Supreme Court of India· 28 September 2026

Is interest on a monetary sum lawfully due compensation for deprivation of its use, awardable in equitable jurisdiction if reasonable and not punitive?

BIHAR STATE ARDH v. STATE OF BIHAR

2026 INSC 1061
Coram: Justice Vikram Nath · Justice Sandeep Mehta

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Answer

Interest on a monetary sum lawfully due is compensation for deprivation of its use, awardable in equitable jurisdiction if reasonable and not punitive.

Yes. Interest represents compensation for the deprivation of the use of money lawfully due to a person, and the Court's equitable or constitutional jurisdiction may award it on delayed monetary dues even where no statute prescribes a rate, provided the rate awarded remains reasonable and compensatory rather than punitive.

Headnote

Employees' Provident Funds and Miscellaneous Provisions Act, 1952 — s.7-Q — Interest on delayed statutory dues — Compensation for deprivation of money — Daily-wage workers' entitlement — EPF Act, 1952 — s.7-Q — Statutory interest on delayed dues — Held: Interest on delayed provident fund dues under s.7-Q is a statutory liability, arising by operation of law and independent of any contractual stipulation. It runs as simple interest at 12% per annum till actual payment. (¶44, 48) Interest as compensation for deprivation of money — Equitable jurisdiction — Held further: Interest on money lawfully due is compensation for deprivation of its use, awardable in equitable jurisdiction absent a statutory rate, if reasonable and not punitive. Writ petition disposed of with EPF and salary interest and a payment to daily-wage workers. (¶52, 54, 62)

Headnote

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In the Court's own words

Paragraph 52The aforesaid exposition underscores that the rationale underlying the award of interest lies in compensating for the deprivation of the use of money lawfully due to a person. Where a monetary entitlement has crystallized and payment thereof is delayed beyond the time when it became due and payable, the person entitled thereto is, for the intervening period, deprived of the use and benefit of the amount to which he is lawfully entitled. Interest, in such circumstances, serves as recompense for such deprivation and seeks to compensate, to the extent capable of monetary assessment, for the loss occasioned by the delay.

Paragraph 54Having said that, the award of interest in exercise of the Court’s equitable or constitutional jurisdiction cannot be permitted to assume the character of a punitive levy upon the public exchequer. Interest in such circumstances is intended to compensate, in a reasonable measure, for the prolonged deprivation of the use of money lawfully due and not to penalise the State. The rate of interest must, therefore, bear a reasonable relationship to the nature of the deprivation, the period for which the dues remained unpaid and the prevailing economic conditions.

Acts & Sections

s.7-Q Employees' Provident Funds and Miscellaneous Provisions Act, 1952

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Also decided in this judgment

Is interest on delayed provident fund dues under s.7-Q, EPF Act, 1952 a statutory liability at 12% per annum, independent of any contractual stipulation?

Plain-language answer prepared by the LexStreak Editorial Desk — verify against the judgment. Source: Supreme Court of India. Corrections