TAHAZHATHE PURAYIL SARABI & ORS. v.

UNION OF INDIA & ANR. (Civil Appeal No. 3568 of 2009)

MAY 14, 2009 [ALTAMAS KABIR AND DR. MUKUNDAKAM SHARMA, JJ.]

The Judgment of the Court was delivered by

ALTAMAS KABIR, J. 1. Leave granted.

2. On 13th November, 1998, one Kunhi Moosa, the husband of  

the Appellant No.1, Thazhathe Purayil Sarabi, boarded the Madras  

Mail  from Payyannur  Railway Station  to  go to  Madras.  He had  

occupied berth  No.67 in  Coach No.S-5,  while  his  brother-in-law  

and two others who were travelling with him occupied berth Nos.66  

and 26 in the same coach. When the train was about to move from  

Parappanangadi  Railway  Station,  the  said  Kunhi  Moosa  was  

robbed of the money that he was carrying with him and during the  

scuffle he was thrown out of the train by his assailants as a result  

of  which  he  expired.  The  police  registered  Crime  No.46/98  in  

respect of the said incident and the case was taken to the to the  

Court of Sessions, Kozhikode.

3. In 1999, the appellants filed O.A.No.68 of 1999 before the  

Railway Claims Tribunal, Ernakulam, for compensation amounting  

to Rs.4 lakhs. On 18th August, 2006, the accused persons were  

convicted under Section 392 of the Indian Penal Code (‘IPC’, for  

short)  and sentenced to 10 years  rigorous imprisonment and to  

pay  a  fine  of  Rs.15,000/-  each,  in  default  to  undergo  rigorous  

imprisonment for a further period of one year.

4. The Railway Claims Tribunal by its order dated 26th March,  

2007, allowed the application in part and in terms of Section 123(c)  

of  the  Railways  Act,  1989,  directed  the  Union  of  India  and  its  

authorities to pay to the appellants herein compensation of Rs.4  

lakhs, out of which a sum of Rs.2 lakhs was given to the Appellant  

No.1, a sum Rs.1,50,000/- was allotted to the Appellant No.2 and  

Rs.50,000/-  was  allotted  to  the  Appellant  No.3.  The  Railway  

Claims Tribunal granted 45 days’ time to the respondents herein to  

comply with the order for payment of the compensation amount,  

failing which it was directed that the appellants would be entitled to  

6.5% interest per annum on the award amount from the date of  

default.

5.  The  said  Award  of  the  Railway  Claims  Tribunal  was  

challenged  before  the  Kerala  High  Court  at  Ernakulam  by  the  

appellants herein on the ground that in view of the decision of this  

court in  Rathi Menon Vs. Union of India  [(2001) 3 SCC 714], the  

claim for compensation would arise from the date of the incident.  

Such a view was expressed by this Court on account of the fact  

that  the  Railways  Act,  1989  did  not  fix  the  amount  of  

compensation,  but  left  it  to  be  determined  by  the  Central  

Government  from  time  to  time.  Reliance  was  also  placed  on  

another decision of this Court in N. Parameswaran Pillai & Anr. Vs.   

Union of India & Anr.  [(2002) 4 SCC 306], whereby 12% interest  

was granted from the date of application till the date of judgment  

following the decision in Rathi Menon’s case (supra).

6. The Division Bench of the Kerala High Court took the view  

that  even though the interest  for  the prior  period had not  been  

awarded, the Tribunal had awarded interest in case of default in

compliance with the order for deposit of the compensation amount.  

The High Court was of the view that since the Tribunal had applied  

its mind while making the order and since awarding interest is the  

discretion of the Tribunal, there was no ground to admit the appeal  

only  on  the  question  of  interest.  The  appeal  was  accordingly  

dismissed and the present appeal has been filed by the claimants,  

namely, the heirs of Kunhi Moosa against the order of the High  

Court.

7. Having regard to the fact that the Railway Claims Tribunal  

has awarded the maximum compensation which can be awarded  

under the Act, the only question which, therefore, falls for decision  

in this appeal is whether both the said Tribunal and the High Court  

were justified in not granting interest on the amount of the Award  

from the date of the incident or from the date of filing of the claim  

petition till actual payment of the awarded sum.

