5 Jan 2022 9:09 AM GMT
The Supreme Court has observed that the award of pendente lite interest under Section 34 of the Code of Civil Procedure is a discretionary remedy, which is steeped in "equitable considerations".A bench comprising Justice Hrishikesh Roy and Justice Subhash Reddy, while denying pendente lite interest claimed by the respondent in a delayed bond payment case, observed that although...
The Supreme Court has observed that the award of pendente lite interest under Section 34 of the Code of Civil Procedure is a discretionary remedy, which is steeped in "equitable considerations".
The court stated that "The respondent did pray for pendente lite interest in the trial court but neither did the trial court frame any issue in this regard, nor were any arguments recorded. This shows that such claim was not pressed by the respondent. Further, no ground is urged in the appeal memo, that such an issue ought to have been framed. Hence, it's clear that the respondent is not serious on its claim for pendente lite interest."
The case pertains to issuance of bonds by appellants (SIDBI) to M/s. CRB Capital Markets Ltd. (CRB Capital) who then sold them to Mr Shankar Lal Saraf and he further sold those to the respondent (SIBCO) in 1998. After claiming payment on these bonds, which was first refused by appellants citing liquidation of CRB capital at the behest of RBI but was eventually released on the Company Court's order stating the subject Bonds were beyond the purview of liquidation proceedings, the respondents wanted further interest and payment. According to respondents, they discovered a delayed payment of interest during an audit, and demanded the same with pendente lite interest.
The apex court first adjudged that the appellants were justified in withholding payment after establishing that RBI's order stating that appellant should not release any payment to respondent, was a directive and RBI holds supervisory powers over financial institutions like SIDBI. Then the court looked into the question of claiming pendente lite interest and referred to its judgment in Clariant International Ltd. v. SEBI where two conditions were established for awarding of interest. "First, that money should be wrongfully withheld from the rightful owners; Second, that there should be equitable considerations for awarding said interest." The court noted that in the present case, neither of these conditions were satisfied.
The bench then went on to state that, "As per S.34 of the Code of Civil Procedure, award of an interest is a discretionary exercise, steeped in equitable considerations. Interest is payable for different purposes such as compensatory, penal, etc. but the conditions before us are different. Firstly, the appellant was justified in withholding payment as per RBI's direction, secondly, the defendant did not derive any undue benefit from their act and thirdly, due payment was promptly made to the respondents upon settlement of rights by the court."
Further referring to Shakespeare's play, Merchant of Venice, the court remarked that, "As we see in the situation, the holder of the Bond has received their 'pound of flesh', but they seem to want more." And said that "burdening the appellant with any further amount towards interest would be akin to Shylockian extraction of blood from the appellant."
The court then proceeded to allow the appellant's appeal that trial court judgement be restored and disposed the appeals of without any order on cost.
Case Title : Small Industries Development Bank of India vs M/s Sibco Investment Pvt Ltd
Citation : 2022 LiveLaw (SC) 7
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