Supreme Court of India
TAHAZHATHE PURAYIL SARABI & ORS.versusUNION OF INDIA & ANR.
- Citation
- 2009 INSC 815
- Decided
- 14 May 2009
- Disposal
- Appeal(s) allowed
- Bench
- ALTAMAS KABIR
Holding
When a money decree is passed, interest must be awarded from the date of filing of the claim to the date of the award and thereafter at a higher rate until actual payment, and the Tribunal and High Court erred in not granting such interest.
Summary
The appellants' husband was robbed and thrown from a moving train in 1998, resulting in his death. The appellants filed a claim for compensation before the Railway Claims Tribunal, which awarded Rs.4 lakh in 2007 but granted interest only in case of default. The appellants appealed, arguing that interest should accrue from the date of filing of the claim (or earlier) until full payment. The Supreme Court held that, in the absence of a specific statutory provision, courts may award interest under the Interest Act, 1978 and CPC, s.34, and that interest should be payable from the date of the claim to the date of the award and thereafter at a higher rate until actual payment. Consequently, the Tribunal and High Court were wrong in limiting interest to a default clause. The Court modified the award, directing interest at 6% p.a. from claim filing to award and 9% p.a. thereafter, and allowed the appeal.
Issues considered
- The appropriate date from which interest on compensation awarded by the Railway Claims Tribunal should accrue
- Whether the Tribunal and the High Court erred in not granting interest except for a default clause
- Whether courts have authority to award interest under the Interest Act, 1978 and CPC when the Railways Act and Railway Claims Tribunal Act are silent
Legislation cited
- Code of Civil Procedure, 1908s. 34
- Interest Act, 1978s. 3
- Railway Claims Tribunal Act, 1987s. 16
- Railways Act, 1989s. 123(c), s. 124, s. 124A
Subjects
interest on money decreeRailway Claims Tribunalcompensation for deathRailways ActInterest ActCivil Procedure Codestatutory silencedefault clause
Judgment
(2009] 10 S.C.R. 70
A TAHAZHATHE PURAYIL SARABI & ORS.
v.
UNION OF INDIA & ANR.
(Civil Appeal No. 3568 of 2009)
MAY 14, 2009
B
[ALTAMAS KABIR AND DR. MUKUNDAKAM
SHARMA, JJ.]
Interest Act, 1978 - s.3 - Code of Civil Procedure, 1908
c - s.34 - Money decree - Interest on, since when payable -
Death of railway passenger - Compensation claim - Railway
Claims Tribunal awarded compensation but did not grant
interest on awarded amount from date of incident or date of
claim - It awarded interest only in case of default in
~
D compliance with order for deposit of compensation amount -
Held: Payment of interest follows as a matter of course when
a money decree is passed - Interest is essentially a
compensation payable on account of denial of the right to
utilize the money due, which was, in fact, utilized by the person
E withholding the same - Though neither the Railway Claims
Tribunal Act nor the Railways Act made provision for payment
of interest on the awarded amount, power of Courts to grant
interest can also be referred to, from provisions of the Interest i
Act and CPC - On facts, there was no delay on part of
F claimants in making the claim - Even if, claimants may not
be entitled to claim interest from date of accident, interest on
the awarded sum has to be allowed from date of claim till date
of recovery, since the claimants cannot be faulted for delay
of approximately 8 years in making of the Award by the
Tribunal - Courts below erred in not granting any interest
G
whatsoever to the claimants, except by way of a default clause, -4
which is contrary to established principles relating to payment
of interest on money claims - Direction given that the
awarded sum be paid with interest @ 6% simple interest p.a.
H 70
TAHAZHATHE PURAYIL SARABI & ORS. v. UNION 71
OF INDIA & ANR.
from date of claim till date of Award and, thereafter, at the rate A
~
of 9% p.a. till date of actual payment of the same - Railways
Act, 1989 - ss.123(c), 124 and 124A ,... Railway Claims
Tribunal Act, 1987 - s. 16.
Appellant no.1's husband was robbed of money and
B
thrown out of a moving train by certain assailants as a
result of which he died. The accused persons were
convicted under Section 392 IPC and sentenced to 10
years rigorous imprisonment.
'·· The appellants claimed compensation before the c
Railway Claims Tribunal. The Tribunal, in terms of Section
123(~) of the Railways Act, 1989, awarded compensation
but did not grant interest on the awarded amount from
the-pate of incident or the date of claim. Interest @ 6.5%
p.a, w~s awarded only in case of default in compliance D
with the order for deposit of compensation amount.
