Case Note & Summary
The case involves two appeals arising from a common order of a learned single Judge of the Karnataka High Court regarding the rate of interest payable on a fixed deposit after its maturity. The appellant in Writ Appeal No.30196/2013, Venkateshwara Power Project Ltd. and Sugar Factory, contended that the interest payable after maturity should be only 6% per annum, while the appellant in Writ Appeal No.30336/2013, Yamakanmaradi Urban Co-operative Society Ltd., argued that they were entitled to 17% interest as per the original agreement. The learned single Judge had fixed the interest at 12% per annum from the date of maturity till payment. The High Court, in its judgment, noted that the deposit receipt specified the interest rate only for the period of deposit and was silent on the post-maturity rate. The court held that once the deposit matures, the relationship between the depositor and the society becomes that of a debtor and creditor, and in the absence of a contractual rate, the court can award interest under Section 34 of the Code of Civil Procedure, 1908, which provides for interest at 12% per annum. The court rejected both the contention of 6% (as too low) and 17% (as not agreed for post-maturity period) and upheld the single Judge's order of 12% interest. The appeals were accordingly dismissed.
Headnote
A) Interest - Post-Maturity Rate - Fixed Deposit - Contract Act, 1872, Section 34 CPC - Where the deposit receipt specifies interest rate only for the period of deposit and is silent on post-maturity interest, the court may award interest at the rate prevailing under Section 34 CPC (12% per annum) from the date of maturity till payment, as the relationship becomes that of a debtor and creditor. (Paras 2-4) B) Co-operative Societies - Interest - Deposit - Karnataka Co-operative Societies Act, 1959 - The court held that the rate of interest agreed upon between the parties for the deposit period (17%) does not automatically apply after maturity; in absence of agreement, the court can fix a reasonable rate. (Paras 2-4)
Issue of Consideration
What is the rate of interest payable on a fixed deposit after the date of maturity when the deposit receipt does not specify the post-maturity interest rate?
Final Decision
Both appeals dismissed; order of learned single Judge fixing interest at 12% per annum from date of maturity till payment is upheld.
Law Points
- Interest rate after maturity
- Section 34 CPC
- Co-operative Societies Act
- 1959
- Contract Act
- 1872
