The court ruled that interest on delayed payments should commence from the date of legal notice, emphasizing equitable discretion and plaintiff's inaction.
In a significant judgment, the Rajasthan High Court has dismissed an appeal filed by M/s Shalimar Electrical, challenging the interest commencement date on delayed payments awarded by the Commercial Court, Ajmer. The case, titled M/s Shalimar Electrical v. M/s Kanchan India Limited, revolved around a dispute concerning payments for electrical switchgear supplied by the plaintiff to the defendant.
The dispute arose from two purchase orders issued by M/s Kanchan India Limited in 2008, with a total amount of Rs.60,43,356/- for the first order and Rs.44,51,000/- for the second. Despite the delivery of goods, a significant payment remained outstanding, leading M/s Shalimar Electrical to seek legal recourse for recovery of Rs.10,24,017/- which included the principal amount and penalties incurred due to delayed acceptance of goods.
The appellant, represented by Mr. Nirmal Solanki and Ms. Pragya Pandey, argued that the interest should be awarded from October 2008, the alleged date of delivery, rather than from December 2011, the date of the legal notice. They contended that the Commercial Court erred in denying interest for the period preceding the notice, despite the defendant admitting receipt of goods.
However, the bench comprising Mr. Sanjeev Prakash Sharma, A.C.J., and Bipin Gupta, J., upheld the lower court's decision, emphasizing that the award of pre-suit interest is discretionary and equitable. The court noted that the plaintiff remained inactive for several years before issuing a legal notice, hence, it cannot claim interest for the entire period of inaction.
The court further highlighted the principle that equitable relief demands promptness and due diligence from the claimant. In the absence of a contractual stipulation or statutory mandate to dictate the interest commencement date, the court found the Commercial Court's decision to award interest from the notice date legally sustainable and equitable.
The defendant, represented by Mr. Rajendra Sharma, supported the judgment, arguing that the interest should only accrue from the formal demand date, given the disputes over the quality and specifications of the supplied goods. The court agreed, noting that there was no agreement or evidence to suggest mutual consent for earlier interest accrual.
This judgment reinforces the judicial discretion in civil cases involving interest awards and underscores the importance of timely legal action by parties seeking equitable relief.
Bottom line:-
Award of pre-suit interest is discretionary and equitable unless governed by a contractual stipulation or statutory mandate. Plaintiff cannot claim interest for a period during which it remained inactive and indolent.
Statutory provision(s):
- Discretionary award of interest in civil proceedings
- Principles of equitable relief in civil law
- Appellate jurisdiction concerning discretionary orders
