*I.K. Merchants Pvt. Ltd V. The State of Rajasthan (2025 SC)* 1. S.34 CPC empowers the court to grant interest at three different stages of a money decree viz., (i) the court may award interest on the principal sum claimed at a rate it deems reasonable, for the period before the suit was filed. Such interest is generally governed by agreements between the parties; (ii) The court may award interest on the principal amount from the date of filing the suit until the date of the decree, at a reasonable rate. Here, the court has full discretion to determine the interest rate based on fairness, commercial usage and equity; and (iii)the court may grant interest on the total decretal amount (principal + interest before decree) from the date of the decree until payment, at a rate not exceeding 6% per annum unless otherwise specified in contractual agreements or statutory provisions. However, if the claim arises from a commercial transaction, courts may allow interest at a higher rate based on agreements between the parties. 2. ⁠The Courts have the authority to determine the appropriate interest rate, considering the totality of the facts and circumstances in accordance with law. That apart, the Courts have the discretion to decide whether the interest is payable from the date of institution of the suit, a period prior to that, or from the date of the decree, depending on the specific facts of each case. 3. While the discretion to award interest, whether pendente lite or post-decree, is well recognized, its exercise must be guided by equitable considerations. The rate and period of interest cannot be applied mechanically or at an unreasonably high rate without any rationale. Though it is not possible to arrive at the actual value of improvement or the inflation on the fair consideration, if paid at the relevant point of time, it is just and necessary that the rate of interest must be a reparation for the appellant. The Court must ensure that while the claimant is fairly compensated, the award does not become punitive or unduly burdensome on the Judgement Debtor. Therefore, the rate of interest should be determined in a manner that balances both fairness and financial impact, taking into account the "loss of use" principle and economic prudence, in the specific facts of each case.