Appellants filed 11ppe11I on the question of interest but the
High Court declined to interfere.
In appeal to this Court, the question which arose for
E
consideration was whether both Tribunal and the High
Court erred in not granting interest on the awarded
amount from date of incident or date of claim petition.
... ~
Allowing the appeal, the Court
F
HELD:1.1. Neither the Railway Claims Tribunal Act,
1987, nor the Railways Act, 1989, make provision for
payment of interest on any awarded amount. In cases
where the statute does not make any specific provision
for payment of interest on any awarded sum, the power G
-
of the Courts to grant interest can also b~ referred to from
>- the provisions of the Interest Act, 1978 and the Code of
Civil Procedure. [Para 13] [79-E; 79-G-H; 80-A]
H
72 SUPREME COURT REPORTS [2009] 10 S.C.R.
A 1.2. The Court, while making a decree for payment of
"
money is entitled to grant interest at the current rate of
interest or contractual rate as it deems reasonable to be
paid on the principal sum adjudged to be payable and/
or awarded, from the date of claim or from the date of the
B otder or decree for recovery of the outstanding dues.
There is also hardly any room for doubt that interest may
be claimed on any amount decreed or awarded for the
period during which the money was due and yet
remained unpaid to the claimants. (Para 16] (79-0-E, G-
c H~ 80-A]
1.3. Normally when a money decree i§ passed, it is
most essential that ;nterest be granted for the period
during which the money was due, but could not be
utilized by lhe person in whose favour an order of
-
D recovery of me>ney was passed. Interest is essentially a
cbmpensation payable on a1.count of denial of th~ right
to utilize th2 money due, which has been, in fact, utilized
by the person withholding the same. Accordingly,
payment of interest follows as a matter of course when
E a money decree is passed. As regards the question as
to since when is such interest payable on such a decree,
though, there are two divergent views, one indicating that
interest is payable from the date whsn claim for the
principal sum is made, namely, the date of institution of "' ...
F the proceedings till the recovery of the amount, the other
view is that such interest is payable only when a
determination is made and order is passed for recovery
of the dues. However, the more consistent view has been
the former and in rare cases interest has been awarded
G for periods even prior to the institution of proceedings for
recovery of the dues, where the same is provided for by
the terms of the agreement entered into between the
parties or where the same is permissible by statute.
...\
-
Accordingly, the order of the Railway Claims Tribunal
H directing payment of interest on default of the payment
-
TAHAZHATHE PURAYIL SARABI & ORS. v. UNION 73
OF INDIA & ANR.
_,,, of the principal sum within a period of 45 days, cannot A
be sustained. When there is no specific provision for
grant of interest on any amount due, the Court and even
Tribunals have been held to be entitled to award interest
in their discretion, under the provisions of Section 3 of
the Interest Act and Section 34 CPC. [Para 17 and 19] [83- B
F-H; 84-A-D]
,k Rathi Menon vs. Union of India (2001) 3 SCC 714; N.
ParameswaranPillai & Anr. vs. Union of India & Anr. (2002)
4 SCC 306; PratappNarain Singh Deo vs. Srinivas Sabata
& Anr. (1976) 1 SCC 289;Tejinder Singh Gujral vs. lnderjit
c
Singh and Anr. (2007) 1 SCC 508 and Or. K. R. Tandon vs.
_,.., Om Prakash & Anr. (1998) 8 SCC 421 L; Jagdish Rai &
' Brothers Vs. Union of India (1999) 3 SCC 257 and Hindustan
Construction Co. Ltd. vs. State of Jammu & Kashmir (1992)
4 sec 217, referred to. D
2.1. In the instant case, the claim for compensation
accrued on 13th November, 1998, when the husband of
appellant No.1, died on account of being thrown out of
the moving train. The claim before the Railway Claims E
Tribunal was filed immediately thereafter in. 1999. There
was no delay on the part of the claimants/appellants in
making the claim, which was ultimately granted for the
-- • maximum amount of Rs.4 lakhs on 26th March, 2007.
