"Interest" is not defined in the Civil Procedure Code. Interest is compensation allowed by a law to the person. Where the decree is for the payment of money, the court may award interest as such rate as it thinks reasonable and the principal sum adjudged.

Interest (Section 34) -


 (1) Where and in so far as a decree is for the payment of money, the Court may, in the decree, order interest at such rate as the Court deems reasonable to be paid on the principal sum adjudged, from the date of the suit to the date of the decree, in addition to any interest adjudged on such principal sum for any period prior to the institution of the suit, with further interest at such rate not exceeding six per cent, per annum as the Court deems reasonable on such principal sum from the date of the decree to the date of payment, or to such earlier date as the Court thinks fit: Provided that where the liability in relation to the sum so adjudged had arisen out of a commercial transaction, the rate of such further interest may exceed six percent, per annum, but shall not exceed the contractual rate of interest or where there is no contractual rate, the rate at which moneys are lent or advanced by nationalized banks in relation to commercial transactions.


Explanation I - 

      In this sub-section, " nationalized bank" means a corresponding new bank as defined in the Banking Companies (Acquisition and Transfer of Undertakings) Act 1970 (5 of 1970).

Explanation II - 

      For the purposes of this section, a transaction is a commercial transaction if it is connected with the industry, trade or business of the party incurring the liability.

(2) Where such a decree is silent with respect to the payment of further interest on such principal sum from the date of the decree to the date of payment or other earlier dates, the Court shall be deemed to have refused such interest, and a separate suit, therefore, shall not lie.



When decree is for payment of money, interest is calculated at 3 following stages -\

1) Interest upto Institution of the suit or proceeding

2) Interest from the date of Institution upto the passing of the decree


3) Interest from the date of the decree till the execution of the decree



See also...

What are the similarities between Order and Decree?

Bar to further suit  [Bar of suit] (Section 12 of the Code of Civil Procedure)

Suits relating to public nuisance Section 91 of civil procedure code

Difference between Judgement and Decree

Difference between Res Judicata and Res Subjudice

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