Costs Jurisprudence II: Interest on Litigation Costs

There is no provision under The Code of Civil Procedure, 1908 or The Interest Act, 1978 which permits imposition of interest on litigation costs. In view of the deletion of Section 35(3) of the CPC, grant of interest on costs is no longer recognized under Indian law… the same does not mean that Indian Courts are powerless to execute a decree for interest on costs. The right to 8% interest as per The Judgments Act, 1838 of UK can be recognized as well as implemented in India… Parliament did not choose positively to prohibit interest on costs by inserting suitable clause in Section 35. It is to the reciprocal advantage of the Courts of all Nations to enforce foreign rights as far as practicable.

Hon’ble Justice N.V. Ramana, M/s. Alcon Electronics Pvt. Ltd. v. Celem S.A. of France, [Civil Appeal No. 10106 of 2016].

Section 17(1) of The Judgments Act, as amended, provides that “Every judgment debt shall carry interest at the rate of 8 pounds per centum per annum from such time as shall be prescribed by rules of Court until the same shall be satisfied, and such interest may be levied under a writ of execution on such judgment.

This has always been interpreted as permitting simple interest only, on the basis that “the primary purpose of an award of interest is to compensate the creditor for having been kept out of his money”, and that “in the eyes of the law simple interest is generally regarded as adequate compensation” [See, Novoship (UK) Ltd v. Nikitin, [2014] EWCA Civ 908, per Longmore LJ].

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