INTEREST ACT 1978
THE INTEREST ACT, 1978
ACT No. 14 OF 1978
31st March, 1978
An Act to consolidate and amend the lawrelating to the allowance of interest in certain cases
BE it enacted by Parliament in theTwenty-ninth year of the Republicof India as follows: –
1.Short title, extent and commencement: (1)This Act may be called the Interest Act, 1978.
(2) It extends to the whole of India except the State of Jammu and Kashmir.
(3) It shall come into force on such dateas the Central Government may, by notification in the Official Gazette,appoint.
2.Definitions: In this Act, unless thecontext otherwise requires; –
(a) "court includes a tribunal and anarbitrator;
(b) "current rate of interest"means the highest of the maximum, rates at which interest may be paid ondifferent classes of deposits (other than those maintained in savings accountor those maintained by charitable or religious institutions) by differentclasses of Scheduled banks in accordance with the directions given or issued tobanking companies generally by the Reserve Bank of India under the BankingRegulation Act, 1949 (10 of 1949).
Explanation: In this clause,"scheduled Bank" means a bank , not being a Co-operative bank ,transacting any business authorised by the BankingRegulation Act, 1949 (10 of 1949);
(c) "debt" means any liabilityfor an ascertained sum of money and includes a debt payable in kind , but doesnot include a judgment debt;
(d) "personal injuries" includesany diseases and any impairment of a person physical or mental condition;
(e) all other words and expression usedherein but not defined and defined in the Reserve Bank of India Act, 1934 (2 of1934) shall have the meanings respectively assigned to them in the Act.
3.Power of court to allow Interest: (1) Inany proceeding for the recovery of any debt or damage or in any proceedings inwhich a claim for interest in respect of any debt or damages already paid ismade, the court may, if it thinks fit , allow interest to the person entitledto the debt or damages or to the person making such claim, as the case may be,at a rate not exceeding the current rate of interest, for the whole or part ofthe following period, that is to say; –
(a) If the proceedings relate to a debtpayable by virtue of a written instrument at a certain time ,then from the datewhen the debt is payable to the date of institution of the proceedings;
(b) if the proceedings do not relate to anysuch debt, then , from the date mentioned in this regard in a written noticegiven by the person entitled or the person making the claim to the personliable that interest will be claimed to the date of institution of theproceedings:
Provided that where the amount of the debtor damages has been repaid before the institution of the proceedings, interestshall not be allowed under this section for the period after such repayment.
(2) Where in any such proceedings as arementioned in sub-section (1) : –
(a) judgment, order or award is given for asum which , apart from interest on damages, exceeds four thousand rupees, and
(b) the sum represents or includes damagesin respect of personal injuries to the plaintiff or any other person or inrespect of a person’s death.
then , the power conferred by thatsub-section shall be exercised so as to include in that sum interest on thosedamages or on such part of them as the court considers appropriate for thewhole or part of the period from the date mentioned in the notice to the dateof institution of the proceedings, unless the court is satisfied that there arespecial reasons why no interest should be given in respect of those damages.
(3) Nothing in this Section; –
(a) shall apply in relation to: –
(i) any debt ordamages upon which interest is payable as of right, by virtue of any agreement;or
(ii) any debt or damages upon which paymentof interest is barred , by virtue of an express agreement;
(b) shall affect: –
(i) thecompensation recoverable for the dishonour of a billof exchange, promissory note or cheque, as defined inthe Negotiable instrument Act, 1881: or
(ii) the provisions of rule 2 of Order IIof the First Schedule to the Code of Civil Procedure, 1908;
(c) shall empower to court to awardinterest upon interest.
4.Interest payable under certainenactments: (1) Notwithstanding anything contained in section 3, interest shallbe payable in all cases in which it is payable by virtue of any enactment orother rule of law or usage having the force of law.
(2) Notwithstanding as aforesaid, andwithout prejudice to the generality of the provisions of sub-section (1), thecourt shall, in each of the following cases, allow interest from the datespecified below to the date of institution of the proceedings at such rate asthe court may consider reasonable, unless the Court is satisfied that there arespecial reasons why interest should not be allowed, namely; –
(a) where money or other property has beendeposited as security for the performance of any obligation imposed by law orcontract from the date of the deposit;
(b) where the obligation to pay money orrestore any property arises by virtue of a fiduciary relationship from the dateof the cause of action;
(c) where money or other property isobtained or retained by fraud, from the date of the cause of action;
(d) where the claim is of dower of maintenance,from the date of the cause of action.
5.Selection 34 of the Code of CivilProcedure, 1908 to apply: Nothing in this Act shall affect the provisions ofsection 34 of the Code of Civil Procedure, 1908 (5 of 1908).
6.Repeal and saving: (1) As from the commencementof this act, the Interest Act, 1839 (32 of 1839) and any other lawcorresponding thereto in force in any State immediately before suchcommencement shall stand repealed.
(2) The provisions of this act, not applyto any suit or other legal proceeding pending at the commencement of this Actand the provisions of the corresponding law applicable immediately before suchcommencement shall, notwithstanding the repeal of such law by sub-section (1),continue to apply to such suit or other legal proceeding.
(3) The mention of particular matters insub-section (2) shall not be held to prejudice or affect the generalapplication of section 6 of the General Clauses Act, 1897 (10 of 1897), withregard to the effect of repeal.