AWARD OF INTEREST CONSUMER LAW
Specially in the consumer District Forums and the State Commissions one finds that a complainant in cases of deficiency of service against Insurance Companies gets not only the settlement, when he succeeds the case, but a huge amount as interest over the unpaid insured amount. In some cases the rate of interest awards has been found to be even 25% or more.
Seeing the high rate of interest a complainant may be happy and many more may come up to file complaints for such high interest. But the legal aspect is a bit different as the awarding of the said interests is to be governed by the Interest Act,1978 until and unless the rate of interest is specified in the law under which a case is being filed.
The law is specific that the interest awarded is to be in accordance to the current rate and the Interest Act defines current rate as the highest of the maximum rates at which interest may be paid on different classes of deposits ( other than those maintained in the savings account or those maintained by charitable or religious institution) by different classes of schedule banks in accordance with direction given or issued to banking companies generally by the Reserve Bank of India as under the Bank Regulation Act 1949.
The interest law under section 3 states that the courts may award or allow interest in cases it thinks fit on the debt and damage to the person claiming such claim as the case may be but the rate of interest should not exceed more than the current rate of interest as explained above. The Supreme Court in state of Punjab vs K.D.Sharma AIR 1990 SC 2177 is clear that the execution courts cannot grant interest until and unless it is mentioned in the decree or till the law provides for the same. Under the Consumer law the authorities have been given the power to award interest but on the rate it is silent thus the Interest Act has to be taken into consideration while the awarding of the interest.
In laws where the rate of interest if specified the interest law is clear that the interest law should not be taken in to consideration as the said law will govern that case.