Even if, the appellants may not be entitled to claim interest F
from the date of the accident, the claim to interest on the
awarded sum has to be allowed from the date of the
application till the date of recovery, since the appellant
cannot be faulted for the delay of approximately 8 years
in the making of the Award by the Railway Claims
G
Tribunal. Had the Tribunal not delayed the matter for so
~·
}. long, the appellants would have been entitled to the
beneficial interest of the amount awarded from a much
earlier date and there is no reason why they should be
deprived of such benefit. Payment of interest is basically
H
74 SUPREME COURT REPORTS [2009] 10 S.C.R.
A compensation for being denied the use of the money ,._
during the period which the same could have been made
available to the claimants. [Para 23] [85-E-H; 86-A-B]
2.2. Both the Tribunal, as also the High Court, were
B Wrong in not granting any interest whatsoever to the
appellants, except by way of a default clause, which is
contrary to the established principles relating to payment
of interest on money claims. It is directed that the
awarded sum will carry interest @ 6% simple interest p.a.
from the date of the application till the date of the Award
c and, thereafter, at the rate of 9% p.a. till the date Qf actual
payment of the same. [Para 24 and 25) [86-B-D]
Case Law Reference:
c2001) 3 sec 114 referred to Para 5
D
c2002) 4 sec 306 referred to Para 5
(1976) 1 sec 289 referred to Para 8
c2001) 1 sec 508 referred to Para 9
E
(1998) 8 sec 421 referred to Para 10
c2008) 9 sec 527 referred to Para 10
(1999) 3 sec 251 referred to Para 20 " ....
F (1992) 4 sec 211 referred to Para 21
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
3568 of 2009.
From the Judgment & Order dated 24.5.2007 of the High.
G
Court of Kerala at Ernakulam in M.F.A. No. 64 of 2007.
P.V. Dinesh for the Appellants.
K. Radhakrishnan, Naresh Kaushik, Rashmi Malhotra, A.K.
_..
-
H Sharma and Sushma Suri for the Respondents.
·- TAHAZHATHE PURAYIL SARABI & ORS. v. UNION 75
OF INDIA & ANR.
_. A
The Judgment of the Court was delivered by
ALTAMAS KABIR, J. 1. Leave granted.
2. On 13th November, 1998, one Kunhi Moosa, the
husband of the Appellant No.1, Thazhathe Purayil Sarabi,
boarded the Madras Mail from Payyannur Railway Station to B
go to Madras. He had occupied berth No.67 in Coach No.S-5,
while his brother-in-law and two others who were travelling with
him occupied berth Nos.66 and 26 in the same coach. When
the train was about to move from Parappanangadi Railway
Station, the said Kunhi Moosa was robbed of the money that c
he was carrying with him and during the scuffle he was thrown
out of the train by his assailants as a result of which he expired.
The police registered Crime No.46/98 in respect of the said
incident and the case was taken to the to the Court of Sessions,
Kozhikode. D
3. In 1999, the appellants filed O.A.No.68 of 1999 before
the Railway Claims Tribunal, Ernakulam, for compensation
amounting to Rs.4 lakhs. On 18th August, 2006, the accused
persons were convicted under Section 392 of the Indian Penal E
Code ('IPC', for short) and sentenced to 10 years rigorous
imprisonment and to pay a fine of Rs.15,000/- each, in default
to undergo rigorous imprisonment for a further period.of one
- ~
year.
4. The Railway Claims Tribunal by its order dated 26th F
March, 2007, allowed the application in part and in terms of
Section 123(c) of the Railways Act, 1989, directed the Union
of India and its authorities to pay to the appellants herein
compensation of Rs.4 lakhs, out of which a sum of Rs.2 lakhs
was given to the Appellant No.1, a sum Rs.1,50,000/- was G
~ allotted to the Appellant No.2 and Rs.50,000/- was allotted to
-
~
the Appellant No.3. The Railway Claims Tribunal granted 45
days' time to the respondents herein to comply with the order
for payment of the compensation amount, failing which it was
"' directed that the appellants would be entitled to 6.5% interest H
76 SUPREME COURT REPORTS [2009] 10 S.C.R.
A per annum on the award amount from the date of default. ...
5. The said Award of the Railway Claims Tribunal was
challenged before the Kerala High Court at Ernakulam by the
appellants herein on the ground that in view of the decision of
this court in Rathi Menon Vs. Union of India [(2001) 3 SCC
B
714], the claim for compensation would arise from the date of
the incident. Such a view was expressed by this Court on
account of the fact that the Railways Act, 1989 did not fix the
amount of compensation, but left it to be determined by the
Central Government from time to time. Reliance was also
c placed on another decision of this Court in N. Parameswaran
Pillai & Anr. Vs. Union of India & Anr. [(2002) 4 SCC 306],
whereby 12% interest was granted from the date of application
till the date of judgment following the decision in Rathi Menon's
case (supra).
