Supreme Court Increases Interest Rate for Auction Purchasers in Property Dispute

The Supreme Court of India in Civil Appeal Nos. 4270-4271 of 2016 ruled on a property dispute involving auction purchasers and a bank. The case was filed by Pragati Builders & Promoters & Others (Appellants) against M/s Ram Murty Pyara Lal & Others (Respondents). The dispute centered on whether the appellants, who had purchased a property in an auction, were entitled to a higher interest rate due to delays caused by the bank.

Background of the Case

The appellants had paid the auction price for a property but faced delays in receiving their dues. The High Court awarded them interest at 6% per annum, but the appellants challenged this rate, arguing that it was inadequate considering the financial loss they incurred.

Petitioner’s Arguments

The appellants contended that:

• The interest rate of 6% awarded by the High Court was too low.
• They had suffered financial losses due to delays in receiving the amount they had paid for the property.
• The bank had retained their money and benefited from interest, which should be factored into the compensation.

Respondents’ Arguments

The respondent bank argued that:

• The interest rate granted by the High Court was reasonable.
• They were not in a position to pay a higher interest rate.
• Any additional burden should be borne by the borrower rather than the bank.

Judgment

The Supreme Court found that the interest rate awarded was indeed on the lower side and ruled:

“Instead of simple interest at the rate of 6% per annum, the appellants should be paid simple interest at the rate of 15% per annum from the date on which the appellants had paid the amount for purchase of the property.”

The Court further directed:

• The bank must calculate the amount of interest payable at 15% per annum and inform the appellants and respondents.
• The bank should pay the interest from its own funds, presuming it had earned interest on the retained amount.
• The borrower would be liable to pay the balance interest so that the appellants receive the full 15% interest.

Key Takeaways

• Courts can increase the interest rate if they find the awarded amount inadequate.
• Auction purchasers should not suffer financial losses due to delays by banks.
• The ruling ensures fair compensation for individuals whose money is retained for extended periods.

This decision reinforces the principle of fair compensation in financial disputes, ensuring that auction purchasers are not unfairly disadvantaged due to procedural delays.

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Download Judgment: Pragati Builders & P vs Ms Ram Murty Pyara Supreme Court of India Judgment Dated 12-04-2016-1741854760680.pdf