BIKENDRA PRASAD SINHA, J.

(1.) This appeal by the defendant State of Bihar is against a judgment and decree passed by the Court below. The plaintiff-respondent M/s. New India Sugar Mills Ltd., filed a suit for realisation of Rupees 12,387.68 on account of principal, interest and cost of notice under Section 80 of the Code of Civil Procedure, as per account given at the foot of the plaint.

(2.) The case of the plaintiff was that the defendant State of Bihar realised a sum of Rs. 10,468.44 on account of sales-tax on the sale of sugar by the plaintiff-mill outside the State of Bihar through the authorised agents of the purchasing State. The plaintiff mill during the 1st April, 1947, to 31st March, 1948, had despatched sugar worth Rs. 6,89,482/- to the authorised agents of the State of Madras under the direction of the Controller exercising powers under the Sugar and Sugar Products Control Order 1946. The Superintendent of Sales Tax held that the plaintiff was liable to be taxed under the Sales Tax Act. The plaintiffs appeal to the Deputy Commissioner, Sales tax, was rejected, The Board of Revenue remanded the case to the Deputy Commissioner who again rejected the plea of the plaintiff. The Board of Revenue by its order dated the 23rd March, 1956, held that the plaintiff was not liable to be assessed to sales-tax on the value of the sugar despatched to the State of Madras. The State of Bihar took up the matter to the High Court and the order of the Board of Revenue was set aside. The plaintiff went up to the Supreme Court and the Supreme court held that the sale outside the State of Bihar was not taxable under the Bihar Sales Tax Act. In the meanwhile, a demand notice had been served upon the plaintiff to pay a sum of Rs. 10,468.44 and the plaintiff deposited the said amount. After the decision of the Supreme Court, the plaintiff filed an application before the Additional Superintendent of Sales Tax, Samastipur, for refund of the sum of Rs. 10,468.44, but the refund was not made. The plaintiff took up this matter with the Commissioner of Commercial Taxes but nothing was done. Ultimately, a notice under Section 80 of the Code of Civil Procedure was served upon the Collector and others and the suit was filed on 25-11-65 for the principal amount with interest at 6 per cent per annum from 26-12-62 till the date of filing of the suit, being a sum of Rs. 1,884.24, plus Rs. 35/- as cost of the notice.

(3.) The defendant State of Bihar contested the suit. Their main defence was that the plaintiff was not entitled to claim any interest for the period prior to the filing of the refund application as also for the period the refund application was pending with the authorities. Their further plea was that the payment order was made on 24-1-66 for the principal amount and the plaintiff was informed but they did not come to receive it, Therefore, no interest could be charged after that date. The defendant, however, accepted the liability to pay the principal amount of Rs. 10,468-44, but stated that the plaintiff applied for refund without the certified copy of the Supreme Court judgment and when the matter was still under consideration of the department, the suit was filed.

(4.) The lower court decreed the suit for the principal amount plus interest at the rate of 6 per cent per annum with effect from 26-11-62 by way of damages as claimed by the plaintiff. Interest pendente lite and future was also allowed at 6 per cent per annum.

(5.) The State of Bihar has limited the appeal only to the amount allowed as interest and the cost of notice and as such the appeal has been valued at Rs. 5,315.89. The plaintiffs claim regarding the principal amount, therefore, has not been challenged. Shri Tara Kant Jha, learned Government Advocate, contended that there was no contract between the parties for payment of interest nor was there any statutory obligation under the Sales Tax Act for the same. That being so, a decree for interest could not be passed by the court below. He further contended that the State had taken steps that were normally expected of it for payment of the principal amount, but the plaintiff did not receive the payment order and, therefore, interest should not have been allowed. Shri Parmeshwar Prasad Sinha, learned counsel appearing on behalf of the respondent, on the other hand, submitted that under the Interest Act, 1839, the plaintiff was entitled to a decree for interest also. He next contended that the department was under an obligation to deliver the payment order after the Supreme Court judgment and on equitable grounds also the plaintiff was entitled to interest.

(6.) The main point for consideration, therefore, in this case is whether in the absence of any contract or statutory provision the plaintiff is entitled to a decree for interest.

(7.) It is admitted by both sides that there was neither any contract between the parties nor there is any provision under the Sales Tax Act for the payment of interest in a case of refund. Interest for a period prior to the commencement of a suit can be claimed under an agreement, or usage of trade or under a statutory provision or under the Interest Act. Before an interest is awarded under the Interest Act, there must be a debt or sum certain; it must be payable at a certain time or otherwise and there must be a demand in writing stating that interest will be charged from the date of demand. It is, therefore, manifest that in the present case interest could not be allowed for the period prior to the filing of the suit. The court below has stated in paragraph 24 of its judgment that the plaintiff claimed interest of 6 per cent by way of damages and, in the circumstances, of the case, according to the court below, the claim was reasonable and the plaintiff was entitled to the same. Interest by way of compensation or damages cannot be allowed unless there was a contract between the parties to that effect. Reference may be made to the case of Mahabir Prasad Rungta v. Durga Datta (AIR 1961 SC 990 [LQ/SC/1961/39] ), and Anup Lal Mahto v. Mahesh Jha (AIR 1937 Pat 656 [LQ/PatHC/1937/136] ). In Union of India v. Watkins Meyor and Co. (AIR 1966 SC 275 [LQ/SC/1965/378] ), it was held that interest may be awarded for the period prior to the date of institution of the suit when there was an agreement for payment of interest at fixed rate or when interest was payable by the usage of trade having the force of law or under the provisions of any substantive law when no rate of interest was specified. It was further held that under the Interest Act, 1839, the Court may allow interest if the amount claimed was a sum certain which was payable at a certain time by virtue of a written agreement. This being the position in law, the court below was not right in allowing interest to the plaintiff for the period prior to the institution of the suit.

(8.) Learned Counsel appearing on behalf of the respondent next submitted that on the facts and in the circumstances of this case the plaintiff can be awarded interest on equitable grounds. In this connection, he referred to Section 34 of the Code of Civil Procedure. Under Section 34, the Court may order interest at such rate as it thinks reasonable to pay on the principal sum adjudged from the date of the suit to the date of the decree as also future interest from the date of the decree to the date of payment. In order to invoke the rule of equity, the existence of the state of circumstances which attracts the equitable jurisdiction must be established. The liability of the plaintiff to pay the sales-tax was finally adjudicated upon by the Supreme Court on 26-11-62, when it was held that the plaintiff was not liable to pay the sales-tax. On 11-11-63, after having waited for about a year, the plaintiff applied for refund of the principal amount but the matter was put off by the Sales Tax Department on flimsy grounds. It was incumbent upon the authorities to take immediate steps for the refund of the principal amount which had been deposited as far back as on the 2nd March, 1960. A notice under Section 80 of the Code of Civil Procedure was sent in August, 1965, but still the amount was not refunded and the plaintiff was forced to file the suit. The refund order was made in March-April, 1966 only after the institution of the suit. In these circumstances, the plaintiff must be held to be entitled to interest pendente lite as well as future until the date of realisation. I, therefore, hold that the plaintiff-respondent shall be paid interest at the rate of six per cent per annum on the principal amount from the date of institution of the suit until payment.

(9.) In the result, the appeal is allowed in part and the decree of the Court below is modified to the extent indicated above. There shall be no order as to costs.