Case Note & Summary
The plaintiff, Mahindra & Mahindra Limited, filed a summary suit against NEPC Micon Limited for recovery of Rs. 1.06 crores, comprising a principal sum of Rs. 60 lakhs (actually Rs. 1 crore bill discounted) and interest at 18% p.a. from the date of suit. The defendant admitted the principal liability under a bill discounting facility but contested the interest rate, claiming it was exorbitant. The court framed the sole issue of whether the plaintiff was entitled to interest and at what rate. The plaintiff had discounted a bill of exchange for Rs. 1 crore at 25% p.a. for 90 days, paying Rs. 93.59 lakhs to the defendant. The defendant defaulted on the due date (4th February 1996) and later admitted liability in a letter dated 5th February 1996, offering to repay by 12th February 1996. The plaintiff claimed interest at 30% p.a. from 15th May 1998 until suit, after adjusting margin. The court analyzed the documentary evidence, including the bill discounting advice showing a 25% discount rate, and the defendant's admissions. The court held that the plaintiff was entitled to interest at 18% p.a. from the due date (4th February 1996) until the date of suit, and thereafter at 6% p.a. pendente lite and future interest until realization, as per Section 34 of the Code of Civil Procedure, 1908. The court rejected the claim for 30% interest as excessive and not supported by the contract. The suit was decreed accordingly.
Headnote
A) Contract Law - Bill Discounting - Interest on Default - The plaintiff granted a bill discounting facility to the defendant, who defaulted on repayment of principal and interest. The court considered the rate of interest payable on the defaulted amount, noting that the defendant admitted the principal liability but disputed the interest rate claimed (30% p.a.). Held that the plaintiff is entitled to interest at 18% p.a. from the due date until filing of suit, and thereafter at 6% p.a. pendente lite and future interest as per Section 34 CPC (Paras 1-8).
Issue of Consideration
Whether the plaintiff is entitled to interest on the defaulted principal amount and at what rate.
Final Decision
The suit is decreed in favour of the plaintiff for the principal amount of Rs. 60 lakhs (or the admitted principal) with interest at 18% p.a. from the due date (4th February 1996) until the date of suit, and thereafter at 6% p.a. pendente lite and future interest until realisation, as per Section 34 CPC.
Law Points
- Interest on bill discounting facility
- rate of interest on default
- contractual interest vs. court discretion
- Section 34 CPC