8.  Mr.  P.V.  Dinesh,  learned  Counsel  for  the  appellant,  

submitted  that  in  Rathi  Menon’s  case  (supra)  one  of  the  issue  

which was touched upon was with regard to the question as to the  

relevant date from which compensation would be payable under  

the relevant provisions of the Railways Act, 1989. While construing  

the provisions of Section 124A of the aforesaid Act under which  

the claim for compensation had been made, this Court held that  

reference to the expression “pay compensation to such extent as  

may be prescribed” indicated that the right to claim compensation  

from the Railway Administration would be acquired by the injured  

from  the  date  of  the  said  incident,  which  principle  was  also  

considered in the case of  Pratap Narain Singh Deo Vs. Srinivas  

Sabata & Anr. [(1976) 1 SCC 289].

9. Mr. Dinesh also submitted that the question of payment of  

interest  on  the  compensation  awarded  was  considered  by  this  

Court in the case of Tejinder Singh Gujral Vs. Inderjit Singh & Anr.  

[(2007) 1 SCC 508], which was a case under the Motor Vehicles  

Act. While considering the question of compensation payable, the  

question of payment of interest on such compensation also fell for  

consideration of this Court and it  was held that grant of interest  

was discretionary and was not required to be claimed separately. It  

was held that interest is granted by way of compensation and has  

to be reasonable depending upon the facts of the case and taking  

into  account  all  relevant  factors.  In  the  said  case,  the  interest  

awarded 9% per annum was not  interfered with  by the Division  

Bench  of  the  High  Court  upon  reference  to  the  provisions  of  

Section 166 of the Motor Vehicles Act, 1988 and Section 34 of the  

Civil Procedure Code.

10. In the case of  Dr. K.R. Tandon Vs. Om Prakash & Anr.  

[(1998)  8  SCC 421],  which  was also  a  claim for  compensation  

under  the  Motor  Vehicles  Act,  the  grant  of  interest  on  the  

compensation award was not only upheld but keeping in mind the  

surrounding circumstances, this Court also enhanced the rate of  

interest  from 6% to 12% from the date of  the application being  

made. It was held that omission on the part of the Courts below to  

award  interest,  irrespective  of  its  rate,  from  the  date  of  the  

application was held to be unjustified. Mr. Dinesh submitted that a  

decision, which was closer to the facts of this case, was referred to  

by this Court in  Union of India Vs. Prabhakaran Vijaya Kumar &  

Ors. [(2008) 9 SCC 527], in which, while considering the provisions  

of Sections 123(c)(2), 124-A and 127 of the Railways Act, 1989  

and the expression “untoward incident” held that the provisions of

Section  124-A  is  in  the  nature  of  a  no-fault  liability  in  case  of  

railway accidents and a bona fide passenger traveling on a train  

would  be  entitled  to  compensation  for  such  untoward  incident  

irrespective of who was at fault therefor.

11. Mr. Dinesh submitted that payment of interest on any such  

amount which is held to be due to a person is purely a matter of  

discretion of the Court, except in cases where a statutory rate of  

interest is prescribed. Even in cases where no interest is provided  

for under the statute, the Court, having regard to the provisions of  

the Interest Act, 1978 and Section 34 of the Civil Procedure Code,  

is entitled to grant interest in its discretion. Mr. Dinesh submitted  

that when any amount is due to a creditor and the same is not paid  

by the debtor over a certain period, the creditor is deprived of the  

use of  the said amount  for  the period during which the amount  

remains unpaid for which he is entitled to be compensated by way  

of payment of interest.  Based on such submissions, Mr. Dinesh  

urged that both the Tribunal as well as the High Court had erred in  

not granting interest on the awarded amount.

12. On the other hand, also relying on the decision of this court  

in  Rathi  Menon’s  case  (supra),  Mr.  K.  Radhakrishnan,  learned  

Senior counsel submitted that the significance of the said decision  

is that it held that the right to claim compensation is acquired on  

the date of the incident but the relevant date for determination of  

compensation is the date of determination by the Tribunal and not  

the date of  incident.  Mr.  Radhakrishnan submitted that  the said  

decision did not really further the appellants’  case since,  in any  

event, the appellants could be awarded interest, if at all, from the  

date  of  the  Award  and  not  from  any  previous  period.  Mr.

