'Claimant Inactive For Years': Rajasthan High Court Upholds Order Restricting Grant Of Interest From Date When Formal Demand Is Raised

Rajasthan High Court held that where the claimant did not issue even a demand notice within a reasonable time, and remained inactive for a considerable period, the Court was justified in restricting the grant of interest only from the date on which a formal demand for payment was first raised.

The division bench of Acting Chief Justice Sanjeev Prakash Mishra and Justice Bipin Gupta held that once the claimant did not assert its alleged right within a reasonable time, it could not subsequently claim interest for the period during which it voluntarily remained silent without any justification.

“It is a settled principle of law that once the plaintiff-appellant itself remained dormant for a considerable period and did not assert its alleged right within a reasonable time, it cannot subsequently claim interest for the period during which it voluntarily remained silent.The said principle is further reinforced by the maxim 'Vigilantibus non dormientibus jura subveniunt', meaning 'the law assists those who are vigilant, not those who sleep over their rights'…A party cannot be permitted to take advantage of its own inaction and seek interest for the entire interregnum despite having failed to initiate any prompt recourse for recovery of the alleged dues.”

The court observed that admittedly, the transactions in question pertain to the year 2008, however, despite the alleged liability having arisen at that stage, the Court after perusing the record found that the plaintiff-appellant remained silent and chose to issue the legal notice only on 01.12.2011. Further, no plausible explanation has been furnished by the learned counsel for the plaintiff-appellant for such prolonged inaction.

"It is further settled that the grant of interest, particularly for the pre-suit period, is essentially discretionary and equitable in nature unless specifically governed by a contractual stipulation or statutory mandate. A party claiming equitable relief must itself approach the Court with due diligence and promptness. Where a claimant remains inactive for years together and does not even issue a demand notice within a reasonable time, the Court would be justified in restricting the grant of interest only from the date on which a formal demand for payment was first raised," the bench added.

The Court was hearing an appeal wherein the claimant-appellant had challenged the order of the Commercial Court whereby the suit instituted by the plaintiff-appellant for recovery of amount had been partly decreed in its favour.

For context, the appellant and the respondent had entered into certain sale and purchase transactions in 2008, and as alleged, the respondent failed to pay in full to the appellant. A notice was sent by the appellant to the respondent, seeking the outstanding payment, in 2011.

Eventually, the appellant had filed a suit for recovery against the respondent in which the Commercial Court had directed the respondent to make the payment of the outstanding amount to the appellant along with an interest calculated from the date of notice in 2011.

The appellant challenged this order on the limited front that the interest should be calculated from the date when the payment became due in 2008 when the products were delivered by appellant to the respondent. Rather, it was calculated only since the date of issuance of notice in 2011.

After hearing the contentions, the Court highlighted inaction on part of the appellant till 2011, despite the fact that the alleged liability had arisen in 2008 itself. Further, no plausible explanation was provided towards this prolonged inaction.

The Court held that the appellant could not be allowed to burden the respondent with the liability of interest for a period during which it itself remained inactive and indolent.

Accordingly, the order of the commercial court was upheld, and the appeal was dismissed.

Title: M/s Shalimar Electrical v M/s Kanchan India Limited

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