D
6. The Division Bench of the Kerala High Court took the
view that even though the interest for the prior period had not
been awarded, the Tribunal had awarded interest in case of
default in compliance with the order for deposit of the
E compensation amount. The High Court was of the view that
since the Tribunal had applied its mind while making the order
and since awarding interest is the discretion of the Tribunal,
there was no ground to admit the appeal only on the question
+
of Interest. The appeal was accordingly dismissed and the
F present appeal has been filed by the claimants, namely, the
----
heirs of Kunhi Moosa against the order of the High Court.
7. Having regard to the fact that the Railway Claims
Tribunal has awarded the maximum compensation which can
be awarded under the Act, the only question which, therefore,
G falls for decision in this appeal is whether both the said Tribunal
and the High Court were justified in not granting interest on the ,;. ...
amount of the Award from the date of the incident or from the
date of filing of the claim petition till actual payment of the
awarded sum.
H ...
TAHAZHATHE PURAYIL SARABI & ORS. v. UNION 77
OF INDIA & ANR. [ALTAMAS KABIR, J.]
~
8. Mr. P.V. Dinesh, learned Counsel for the appellant, A
submitted that in Rathi Menon's case (supra) one of the issue
which was touched upon was with regard to the question as to
the relevant date from which compensation would be payable
under the relevant provisions of the Railways Act, 1989. While
construing the provisions of Section 124A of the aforesaid Act B
under which the claim for compensation had been made, this
Court held that reference to the expression "pay compensation
to such extent as may be prescribed" indicated that the right
to claim compensation from the Railway Administration would
be acquired by the injured from the date of the said incident, c
which principle was also considered in the case of Pratap
Narain Singh Deo Vs. Srinivas Sabata & Anr. [(1976) 1 SCC
289].
9. Mr. Dinesh also submitted that the question of payment
of interest on the compensation awarded was considered by D
this Court in the case of Tejinder Singh Gujral Vs. lnderjit
Singh & Anr. [(2007) 1 sec 508], which was a case under the
Motor Vehicles Act. While considering the question of
compensation payable, the question of payment of interest on.
such compensation also fell for consideration of this Court and E
it was held that grant of interest was discretionary and was not
required to be claimed separately. It was held that interest is
granted by way of compensation and has to be reasonable
" depending upon the facts of the case and taking into account
all relevant factors. In the said case, the interest awarded 9% F
per annum was not interfered with by the Division Bench of the
High Court upon reference to the provisions of Section 166 of
the Motor Vehicles Act, 1988 and Section 34 of the Civil
Procedure Code.
G
10. In the case of Dr. K.R. Tandon Vs. Om Prakash & Anr.
~ [(1998) 8sec 421], which was also a claim for compensation
under the Motoi:_yehicles Act, the grant of interest on the
compensation award was not only upheld but keeping in mind
the surrounding circumstances, this Court also enhanced the
.. H
78 SUPREME COURT REPORTS [2009] 10 S.C.R.
A rate of interest from 6% to 12% from the date of the application ,.
being made. It was held that omission on the part of the Courts
below to award interest, irrespective of its rate, from the date
of the application was held to be unjustified. Mr. Dinesh
submitted that a decision, which was closer to the facts of this
8 case, was referred to by this Court in Union of India Vs.
Prabhakaran Vijaya Kumar & Ors. [(2008) 9 SCC 527], in
whi<eh, while considering the provisions of Sections 123(c)(2),
124r-A and 127 of the Railways Act, 1989 and the expression
"untoward incident" held that the provisions of Section 124-A
c is in the nature of a no-fault liability in case of railway accidents
and a bona fide passenger traveling on a train would be entitled
to compensation for such untoward incident irrespective of who
was at fault therefor.
