Report No. 55
29. Rate of interest after decree-Justification for reverting to old position in case of commercial transactions.-
On the first point,1 it can be said in favour of the present section that the tendency of modern legislation is to discourage, rather than to encourage, high rates of interest, and no doubt, the amendment was made after taking into account that tendency.
It appears to us, however, that the practical working of the section,requires a special provision for commercial transactions for a high amount. In the first place, judgment-debtors2 entering into such transactions have exploited the amended law, by investing moneys at a much higher rate of interest than 6 per cent. knowing that they themselves do not have to pay more than 6 per cent. interest; and this is hardly just or fair. The law may, as a matter of abstract policy, regulate the maximum rate of interest and impose legal restrictions in that regard.
But it ought not to allow a person to take advantage of the legal restriction, and make profit thereby. After all, the judgment-debt belongs to the decree-holder, and the fruits thereof ought also to belong to him. In the second place, whatever be the current rate of interest around 1956, it is well known that the rate of interest now obtainable in the market is much higher than 6 pet cent.-at least in commercial transactions, and judgement-debtors, one can presume, must be taking advantage of that higher rate.
1. Para. 28(i), supra.
2. See oral suggestion of the Bombay Bar Association, para. 1, supra.