Interest rate under section 372a

Dear All,

I have a query about the rate of interest applicable to the following contract considering the provisions of section 372A(3)

 

A valid by A Ltd to B Ltd for an advance was made by the company in the May 2011 under section 372A and the contract specifies the rate of interest being the 6% then effective bank rate and now RBI has increased to 9.5% then will this change effeect the cntracts already entred into and will they be liable to pay interest at the revised rates or at the rate of 6 % as per their contract

Please Specify

 

Waiting for an early and educative reply

Replies (4)

Bank rate prevalent at the time of contract will only be applicable and hence no need to change now for old contract.

 

will such amendment will not make my contract as void due to the subsequent change in the legal parameters?

NO.

 

We should see the wordings used in contract, if it was specified that interest is 6%, no need to change interest rates but if wordings used in contract is interest rate is as per bank rates specified by RBI, we has to change interest rates with effect from RBI circular, however contract is not void, just you have to amend contract in second case.

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