SC: NO INTEREST FOR PARTIES ABUSING JUDICIAL PROCESS:

SC: NO INTEREST FOR PARTIES ABUSING JUDICIAL PROCESS:

In commercial disputes, interest is typically awarded under Section 34 of the Civil Procedure Code to compensate for the time value of money. However, the Supreme Court has clarified that such interest may be denied in cases where a party’s conduct is found to be in breach of contractual obligations or where their actions undermine judicial authority. The Court emphasized that the grant of interest is not an absolute right but is subject to judicial discretion, particularly in cases involving bad faith or procedural impropriety.

In a recent ruling, a bench comprising Justices Surya Kant and Ujjal Bhuyan declined to award interest on the refund of a forfeited amount. The Court noted that the appellant had not approached the Court with clean hands and had engaged in forum shopping by strategically withdrawing a suit from the High Court and refiling it in a lower court to gain an advantage. Additionally, the appellant failed to comply with a judicial directive to deposit Rs.15 crores as ordered. Given these circumstances, the Court held that granting interest would amount to rewarding conduct that was contrary to legal and ethical principles, reinforcing the importance of procedural discipline and good faith in commercial litigation.

“We are conscious of the fact that as a general principle, in commercial disputes, the award of interest pendente lite or post decree is typically granted as a matter of course. This is because such interest serves to compensate the aggrieved party for the time value of money that was due but withheld during the legal process. It reflects an established norm aimed at ensuring fairness and equity in commercial transactions.”, the court said.

“Having said so, we find the instant case to be fit to justify a deviation from the established standards. In the facts and circumstances, though we have held Respondent No. 1 to be in breach of several contractual obligations, the conduct of the Appellant is rife with instances where it has also sought to undermine the authority and integrity of the judicial process, by treating the Court with disregard, and attempting to exploit procedural mechanisms for personal gain. We, thus, hold that in view of the above reasons, the Appellant is not entitled to any discretionary relief of interest under Section 34 of CPC.”, the court added.

The Court underscored that although interest is typically awarded in commercial disputes, it remains a discretionary relief under Section 34 of the CPC. Considering the appellant's conduct, the Court denied interest but instructed HUDCO to refund the principal amount within three months. If the payment was delayed, an annual interest rate of 6% would be applicable.