11. Mr. Dinesh submitted that payment of interest on any
D suqh amount which is held to be due to a person is purely a
matter of discretion of the Court, except in cases where a
statutory rate of interest is prescribed. Even in cases where no
interest is provided for under the statute, the Court, having
regard to the provisions of the Interest Act, 1978 and Section
E 34 of the Civil Procedure Code, is entitled to grant interest in
its discretion. Mr. Dinesh submitted that when any amount is
due to a creditor and the same is not paid by the debtor over
a <Certain period, the creditor is deprived of the use of the said j
arnount for the period during which the amount remains unpaid
F fo~ which he is entitled to be compensated by way of payment
of interest. Based on such submissions, Mr. Dinesh urged that
both the Tribunal as well as the High Court had erred in not
granting interest on the awarded amount.
12. On the other hand, also relying on the decision of this
G
court in Rathi Menon's case (supra), Mr. K. Radhakrishnan,
_.
le.arned Senior counsel submitted that the significance of the
said decision is that it held that the right to claim compensation
is acquired on the date of the incident but the relevant date for
determination of compensation is the date of determination by
H
TAHAZHATHE PURAYIL SARABI & ORS. v. UNION 79
OF INDIA & ANR. [ALTAMAS KABIR, J.]
... the Tribunal and not the date of incident. Mr. Radhakrishnan A
submitted that the said decision did not really further the
appellants' case since, in any event, the appellants could be
awarded interest, if at all, from the date of the Award and not
from any previous period. Mr. Radhakrishnan urged that in the
instant case a direction had been given by the Railway Claims B
Tribunal to make payment of the compensation amount within
45 days from the date of the Award, failing which the appellants
-+
would be entitled to the interest at the rate of 5% per annum
from the date of default. According to Mr. Radhakrishnan, even
if the claim of the appellants was accepted, having regard to c
the decision in Rathi Menon's case (supra), such claim would
be restricted only to the period of 45 days within which period
'payment of awarded amount was to be made, since in default
of such payment, interest would be payable on the awarded
sum at the rate indicated in the order. Mr. Radhakrishnan
• submitted that no interference was called for with the order of
D
the Tribunal and the High Court impugned in this appeal.
13. Admittedly, neither the Railway Claims Tribunal Act,
1987, nor the Railways Act, 1989, make provision for payment
of interest on any awarded amount. While Section 16 of the E
1987 Act prescribes the procedure for making an application
to the Claims Tribunal, the right to receive compensation is
• contained in Sections 124 and 124-A comprising Chapter XIII
of the 1989 Act dealing with the liability of the Railway
Administration for death and injury to passengers due to F
accidents. Even though there is no provision in either of the
Acts for payment of interest on the awarded sum, there is no
denying the fact that the right to claim compensation accrued
on the date of the incident, although, compensation has been
held in Rathi Menon's case (supra) is to be computed from the G
;.. date of the Award of the Claims Tribunal. In cases where the
statute does not make any specific provision for payment of
interest on any awarded sum, the power of the Courts to grant
interest can also be referred to from the provisions of the
H
80 SUPREME COURT REPORTS [2009] 10 S.C.R.
A Interest Act, 1978 and the Code of Civil Procedure. Section 3 ...
of the Interest Act 1978, which confers power on the Court to
allow interest reads as follows :
"3. Power of court to allow interest. - (1) In any proceedings
for the recovery of any debt or damages or in any
B
proceedings in which a claim for interest in respect of any
debt or damages already paid is made, the court may, if
it thinks fit, allow interest to the person entitled to the debt ...
or damages or to the person making such claim, as the
case may be, at a rate not exceeding the current rate of
c interest, for the whole or part of the following period, that
is to say,-
(a) If the proceedings relate to a debt payable
by virtue of written instrument at a certain
D time, then, from the date when the debt is •
payable to the date of institution of the
proceedings;
(b) If the proceedings do not relate to any such
debt, then, from the date mentioned in this
E
regard in a written notice given by the person
entitled or the person making the claim to the
person liable that interest will be claimed, to
the date of institution of the proceedings:
F Provided that where the amount of the debt or
damages has bean repaid before the institution of the
proceedings interest shall not be allowed under this
section for the period after such repayment.
G (2) Where, in any such proceedings as are
mentioned in subsection ( 1), -
(a) Judgment, order or award is given for a sum
which, apart from interest on damages,
exceeds four thousand rupees, and
H
TAHAZHATHE PURAYIL SARABI & ORS. v. UNION 81
OF INDIA & ANR. [ALTAMAS KABIR, J.]
