Pre-suit interest on admitted dues may be awarded on equitable grounds despite the Interest Act's limits.

Pre-suit interest may be granted on an admitted liability even where Section 3 of the Interest Act, 1978 is not exhaustive, because courts may award equitable interest on principles of justice, equity and good conscience when a defendant wrongfully withholds admitted dues and takes a false plea to resist payment. The text also notes differentiated rates of interest for distinct periods, with a moderated rate for the pre-suit period and a higher rate from institution of suit until realisation, applied to the admitted principal claim with costs, and with excess court fee refundable pro rata.

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Issues: (i) whether pre-suit interest could be awarded on an admitted liability notwithstanding the requirements of Section 3 of the Interest Act, 1978; (ii) what rate of interest was for the pre-suit, pendente lite and future periods.

Issue (i): whether pre-suit interest could be awarded on an admitted liability notwithstanding the requirements of Section 3 of the Interest Act, 1978.

Analysis: The admitted liability was reflected in the defendant company's balance sheet, yet a contrary stand was taken in the proceedings. The statutory scheme under Section 3 of the Interest Act, 1978 was considered, but the Court held that the Act is not exhaustive of all claims for interest. On principles of justice, equity and good conscience, pre-suit interest can be granted where the defendant has retained the plaintiff's money and attempted to defeat a rightful claim by taking a false plea.

Conclusion: Pre-suit interest was held payable in favour of the plaintiff.

Issue (ii): what rate of interest was for the pre-suit, pendente lite and future periods.

Analysis: The Court found it appropriate to award interest at a moderated rate for the pre-suit period and a higher rate for the pendente lite and future period, having regard to the facts and the wrongful withholding of admitted dues. The claim was confined to the admitted sum of Rs. 50 lakhs, and the remaining claims were not pressed.

Conclusion: Interest was awarded at 9% per annum for the pre-suit period and 12% per annum from the date of institution of the suit until realisation.

Final Conclusion: The suit was decreed for the admitted principal amount with interest and costs, and the excess court fee was directed to be refunded on a pro-rata basis.

Ratio Decidendi: The Interest Act, 1978 does not exhaust the court's power to award pre-suit interest, and equitable interest may be granted where an admitted debt is wrongfully withheld and the defendant takes a false stand to defeat repayment.

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