Radhakrishnan urged that in the instant case a direction had been  

given  by  the  Railway  Claims  Tribunal  to  make  payment  of  the  

compensation amount within 45 days from the date of the Award,  

failing which the appellants would be entitled to the interest at the  

rate of 5% per annum from the date of default. According to Mr.  

Radhakrishnan, even if the claim of the appellants was accepted,  

having regard to the decision in Rathi Menon’s case (supra), such  

claim would be restricted only to the period of 45 days within which  

period  payment  of  awarded  amount  was  to  be  made,  since  in  

default  of  such  payment,  interest  would  be  payable  on  the  

awarded sum at the rate indicated in the order. Mr. Radhakrishnan  

submitted that no interference was called for with the order of the  

Tribunal and the High Court impugned in this appeal.

13. Admittedly, neither the Railway Claims Tribunal Act, 1987,  

nor the Railways Act, 1989, make provision for payment of interest  

on  any  awarded  amount.  While  Section  16  of  the  1987  Act  

prescribes the procedure for making an application to the Claims  

Tribunal,  the  right  to  receive  compensation  is  contained  in  

Sections 124 and 124-A comprising Chapter XIII of the 1989 Act  

dealing with the liability of the Railway Administration for death and  

injury to passengers due to accidents.  Even though there is  no  

provision  in  either  of  the  Acts  for  payment  of  interest  on  the  

awarded sum, there is no denying the fact that the right to claim  

compensation  accrued  on  the  date  of  the  incident,  although,  

compensation has been held in  Rathi Menon’s  case (supra) is to  

be computed from the date of the Award of the Claims Tribunal. In  

cases where the statute does not make any specific provision for  

payment of interest on any awarded sum, the power of the Courts  

to grant interest can also be referred to from the provisions of the

Interest Act, 1978 and the Code of Civil Procedure. Section 3 of  

the Interest Act 1978, which confers power on the Court to allow  

interest reads as follows :

“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) If the proceedings relate to a debt payable by virtue  

of  written instrument at a certain time,  then, from  

the date when the debt is payable to the date of  

institution of the proceedings;

(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:

Provided that where the amount of the debt or damages  

has  bean  repaid  before  the  institution  of  the  proceedings  

interest shall not be allowed under this section for the period  

after such repayment.

(2) Where, in any such proceedings as are mentioned  

in subsection (1), -

(a) Judgment, order or award is given for a sum which,  

apart  from  interest  on  damages,  exceeds  four  

thousand rupees, and

(b) The sum represents or includes damages in respect  

of  personal  injuries  to  the  plaintiff  or  any  other  

person, or in respect of a person's death,  

then,  the  power  conferred  by  that  subsection  shall  be  

exercised  so  as  to  include  ill  that  sum  interest  on  those  

damages  or  on  such  part  of  them  as  the  court  considers  

appropriate for the whole or part of the period from the date  

mentioned  in  the  notice  to  the  date  of  institution  of  the  

proceedings, unless the court is satisfied that there are special  

reasons why no interest should be given in respect of those  

damages.

(3) Nothing in this section, -

(a) shall apply in relation to-

(i) Any  debt  or  damages  upon  which  interest  is  

payable as of right by virtue of any agreement; or

(ii) Any  debt  or  damages  upon  which  payment  of  

interest  is  barred,  by  virtue  of  all  express  

agreement;

(b) Shall affect-

(i) The compensation recoverable for the dishonour of  

a bill of exchange, promissory note or cheque, as  

defined in the Negotiable Instruments Act, 1881 (26  

of 1881); or

(ii) The provisions of  rule  2  of  Order  11 of  the  First  

Schedule to the Code of Civil Procedure, 1908 (5 of  

1908);

(c) Shall empower the court to award interest upon interest.”

