Hemant Gupta, J.
1. The plaintiff-appellant is in second appeal arising out of suit for recovery of Rs.83,500/-.
2. The plaintiff had taken a contract for fishing of drains namely Mudki Drain, Pakka Drain, Langana Drain No. l, Langana Drain No. II, Gholia Drain and Chand Bhan Drain, Golawala Drain, Golawala link Drain, and Jalalabad Mauzen Drain for the period 1.9.1978 to 21.8.1979. The plaintiff deposited a sum of Rs.30,100/- relating to one bid and another sum of Rs.28,400/- for another bid. The said amount was paid for getting the contract in question for catching the fish from the above mentioned drains. The plaintiff claimed another sum of Rs.25,000/- on account of loss occasioned to him and also interest on this amount. It was stated that the licence for catching fish was required to be issued after his bid was approved by the Executive Engineer, Ferozepur, but the licence was not granted. The plaintiff also made a grievance that some other persons were taking out fish from the water of the drains for which fishing rights have been auctioned in favour of the plaintiff and that some of the Panchayat had auctioned separately some ponds forming part of these drains, in respect of which the plaintiff has submitted his bills. The plaintiff alleged that the water of the drain has been poisoned by some mischievous persons resulting into death of lot of fish which also caused loss to the plaintiff.
3. In the written statement, it was admitted that the plaintiff was granted contract for fishing of drain and deposit of amount of Rs.30,100/-, and Rs.28,400/-. It was stated that the approval of Executive Engineer was only a formality. The plaintiff has failed to perform contract, therefore, he is estopped to claim any amount from the defendants.
4. On the basis of these averments, the parties went to trial. It was found that one of the condition of the contract was that the final acceptance of bid was to be granted by the Executive Engineer, Drainage Construction, Division, Ferozepur. The approval of the Executive Engineer allegedly vide letter dated 4.12.1978 Ex.Dl was after three months and that too, the said letter was not communicated to the plaintiff. Thus, there is a violation by the Department with regard to the terms of auction. Consequently, the learned trial court passed a decree for the recovery of Rs.58,500/- but no order granting interest was passed.
5. Appeal against such judgment and decree have been dismissed by the first Appellate Court. It may be stated that neither the trial court nor the Appellate Court has given any reason to deny interest to the plaintiff on the amount of Rs.58,500/- from the date of the deposit till the date of filing of the suit nor given any reason to decline interest from the date of the filing of the suit and thereafter.
6. In view of above facts, the following substantial questions of law arise for consideration of this in this appeal.
1. Whether the courts below were required to give any reason for declining presuit, pendente lite and future interest?
2. Whether the plaintiff is entitled to interest from the date of deposit till the date of filing the suit till realisation. If so, at what rate?
7. Learned counsel for the appellant argued that the plaintiff has been deprived of the use of money for no fault of the plaintiff. Thus, he is required to be compensated in that behalf. It was argued that the plaintiff has been legitimately found entitled to amount deposited by him and therefore, he has a right to be compensated for the deprivation, call it, interest compensation or damages.
8. Reliance was placed on Satish Solvent Extractions Pvt. Ltd. v. New India Assurance Company Ltd,1 1998(1) Civil Court Cases 509 (Bombay). In that case a Division Bench of Bombay High Court has found the reasoning of the trial court is fallacious in declining interest to the plaintiff on the ground that the agreement between the parties does not contemplate payment of interest if the amount is not paid. The Court found:
'The above reasoning of the trial Court, on the face of it, is fallacious and cannot be accepted. It is difficult to see why the plaintiff should be deprived of interest for the amount due to him from the defendant, which the defendant refused to pay and thereby forced the plaintiff to approach the Court. In our opinion, it is a fit case where the Court should have exercised its discretion under Section 34 of the Civil Procedure Code in favour of the plaintiff. We, therefore, order payment of interest at the rate of six per cent per annum on the decretal amount from the date of the suit to the date of decree with further interest at the same rate from the date of the decree to the date of payment.'
9. Reliance was also placed on Secretary, Irrigation Department, Government of Orissa and ors. v. Secretary to Government of Orissa and ors.2 A.I.R. 1992 Supreme Court 732 and Central Bank of India v, Ravindra and ors.3 A.I.R. 2001 Supreme Court 3095.
!0. In Ravindera's case (supra), the Hon'ble Supreme Court has the occasion to discuss the scope of Section 34 of the Code of Civil Procedure as well as the provisions of Banking Regulation Act, 1949. The Supreme Court in the said case approved the view of this Court in a judgment reported in Commissioner of Income Tax, Punjab, Jammu and Kashmir and Himachal Pradesh, Patiala v. Dr. Sham Lal Narula.4 A.I.R. 1963 Punjab 411, and considered definition of interest as defined in Black's Law Dictionary and Stroud's Judicial Dictionary and held to the following effect:
'37. Black's Law Dictionary (7th Edition) defines interest inter alia as the compensation fixed by agreement or allowed by law for the use or detention of money or for the loss of money by one who is entitled to its use; especially, the amount owned to a lender in return for the use of the borrowed money. According to Stroud's Judicial Dictionary of words and phrases (5th edition) interest means, inter alia; compensation paid by the borrower to the lender for deprivation of the use of his money. In Secretary, Irrigation Department, Government of Orissa v. G.C. Roy, (1992)1 S.C.C. 508, the Constitution Bench opined that a person deprived of the use of money to which he is legitimately entitled has a right to be compensated for the deprivation, call it by any name. It may be called interest, compensation or damages... this is the principles of Section 34, Civil Procedure Code. In Dr. Shamlal Narula v. C.I.T. Punjab, (1964)7 S.C.R. 668, this Court held that interest is paid for the deprivation of the use of the money. The essence of interest in the opinion of Lord Wright, in Riches v. Westminister Bank, Ltd, (1947)I All.L.R. 469, 472, is that it is a payment which becomes due because the creditor has not had his money at the due date. It may be regarded either as representing the profit he might have made if he had the use of the money, or, conversely, the loss he suffered because he had not that use. The general idea is that he is entitled to compensation for the deprivation; the money due to creditor was not paid, or, in other words, was withheld from him by the debtor after the time when payment should have been made, in breach of his legal rights, and interest was a compensation whether the compensation was liquidated under an agreement or statute......'
