Interest on unauthorized use of bank funds remains recoverable even after repayment before suit under the Interest Act.

Section 3 of the Interest Act permits a court to award interest in proceedings for recovery of debt or damages even without an express contractual term, provided notice claiming interest has been given and the claim is otherwise proved. Where money was repaid before suit, the proviso to Section 3(1)(b) does not bar interest altogether; it only excludes interest for the period after repayment and before institution of proceedings. On proved and unrebutted facts, unauthorized overdrawing and retention of the bank's funds without interest created liability for compensatory interest, including on equitable principles. The bank's claim was therefore allowed to the extent proved.

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Issues: Whether the appellant bank was entitled to recover interest on amounts withdrawn without proper sanction and later repaid before suit under Section 3 of the Interest Act.

Analysis: Section 3 empowers the court to award interest in proceedings for recovery of debt or damages, even where there is no express contractual stipulation for interest, if notice claiming interest has been given and the claim is otherwise proved. The proviso to Section 3(1)(b) does not extinguish the claim for interest altogether where repayment occurred before institution of proceedings; it only excludes interest for the period after repayment and before the suit. On the facts proved by unrebutted evidence, the respondents had overdrawn and utilized the bank's funds without authority and without paying interest. Such unauthorized use of money attracted liability to compensatory interest, and the court could also act on equitable principles where money has been wrongfully retained.

Conclusion: The appellant was entitled to recover interest, and the claim was allowed to the extent of the proved amount.

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