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TMI Blog2002 (7) TMI 818X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the decisions of the Supreme Court in SMT. CHAMELI WATI vs. DELHI MUNICIPAL CORPORATIOIN OF DELHI, , JAGBIR SINGH vs. GENERAL MANAGER, PUNJAB ROADWAYS, , Dr. K.R. TANDON vs. OM PRAKASH, and a Division Bench decision of this Court in SHOBHA RANI vs. NEW INDIA ASSURANCE COMPANY LTD., wherein interest at 12% p.a. was granted, on the other hand, a Division Bench of this Court opined that there is some uncertainty in granting interest on the compensation amount and the matter requires consideration by a Larger Bench of this Court. While admitting the appeals, the Bench granted stay of the award of the Tribunals on condition of appellants depositing 3/4th of the compensation amount with costs and interest at 9 per annum. At this stage, the matters are referred to the Larger Bench for appropriate decision on the question of interest. 3. We have heard Smt. Nanda R Rao, learned Standing Counsel appearing for the appellants - A.P. State Road Transport Corporation and Sri V. Tulsi Reddy, Sri Kota Subba Rao, Sri K. Mahender Reddy, Mr. K.L.N. Rao and Mr. Sairam Goud, learned counsel appearing for the respondents-claimants. 4. Smt. Nanda R Rao, learned Standing Counsel appearing for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein the Apex court taking notice of the inflation rate, granted interest at 12% per annum. Reliance has also been placed on the observation of the Apex Court in RAMESH CHANDRA vs. RANDHIR SINGH, that addition of interest to the compensation, by judicial discretion, is sequential in the eye of law and not dependant on any pleading. Reliance has also been placed on the decisions in RL Gupta vs. Jupiter General Insurance Company, , Jagbir Singh vs. General Manager, Punjab Roadways wherein Chameli Wati's case was followed, Devi Dayal Kansal vs. Raj Roop, wherein interest was granted at 12% on the enhanced amount of compensation. 8. Referring to Rule 473 of the A.P. Motor Vehicles Rules, 1989, the learned counsel would submit that certain provisions of the Code of Civil Procedure were made applicable to the proceedings before the Claims Tribunal and, therefore, Section 34 CPC, which provides for interest is applicable to the proceedings before the claims Tribunal. 9. Mr. K.L.N. Rao, learned Counsel appearing for one of the respondents-claimants submitted that where the death of, or bodily injury to any person gives rise to claim compensation under the provisions of the M.V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the amount of compensation, directed that interest at the rate of 6% be paid on the enhanced amount from the date of its judgment. The Supreme Court held that when the learned single Judge as well as the Division Bench enhanced the amount of compensation, the learned single Judge and the Division Bench totally ignored the fact that the enhanced amount of compensation awarded by them was in their judgment was the correct amount of compensation payable to the appellants therein on account of the death of deceased resulting from the accident and the learned single Judge and the Division Bench should have therefore awarded interest on the enhanced amount of compensation from the date of application. The Supreme Court accordingly set aside the Judgment of the Division bench as also the judgment of the learned single Judge in so far as the said judgments direct that interest shall be payable on the enhanced amount of compensation from the date of receipt of the judgments. Instead, the supreme Court directed that interest shall be payable on the enhanced amount of compensation as finally determined by the Division Bench of the High court at the rate of 12% per annum from the date of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest allowed from the date of accident was not interfered with as the same would have the effect of further reducing the quantum of compensation, which is not on the high side. The Supreme Court, in that case, considering the enormity of the suffering underwent by the claimant and also the permanent injuries sustained by him as well as loss of future income and enjoyment of life, was disinclined to interfere with the order directing payment of interest. Further, taking notice of the fact that the claim was not settled promptly and dragged on mercilessly, awarded ₹ 5,000/- by way of costs. 18. In Dr. K.R. Tandon vs. Om Prakash, the Apex Court held that the reduction of rate of interest from 6% per annum as awarded by the claims Tribunal to 3% by the High Court was improper. The Supreme Court enhanced the rate of interest to 12% from the date of application and also held that the omission on the part of the courts below to award interest, irrespective of its rate, from the date of the application was unjustified. The Supreme Court further observed: We also see no justification by the courts below of not having awarded interest, whatever be its rate, from the date of appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and also the future economic prospects of the deceased had he survived, the Supreme Court further enhanced the amount to ₹ 3,00,000/-. However, as regards the interest it was observed: Learned counsel for the appellant is right when she contended that there was no reason for the High Court to abruptly reduce the interest from 9 per cent to 6 per cent only because the High Court was enhancing the compensation amount. However, in our view, once interest of 6 per cent is granted on the awarded amount, for the enhanced amount of ₹ 88,800/- pursuant to our order also there should be 6 per cent interest from the date of the application till payment of additional amount of ₹ 88,800/- by the respondent. 