Kerala Water Authority v. T.I. Raju - Interest Act vs CPC
Interest Act, 1978 - The object of the Interest Act, 1978 is to mandate the payment of interest to the parties in the absence of, or any vacuum in the agreement, or where the interest so fixed is contrary to law, being in the nature of an exorbitant charge. (Para 6)
Code of Civil Procedure, 1908 -Section 34 ; Interest Act, 1978 - Section 3(3): Section 34 of the CPC merely speaks about the rate of interest to be applied and, therefore, sub-section (5) cannot be interpreted to have an overriding effect on Section 3(3) of the Interest Act, 1978. (Para 9-10)
Case Info
Case Information
Case name and neutral citation:Kerala Water Authority & Ors. v. T.I. Raju & Ors., Civil Appeal No(s). of 2026 (@ SLP(C) No(s). 17823/2023) with Civil Appeal No(s). of 2026 (@ SLP(C) No(s). 24631/2023). No separate neutral citation number is mentioned in the text provided.
Coram
The judgment is by a Bench comprising:Hon’ble Mr. Justice M.M. Sundresh and Hon’ble Mr. Justice Nongmeikapam Kotiswar Singh.
Judgment Date
The order is dated 09 February 2026 (NEW DELHI; FEBRUARY 09, 2026).
Statutes / Laws Referred
The order expressly refers to:
- Interest Act, 1978, particularly Section 3(1) and the exception under Section 3(3).
- Code of Civil Procedure, 1908, Section 34 (rate of interest and pendente lite interest).
No other statutes are expressly cited in the text you provided.
Caselaws and Citations
No prior case law or reported citation (SCC, AIR, etc.) is quoted or referred to in the extracted text. The discussion is confined to interpreting the contract clause and the Interest Act / CPC.
Brief Summary (Three Sentences)
The case arises from a Government contractor’s claim for interest on delayed payment for a sewage treatment plant contract, where the contract contained clause (5) stating that no claim for interest or damages would lie for belated settlement of bills. The Supreme Court holds that, in light of Section 3(3) of the Interest Act, 1978, where the parties have agreed by contract to waive interest on delayed payments, they are bound by that term and the Court cannot override it by relying on Section 34 CPC. Consequently, the Court sets aside the High Court’s direction granting interest (reduced to 9% by the High Court), allows the appeal of Kerala Water Authority (SLP(C) 17823/2023), and dismisses the contractor’s appeal (SLP(C) 24631/2023).