Description

Section 34 of the Code of Civil Procedure (CPC), 1908, deals with the power of the court to grant interest on the amount of money awarded to a party in a civil suit. The section sets out the conditions under which the court may grant interest, the rate of interest, and the period for which it may be awarded. This section is important in ensuring that the party who wins a case is compensated fairly for the delay in receiving the amount awarded by the court.

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Key Features of Section 34 - Interest

1. Right to Interest:

   • Under Section 34, a party that has won a lawsuit can claim interest on the sum awarded by the court. The interest is meant to compensate the winning party for the delay in receiving the money, as a delay can lead to a loss of opportunity or use of the funds.

2. Types of Interest:

   • Interest can be awarded in two stages:
     • Pre-judgment interest: This is the interest awarded for the period before the judgment is passed by the court. It compensates the plaintiff for the time they were deprived of the money they were entitled to.
     • Post-judgment interest: This is the interest awarded after the judgment is passed, during the period from the judgment date until the actual payment is made.

3. Rate of Interest:

   • The rate of interest to be awarded is left to the discretion of the court, but it must be reasonable. Typically, the rate of interest is decided based on the circumstances of the case, the amount involved, and prevailing interest rates in the market or set by law.
   • Section 34(1) provides that interest should be calculated at a rate not exceeding 6% per annum, unless the court directs a higher rate.
     • However, the rate can be higher in certain cases where it is stipulated by the contract between the parties or by a specific law.

4. Court’s Discretion:

   • The court has the discretion to award interest or not, depending on the circumstances of the case. In some cases, the court may decide not to award interest if it believes that the circumstances do not justify it.
   • The interest is generally calculated from the date of filing the suit or from the date when the cause of action arose (depending on the court's order), until the date the judgment is passed or the amount is paid.

5. Interest in Contractual or Commercial Matters:

   • In commercial contracts, where a specific agreement has been made between the parties about interest, the court typically upholds such contractual stipulations. If the contract provides for a higher rate of interest, that rate will be applied.
   • Section 34 does not override such agreements, but it provides an alternative mechanism for interest when no agreement has been made, or in cases where the contract is silent on interest.

6. Calculating Interest:

   • Interest is usually simple interest unless otherwise specified, and it is calculated on the amount awarded by the court.
   • The interest may be computed from the date the cause of action arose (i.e., the date the dispute started) or from the date the suit was filed, depending on the judgment.

7. Discretionary Nature of Interest:

   • The award of interest is at the discretion of the court. The court may consider the following factors when deciding whether to award interest and at what rate:
     • Whether there was willful delay in the payment of the amount.
     • The nature of the suit (whether it was contractual, tort, or based on other causes of action).
     • The economic conditions or interest rates prevalent at the time of the dispute.

8. Liability to Pay Interest:

   • The party against whom a judgment is passed is liable to pay interest on the sum awarded from the date of the judgment until the amount is paid. This ensures that the winning party is compensated for any delays in enforcement or settlement.

Punishment

1. Failure to Pay Interest:

   • Section 34 ensures that the winning party is compensated for any delay, but it does not provide direct penal consequences for failure to pay interest. However, the failure to pay the amount due (including interest) may result in contempt of court if the party does not comply with the court’s decree.
   • If a person refuses to pay the awarded amount and interest, the court may take execution proceedings. These include attachment of property, arrest of the party, or other coercive actions to enforce the court’s decree.

2. Contempt of Court for Non-Payment:

   • If a party fails to pay the interest along with the principal amount due, or if there is willful disobedience of the court’s orders, the court can initiate contempt of court proceedings. The penalties for contempt include:
     • Fines.
     • Imprisonment.
     • Attachment of property or other coercive actions.

3. Execution of Decree:

   • If the defendant fails to pay the amount (including interest) as directed by the court, the plaintiff can file for the execution of the decree, which will compel the defendant to comply with the order. This may include seizure of the defendant’s assets, property, or bank accounts to settle the amount due.

4. Adverse Consequences:

   • Failure to pay interest can also result in the party’s credibility being harmed in future proceedings. Repeated failures to comply with court orders could lead to more stringent penalties in subsequent cases.