22. In Muthaiah Sekhar vs. Nesamony Pvt. Corpn. Ltd. (supra), the claimant therein who was pursuing his ML Course in Madras University suffered loss of 60% vision in the left eye and 50% hearing in the left year and there was also dislocation of the right hip permanently. The Apex Court on a consideration of the facts and circumstances of the case, awarded a sum of ₹ 3 lakhs in addition to the amount of ₹ 1,76,000/- granted by the Tribunal with interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leg by approximately two inches. Compensation of ₹ 1,00,000/- was awarded by the Tribunal which was reduced to ₹ 80,000/- by the High Court by a non-speaking order. The Supreme Court held that compensation of ₹ 1,00,000/- for such injury was not too excessive and that the order reducing the compensation was improper. The Supreme Court while allowing the appeal affirmed the award of the tribunal together with interest at 6% per annum with costs throughout. 29. In Institute of Chartered Accountants of India vs. L.K. Ratna, the Supreme Court held that the compensation, which was determined by the Tribunal, was on the basis of the material on record and therefore reduction of the same by the Court was not proper and restored the award passed by the Tribunal and granted interest at 12% per annum. 30. In S. Kaushnuma Begum v. The New India Assurance Co. Ltd., it was observed: Section 171 of the MV Act empowers the Tribunal to direct that in addition to the amount of compensation simple interest shall also be paid at such rate and from such date not earlier than the date of making the claim as may be specified in this behalf. Earlier 12% was found to be the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the date of making the claim as it may specify in this behalf. 36. Section 34 of the Code of Civil Procedure reads as follows: 34. Interest: (1) Where and in so far as a decree is for the payment of money, the Court may in the decree, order interest at such rate as the Court deems reasonable to be paid on the principal sum adjudged, from the date of the suit to the date of the decree, in addition to any interest adjudged on such principal sum for any period prior to the institution of the suit, with further interest at such rate not exceeding six per cent per annum as the Court deems reasonable on such principal sum, from the date of the decree to the date of payment, or to such earlier date as the Court thinks fit; Provided that where the liability in relation to the sum so adjudged had arisen out of commercial transaction, the rate of such further interest may exceed six per cent per annum, but shall not exceed the contractual rate of interest or where there is no contractual rate, the rate at which moneys are lent or advanced by nationalised banks in relation to commercial transactions. 37. Section 2(b) of the Interest Act, 1978 (Act No.14 of 1978) defines current ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the claimant in the claim petition nor was it awarded by the Tribunal. The Supreme Court held that the grant of interest is not dependant on any pleading in that regard and can even be orally asked if the contingency arises. 41. Thus, it is seen that different views are taken on the issue and interest was being granted depending upon the facts and circumstances of each case. In this context, we may also usefully notice section 167 of the M.V. Act, which is reproduced hereunder: 167. Option regarding claims for compensation in certain cases: Notwithstanding anything contained in the Workmen's Compensation Act, 1923 (8 of 1923) where the death of, or bodily injury to any person gives rise to claim for compensation under this Act and also under the Workmen's Compensation Act, 1923, the person entitled to compensation may without prejudice to the provisions of Chapter X claim such compensation under either of those Acts but not under both. 42. The Section, therefore, gives an option to the claimant to claim for compensation in certain cases, either under the Workmen's Compensation Act, 1923 or under the Motor Vehicles Act. 43. Rule 473 of the Motor Vehicle Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the borrower to the lender for forbearance or detention of the amount lent to him. The rate of interest may either be by agreement or by operation of statutory provisions where it specifically provides for such payment. 47. There is difference between the amount borrowed for specific purpose and the amount to be granted in a motor accident claim case. The amount in the former case is on account of contractual obligation whereas in the latter case it is a variable one and not based on any agreement but has occasioned on account of the death of or injury caused to any person resulting from an accident arising out of the use of a motor vehicle or motor vehicles due to negligence. 