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Section 79: Interest when rate specified

Negotiable Instruments Act • Official Statutory Text & Practice Guide

Statutory Regulation
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Act 1881
Section 78 All 148 Sections of Negotiable Instruments Act Section 80

Legal Commentary & Landmark Judgments: Section 79

Section 79 regulates the calculation of interest when a specific rate is specified in a promissory note or bill of exchange, mandating interest at that rate from the date of the instrument until realization.

  • Contractual Interest Primacy: The court is statutory bound to award interest at the agreed contractual rate stated on the face of the paper.
  • Period of Calculation: Calculated from the date of the instrument (or from the date of default, if specified) until tender or realization.
  • Court Discretion Displaced: Displaces the general discretion of the court under Section 34 CPC up to the date of decree; contractual rate governs commercial paper.
Key Landmark Precedents:
  • Union of India v. Watkins Mayor & Co. (AIR 1966 SC 275): The Supreme Court examined statutory interest provisions, holding that agreed rates on commercial paper must be enforced up to the date of suit.
  • Central Bank of India v. Ravindra (2002) 1 SCC 367: The Constitution Bench settled banking interest jurisprudence, affirming that agreed interest on commercial documents governs until judgment.
Courtroom Practice & Strategic Litigation Guidance:

In summary suits under Order XXXVII CPC, claim the exact interest rate specified in the promissory note under Section 79. Because Section 79 is a special statutory mandate, the court cannot reduce the interest rate for the pre-suit period.

Section 78 All 148 Sections of Negotiable Instruments Act Section 80