Judgment:
D.P.S. Chouhan, J.
1. The controversy involved in the appeal is in a limited sphere and the facts have only peripheral relevance.
2. A suit was filed on the ground that a contract was executed on the basis of an auction regarding the forest produce. The auction took place regarding the forest produce and thereafter money amounting to Rs. 44,193.55 p. was deposited by the respondent but before the contract was executed, the amount so deposited was returned by the State Government on 18-6-1986, i.e. subsequent to the filing of the suit for recovery of the money. In the suit, prayer was for recovery of the money together with the interest at the rate of 18% per annum.
3. The trial Court decreed the suit as it was only relating to the interest and the rate of interest awarded was 18% per annum. Against this order, the State of Madhya Pradesh has come in appeal.
4. The claim-amount was Rs. 9590.50 p. The State did not prefer to pay the amount and to keep itself satisfied with the decree of the trial Court and instead, approached this Court and more expenditure has been incurred than what would have been paid to the plaintiff. Actually in such state of affairs, the approach should be how the money of the public exchequer can be saved but the position here has been reversed in this case.
5. Learned counsel for the appellant-State relied on Section 34, Civil Procedure Code which gives the discretion to the Court in the matter of interest, fixing the outer limits. Learned counsel for the State submitted that Section 34 gives the discretion in the matter of interest but fixes the outer limits. Learned counsel also relied on Section 3(l)(b) of the Interest Act, 1978 which reads as under :-
'3. Power of court to allow interest. - (1) In any proceedings for the recovery of any debt or damages or in any proceedings in which a claim for interest in respect of any debt or damages already paid is made, the Court may, if it thinks fit, allow interest to the person entitled to 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 of the following period, that is to say, -
(a) xx xx xx
(b) if the proceedings do not relate to any such debt, then, from the date mentioned in this regard in a written notice given by the person entitled or the person making the claim to the person liable that interest, will be claimed to the date of institution of the proceedings;'
6. This provision is not attracted in the present case, as it says that if the proceedings do not relate to any such debt, then, from the date mentioned in this regard in a written notice given by the person entitled or the person making the claim to the person liable that interest, will be claimed to the date of the institution of the proceedings. It is not a case of any debt. It is a commercial transaction. The auction sale was advertised and it was o a condition of the bid that the amount was deposited.
7. Learned counsel for the parties stated that in the year 1986 the F. D. interest rate was 10% and the S. B. interest rate was 5%. On this position, the parties are not at variance. I think, the interest awarded by the Court below was excessive. The interest of justice would be served if the rate of interest is reduced from 18% to 10%.
8. The appeal is accordingly allowed. The respondent is entitled to interest at the rate of 10% per annum and this amount shall be paid after preparation of the decree, by the State Government within a period of two months from the preparation of the decree, failing which the same rate of interest shall be payable till the final amount is paid by the Govt. In the circumstances, no orders as to costs.