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Report No. 63

4.9. Judicial decisions as to suit for interest.-

We shall now examine judicial decisions as to the interpretation of section 1, on the question whether a suit merely for interest is competent. We may begin with the Lahore case.1 The plaintiffs in that case had supplied coal to the Municipal Committee, Amritsar, in a large quantity. Their bills were kept unpaid for a long time, and, therefore, the plaintiffs gave several notices to the Municipal Committee that interest would be charged on the unpaid bills. Subsequently, the bills were paid by the Committee without interest, and so the plaintiffs instituted a suit for interest alone.

The objection was raised that a suit merely for interest could not be instituted. Overruling this objection, the High Court held that the Interest Act did not prohibit a suit for interest alone if tile-principal had been paid by the debtor before the institution of the suit. It said that as the plaintiffs had themselves paid interest to their bankers at 9% per annum on the sums borrowed by them for carrying on their coal business, it was reasonable to allow that amount. The claim for interest in this case was for Rs. 25,000 and odd. The following extract from the judgment of Jai Lal, J. is instructive:

"I was unable to construe the Act so as to prohibit a suit for interest alone if the principal has been paid by the debtor before its institution." Counsel in that case relied upon the words in the Act-"the Court before which such debts or sums certain may be recovered" in this connection, and argued that these words implied that a suit for such debts or sums certain should also have been instituted along with interest as if "may be recovered" means "is sought to be recovered".

Dealing with this argument, Jai Lal J. said:

"They merely specify the Court which has jurisdiction to entertain a suit for interest, that is to say, it provides that the Court in which a suit for the recovery of interest can be instituted is the Court which has jurisdiction to entertain a suit for recovery of such debt or sums certain. If the contention of the learned counsel be correct, then it may lead sometimes to absurdities.

Supposing a principal sum of Rs. 100 is due to a creditor and a notice is given by him to the debtor that interest would be claimed by him from the date of the notice, and thereafter the debtor pays, say, Rs. 90 by nine monthly installments of Rs. 10 each on account of principal which instalments are accepted by the creditor as such but without waiving his right to interest or expressly reserving such a right, and subsequently he institutes a suit for the recovery of Rs. 10 "and interest which has accrued due on the several balances of the principal, it is possible to argue with any reason that only interest on the remaining principal amount of Rs. 10 can be claimed and not on the whole of the principal, or the respective balances thereof? There is, in my opinion, no justification for such a contention

1. Bhandari Brothers v. Municipal Committee, Amritsar, AIR 1931 Lah 457 (462) (Jai Lal and Abdul Qadir JJ.).

Interest Act, 1839 Back

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