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TMI Blog2024 (8) TMI 652X X X X Extracts X X X X X X X X Extracts X X X X ..... e appointed date till the date of repayment, calculated on the basis of compound interest with monthly rests, the rate of interest being taken at each point of incidence at each monthly rest, in terms of the RBI rates prevalent at that point of time, multiplied by three. Hence, the award-debtor is to pay interest to the award-holder at the variable rates of interest as notified by the RBI from time to time, multiplied by three, throughout the period, calculated at each monthly interval at the then prevailing rates. The mode of calculation having thus been determined, the award-debtor is directed to make the full payment of interest as per the calculations in the light of the observations above to the award-holder within four (04) weeks from date. For such purpose, along with such payment of the entire interest component over and above the principal awarded amount, deducting the amounts already paid/deposited in terms of court orders, the award-debtor shall also file in court a copy of the detailed calculations for arriving at the amount paid to the award-holder. The award holder will be at liberty to withdraw (if deposited), alternatively utilize (if paid directly) the amount alrea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made on the basis of several appointed days, taking into account notified rates at different points of time, which is completely contrary to the provisions of the MSME Act. Thus, it is argued that the calculations ought to be made at the rate which prevailed on the appointed day. 4. On the other hand, learned counsel for the respondent/award-debtor argues that Section 16 contemplates fluctuating rates to be the basis of calculation of interest. In support of such contention, learned counsel cites Government of Maharashtra v. Shrivin Pharma Pvt. Ltd., reported at 2023 SCC OnLine Cal 3482 and Usha Martin Ltd. v. Eastern Gases Ltd., reported at 2022 SCC OnLine Cal 3342, both co-ordinate Bench decisions of this Court. 5. Insofar as certain payments were made at the fixed rate as on the appointed day by the award-debtor pursuant to orders of court and undertakings given before the court, it is argued that the same cannot bind the petitioner to a fixed rate. It is argued that there cannot be any estoppel against the law, in support of which proposition learned counsel cites Krishna Rai (dead) represented through LRs and Others v. Banaras Hindu University, reported at (2022) 8 SCC 713. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut hereinbelow: 16. Date from which and rate at which interest is payable. where any buyer fails to make payment of the amount to the supplier, as required under section 15, the buyer shall, notwithstanding anything contained in any agreement between the buyer and the supplier or in any law for the time being in force, be liable to pay compound interest with monthly rests to the supplier on that amount from the appointed day or, as the case may be, from the date immediately following the date agreed upon, at three times of the bank rate notified by the Reserve Bank. 14. Interest, as per Section 16, thus has the following features: (i) The award of interest is mandatory, in view of the expression shall preceding the non-obstante clause; (ii) The mode of calculation of interest is compound interest with monthly rests; (iii) The date of commencement is the appointed day or, as the case may be, from the date immediately following the date agreed upon; (iv) The rate of interest shall be three times the bank rate notified by the RBI. 15. The expression appointed day has been defined in Section 2(b) of the MSME Act as the day following immediately after the expiry of the period of 15 days ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he end of the first month, the total amount would be Rs. 100 + 10% thereof that is Rs. 10/-, which equals Rs. 110/-. 23. The said sum of Rs. 110/-, which is the initial principal plus interest for the first month, forms the basis of calculation or principal for the second month. Thus, calculated, the principal for the second month would be Rs. 110/-, which would be the base amount on which further interest would be calculated. 24. Hence, although the commencement of calculation is tied to the appointed day, the point of incidence of the bank rates for calculation of interest becomes the end point of each month, which are also known as monthly rests as stipulated in Section 16 itself. Hence, by its very nature, compound interest has to be imposed at staggered intervals. 25. Since the point of incidence of the rate of interest is the rate prevailing at the end of each month, which is the monthly rest, the rate prevailing on such date must be the premise of calculation. For instance, if the initial rate of interest prevailing on the appointed day was x% , the calculation for the first month would be equal to Principal (P) + x% of principal . Again, at the beginning of the second month ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. Hence, by its very definition, compound interest at monthly rest is variable and cannot be static, frozen at the appointed day. 32. Even a plain reading of Section 16 clearly indicates that the compound interest envisaged therein has to be with monthly rests, taking the then prevailing bank rates notified by the RBI at each monthly interval. 33. The argument of the petitioner regarding liberal interpretation in beneficial legislation is a double-edged sword and can work either way. It entirely depends on whether the RBI bank rates increase or decrease at a given point of time. A beneficial interpretation cannot be in thin air, on a prospective basis, in anticipation of the fluctuation of rates. In any event, Section 16 stipulates three times the RBI rates which itself is the beneficial component of the legislation insofar as interest is concerned. No further benefit can be read into it which would be contrary to Section 16. 34. However, the judgments cited with regard to rates of interest by the award-debtor are not germane. In the case of Government of Maharashtra (supra), the learned Single Judge was considering two issues, as to whether adjudication of the Facilitation Counci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the RBI-notified rates at variable points of time, to be taken at each monthly interval which is the point of incidence of such rates. 40. Accordingly, the version of the award-debtor is accepted. The rate of interest has to be calculated from the appointed date till the date of repayment, calculated on the basis of compound interest with monthly rests, the rate of interest being taken at each point of incidence at each monthly rest, in terms of the RBI rates prevalent at that point of time, multiplied by three. Hence, the award-debtor is to pay interest to the award-holder at the variable rates of interest as notified by the RBI from time to time, multiplied by three, throughout the period, calculated at each monthly interval at the then prevailing rates. 41. Since the executing court cannot go behind the award itself, the award is to be interpreted for the purpose of enforcement, to make it workable, in the light of the above principles. 42. The mode of calculation having thus been determined, the award-debtor is directed to make the full payment of interest as per the calculations in the light of the observations above to the award-holder within four (04) weeks from date. For ..... X X X X Extracts X X X X X X X X Extracts X X X X
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