11. In the said case, the Hon'ble Supreme Court has held that once the suit is filed in Court, the relationship of the parties ceased to be governed by contract between the parties and case is to be governed by the provisions of Section 34 of the Code of Civil Procedure. The Court placed on record a few incidental observations regarding capitalization of interest etc. Observation No. 8 of para 58 is relevant for the present appeal which reads as under:
(8) Award of interest pendente lite and postdecree is discretionary with the Court as it is essentially governed by Section 34 of the CPC dehor the contract between the parties. In a given case if the Court finds that in the principal sum adjudged on the date of the suit the component of interest is disproportionate with component of the principal sum actually advanced the Court may exercise its discretion in awarding interest pendente lite and post decree interest at a lower rate or may even decline awarding such interest. The discretion shall be exercised fairly, judiciously and for reasons and not in an arbitrary or fanciful manner.'
12. A perusal of the said observation shows that the court has discretion in awarding interest pendente lite and post-decree interest at lower rate or might even decline interest. However, such discretion has to be exercised fairly, judiciously and for reasons and not in arbitrary manner. Earlier, it has been held that interest for the period anterior to institution of the suit is not a matter of procedure; interest pendente lite is not a matter of substantive law. Presuit interest is referable to substantive law and can be sub-divided into two sub-heads (1) where there is a stipulation for payment of interest at a fixed rate; (ii) where there is no stipulation. If there is stipulation for the rate of interest, the court must allow that rate upto the date of suit subject to three exceptions such as (i) any provision of law applicable to money lending transactions, or usury laws or any other debt law governing parties and having an overriding effect on any stipulation for payment of interest voluntarily entered into between the parties; (ii) if the rate is penal, the court must award interest at such rate as it deems reasonable; (iii) even if the rate is not penal the court may reduce it if the interest is excessive and transaction was sub-stantially unfair. If there is no impress stipulation for payment of interest, the plaintiff is not entitled to interest except on proof of mercantile usage, statutory right to interest, or an implied agreement.
13. In the present case, since there was no express stipulation for the payment of interest, the plaintiff, is entitled to interest on either proof of mercantile usage, statutory right to interest, or an implied agreement. The plaintiff has neither proved mercantile usage or an implied agreement to pay interest. However the plaintiff is entitled to interest in terms of Interest Act, 1978 which is a statutory right to claim interest. The said Act empowers the court to allow interest in any proceedings for the recovery or any debt or damages at a rate not exceeding the current rate of interest and from the date when the debt is payable to the date of the institution of the proceedings. The current rate of interest under Section 2(b) of the Act means highest of the maximum rates at which interest may be paid on different classes of deposits other than those maintained in savings account or those maintained by charitable or religious institutions by different classes of schedule banks in accordance with the directions given or issued to the banking companies generally by the Reserve Bank of India under the Banking Regulations Act, 1949.
14. In view of the principles laid down by the Hon'ble Supreme Court in the judgment mentioned above and keeping in view the provisions of Interest Act, 1978, I am of the opinion that the plaintiff is entitled to interest for a period prior to filing of the suit and thereafter, in terms of provisions of Section 34 of the CPC. Learned trial Court had the discretion not to award interest prior to the filing of the suit or thereafter but such discretion has to be exercised in a fair, judicious manner and for the reasons. However, a perusal of the judgment and the decree passed by the courts below shows that no reason, whatsoever, has been given by the courts while declining the interest. In the absence of any reason to decline interest, the plaintiff is entitled to interest on the amount found due and payable by the defendant.
15. Although the plaintiff has deposited the auction money for fishing rights and thus it was a commercial transaction but the plaintiff has not led evidence to prove the prevailing rate of interest in commercial transactions. Therefore, I consider it just and fair and appropriate to grant interest at the rate of 6 per cent per annum from the date of deposit till the date of filing of the suit and also interest at the rate of 6 per cent from the date of the suit till the date of realisation.
16. In view of above, the substantial questions of law are answered in favour of the appel-lant and it is held that awarding of pendente lite and future interest is in discretion of courtbut such discretion has to be exercised fairly, judiciously and for reasons. Since no rea-sons are available on record, therefore, the plaintiff is entitled to interest at the rate of 6per cent per annum from the date of default till realisation. The judgments and decreespassed by the courts below stand modified to the extent mentioned above.