Section 34 of CPC : Section 34: Interest.

Explanation using Example

Example 1:

Scenario: Rajesh lent Rs. 1,00,000 to his friend Suresh for personal use. Suresh promised to repay the amount within a year but failed to do so. Rajesh then filed a suit in the court to recover the money.

Application of Section 34:

• The court decrees that Suresh must pay Rajesh the principal sum of Rs. 1,00,000.
• The court orders interest at a rate of 8% per annum on the principal sum from the date Rajesh filed the suit to the date of the decree.
• Additionally, the court orders further interest at a rate of 6% per annum on the principal sum from the date of the decree until the date of payment.

Outcome:

• If Rajesh filed the suit on 1st January 2022 and the court passed the decree on 1st January 2023, Suresh would owe Rajesh Rs. 1,08,000 (principal + interest for one year).
• If Suresh pays the amount on 1st July 2023, he would also owe further interest for six months at 6% per annum, which is Rs. 3,000.
• Total amount payable by Suresh would be Rs. 1,11,000.

Example 2:

Scenario: A textile company, ABC Textiles, supplied goods worth Rs. 5,00,000 to XYZ Garments, a retailer. XYZ Garments failed to pay the amount within the agreed period. ABC Textiles filed a suit to recover the amount.

Application of Section 34:

• The court decrees that XYZ Garments must pay ABC Textiles the principal sum of Rs. 5,00,000.
• The court orders interest at a rate of 10% per annum on the principal sum from the date ABC Textiles filed the suit to the date of the decree, considering it a commercial transaction.
• Additionally, the court orders further interest at a rate of 12% per annum (as per the contractual rate) on the principal sum from the date of the decree until the date of payment.

Outcome:

• If ABC Textiles filed the suit on 1st January 2022 and the court passed the decree on 1st January 2023, XYZ Garments would owe ABC Textiles Rs. 5,50,000 (principal + interest for one year).
• If XYZ Garments pays the amount on 1st July 2023, they would also owe further interest for six months at 12% per annum, which is Rs. 30,000.
• Total amount payable by XYZ Garments would be Rs. 5,80,000.