Case Note & Summary
The State of Gujarat, as original defendant, appealed against the judgment and decree dated 30.04.2003 passed by the 6th Joint Civil Judge, Vadodara in Special Civil Suit No. 107 of 1988, whereby the suit was partly decreed and the defendant was directed to pay Rs. 5,95,911.52 to the plaintiff with interest at 15% from the date of suit till realization. The plaintiff, Ashok Builders and Engineers, a registered partnership firm and Class B Government Contractor, had filed the suit to recover Rs. 9,39,990/- with interest at 18% for work done under a contract for construction of additional building for Central Library at Baroda. The work order was issued on 29.03.1982 with completion date 28.06.1983, but due to alleged delays and hindrances by the R&B Department, the work could not be completed on time. The trial court partly decreed the suit. The State challenged the decree primarily on the ground of excessive interest. The High Court, after hearing both sides, held that the rate of interest under Section 34 CPC should be reasonable. Considering that the contractual rate was 12% and the prevailing bank rate was lower, the court reduced the pendente lite and future interest from 15% to 9% per annum. The appeal was partly allowed, and the cross-objection was dismissed.
Headnote
A) Civil Procedure - Interest - Section 34 CPC - Pendente lite and future interest - The trial court awarded interest at 15% per annum from the date of suit till realization in a suit for recovery of money under a construction contract. The High Court held that the rate of interest under Section 34 CPC should be reasonable and not excessive, and reduced it to 9% per annum, noting that the contractual rate was 12% and the prevailing bank rate was lower. (Paras 5-8) B) Contract Law - Construction Contract - Delay and Hindrances - The plaintiff contractor alleged delay and hindrances by the defendant State department, leading to delayed completion. The trial court partly decreed the suit for Rs. 5,95,911.52. The High Court did not interfere with the quantum of damages but modified the interest rate. (Paras 2-4)
Issue of Consideration
Whether the trial court was justified in awarding interest at 15% per annum on the decretal amount from the date of suit till realization, and what is the appropriate rate of interest under Section 34 of the Code of Civil Procedure, 1908.
Final Decision
The First Appeal is partly allowed. The judgment and decree of the trial court is modified to the extent that the rate of interest on the decretal amount from the date of suit till realization is reduced from 15% per annum to 9% per annum. The Cross Objection is dismissed. No order as to costs.
Law Points
- Interest rate under Section 34 CPC
- Pendente lite and future interest
- Commercial contract interest rate
- Reasonable rate of interest
