Power of court to allow interest
Section 3 of the Interest Act, 1978 deals with power of court to allow interest. In any proceedings for the recovery of any debt or damages or in any proceedings in which a claim for interest in respect of any debt or damages already paid is made, the court may, if it thinks fit, allow interest to the person entitled to the debt or damages or to the person making such claim, as The Act came into force on 19 Aug 1981.
(1) In any proceedings for the recovery of any debt or damages or in any proceedings in which a claim for interest in respect of any debt or damages already paid is made, the court may, if it thinks fit, allow interest to the person entitled to the debt or damages or to the person making such claim, as the case may be, at a rate not exceeding the current rate of interest, for the whole or part of the following period, that is to say,--
(a) if the proceedings relate to a debt payable by virtue of a written instrument at a certain time, then, from the date when the debt is payable to the date of institution of the proceedings;
(b) if the proceedings do not relate to any such debt, then, from the date mentioned in this regard in a written notice given by the person entitled or the person making the claim to the person liable that interest will be claimed, to the date of institution of the proceedings:
Provided that where the amount of the debt or damages has been repaid before the institution of the proceedings, interest shall not be allowed under this section for the period after such repayment.
(2) Where, in any such proceedings as are mentioned in sub-section (1),--
(a) judgment, order or award is given for a sum which, apart from interest on damages, exceeds four thousand rupees, and
(b) the sum represents or includes damages in respect of personal injuries to the plaintiff or any other person, or in respect of a person's death,
then, the power conferred by that sub-section shall be exercised so as to include in that sum interest on those damages or on such part of them as the court considers appropriate for the whole or part of the period from the date mentioned in the notice to the date of institution of the proceedings, unless the court is satisfied that there are special reasons why no interest should be given in respect of those damages.
(3) Nothing in this section,--
(a) shall apply in relation to--
(i) any debt or damages upon which interest is payable as of right, by virtue of any agreement; or
(ii) any debt or damages upon which payment of interest is barred, by virtue of an express agreement;
(b) shall affect--
(i) the compensation recoverable for the dishonour of a bill of exchange, promissory note or cheque, as defined in the Negotiable Instruments Act, 1881 (26 of 1881); or
(ii) the provisions of rule 2 of Order II of the First Schedule to the Code of Civil Procedure, 1908 (5 of 1908);
(c) shall empower the court to award interest upon interest.
Section 3, The Interest Act, 1978 (Act 14 of 1978).
Cross-references
Extracted from the operative text of the enactments themselves. Every destination below exists in our corpus.
Referred to by 1
Related judgements & precedents
These are some judgments that construed this section, and hold precedence value. They hold authority on how to read, interpret and use this section.
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Purbanchal Cables & Conductors P. LTD vs Assam State Electricity Board
Court's Decision & Legal Precedent
The Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993, is a substantive law creating new vested rights and liabilities. Being substantive law, it operates prospectively from its commencement date of 23.09.1992 and does not apply to contracts/supply orders entered into prior to this date, even if supplies were made after the Act came into force. The Act does not have retrospective operation absent express legislative language indicating such intention. However, a suit for recovery of interest alone (without principal) is maintainable under Section 6 of the Act when interest has accrued due to delayed payment after the Act's commencement.
On this section: Court noted this Act also deals with interest and is made subject to Section 34 CPC, establishing a hierarchy of interest-bearing provisions.
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Bank of Maharashtra v. G.K. Enterprises
Court's Decision & Legal Precedent
Final Order order-1.pdf 2005-05-27 (index). Body “May 2005” / RFA 139/2002 — DATE-CHECK VERIFY (OCR garbled √7 May; named Mukundakam Sharma + Rekha Sharma DB merits). Isolate: Interest Act s.3(1)(b) court may allow interest even without a written interest stipulation, from the date of written notice; the proviso bars interest after repayment until suit, not interest until repayment. Equitable interest on unauthorised overdraft. Leading HC DB. Distinctive (Bank of Maharashtra, G.K. Enterprises). NEW act. Map 3 only.
On this section: Interest Act s.3(1)(b) lets the court allow interest even without a written stipulation, from written-notice date; the proviso bars interest after repayment until suit, not interest until repayment (Bank of Maharashtra).
The holding above is the ratio decidendi as extracted from the judgment by eCourts India, reproduced unaltered — it is a rendering of the court's reasoning, not a substitute for its words. Read the order itself before relying on it.
Questions about Section 3
What have the courts held on Section 3 of the Interest Act?
Purbanchal Cables & Conductors P. LTD vs Assam State Electricity Board (10 Jul 2012) is the leading judgment on this section among those set out below: Court noted this Act also deals with interest and is made subject to Section 34 CPC, establishing a hierarchy of interest-bearing provisions. Another 1 judgment on this section is set out below, 1 of them from the Supreme Court. They run from 2005 to 2012.
How do I find court cases under Section 3 of the Interest Act?
In judgments and charge sheets this section is written several ways, and each form finds a different set of orders. These search the full text of every order eCourtsIndia holds, best matches first: Interest Act 1978 3, section 3 Interest Act 1978, section 3 of the Interest Act. Each opens the full list of orders on eCourtsIndia, where it can be narrowed by court, year and outcome. 2 reported judgments on this section are set out on this page, beginning with Purbanchal Cables & Conductors P. LTD vs Assam State Electricity Board (10 Jul 2012).
What should I read with Section 3 of the Interest Act, and has it changed?
1 other provision in this corpus refers back to it.
When did Section 3 of the Interest Act come into force?
Section 3 of the Interest Act, cited as Interest Act 1978 3, came into force on 19 Aug 1981, having been enacted on 31 Mar 1978. It is in force as at the date shown on this page.
Other sections of this Act
- 4. Interest payable under certain enactments193 words
- 2. Definitions189 words
- 6. Repeal and saving127 words
- 1. Short title, extent and commencement46 words
Source and method. Compiled from the enactments of Parliament and of the State legislatures as published on India Code, and republished together with commentary and other original matter under section 52(1)(q)(ii) of the Copyright Act, 1957. Structured, cross-referenced and maintained by eCourtsIndia. Text as in force on 15 Oct 2026. This page is not a substitute for legal advice.