Interest – Concept of

In the case of Hello Mineral Water (P) Ltd. v. Union of India, 2004 (174) ELT 422, a Division Bench of the court explained the concept of interest as under:
“Interest is normal accretion on capital.
If on facts of a case, the doctrine of restitution is attracted, interest is often the normal relief. Restitution in its etymological sense means restoring to a party on the modification, variation or reversal of a decree or order what has been lost to him in execution of decree or order of the court or in direct consequence of a decree or order. The term “restitution” is used in three senses, firstly, return or restoration of some specific thing to its rightful owner or status, secondly, the compensation for benefits derived from wrong done to another and, thirdly, compensation for the loss caused to another. Reference in this regard may be had to the Judgment of the Hon’ble Supreme Court in the case of South Eastern Coal Fields Ltd. v. State of M.P., (2003) 8 SCC 648.
In Hari Chand v. State of U.P., 2012 (1) AWC 316, the Court dealing with a stamp matter held that the payment of interest is a necessary corollary to the retention of the money to be returned under order of the appellate or revisional authority.
Thus, the concept of interest is that when a person is deprived of the use of his money, to which, he is legitimately entitled, he has a right to be compensated for the deprivation, which may be called interest or compensation. Interest is paid for the deprivation of the use of money in general terms, which is return or compensation for the use or retention by a person of a sum of money belonging to another. It is a consideration paid either for the use of money or for forbearance of the money. In this sense, it is a compensation allowed by law or fixed by parties, or permitted by custom or usage for use of money belonging to another or for the delay in paying money after it has become payable. Delayed payment normally attracts interest. Ansal Housing and Construction Ltd. v. State of U.P., 2015 (108) ALR 22.

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