In a significant ruling, the Supreme Court has clarified that courts have the discretion to award interest exceeding 6% per annum in commercial disputes, even when there is no prior agreement between the parties on interest rates.
The case revolved around a decades-old dispute concerning the fair valuation of shares transferred to the State of Rajasthan in 1973. The appellants, who sold their shares at ₹11.50 per share, later sought a reassessment of their value. Following a prolonged legal battle, a Chartered Accountant determined the shares were actually worth ₹640 each. However, the High Court awarded only 5% simple interest on the amount, a decision that was ultimately challenged before the Supreme Court.
Rejecting arguments that the transaction was non-commercial, the Supreme Court emphasized that trade and business interests were involved, making it a commercial transaction. The ruling reaffirmed that under Section 34 of the Code of Civil Procedure, courts retain discretion to grant interest exceeding the standard 6% in commercial cases. The Court also underscored that interest should be fair—neither punitive nor excessively burdensome on the paying party—while compensating for the delay.
Modifying the High Court’s decision, the Supreme Court set the pre-decree interest at 6% per annum from 1975 until the decree date and post-decree interest at 9% until full realization. The government was directed to settle the dues within two months.
This ruling reinforces judicial discretion in awarding fair interest rates in commercial disputes, ensuring that claimants are adequately compensated for delays while maintaining economic balance.