14. As will be evident from the aforesaid provisions, the same,  

inter alia, provided that in any proceedings for the recovery of any  

debt or damages the Court may, if it thinks fit, allow interest to the  

person entitled to the debt or damages at a rate not exceeding the  

current rate of interest for the whole or part of the period from the  

date when the debt is payable to the date of the incident of the  

proceedings,  if  such  debt  was  payable  by  virtue  of  a  written  

instrument at a certain time or if the proceedings do not relate to  

any such debt, then, from the date mentioned in any written notice  

given  by  the  person  making  a  claim  to  the  person  liable  that  

interest  would  be  claimed  from  the  date  of  institution  of  the  

proceedings.

15. As indicated hereinbefore, apart from the provisions of the  

Interest  Act,  Section  34  of  the  Civil  Procedure  Code  also  

empowers the Court to order interest on a decree for payment of  

money in the following manner :

“34. Interest.-(1) Where and in so far as a decree is for the  

payment of money, the Court may, in the decree, order interest  

at such rate as the Court deems reasonable to be paid on the  

principal sum adjudged, from the date of the suit to the date of  

the  decree,  in  addition  to  any  interest  adjudged  on  such  

principal sum for any period prior to the institution of the suit,  

2[with further interest at such rate not exceeding six per cent,  

per annum as the Court deems reasonable on such principal

sum from] the date of the decree to the date of payment, or to  

such earlier date as the Court thinks fit:

[Provided that where the liability in relation to the sum so  

adjudged had arisen out of a commercial transaction, the rate  

of such further interest may exceed six per cent, 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.

Explanation  I.-In  this  sub-section,  "nationalised  bank"  

means a corresponding new bank as defined in the Banking  

Companies  (Acquisition  and  Transfer  of  Undertakings)  Act  

1970 (5 of 1970).

Explanation  II.-For  the  purposes  of  this  section,  a  

transaction is a commercial transaction, if it is connected with  

the  industry,  trade  or  business  of  the  party  incurring  the  

liability.]

(2)  Where  such  a  decree  is  silent  with  respect  to  the  

payment of further interest 3[on such principal sum] from the  

date of the decree to the date of payment or other earlier date,  

the Court shall be deemed to have refused such interest, and a  

separate suit therefore shall not lie.”

16. It is, therefore, clear that the Court, while making a decree  

for payment of money is entitled to grant interest at the current rate  

of interest or contractual rate as it deems reasonable to be paid on  

the principal sum adjudged to be payable and/or awarded, from  

the  date  of  claim  or  from  the  date  of  the  order  or  decree  for  

recovery of the outstanding dues. There is also hardly any room

for doubt that interest may be claimed on any amount decreed or  

awarded for the period during which the money was due and yet  

remained unpaid to the claimants.

17. The Courts are consistent in their view that normally when  

a money decree is  passed,  it  is  most  essential  that  interest  be  

granted for the period during which the money was due, but could  

not be utilized by the person in whose favour an order of recovery  

of money was passed. As has been frequently explained by this  

Court  and  various  High  Courts,  interest  is  essentially  a  

compensation payable on account of denial of the right to utilise  

the money due,  which has been,  in fact,  utilized by the person  

withholding the same. Accordingly, payment of interest follows as  

a  matter  of  course  when a  money decree  is  passed.  The only  

question to be decided is since when is such interest payable on  

such  a  decree.  Though,  there  are  two  divergent  views,  one  

indicating that interest is payable from the date when claim for the  

principal  sum  is  made,  namely,  the  date  of  institution  of  the  

proceedings till the recovery of the amount, the other view is that  

such interest is payable only when a determination is made and  

order  is  passed  for  recovery  of  the  dues.  However,  the  more  

consistent view has been the former and in rare cases interest has  

been  awarded  for  periods  even  prior  to  the  institution  of  

proceedings for recovery of the dues, where the same is provided  

for by the terms of the agreement entered into between the parties  

or where the same is permissible by statute.

19.  Accordingly,  we  are  unable  to  sustain  the  order  of  the  

Railway Claims Tribunal directing payment of interest on default of  

the payment of the principal sum within a period of 45 days. As we

have indicated hereinbefore, when there is no specific provision for  

grant of interest on any amount due, the Court and even Tribunals  

have been held to be entitled to award interest in their discretion,  

under the provisions of Section 3 of the Interest Act and Section 34  

of the Civil Procedure Code.  

