LexI.K. MERCHANTS PVT. LTD. & ORS. versus THE STATE OF RAJASTHAN & ORS.
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[2025] 4 S.C.R. 2753 : 2025 INSC 418 I.K. Merchants Pvt. Ltd. & Ors. v. The State of Rajasthan & Ors. (Civil Appeal No(s). 4560-4563 of 2025) 01 April 2025 [J.B. Pardiwala and R. Mahadevan,* JJ.] Issue for Consideration Issue arose as regards the appropriate rate of interest to be awarded on the enhanced valuation of shares sold by the appellants to the Respondent No.1-State in 1973 as determined by the High Court and affirmed by Supreme Court. Headnotes† Code of Civil Procedure, 1908 – s.34 – Interest – Grant of appropriate rate of interest in a commercial transaction – No agreement between the parties relating to grant of interest for delayed payment – In 1973, the appellants sold their shares in Respondent No.2 to the Respondent No.1-State at Rs.11.50/- per equity share – Suit filed by appellants in the High Court inter alia for a decree for reasonable price of their shares – Preliminary decree was passed for appointment of a CA firm to ascertain the fair value of the shares when they were transferred by the appellants to Respondent No.1, which valued the shares at Rs.640/- per share – Valuation not accepted by respondents – High Court affirmed the valuation of shares at Rs.640/- per share with 5% simple interest p.a. – Issue relating to valuation of shares has become final in view of dismissal of SLP (C) Diary Nos.27115/2022 and 24887/2022 filed by Respondents – Matter remanded to High Court – By way of the impugned judgment, High Court upheld and reaffirmed the valuation of shares at Rs.640/- per share as also the grant of 5% simple interest p.a. – Challenge to – Presently, issue only as regards the appropriate rate of interest to be awarded on the enhanced valuation of shares: Held: There has been a transaction of trade, viz. sale and purchase of goods, which clearly implies a commercial transaction between the parties – s.34 empowers the court to grant interest at three * Author 2754 [2025] 4 S.C.R. Supreme Court Reports different stages of a money decree whereunder, inter alia the court may grant interest on the total decretal amount from the date of the decree until payment, at a rate not exceeding 6% p.a 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 – Courts have the authority to determine the appropriate interest rate, considering the totality of the facts and circumstances in accordance with law – They have the discretion to decide whether the interest is payable from the date of institution of the suit, a period prior to that, or from the date of the decree, depending on the specific facts of each case – In the present case, there was no agreement between the parties relating to grant of interest for the delayed payment – Respondent No. 1 agreed to pay a fair valuation for the shares to the appellants, but is yet to make the payment – Appellants having suffered a delay of five decades in receiving the payment, are entitled to be reasonably compensated by way of interest – In the peculiar facts and circumstances, simple interest at the rate of 6% per annum awarded from 8th July 1975, on the enhanced valuation of shares till the date of decree and interest at the rate of 9% per annum from the date of decree till the date of realisation – Impugned judgments of the High Court modified. [Paras 12, 14, 15, 17] Interest – Award of, to be guided by equitable considerations: Held: Discretion to award interest, whether pendente lite or post-decree is well recognized, its exercise must be guided by equitable considerations – The rate and period of interest cannot be applied mechanically or at an unreasonably high rate without any rationale. [Para 16] Public Interest – Commercial transactions – Terms if oppressive or one-sided, constitutional courts can under Article 14 to strike down such contracts or pass appropriate decrees or orders: Held: “Public Interest” denotes a wider concept with its genus rooted to the welfare of the public at large, with different species attributable to individual and specific impact, depending upon the concept and the subject under consideration – It deals with the impact of a policy decision on the society – Generally, public interest is anathema to commercial transactions – However, by exception, when the terms are oppressive or one-sided, they [
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