Interest upon interest barred under the Interest Act; Delhi High Court recalled the earlier payment direction.

The Delhi High Court held that a direction granting further interest on an amount of interest already payable was unsustainable because the Interest Act, 1978 prohibits interest upon interest. The additional sum had not been sought in the writ petition and was not agreed to by the respondent, so the earlier order had been passed without noticing the statutory bar. The court therefore recalled and modified that order and extended the time for payment of the principal interest amount.

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Issues: Whether the order directing payment of further interest on the amount of interest already payable was liable to be modified in view of the prohibition against awarding interest upon interest.

Analysis: The application sought correction of the earlier order under section 151 of the Code of Civil Procedure, 1908. The earlier order had directed payment of further interest on the interest amount for the period 26-3-1995 to 30-4-1995. Section 3(3)(c) of the Interest Act, 1978 expressly prohibits the court from awarding interest upon interest. The additional amount had neither been prayed for in the writ petition nor agreed to in the application filed by the respondent, and the earlier order had been made without noticing the statutory bar.

Conclusion: The direction granting interest upon interest was unsustainable and was rightly recalled. The earlier order was modified accordingly, and time for payment of the principal interest amount was extended.

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