Under the MSME Act, three times the bank rate is a ceiling, not an automatic interest entitlement.

Respondent No. 1 sued to recover ₹26,36,852 on cheques issued by the defendants that were dishonoured.

Although served with summons, the defendants did not file a written statement.

The Commercial Court decreed the suit with interest at 24% per annum from 25 November 2022 until realization

On appeal under Section 13(1A) of the Commercial Courts Act, 2015, the appellants—former directors—argued that they had resigned and transferred their shareholdings before the decree and therefore should not bear personal liability; they also challenged the interest rate

1. Whether the appellants could avoid liability on the ground that they had resigned and transferred their shareholdings before the decree

2. Whether the award of interest at 24% per annum should be reduced, having regard to the limit and principles applicable under the MSME Act

Section 13(1A) of the Commercial Courts Act, 2015 provides the appellate route invoked in this case

The Court referred to the MSME Act principle that interest may not exceed three times the Bank rate, but held that this is a ceiling, not a mandatory rate that the Court must award; the appropriate rate depends on the facts and circumstances

The Court rejected the appellants’ liability argument because the plaint alleged that they controlled and managed the company when the liability arose, and that allegation had not been contested by a written statement.

The Court therefore declined to entertain the contrary assertion at the appellate stage; it also noted that the liability accrued before the alleged resignation and share transfer.

On interest, the Court considered 24% per annum excessive and clarified that the MSME Act’s three-times-Bank-rate limit does not require the Court to award interest at that maximum

The appeal was disposed of, with a modified decree to be drawn accordingly.