(b) The sum represents or includes damages in A
respect of personal injuries to the plaintiff or
any other person, or in respect of a person's
death,
then, the power conferred by that subsection shall be
B
exercised so as to include ill that sum interest on those
damages or on such part of them as the court considers
appropriate for the whole or part of the period from the
date mentioned in the notice to the date of institution of
the proceedings, unless the court is satisfied that there are
special reasons why no interest should be given in respect
c
of those damages.
(3) Nothing in this section, -
(a) shall apply in relation to- c
(i) Any debt or damages upon which interest is
payable as of right by virtue of any
agreement; or
(ii) Any debt or damages upon which payment E
of interest is barred, by virtue of all express
agreement;
.- (b) Shall affect-
(i) The compensation recoverable for the F
dishonour of a bill of exchange, promissory
note or cheque, as defined in the Negotiable
Instruments Act, 1881 (26 of 1881); or
(ii) The provisions of rule 2 of Order 11 of the G
First Schedule to the Code of Civil
Procedure, 1908 (5 of 1908);
(c) Shall empower the court to award interest upon
interest."
H
82 SUPREME COURT REPORTS (2009J 10 S.C.R.
A 14. As will be evident from the aforesaid provisions, the
same, inter alia, provided that in any proceedings for the
recovery of any debt or damages the Court may, if it thinks fit,
allow interest to the person entitled to the debt or damages at
a rate not exceeding the. current rate of interest for the whole
B or part of the period from the date when the debt is payable. to
the date of the incident of the proceedings, if such debt was
payable by virtue of a writter; instrument at a certain time or if
the proceedings do not relate to any such debt, then, from the
date mentioned in any written notice given by the person
c making a claim to the person liable that interest would be
claimed from the date of institution of the proceedings.
15. As indicated hereinbefore, apart from the provisions
of the Interest Act, Section 34 of the Civil Procedure Code also
empowers the Court to order interest on a decree for payment
D of money in the following manner :
•
"34. lnterest.-(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 tt1e Court deems reasonable to be
E 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, 2[with further interest at such rate not
exceeding six per cent, per annum as the Court deems ..
F 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 a commercial transaction,
G the rate of such further interest may exceed six per cent,
per annum, but shall not exceed the contractual rate of
;nterest or where there is no contractual rate, the rate at
which moneys are lent or advanced by nationalised banks
in relation to commercial transactions.
H
TAHAZHATHE PURAYIL SARABI & ORS. v. UNION 83
OF INDIA & ANR. [ALTAMAS KABIR, J.)
Explanation /.-In this sub-section, "nationalised A
bank" means a corresponding new bank as defined in the
Banking Companies (Acquisition and Transfer of
Undertakings) Act 1970 (5 of 1970).
Explanation //.-For the purposes of this section, a
B
transaction is a commercial transaction, if it is connected
with the industry, trade or business of the party incurring
the liability.]
(2) Where such a decree is silent with respect to the
payment of further interest 3[on such principal sum] from C
the date of the decree to the date of payment or other
earlier date, the Court shall be deemed to have refused
such interest, and a separate suit therefore shall not lie."
16. It is, therefore, clear that the Court, while making a o
decree for payment of money is entitled to grant interest at the
current rate of interest or contractual rate as it deems
reasonable to be paid on the principal sum adjudged to be
payable and/or awarded, from the date of claim or from the date
of the order or decree for recovery of the outstanding dues. E
There is also hardly any room for doubt that interest may be
claimed on any amount decreed or awarded for the period
during which the money was due and yet remained unpaid to
the claimants.
17. The Courts are consistent in their view that normally F
when a money decree is passed, it is most essential that
interest be granted for the period during which the money was
due, but could not be utilized by the person in whose favour an
order of recovery of money was passed. As has been frequently
explained by this Court and various High Courts, interest is G
,._ essentially a compensation payable on account of denial of the
right to utilise the money due, which has been, in fact, utilized
by the person withholding the same. Accordingly, payment of
interest follows as a matter of course when a money decree is
passed. The only question to be decided is since when is such H
84 SUPREME COURT REPORTS [2009] 10 S.C.R.
A interest payable on such a decree. Though, there are two ..
divergent views, one indicating that interest is payable from the
date when claim for the principal sum is made, namely, the date
of institution of the proceedings till the recovery of the amount,
the other view is that such interest is payable only when a
B determination is made and order is passed for recovery of the
dues. However, the more consistent view has been the former
and in rare cases interest has been awarded for periods even
prior to the institution of proceedings for recovery of the dues,
where the same is provided for by the terms of the agreement
c entered into between the parties or where the same is
permissible by statute.