48. The natural conception of the word interest is the ordinary or normal profit, which the person entitled to the principal money, might have made had he used the said money, or his expected loss under usual or ordinary circumstances due to the non-payment of the same at the proper time. 49. It is seen that interest prior to the date of filing of the suit is a matter of substantive law and is outside the scope of Section 34. This section applies to the award of interest from the date of the suit t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e owner is deprived of his property without paying price thereof, or where money has been improperly detained and not paid to the person who is entitled to it, or where an employer withholds terminal benefits of an employee even after retirement without any valid reason etc. 51. As regards interest as damages, the law is well settled. Normally, interest cannot be awarded by way of damages. A mere detention of debt will not entitle the creditor to interest by way of damages. Such interest may, however, be awarded in cases where money due is wrongfully withheld and there are equitable grounds for awarding interest. Interest by way of damages can be claimed only from the date of written demand. Grant of interest pendente lite is, no doubt, in the discretion of the court but the discretion is judicial and has to be exercised properly, judiciously and on sound legal principles. Normally, the Court should allow interest pendente lite and the successful party should not be deprived of it except for sufficient reasons. 52. Thus, it is seen that the Court while passing a decree for payment of money is expected to award interest to a successful party from the date of suit to the date o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 56. In Corporation Bank vs. D.S. Gowda, the Supreme Court was called upon to decide whether the Bank was entitled to claim compound interest on agricultural advances. The High Court after considering English and Indian decisions in the light of Section 21-A of the Banking Regulations Act, 1949 as also circulars issued by the Reserve Bank of India held that the concept of compound interest was strange to agricultural financing and the Bank had no power to charge compound interest. Dismissing the appeal and upholding the decision, the Supreme Court agreed with the law laid down by the High Court that Banks cannot charge compound interest with quarterly rests on agricultural advances . 57. In appropriate cases, interest can be awarded by the Supreme Court or by the High Court in exercise of the writ jurisdiction under Article 226 of the Constitution of India. 58. Where the decree is reversed or modified the successful appellant is entitled to claim interest on the sum deposited by him and withdrawn by the other side from the date of deposit till the date of repayment or redeposit. Section 144 C.P.C. expressly provides refund of interest. 59. Rate of interest: Grant of intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under Clause (b) without giving a reasonable opportunity to the employer to show cause why it should not be passed. Explanation: For the purposes of this sub-section Scheduled Bank means a bank for the time being included in the Second Schedule to the Reserve Bank of India Act, 1934. 3-A: the Interest and the penalty payable under sub-section (3) shall be paid to the workman or his dependent, as the case may be. 62. A reading of the above section would show that it is a mandatory provision. If the compensation is not paid within one month, the claimant shall be entitled to simple interest at the rate of 12% per annum and in the pinion of the Commissioner, there is no justification for the delay, he may also direct the employer to pay a further sum not exceeding fifty per cent of such amount by way of penalty. Therefore, the employer is bound to deposit compensation suo motu as soon as it falls due and non-deposit of the same within the stipulated period would make him liable to pay interest and penalty. Courts have held that it is the primary duty of the employer either to deposit the compensation amount within one month from the date of accident or to inform the Insu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 63. The Interest Act, 1839 was replaced by Interest Act, 1978 which remained in force for over a century presented many difficulties and in order to remove those difficulties it was replaced by the Interest Act, 1978 which came into existence on 19th August, 1981. Claims of interest may arise in many types of cases, namely, dues of employees, amount illegally recovered, amount of tax, mortgage property, sale of immovable property, claims on life policies, maintenance, accident claims, detention of money, railway claims, mesne profits etc. In a suit for compensation for death in accident the court has discretion to grant interest on the amount of compensation. In a fatal accident there are economic losses and non-economic losses, which form the component parts of compensation. Interest must be allowed on sums actually spent or lost upto the date of trial such as medical charges, loss of earnings and out of pocket expenses. Future earnings and loss dependency are paid in advance and do not qualify for interest. The Court should fix a composite rate of interest keeping in view the size of ach of the two components. 64. As already noticed, different courts have adopted different v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey: A decree may be for specific performance of a contract, for recovery of possession, a declaratory decree etc. Where the decree is for payment of money with or without any other relief, it is a money decree and the court can allow interest on the principal sum adjudged for the period after the institution of the suit under section 34 C.P.C. It is entirely a matter for the court's discretion under Section 34 C.P.C. whether to award interest from the date of filing of suit, where the decree is for the payment of money. 