Supreme Court fixes interest at 6% (pre-decree) and 9% (post-decree) on enhanced share valuation after five-decade dispute

A bench of Justices J.B. Pardiwala and R. Mahadevan heard appeals by I.K. Merchants Pvt. Ltd. and others against two orders of the Calcutta High Court that affirmed a valuer’s report fixing the fair value of certain shares at Rs.640 per share and awarded simple interest at 5% per annum. The limited question before the Supreme Court concerned the appropriate rate of interest payable on the enhanced valuation of shares sold to the State of Rajasthan in 1973.

The Court modified the High Court orders and fixed the interest regime for the long-delayed payment. It directed simple interest at 6% per annum from 8 July 1975 on the enhanced valuation of shares until the date of the decree and simple interest at 9% per annum from the date of the decree until realisation, with payment to be made within two months after adjusting amounts already paid. The Court emphasised the discretionary character of awards under Section 34 CPC and the need to balance compensation to claimants with the burden on judgment debtors. The Court, in its reasoning, observed: “The above provision empowers the court to grant interest at three different stages of a money decree viz., (i) the court may award interest on the principal sum claimed at a rate it deems reasonable, for the period before the suit was filed. Such interest is generally governed by agreements between the parties; (ii) The court may award interest on the principal amount from the date of filing the suit until the date of the decree, at a reasonable rate. Here, the court has full discretion to determine the interest rate based on fairness, commercial usage and equity; and (iii) the court may grant interest on the total decretal amount (principal + interest before decree) from the date of the decree until payment, at a rate not exceeding 6% per annum unless otherwise specified in contractual agreements or statutory provisions. However, if the claim arises from a commercial transaction, courts may allow interest at a higher rate based on agreements between the parties.” The Court added that while appellants were “entitled to be reasonably compensated by way of interest” for a five‑decade delay, claimed rates of 15–18% were excessive and beyond Section 34’s scope.

Background The dispute arose from transfer of shares of Bikaner Gypsums Ltd. (subsequently Rajasthan State Mines and Minerals Ltd.) to the State of Rajasthan in 1973. Appellants sued in 1978 seeking compensation; a 2012 preliminary decree appointed a valuer to ascertain fair value. After multiple valuations and litigation, the High Court appointed M/s Ray & Ray, which valued the shares at Rs.640 per share. The High Court awarded interest at 6% (later corrected to 5%) per annum; those orders were challenged before this Court. Earlier pleas reached this Court in 2021 when the valuation issue was remitted to the High Court; this Court recorded that consequences of remittal would permit agitating interest and costs. The High Court reaffirmed the valuation and awarded modest interest; the appellants limited their prayer in this appeal to the rate of interest.

Both sides advanced established principles: appellants relied on precedents recognizing compensation for the time value of money and commercial transaction exception in Section 34 CPC; respondents contended the transaction was not commercial in nature and that Rule 34’s cap and discretion justified the lower rate. The Supreme Court examined statutory text of Section 34, precedent on discretionary grant of interest, and equitable considerations, noting the “loss of use” principle but rejecting punitive rates. The Court found the transaction commercial in character and that, given the half‑century delay and equitable balance between parties (including the State as judgment debtor), a two‑tier simple interest award was appropriate. The appeals were disposed of subject to the modified interest rates and payment direction; no costs were awarded.

Case Details: Case No.: CIVIL APPEAL NOS. 4560-4563 OF 2025 (Arising out of SLP (C) Nos. 11779 – 11782 of 2022) Case Title: I.K. MERCHANTS PVT. LTD. & ORS. v. THE STATE OF RAJASTHAN & ORS. Appearances: For the Petitioner(s): Counsel not indicated in the judgment For the Respondent(s): Counsel not indicated in the judgment