2010 (5) TMI 395 - HC - Companies Law

Whether the IDBI had earned interest and if yielded, at what rate? Held that - This Court considers it appropriate to hold that that present applicant is entitled for a reasonable compensation viz., to pay interest at the rate of 8.25 per cent per annum on the amount which indisputably was lying in fixed deposits with respondent-IDBI from the date of its deposit till its refund through banker s cheque dated 12-2-2007. Misc. application is allowed. Respondent-IDBI is directed to pay interest at the rate of 8.25 per cent per annum on the principal sum of auction purchase price to the tune of ₹ 2,30,65,000 (Rs. two crores, thirty lakhs, sixty five thousand) from the date it was deposited with IDBI till its refund through pay order/cheque dated 12-2-2007. Compliance of this order be made within two months from today failing which the interest (supra) shall be realised at the rate of 12 per cent per annum instead of 8.25 per cent.

Issues Involved:

1. Entitlement to interest on the refunded auction purchase amount.
2. Applicability of Order 2, Rule 2, CPC.
3. Applicability of Section 34, CPC.
4. Rate of interest to be awarded.

Detailed Analysis:

1. Entitlement to Interest on the Refunded Auction Purchase Amount:

The applicant, M/s. Blooming Engineers (P.) Ltd., sought interest on Rs. 2,30,65,000 deposited during auction proceedings initiated by the Recovery Officer, Debts Recovery Tribunal (DRT), Jaipur. The auction and sale certificate were quashed by the High Court, and the principal amount was refunded without interest. The applicant claimed interest from the date of deposit till the actual refund.

The court noted that the amount was deposited in Fixed Deposit Receipts (FDRs) with IDBI and renewed periodically. The applicant did not utilize the auctioned property or the interest accrued on the deposit. The court concluded that the applicant was entitled to compensation in the form of interest for the use of the money by IDBI.

2. Applicability of Order 2, Rule 2, CPC:

Respondent-IDBI argued that the application was not maintainable under Order 2, Rule 2, CPC, as the relief for interest was not claimed in the earlier application. The court dismissed this objection, stating that the applicant was a respondent in the initial proceedings and was defending the auction sale. The claim for interest arose after the auction sale was set aside, and thus, Order 2, Rule 2, CPC, was not applicable.

3. Applicability of Section 34, CPC:

Respondent-IDBI also contended that under Section 34, CPC, if the court's order is silent about interest, it is deemed to have refused such interest. The court referred to precedents, including Motors & Investment Ltd. v. New Bank of India and Central Bank of India v. Ravindra, which established that interest is compensation for the use of money. Since the amount was deposited in FDRs and IDBI earned interest, the applicant was entitled to interest as compensation.

4. Rate of Interest to be Awarded:

The court considered various factors, including prevailing interest rates and precedents. It noted that State Bank of India's rates for similar deposits ranged from 7.75% to 8.25%, and IDBI's rates for tax-saving fixed deposits were around 8.5% to 12%. The court deemed 8.25% per annum as a reasonable rate of interest for the applicant.

Conclusion:

The court allowed the application, directing IDBI to pay interest at 8.25% per annum on Rs. 2,30,65,000 from the date of deposit till the refund date. Compliance was ordered within two months, failing which the interest rate would increase to 12% per annum. No order as to costs was made.

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