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Issues: (i) Whether the defendants' counterclaim for compensation on alleged illegal termination of dealership was sustainable; (ii) whether the plaintiff could recover pre-suit interest on the claim; (iii) whether pendente lite and future interest at 12% per annum required interference.
Issue (i): Whether the defendants' counterclaim for compensation on alleged illegal termination of dealership was sustainable.
Analysis: The counterclaim was founded on alleged wrongful termination of the dealership, but the record showed that the defendants had not earlier asserted such claim and raised it only after the suit was filed. No books of account or other acceptable material were produced to establish loss of turnover or other quantifiable damage. The claim was therefore unsupported by evidence.
Conclusion: The counterclaim was rightly rejected and the finding was against the defendants.
Issue (ii): Whether the plaintiff could recover pre-suit interest on the claim.
Analysis: Pre-suit interest was examined with reference to the Interest Act, 1978. Section 34 of the Code of Civil Procedure, 1908 governs pendente lite and future interest, whereas pre-suit interest depends on substantive law. Under Sections 3 and 4 of the Interest Act, 1978, such interest may be awarded where it is payable under an enactment, agreement, usage having the force of law, a written instrument, or after written notice in the appropriate case. In the present matter, there was no written instrument stipulating time-bound payment of interest, no proved express or implied agreement, no established usage having the force of law, and no written notice claiming interest. The claim for pre-suit interest was also not supported by the account entries or the relevant invoice.
Conclusion: The plaintiff was not entitled to pre-suit interest, and that part of the decree was set aside in favour of the defendants.
Issue (iii): Whether pendente lite and future interest at 12% per annum required interference.
Analysis: Interest for the period after institution of the suit and after decree falls within the court's discretion under Section 34 of the Code of Civil Procedure, 1908. The rate of 12% per annum awarded by the trial court was not shown to be arbitrary, and no sufficient ground was made out for interference with that discretionary determination.
Conclusion: The award of pendente lite and future interest was maintained and the challenge on this score failed.
Final Conclusion: The decree was modified by deleting the award of pre-suit interest while sustaining the principal amount and the discretionary pendente lite and future interest, resulting in a partial success for the appellants.
Ratio Decidendi: Pre-suit interest can be awarded only where it is supported by substantive law, agreement, usage having the force of law, a written instrument, or a valid written notice under the Interest Act, 1978, while pendente lite and future interest remain governed by the discretion conferred by Section 34 of the Code of Civil Procedure, 1908.
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