In this 'Leading Questions' section, SR Tejas and Thapo Shreshta discuss the fundamentals to be kept in mind while drafting pleadings and prayers pertaining to claim/s for interest in proceedings before courts in India.

Question: Is a party to a suit, in India, entitled to seek interest on its relief/s pertaining to the payment of money?

Answer: Yes. In terms of Section 34 of the Code of Civil Procedure, 1908, a Court may order interest at such rate as the Court deems reasonable to be paid on the principal sum adjudged. The interest which may be ordered by the Court is generally classified into three categories – (i) pre-suit interest (for any period prior to the institution of the suit); (ii) pendente lite interest (from the date of the suit to the date of the decree); and (iii) future (post decree) interest (from date of decree to the date of payment or such earlier date as the Court thinks fit).

Question: What are the principles governing pre-suit interest?

Answer: Entitlement and rate of pre-suit interest may be claimed by a party in terms of a contractual right or a statutory right. A contractual right may be traced to a stipulation in a contract which provides for entitlement, rate, period, etc. A statutory right may be such as provided in the Interest Act, 1978, the Micro, Small and Medium Enterprises Development Act, 2006, etc.

Question: What are the principles governing pendente lite interest?

Answer: There are no hard and fast principles governing the award of pendente lite interest. The Supreme Court of India in Small Industries Development Bank of India v. SIBCO Investment Pvt. Ltd., 2022 INSC 3 has aptly summed up the legal position as ‘a discretionary exercise steeped in equitable considerations’, reiterating the wide discretion vested with a Court in awarding pendente lite interest. The Supreme Court of India, most recently, in IK Merchants Pvt. Ltd. and others vs. State of Rajasthan and others, 2025 INSC 418, has directed courts to ensure that while the claimant is fairly compensated, the award does not become punitive or unduly burdensome on the judgment debtor and that therefore the rate of interest must be determined in a manner that balances both fairness and financial impact, taking into account the ‘loss of use’ principle and economic prudence, in the specific facts of each case.

Question: What are the principles governing future (post-decree) interest?

Answer: In terms of Section 34 of the Code of Civil Procedure, 1908, while ordering future (post-decree) interest also, the Court may exercise its discretion (which discretion is similar to that of pendente lite interest), but Future interest may not exceed six percent per annum.

Question: Is there any difference between the interest awarded in commercial transactions and other transactions?

Answer: If the liability has arisen out of a commercial transaction, the rate of post-decretal interest may exceed six percent per annum but shall not exceed the contractual rate of interest or where there is no contractual rate, the rate at which moneys are lent or advanced by Nationalised Banks in relation to commercial transactions. The explanations to Section 34 themselves define a ‘Nationalised Bank’ to mean a corresponding new bank as defined in the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and a ‘Commercial Transaction’ as being connected with the industry, trade or business of the party incurring the liability.

Question: Are there any additional aspects to be kept in mind while claiming interest in suits before the commercial courts established under the Commercial Courts Act, 2015?

Answer: In light of the amendments to the CPC by the Commercial Courts Act, 2016 by insertion of Order VII Rule 2-A, a plaint filed before a commercial court is required to contain specific additional pleadings including whether the interest is being claimed under contract or any statute, the rate at which interest is claimed, the date from which it is claimed, the date to which it is calculated, the total amount of interest claimed to the date of calculation and the daily rate at which interest accrues after that date. It is also pertinent to note that similar requirements have been brought in for other civil suits under specific state amendments to the CPC, such as the Code of Civil Procedure (Karnataka Amendment) Act, 2024.

SR Tejas is a Partner and Thapo Shreshta is an Associate at Dua Associates.