedly, interest was demanded by a notice dated 15.06.2001. Therefore, in line with the judgment of the Honble Supreme Court of India reported in B.V. Radha Krishna v. Sponge Iron India Ltd., this Court feels that the lower Court did not commit any error in awarding interest from 15.06.2001. In B.V. Radha Krishnas case also, the Honble Supreme Court considered the provisions of the Interest Act, 1978. In a constitution bench decision reported in Secretary, Irrigation Department, Government of Orissa v. G.C. Roy, the Honble Supreme Court of India held as follows:

47(i) A person deprived of the use of money to which he is legitimately entitled has a right to be compensated for the deprivation, call it by any name. It may be called interest, compensation or damages. This basic consideration is as valid for the period the dispute is pending before the arbitrator as it is for the period prior to the arbitrator entering upon the reference. This is the principle of Section 34, C.P.C., and there is no reason or principle to hold otherwise in the case of arbitrator.

This principle of law although enunciated in a case under the Arbitration Act is valid for all claims for interest.

8. As far as the rate of interest is concerned, as per the provisions of the Interest Act, 1978, interest rates prevailing have to be proved. In this case, admittedl