72. Pendente lite interest in mortgage suits: Provisions of Section 34 C.P.C. are not applicable to mortgages. Under Order 34 Rule 11 C.P.C. the plaintiff is entitled to get interest at the agreed rate till the period of redemption expires. As regards pen dente lite and future interest, the ordinary rule is that interest from the date of suit to the date of redemption should be awarded at the contract and not a different rate unless there are circumstances which justify doing so. 73. Future interest in cases other than arbitration proceedings can be allowed by the court under section 34 C.P.C. Under Order 34 Rule 11 CPC plaintiff is entitled to interest at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y not be from a date earlier than the date of the claim. The language of section 171 of M.V. Act is very clear and unambiguous that interest can be awarded by the Court or Tribunal at such rate as it thinks fit but the same cannot be made earlier than the date of the claim. As already seen from the judgments cited by both the parties, no ratio has been laid down in any of the decisions in regard to payment of interest. Therefore, discretion vests with the Tribunal or the Court, as the case may be, under section 171 of the Act to award interest at such rate, which is reasonable, and from such date not earlier than making the claim as it may specify in this behalf. 78. Further, as can be seen from Section 167 of the MV Act, option is given to the parties regarding claims for compensation in certain cases. Section 4-A(3) provides that where the employer is in default in paying the compensation under the Act within a period of one month from the date it fell due, the Commissioner shall direct the employer that in addition to the amount of arrears of amount, pay simple interest at the rate of 12% per annum or at such rate higher rate not exceeding the maximum of the lending rates of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion has been made under the statute such provision has to govern the field. When the statute has not fixed any rate of interest to be awarded on the award of compensation amount, it is not open for the Court to read into the provision and fix certain rate of interest. Section 171 of the M.V. Act in unequivocal terms conferred discretion on the Tribunal to grant interest on the amount of compensation awarded at such rate as it may specify in that behalf. Therefore, Court has to take all the relevant factors into consideration while awarding the rate of interest on the compensation. The factors may include inflation, change of economy, policy being adopted by the Reserve Bank of India from time to time, how long the case is pending for determination of compensation, permanent injuries suffered by the victim, enormity of the suffering, loss of future income, loss of enjoyment of life etc. If any rate of interest is imported into the section by the Court, it would be contrary to the intent of the Act. The Legislature in its wisdom thought it fit to confer such discretion only on the Tribunal or the Court with the object that the Tribunal or the Court while awarding the rate of interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Court under Section 34 C.P.C. to grant interest at such rate the Court deems reasonable for different stages viz., interest prior to the institution of the suit on the principal sum adjudged, interest on the principal sum adjudged from the date of the suit to the date of the decree and interest on the principal sum adjudged from the date of the decree to the date of the payment. Only the future interest payable for the period from the date of the decree to the date of payment on the principal sum adjudged was specified as 6% per annum and for other stages discretion was conferred on the Court to arrive at the reasonable rate of interest on an appreciation of the evidence on record. Whereas under section 171 of the M.V. Act discretion has been given to the Tribunal to grant interest at such rate the Tribunal may deem fit and appropriate in the facts and circumstances of each case. In cases under section 34 C.P.C the principal sum, in most of the cases, is a determined one based on the agreement or contract. Whereas in the cases arising under the M.V. Act, the amount of compensation has to be determined taking into account various factors such as loss of earnings, percentage of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rate of interest depending upon the facts and circumstances of each case. In our considered opinion, while granting interest on the compensation amount awarded, the Tribunal or the Court shall award the rate of interest, which is just and reasonable on an analysis of the facts and circumstances obtaining in the case. 86. In the result, we remit the matters to the appropriate Bench to consider the other grounds raised in the appeal challenging the award of the Tribunal and dispose of the same in accordance with law. The rate of interest on the compensation amount shall be awarded by the Tribunal or the Court depending upon the facts and circumstances of each case and the relevant guiding factors as observed as above. We make it clear that if the compensation amount is enhanced, interest can be awarded at the discretion of the bench either from the date of the petition or from the date of the award, as the case may be. 87. We answer the reference accordingly. The matters are remitted back to the Division Bench for disposal in accordance with law. 88. It was held in the instant case that the grant of interest is dependant on the facts and circumstances of each case and a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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