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Application for modification of order for payment of interest on allotment money. Analysis: The respondent filed an application under section 151 of the Civil Procedure Code, 1908, seeking modification of an order directing payment of further interest on the allotment money. The respondent had issued debentures with specific payment terms, and due to financial constraints, the deadline for payment was extended. The petitioner sought interest for the period from 26-3-1995 to 30-4-1995. Respondent agreed to pay interest at 14% for this period to debenture holders who paid before 25-3-1995. However, the petitioner did not request interest on interest, and the respondent did not agree to it initially. The respondent, feeling aggrieved, filed a special leave petition before the Supreme Court, highlighting that interest over interest was not permissible under the Interest Act, 1978. The Court observed that the issue of interest over interest was not raised earlier. The respondent withdrew the petition and sought appropriate relief before the High Court. Section 3 of the Interest Act, 1978, prohibits the award of interest upon interest by the Court. The High Court analyzed the provisions of the Interest Act and noted the prohibition on awarding interest over interest under section 3(3)(c). The respondent had only agreed to pay interest for the specific period mentioned, and there was no prayer for interest over interest in the petition. The Court found that the order directing payment of interest over interest at 14% till 31-10-1998 was in contravention of the Interest Act. Consequently, the Court allowed the application, modified the order, and extended the time for payment of interest by two weeks from the date of the judgment. In conclusion, the High Court granted the application for modification, emphasizing compliance with the provisions of the Interest Act, 1978, and prohibiting the award of interest on interest. The judgment clarified the limitations on awarding interest over interest and adjusted the order accordingly to align with the legal framework.
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