Regular Second Appeal No. 478 of 2009 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Regular Second Appeal No. 478 of 2009. (O&M) Date of Decision: 15.5.2009 *** Punjab State, Ministry of Home Affairs, Punjab & Anr. .. Appellants VS. Rajiv Ahuja .. Respondent CORAM: HON'BLE MR. JUSTICE ARVIND KUMAR, Present:- Mr. B.S. Sra, DAG Punjab. Mr. R.S. Bajaj, Advocate for the respondent. *** ARVIND KUMAR, J. There is delay of 20 days in filing the instant appeal. Heard. For the reasons mentioned in the application, the same is allowed and delay, as aforesaid, stands condoned. The State has come up in this second appeal, challenging the increase made by the learned first Appellate Court, towards the interest payable to the plaintiff-respondent. As per judgment and decree rendered by the learned trial Court interest @ 6% per annum was awarded to the plaintiff on delayed payments from the date of filing of the suit till the actual payment of principal amount of Rs.40,03,848/-. The learned first appellate Court below, on an appeal preferred by the plaintiff, enhanced the rate of interest to 17.5% per annum from the date of issuance of bills in question till the realization of the amount. The principal amount claimed in the suit by the plaintiff was Rs.45,12,142.47 paise, but it was decreed under the provisions of Order 12 Rule 6 CPC, to the extent of Rs.40,03,848/-, since to that extent the defendants admitted their liability and with regard to remaining amount, after conclusion of trial, it was held that the plaintiff has failed to prove the liability of the defendants to that extent. The plaintiff as well as the defendants preferred separate appeals before the appellate Court below, which affirmed the findings of the Regular Second Appeal No. 478 of 2009 2 learned trial Court to that extent, but, as noticed above, increased the rate of interest to be paid to the plaintiff on delayed payments. Accordingly, the appeal of the plaintiff was partly accepted while the appeal of the defendants was dismissed as having rendered infructuous. Thus, the appellants have filed the instant appeal questioning the judgment and decree of the appellate court below to the extent of interest awarded to the plaintiff on delayed payment and this Court, on 27.1.2009, also issued the notice of motion qua the quantum of interest only. It has been contended by the learned State counsel that the interest awarded @ 17.5% is excessive while according to the learned counsel for the respondent has claimed that the appellants cause unnecessary delay in making the payment to the plaintiff firm, due to which the plaintiff firm sustained financial losses and thus, no interference is called for in the rate of interest awarded to the plaintiff, a small scale industry, by the appellate Court which has element of penal in it. Having considered the rival contention of learned counsel for the parties, this Court is of the considered view that the rate of interest awarded to the plaintiff seems to be on higher side and is liable to be modified, keeping in view the peculiar facts and circumstances of the case. There is no dispute as to the liability of the defendant-appellants towards the decreetal principal amount of Rs. 40,03,848/-, which, as per records, has already been paid to the plaintiff on various dates. It is also not in dispute that the plaintiff firm is a Small Scale Entrepreneurship as has been proved vide Ex.P16. Amittedly, there was no written agreement between the parties regarding interest payable, in case of delayed payment but the transactions carried out between the parties were commercial one. The plaintiff has to wait for a substantial period for realization of the principal amount that too by knocking the doors of the Court and during that period it must have faced financial crisis. Hence, he is obviously entitled to interest as per the Legislation enacted in this regard and the interest on the delayed payment has to be calculated after taking into account the date of issuance of bills i.e. the day when the defendants-appellants accepted the goods from the plaintiff, as awarded by the learned Appellate Court. Coming to the rate of interest, the appellate Court below while relying upon the decision of Hon'ble Supreme Court in the case of Assam Small Scale Ind. Dev Regular Second Appeal No. 478 of 2009 3 Corporation Ltd. Vs. J.D. Pharmaceuticals AIR 2006(SC) 131. awarded the interest at the rate of 17.5%, which is unacceptable to this Court. In that case the Hon'ble Apex Court, while relying upon the provisions of Act of 1993, prevailing at that time, awarded compound interest @ 23.5% per annum. That case came to be passed in the year 2005 and after that there is considerable downtrend in the interest rates. Hence, the rate of interest is to be fixed in the circumstances of each case and it should not be imposed at a uniform rate without looking into the circumstances leading to a situation where compensation was required to be paid. What is being awarded is compensation i.e. a recompense for the loss or injury. It therefore necessarily has to be based on a finding of loss or injury and no hard and fast rule can be laid down, but such an exercise will have to be undertaken within the parameters of circumstances and reason and the rate of interest should not be fixed arbitrarily and the Courts should take into account the current bank rates which in recent years have shown a tendency to slide downwards and has been reduced substantially. Therefore, taking into account all these facts, this Court is of the considered opinion that it will be in the fitness of things if the plaintiff is allowed interest @ 12% per annum from the appellants, in the manner discussed above. It is ordered accordingly. With the aforesaid modification in the judgment and decree passed by the first appellate Court below, the appeal stands disposed of accordingly with costs throughout. (ARVIND KUMAR) JUDGE May 15,2009 Jiten