20. In Jagdish Rai & Brothers Vs. Union of India [(1999) 3 SCC  

257], this Court, while considering grant of interest in respect of an  

amount awarded in an arbitration proceeding under Section 9 of  

the  Arbitration  Act,  1940  read  with  Section  34  of  the  Civil  

Procedure Code, observed that there are four stages of grant of  

interest. Firstly, from the stage of accrual of cause of action till the  

filing of the arbitration proceedings; secondly, during pendency of  

the proceedings before the arbitrator; thirdly, future interest arising  

between the date of the award and the date of the decree; and  

fourthly, interest arising from the date of the decree till realization  

of the award. This Court held that although the claim for interest  

had been made before the Court in which proceedings for making  

the Award  the Rule of  the Court  were pending,  the High Court  

ought to have further examined whether the appellant was entitled  

to any interest after the decree was made in terms of the award.  

This Court went on to observe that the Courts have taken a view  

that the award on interest under Section 34 of the Civil Procedure  

Code is a matter of procedure and ought to be granted in all cases  

where there is a decree for money unless there are strong reasons  

to  decline  the  same.  In  the  said  case,  this  Court  modified  the  

decree  of  the  Court  of  the  Subordinate  Judge  by  including  a  

direction for payment of interest @12% per annum from the date  

when  the  award  was  made  the  Decree  of  the  Court  of  the  

Subordinate Judge, till realization.

21. A similar view was expressed by a Three Judge Bench of  

this Court in Hindustan Construction Co. Ltd. Vs. State of Jammu  

& Kashmir [(1992) 4 SCC 217].

22. Though, both the two aforesaid cases were in relation to  

Awards having been made under the Arbitration Act,  a principle  

has been enunciated that in cases where a money award is made,  

the  principles  of  Section  34  of  the  Civil  Procedure  Code  and  

Section 3 of the Interest Act could be invoked to award interest  

from the date of the Award till the realisation thereof.

23. In the instant case, the claim for compensation accrued on  

13th  November,  1998,  when  Kunhi  Moosa,  the  husband  of  the  

Appellant No.1, died on account of being thrown out of the moving  

train. The claim before the Railway Claims Tribunal,  Ernakulam,  

(O.A.No.68/1999) was filed immediately thereafter in 1999. There  

was no delay on the part of the claimants/appellants in making the  

claim, which was ultimately granted for the maximum amount of  

Rs.4 lakhs on 26th March, 2007. Even if, the appellants may not  

be entitled to claim interest from the date of the accident, we are of  

the view that the claim to interest on the awarded sum has to be  

allowed from the date of the application till the date of recovery,  

since  the  appellant  cannot  be  faulted  for  the  delay  of  

approximately 8 years in the making of the Award by the Railway  

Claims Tribunal. Had the Tribunal not delayed the matter for so  

long,  the  appellants  would  have  been  entitled  to  the  beneficial  

interest of the amount awarded from a much earlier date and we  

see no reason why they should be deprived of such benefit. As we  

have  indicated  earlier,  payment  of  interest  is  basically  

compensation for being denied the use of the money during the

period which the same could  have been made available  to  the  

claimants.

24. In our view, both the Tribunal, as also the High Court, were  

wrong in not granting any interest whatsoever to the appellants,  

except  by  way  of  a  default  clause,  which  is  contrary  to  the  

established  principles  relating  to  payment  of  interest  on  money  

claims.

25. We, therefore, allow the appeal and modify the order of the  

High Court dated 24.5.2007 affirming the order of the Trial Court  

and direct that the awarded sum will  carry interest @6% simple  

interest per annum from the date of the application till the date of  

the Award and, thereafter, at the rate of 9% per annum till the date  

of actual payment of the same.  

26.  The  appeal  is  allowed  to  the  aforesaid  extent.  The  

respondents  shall  pay  the  costs  of  this  proceeding  to  the  

appellants assessed at Rs.25,000/-.