19. Accordingly, we are unable to sustain the order of the
Railway Claims Tribunal directing payment of interest on default
of the payment of the principal sum within a period of 45 days.
D As we have indicated hereinbefore, when there is no specific
provisi<Dn for grant of interest on any amount due, the Court and
even Tribunals have been held to be entitled to award interest
in their discretion, under the provisions of Section 3 of the
Interest Act and Section 34 of the Civil Procedure Code.
-E
20. In Jagdish Rai & Brothers Vs. Union of India [(1999)
3 SCC 257], this Court, while considering grant of interest in
respect of an amount awarded in an arbitration proceeding
under Section 9 of the Arbitration Act, 1940 read with Section
•
F 34 of the Civil Procedure Code, observed that there are four
stages of grant of interest. Firstly, from the stage of accrual of
cause of action till the filing of the arbitration proceedings;
secondly, during pendency of the proceedings before the
arbitrator; thirdly, future interest arising between the date of the
G award and the date of the decree; and fourthly, interest arising
from the date of the decree till realization of the award. This
Court held that although the claim for interest had been made
before the Court in which proceedings for making the Award
the Rule of the Court were pending, the High Court ought to have
H further examined whether the appellant was entitled to any
TAHAZHATHE PURAYIL SARABI & ORS. v. UNION 85
OF INDIA & ANR. [ALTAMAS KABIR, J.)
~\
interest after the decree was made in terms of the award. This A
Court went on to observe that the Courts have taken a view that
the award on interest under Section 34 of the Civil Procedure
Code is a matter of procedure and ought to be granted in all
cases where there is a decree for money unless there are
strong reasons to decline the same. In the said case, this Court B
modified the decree of the Court of the Subordinate Judge by
including a direction for payment of interest @12% per annum
~ from the date when the award was made the Decree of the
Court of the Subordinate Judge, till realization.
21. A similar view was expressed by a Three Judge Bench C
of this Court in Hindustan Construction Co. Ltd. Vs. State of
Jammu & Kashmir [(1992) 4 SCC 217].
22. Though, both the two aforesaid cases were in relation
. to Awards having been made under the Arbitration Act, a o
<. principle has been enunciated that in cases where a money
award is made, the principles of Section 34 of the Civil
Procedure Code and Section 3 of the Interest Act could be
invoked to award interest from the date of the Award till the
realisation thereof. E
23. In the instant case, the claim for compensation accrued
on 13th November, 1998, when Kunhi Moosa, the husband of
, the Appellant No.1, died on account of being thrown out of the
moving train. The claim before the Railway Claims Tribunal,
Ernakulam, (O.A.No.68/1999) was filed immediately thereafter F
in 1999. There was no delay on the part of the claimants/
appellants in making the claim, which was ultimately granted
for the maximum amount of Rs.4 lakhs on 26th March, 2007.
Even if, the appellants may not be entitled to claim interest from
the date of the accident, we are of the! view that the claim to G
A interest on the awarded sum has to be allowed from the date
of the application till the date of recovery, since the appellant
cannot be faulted for the delay of approximately 8 years in the
making of the Award by the Railway Claims Tribunal. Had the
Tribunal not delayed the matter for so long, the appellants would H
86 SUPREME COURT REPORTS [2009] 10 S.C.R.
A have been entitled to the beneficial interest of the amount
awarded from a much earlier date and we see no reason why
they should be deprived of such benefit. As we have indicated
earlier, payment of interest is basically compensation for being
denied the use of the money during the period which the same
8 could have been made available to the claimants.
24. In our view, both the Tribunal, as also the High Court,
were wrong in not granting any interest whatsoever to the
appellants, except by way of a default clause, which is contrary
to the established principles relating to payment of interest on
C money claims.
25. We, therefore, allow the appeal and modify the order
of the High Court dated 24.5.2007 affirming the order of the
Trial Court and direct that the awarded sum will carry interest
o @6% simple interest per annum from the date of the application
till the date of the Award and, thereafter, at the rate of 9% per
annum till the date of actual payment of the same.
26. The appeal is allowed to the aforesaid extent. The
respondents shall pay the costs of this proceeding to the
E appellants assessed at Rs.25,000/-.
8.8.B. Appeal allowed.
•
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